EXHIBIT 10.60
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement"), dated
as of March 24, 1998, between USCI, Inc., a Delaware corporation (the
"Company"), and JNC Opportunity Fund Ltd., a Cayman Islands corporation
(the "Purchaser").
WHEREAS, subject to the terms and conditions set forth in this
Agreement, the Company desires to issue and sell to the Purchaser and
the Purchaser desires to purchase from the Company, shares of the
Company's 6% Series A Convertible Preferred Stock, par value $.01 per
share (the "Series A Preferred"), the Company's 6% Series B Convertible
Preferred Stock, par value $.01 per share (the "Series B Preferred"),
and the Company's 6% Series C Convertible Preferred Stock, par value
$.01 per share (the "Series C Preferred" and, together with the Series A
Preferred and the Series B Preferred, the "Preferred Stock").
IN CONSIDERATION of the mutual covenants contained in this Agreement,
the Company and Purchaser agree as follows:
ARTICLE I
PURCHASE AND SALE OF PREFERRED STOCK
1.1 Purchase and Sale. (a) Subject to the terms and conditions set
forth herein, the Company shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Company: (i) 500 shares of Series A
Preferred (the "Series A Shares"); (ii) up to 500 shares of Series B
Preferred (the "Series B Shares"); and (iii) up to 500 shares of Series
C Preferred (the "Series C Shares" and, together with the Series A
Shares and the Series B Shares, the "Shares").
(b) The Series A Preferred shall have the respective rights, preferences
and privileges set forth in Exhibit A attached hereto (the "Series A
Terms"), which shall be incorporated into a Certificate of Designation
to be approved by the Purchaser and filed prior to the Series A Closing
Date (as defined below) by the Company with the Secretary of State of
Delaware (the "Series A Designation"). The Series B Preferred and the
Series C Preferred shall have respective rights, preferences and
privileges identical to the Series A Terms, mutatis mutandis, and shall
rank pari passu with the Series A Preferred with regard to dividends,
liquidation, voting rights and any other preferential rights designated
therein, except that the Conversion Price (as defined below) for
conversion of the Series B Shares and Series C Shares shall be
determined as of the Original Issue Date (as defined below) for such
Series B Shares and Series C Shares, and the case may be.
The Series B Preferred and the Series C Preferred shall be authorized
pursuant to Certificates of Designation prepared by the Company, subject
to the approval of the Purchaser, and filed prior to the Series B
Closing Date (as defined below) or the Series C Closing Date (as defined
below), as applicable, by the Company with the Secretary of State of
Delaware (such Certificates of Designation and the Series A Designation
are collectively, the "Certificates of Designation").
For purposes of this Agreement, "Conversion Price," "Original Issue
Date," "Conversion Date," "Trading Day" and "Per Share Market Value"
shall have the meanings set forth in Exhibit A; and "Market Price" as at
any date shall mean the average Per Share Market Value for the five (5)
Trading Days immediately preceding such date.
1.2 Purchase Price. The purchase price per Share shall be $10,000.
1.3 The Closings.
(a) The Series A Closing. (i) The closing of the purchase and sale
of the Series A Shares (the "Series A Closing") shall take place at the
offices of Xxxxxxxx Xxxxxxxxx Xxxxxx Xxxxxxxx & Xxxxxx LLP (the "Escrow
Agent"), 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000,
immediately following the execution hereof or such later date as the
parties shall agree. The date of the Series A Closing is hereinafter
referred to as the "Series A Closing Date."
(ii) At the Series A Closing, the parties shall deliver or shall
cause to be delivered to the Escrow Agent such items as are required to
be delivered by them in accordance with and subject to the terms and
conditions of the Escrow Agreement, dated as of the date hereof, by and
among the Company, the Purchaser and the Escrow Agent, in the form of
Exhibit E (the "Escrow Agreement"), including the following: (a) the
Company shall deliver to the Purchaser (1) stock certificates
representing 250,000 Series A Shares registered in the name of the
Purchaser, (2) a common stock purchase warrant in the form of Exhibit B
(the "Series A Warrant") to purchase an aggregate of 149,522 shares of
the Company's common stock, $.0001 par value per share (the "Common
Stock"), at an exercise price equal to 120% of the Market Price on the
Series A Closing Date, exercisable for three years from the Original
Issue Date, registered in the name of the Purchaser, (3) the legal
opinion of the Law Offices of Xxxxxxx X. Xxxxx, P.A., outside counsel to
the Company, substantially in the form attached hereto as Exhibit D, and
(4) all other documents, instruments and writings required to have been
delivered at or prior to the Series A Closing by the Company pursuant to
this Agreement and the Registration Rights Agreement, dated the date
hereof, by and between the Company and the Purchaser, in the form of
Exhibit C (the "Registration Rights Agreement"); and (b) the Purchaser
shall deliver to the Company (1) $5,000,000 in United States dollars in
immediately available funds by wire transfer to an account designated in
writing by the Company for such purpose prior to the Series A Closing
Date, and (2) all documents, instruments and writings required to have
been delivered at or prior to the Series A Closing by the Purchaser
pursuant to this Agreement and the Registration Rights Agreement.
(b) The Series B Closing. (i) Subject to the terms and conditions
set forth in this Agreement, the Purchaser and the Company shall have
the right to deliver a written notice to the other (a "Series B
Subsequent Financing Notice") requiring such other party to either sell
or buy, as the case may be, Series B Shares and Series B Warrants (as
defined below), for a purchase price of $10,000 per Series B Share. A
Series B Subsequent Financing Notice may be delivered no earlier than 60
Trading Days after the effective date of the Underlying Shares
Registration Statement (as defined in the Registration Rights Agreement)
relating to the Underlying Shares (as defined in Section 2.1(d))
issuable upon conversion or exercise (as the case may be) of the Shares
and the Warrants and no later than 150 days after such effective date.
The closing of the purchase and sale of the Series B Shares (the "Series
B Closing") shall take place at the offices of the Escrow Agent on the
date indicated in the Series B Subsequent Financing Notice (which may
not be prior to the 15th Trading Day or subsequent to the 30th Trading
Day after receipt by the other party of the Subsequent Financing Notice,
or as otherwise agreed to by the parties); provided that in no case
shall the Series B Closing take place unless and until the conditions
listed in Section 4.1 have been satisfied or waived by the appropriate
party. The date of the Series B Closing is hereinafter referred to as
the "Series B Closing Date."
(ii) At the Series B Closing, the parties shall deliver or shall
cause to be delivered to the Escrow Agent such items as are required to
be delivered by them in accordance with and subject to the terms and
conditions of an Escrow Agreement, in the form of Exhibit E, to be
executed by and among the Company, the Purchaser and the Escrow Agent,
prior to the Series B Closing Date, including the following: (a) the
Company shall deliver to the Purchaser (1) such number of Series B
Shares as indicated on the Series B Subsequent Financing Notice (as
adjusted pursuant to the terms and conditions hereof), registered in the
name of the Purchaser, (2) a common stock purchase warrant in the form
of Exhibit B (the "Series B Warrants") to purchase a number of shares of
the Common Stock as would equal 0.125 multiplied by the number of shares
of Common Stock issuable upon conversion in full of the Series B Shares
to be issued at the Series B Closing (assuming that such conversion
occurred on the Series B Closing Date) at an exercise price equal to
120% of the Market Price on the Series B Closing Date, exercisable for
three years from the Series B Closing Date registered in the name of the
Purchaser, (3) the legal opinion referenced in Section 4.1(xii),
substantially in the form attached hereto as Exhibit D, and (4) all
other documents, instruments and writings required to have been
delivered at or prior to the Series B Closing by the Company to the
Purchaser pursuant to this Agreement; and (b) the Purchaser shall
deliver to the Company (1) the product of $10,000 and the number of
Series B Shares to be issued and sold at the Series B Closing, in United
States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose prior to
the Series B Closing Date and (2) all documents, instruments and
writings required to have been delivered at or prior to the Series B
Closing by such Purchaser pursuant to this Agreement.
(c) The Series C Closing. (i) Subject to the terms and conditions set
forth in this Agreement, the Purchaser and the Company shall have the
right to deliver a written notice to the other (a "Series C Subsequent
Financing Notice") requiring such other party to either sell or buy, as
the case may be, Series C Shares and the Series C Warrants (as defined
below), for a purchase price of $10,000 per Series C Share. A Series C
Subsequent Financing Notice may be delivered no earlier than the later
to occur of (i) the 60th Trading Day after the effective date of the
Underlying Shares Registration Statement (provided, that in the event
that the Underlying Shares Registration Statement filed in connection
with the Series A Closing does not cover the Underlying Shares issuable
upon conversion or exercise of the Series B Shares and Series B
Warrants, then such 60 Trading Day period shall commence upon the
effective date of the Underlying Shares Registration Statement that
covers such Underlying Shares) and (ii) in the event that the Underlying
Shares Registration Statement filed in connection with the Series A
Closing covers the Underlying Shares issuable upon conversion or
exercise (as the case may be) of the Series B Shares and Series B
Warrants, 60 Trading Days after the Series B Closing Date, and no later
than 150 days after the later to occur of the applicable effective date
and the Series B Closing Date. The closing of the purchase and sale of
the Series C Shares (the "Series C Closing") shall take place at the
offices of the Escrow Agent on the date indicated in the Series C
Subsequent Financing Notice (which may not be prior to the 15th Trading
Day or subsequent to the 30th Trading Day after receipt by the other
party of the Subsequent Financing Notice, or as otherwise agreed to by
the parties); provided that in no case shall the Series C Closing take
place unless and until the conditions listed in Section 4.2 have been
satisfied or waived by the appropriate party. The date of the Series C
Closing is hereinafter referred to as the "Series C Closing Date."
(ii) At the Series C Closing, the parties shall deliver or shall cause
to be delivered to the Escrow Agent such items as are required to be
delivered by them in accordance with and subject to the terms and
conditions of an Escrow Agreement, in the form of Exhibit E, to be
executed by and among the Company, the Purchaser and the Escrow Agent,
prior to the Series C Closing Date, including the following: (a) the
Company shall deliver to the Purchaser (1) such number of Series C
Shares, as indicated in the Series C Subsequent Financing Notice (as
adjusted pursuant to the terms and conditions hereof), registered in the
name of the Purchaser, (2) a common stock purchase warrant in the form
of Exhibit B (the "Series C Warrants" and together with the Series A
Warrants and the Series B Warrants, the "Warrants") to purchase a number
of shares of the Common Stock as would equal 0.125 multiplied by the
number of shares of Common Stock issuable upon conversion in full of the
Series C Shares to be issued at the Series C Closing (assuming that such
conversion occurred on the Series C Closing Date) at an exercise price
equal to 120% of the Market Price on the Series C Closing Date,
exercisable for three years from the Series C Closing Date, registered
in the name of the Purchaser, (3) the legal opinion referenced in
Section 4.2(xii), substantially in the form attached hereto as Exhibit
D, and (4) all other documents, instruments and writings required to
have been delivered at or prior to the Series C Closing by the Company
to the Purchaser pursuant to this Agreement; and (b) the Purchaser shall
deliver to the Company (1) the product of $10,000 and the number of
Series C Shares to be issued and sold at the Series C Closing, in United
States dollars in immediately available funds by wire transfer to an
account designated in writing by the Company for such purpose prior to
the Series C Closing Date and (2) all documents, instruments and
writings required to have been delivered at or prior to the Series C
Closing by such Purchaser pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations, Warranties and Agreements of the Company. The
Company hereby makes the following representations and warranties to the
Purchaser:
(a)Organization and Qualification. The Company is a corporation, duly
incorporated, validly existing and in good standing under the laws of
the State of Delaware, with the requisite corporate power and authority
to own and use its properties and assets and to carry on its business as
currently conducted. The Company has no subsidiaries other than as set
forth in Schedule 2.1(a) (collectively the "Subsidiaries"). Each of the
Subsidiaries is a corporation, duly incorporated, validly existing and
in good standing under the laws of the jurisdiction of its incorporation
or organization (as applicable), with the full corporate power and
authority to own and use its properties and assets and to carry on its
business as currently conducted. Each of the Company and the
Subsidiaries is duly qualified to do business and is in good standing as
a foreign corporation in each jurisdiction in which the nature of the
business conducted or property owned by it makes such qualification
necessary, except where the failure to be so qualified or in good
standing, as the case may be, could not, individually or in the
aggregate, (x) adversely affect the legality, validity or enforceability
of the Securities (as defined below) or any of the Transaction Documents
(as defined below) in any material respect, (y) have or result in a
material adverse effect on the results of operations, assets, prospects,
or condition (financial or otherwise) of the Company and the
Subsidiaries, taken as a whole or (z) adversely impair the Company's
ability to perform fully on a timely basis its obligations under any of
this Agreement, the Certificates of Designation, the Warrants, the
Escrow Agreements or the Registration Rights Agreement (collectively,
the "Transaction Documents") (any of (x), (y) or (z), being a "Material
Adverse Effect").
(b) Authorization; Enforcement. The Company has the requisite
corporate power and authority to enter into and to consummate the
transactions contemplated by each of the Transaction Documents, and
otherwise to carry out its obligations thereunder. The execution and
delivery of each of the Transaction Documents by the Company and the
consummation by it of the transactions contemplated hereby and thereby
have been duly authorized by all necessary action on the part of the
Company and no further action is required by the Company. Each of the
Transaction Documents has been duly executed by the Company and when
delivered in accordance with the terms hereof will constitute the valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms, except as such enforceability may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the
enforcement of, creditors' rights and remedies or by other equitable
principles of general application. Neither the Company nor any
Subsidiary is in violation of any of the provisions of its respective
certificate of incorporation, articles, by-laws or other charter
documents. Prior to the Series A Closing Date, the Series B Closing
Date and the Series C Closing Date (each a "Closing Date"), as the case
may be, the respective Certificates of Designation shall have been filed
with the Secretary of State of the State of Delaware and will be in full
force and effect, enforceable against the Company in accordance with the
terms thereof.
(c)Capitalization. The authorized, issued and outstanding capital
stock of the Company is set forth in Schedule 2.1(c). No shares of
Common Stock are entitled to preemptive or similar rights, nor is any
holder of the Common Stock entitled to preemptive or similar rights
arising out of any agreement or understanding with the Company by virtue
of any of the Transaction Documents. Except as disclosed in Schedule
2.1(c), there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating
to, or, except as a result of the purchase and sale of the Shares and
the Warrants, securities, rights or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or
acquire any shares of Common Stock, or contracts, commitments,
understandings, or arrangements by which the Company or any Subsidiary
is or may become bound to issue additional shares of Common Stock, or
securities or rights convertible or exchangeable into shares of Common
Stock. To the knowledge of the Company, except as specifically
disclosed in the SEC Documents (as defined below) or Schedule 2.1(c), no
Person or group of related Persons beneficially owns (as determined
pursuant to Rule 13d-3 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act")) or has the right to acquire by
agreement with or by obligation binding upon the Company beneficial
ownership of in excess of 5% of the Common Stock. A "Person" means an
individual or corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company,
joint stock company, government (or an agency or subdivision thereof) or
other entity of any kind.
(d) Issuance of the Shares and the Warrants. The Shares and the
Warrants are duly authorized, and, when issued and paid for in
accordance with the terms hereof, shall have been validly issued, fully
paid and nonassessable, free and clear of all liens, encumbrances and
rights of first refusal of any kind (collectively, "Liens"). The
Company has on the date hereof and will, at each Closing Date, have, and
at all times while the Shares and any Warrants are outstanding will
maintain an adequate reserve of duly authorized shares of Common Stock,
to enable it to perform its conversion, exercise and other obligations
under this Agreement, the Warrants and the Certificate of Designation
with respect to the number of Shares and Warrants issued at such Closing
Date, and in no circumstances shall such reserved and available shares
of Common Stock be less than the sum of (i) 200% of the maximum number
of shares of Common Stock which would be issuable upon conversion in
full of the Shares issued pursuant to the terms hereof assuming such
conversion were effected on the Original Issue Date for such Shares,
(ii) the number of shares of Common Stock issuable upon exercise of the
Warrants, and (iii) the number of shares Common Stock which would be
issuable upon payment of dividends on the Shares, assuming each Share is
outstanding for three years and all dividends are paid in shares of
Common Stock. All such authorized shares of Common Stock shall be duly
reserved for such issuance to the holders of such Shares and Warrants.
The shares of Common Stock issuable upon conversion of the Shares, as
payment of dividends thereon, or upon exercise of the Warrants are
collectively referred to herein as the "Underlying Shares." The Shares,
the Warrants and Underlying Shares are, collectively, the "Securities".
When issued in accordance with the Certificates of Designation, and
upon exercise of the Warrants, the Underlying Shares have been duly
authorized, validly issued, fully paid and nonassessable, free and clear
of all Liens.
(e)No Conflicts. The execution, delivery and performance of the
Transaction Documents by the Company and the consummation by the Company
of the transactions contemplated thereby do not and will not (i)
conflict with or violate any provision of its certificate of
incorporation, bylaws or other charter documents (each as amended
through the date hereof) or (ii) subject to obtaining the consents
referred to in Section 2.1(f), conflict with, or constitute a default
(or an event which with notice or lapse of time or both would become a
default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, any agreement, indenture or instrument
(evidencing a Company debt or otherwise) to which the Company is a party
or by which any property or asset of the Company is bound or affected,
or (iii) result in a violation of any law, rule, regulation, order,
judgment, injunction, decree or other restriction of any court or
governmental authority to which the Company is subject (including
Federal and state securities laws and regulations), or by which any
material property or asset of the Company is bound or affected, except
in the case of each of clauses (ii) and (iii), such conflicts, defaults,
terminations, amendments, accelerations, cancellations and violations as
could not, individually or in the aggregate, have or result in a
Material Adverse Effect. The business of the Company is not being
conducted in violation of any law, ordinance or regulation of any
governmental authority, except for violations which, individually or in
the aggregate, would not have a Material Adverse Effect.
(f) Consents and Approvals. Except as specifically set forth in
Schedule 2.1(f), neither the Company nor any Subsidiary is required to
obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other Federal,
state, local or other governmental authority or other Person in
connection with the execution, delivery and performance by the Company
of the Transaction Documents, other than (i) the filings of the
Certificates of Designation with the Secretary of State of Delaware,
(ii) the filing of Underlying Shares Registration Statement with the
Securities and Exchange Commission (the "Commission"), (iii) the
application(s) or any letter(s) acceptable to the Nasdaq National Market
System (the "NASDAQ") for the listing of the Underlying Shares with the
NASDAQ (and with any other national securities exchange or market on
which the Common Stock is then listed), and (iv) in all other cases
where the failure to obtain such consent, waiver, authorization or
order, or to give such notice or make such filing or registration could
not have or result in, individually or in the aggregate, a Material
Adverse Effect (together with the consents, waivers, authorizations,
orders, notices and filings referred to in Schedule 2.1(f), the
"Required Approvals").
(g) Litigation; Proceedings. Except as specifically disclosed in the
Disclosure Materials (as hereinafter defined) there is no action, suit,
notice of violation, proceeding or investigation pending or, to the
knowledge of the Company, threatened against or affecting the Company or
any of its Subsidiaries or any of their respective properties before or
by any court, governmental or administrative agency or regulatory
authority (Federal, state, county, local or foreign) which (i) adversely
affects or challenges the legality, validity or enforceability of any of
the Transaction Documents or the Securities or (ii) could individually
or in the aggregate, have a Material Adverse Effect.
(h) No Default or Violation. Neither the Company nor any Subsidiary
(i) is in default under or in violation of any indenture, loan or credit
agreement or any other agreement or instrument to which it is a party or
by which it or any of its properties is bound, (ii) is in violation of
any order of any court, arbitrator or governmental body applicable to
it, or (iii) is in violation of any statute, rule or regulation of any
governmental authority to which it is subject, except as could not, in
any such case (individually or in the aggregate) have or result in a
Material Adverse Effect.
(i)Schedules. The Schedules to this Agreement furnished by or on
behalf of the Company do not contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in light of the circumstances under which they
were made, not misleading.
(j) Private Offering. Neither the Company nor any Person acting on its
behalf has taken or will take any action which might subject the
offering, issuance or sale of the Securities to the registration
requirements of the Securities Act of 1933, as amended (the "Securities
Act").
(k) SEC Documents; Financial Statements; No Adverse Change. The
Company has filed all reports required to be filed by it under the
Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for
the three years preceding the date hereof (or such shorter period as the
Company was required by law to file such material) (the foregoing
materials being collectively referred to herein as the "SEC Documents"
and, together with the Schedules to this Agreement the "Disclosure
Materials") on a timely basis or has received a valid extension of such
time of filing and has filed any such SEC Documents prior to the
expiration of any such extension. As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act and the Exchange Act and the rules and regulations of the
Commission promulgated thereunder, and none of the SEC Documents, when
filed, contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading. All material agreements to
which the Company is a party or to which the property or assets of the
Company are subject have been filed as exhibits to the SEC Documents as
required; neither the Company nor any of its subsidiaries is in breach
of any agreement where such breach would have or result in a Material
Adverse Effect. The financial statements of the Company included in the
SEC Documents comply in all material respects with applicable accounting
requirements and the rules and regulations of the Commission with
respect thereto as in effect at the time of filing. Such financial
statements have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis during the periods
involved, except as may be otherwise specified in such financial
statements or the notes thereto, and fairly present in all material
respects the financial position of the Company as of and for the dates
thereof and the results of operations and cash flows for the periods
then ended, subject, in the case of unaudited statements, to normal
year-end audit adjustments. Since the date of the financial statements
included in the Company's last filed Annual Report on Form 10-K for the
fiscal year ended December 31, 1996, there has been no event, occurrence
or development that has had or could result in a Material Adverse Effect
which has not been specifically disclosed to the Purchaser by the
Company. The Company last filed audited financial statements with the
Commission on December 31, 1996, and has not received any comments from
the Commission in respect thereof.
(l) Seniority. No class of equity securities of the Company is senior
to the Preferred Stock in right of payment, whether upon liquidation,
dissolution or otherwise.
(m) Investment Company. The Company is not, and is not controlled by
or under common control with an affiliate (an "Affiliate") of, an
"investment company" within the meaning of the Investment Company Act of
1940, as amended.
(n) Certain Fees. Except for certain fees payable by the Company to
Xxxxxxx Capital Partners, Ltd. and to Xxxxxx Drum, no fees or
commissions will be payable by the Company to any broker, financial
advisor or consultant, finder, placement agent, investment banker, or
bank with respect to the transactions contemplated by this Agreement.
The Purchaser shall have no obligation with respect to any fees or with
respect to any claims made by or on behalf of other Persons for fees of
a type contemplated in this Section that may be due in connection with
the transactions contemplated by this Agreement. The Company shall
indemnify and hold harmless the Purchaser, its employees, officers,
directors, agents, and partners, and their respective Affiliates (as
such term is defined under Rule 405 promulgated under the Securities
Act), from and against all claims, losses, damages, costs (including the
costs of preparation and attorney's fees) and expenses suffered in
respect of any such claimed or existing fees, as such fees and expenses
are incurred.
(o) Solicitation Materials. The Company has not (i) distributed any
offering materials in connection with the offering and sale of the
Securities, other than the Disclosure Materials and any amendments and
supplements thereto or (ii) solicited any offer to buy or sell the
Securities by means of any form of general solicitation or advertising.
None of the Disclosure Materials or any other information provided to
the Purchaser by or on behalf of the Company contain any untrue
statement of material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading.
(p) Form S-3 Eligibility. The Company is, and at each Closing Date
will be, eligible to register securities for resale with the Commission
under Form S-3 promulgated under the Securities Act.
(q) Exclusivity. The Company shall not issue and sell the Preferred
Stock to any Person other than the Purchaser pursuant to this Agreement
other than with the specific prior written consent of the Purchaser,
provided the Purchaser has not failed to purchase the Series B Shares or
Series C Shares, as the case may be, if obligated to do so hereunder.
(r) Listing and Maintenance Requirements Compliance. The Company has
not in the two years preceding the date hereof received notice (written
or oral) from the NASDAQ or any other stock exchange, market or trading
facility on which the Common Stock is or has been listed (or on which it
has been quoted) to the effect that the Company is not in compliance
with the listing or maintenance requirements of such exchange or market.
The Company is in compliance with all such maintenance requirements.
(s) Patents and Trademarks. The Company has, or has rights to use, all
patents, patent applications, trademarks, trademark applications,
service marks, trade names, copyrights, licenses and rights
(collectively, the "Intellectual Property Rights") which are necessary
for use in connection with its business, as currently conducted and as
described in the SEC Documents, and which the failure to so have would
have a Material Adverse Effect. To the best knowledge of the Company,
there is no existing infringement by another Person of any of the
Intellectual Property Rights which are necessary for use in connection
with the Company's business.
(t) Acknowledgement of Dilution. The Company acknowledges that the
issuance of the Underlying Shares upon (i) conversion of the Shares and
payment of dividends thereon in accordance with the Certificates of
Designation, and (ii) exercise of the Warrants may result in dilution of
the outstanding shares of Common Stock, which dilution may be
substantial under certain market conditions. The Company further
acknowledges that its obligation to issue Underlying Shares upon (x)
conversion of the Shares and payment of dividends thereon in accordance
with the Certificates of Designation, and (y) exercise of the Warrants
is unconditional and absolute, subject to the limitations set forth
herein in the Certificates of Designation or pursuant to the Warrants,
regardless of the effect of any such dilution.
(u) Registration Rights; Rights of Participation. Except as described
on Schedule 2.1(u) hereto, (A) the Company has not granted or agreed to
grant to any Person any rights (including "piggy-back" registration
rights) to have any securities of the Company registered with the
Commission or any other governmental authority which has not been
satisfied and (B) no Person, including, but not limited to, current or
former shareholders of the Company, underwriters, brokers, financial
consultants or advisors or agents, has any right of first refusal,
preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by this Agreement or any
other Transaction Document.
(v) Title. The Company and the Subsidiaries have good and marketable
title in fee simple to all real property and personal property owned by
them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all Liens, except for
liens, claims or encumbrances as do not materially affect the value of
such property and do not interfere with the use made and proposed to be
made of such property by the Company and its Subsidiaries. Any real
property and facilities held under lease by the Company and its
Subsidiaries are held by them under valid, subsisting and enforceable
leases with such exceptions as are not material and do not interfere
with the use made and proposed to be made of such property and buildings
by the Company and its Subsidiaries.
(w) Regulatory Permits. The Company and its Subsidiaries possess all
certificates, authorizations and permits issued by the appropriate
Federal, state or foreign regulatory authorities necessary to conduct
their respective businesses as described in the SEC Documents except
where the failure to possess such permits would not, individually or in
the aggregate, have a Material Adverse Effect ("Material Permits"), and
neither the Company nor any such Subsidiary has received any notice of
proceedings relating to the revocation or modification of any Material
Permit.
2.2 Representations and Warranties of the Purchaser. The Purchaser
hereby represents and warrants to the Company as follows:
(a) Organization; Authority
The Purchaser is a corporation duly
incorporated or a limited partnership duly formed, validly existing and
in good standing under the laws of the jurisdiction of its incorporation
or formation with the requisite power and authority, corporate or
otherwise, to enter into and to consummate the transactions contemplated
hereby and by the Registration Rights Agreement and otherwise to carry
out its obligations hereunder and thereunder. The purchase by the
Purchaser of the Securities hereunder has been duly authorized by all
necessary action on the part of the Purchaser. Each of this Agreement
and the Registration Rights Agreement has been duly executed and
delivered by the Purchaser and constitutes the valid and legally binding
obligation of the Purchaser, enforceable against the Purchaser, in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights generally and
to general principles of equity.
(b) Investment Intent
The Purchaser is acquiring the Securities for its own account
for investment purposes only and not with a view to or for distributing
or reselling such Securities or any part thereof or interest therein,
without prejudice, however, to the Purchaser's right, subject to the
provisions of this Agreement and the Registration Rights Agreement, at
all times to sell or otherwise dispose of all or any part of such
Securities pursuant to an effective registration statement under the
Securities Act and in compliance with applicable state securities laws
or under an exemption from such registration.
(c) Purchaser Status
At the time the Purchaser was offered the Shares and the
Warrants, it was, and at the date hereof, it is, and at each Closing
Date and each exercise date under the Warrants, it will be, an
"accredited investor" as defined in Rule 501(a) under the Securities
Act.
(d) Experience of the Purchaser. The Purchaser either alone or
together with its representatives, has such knowledge, sophistication
and experience in business and financial matters so as to be capable of
evaluating the merits and risks of the prospective investment in the
Securities, and has so evaluated the merits and risks of such
investment.
(e) Ability of the Purchaser to Bear Risk of Investment. The Purchaser
is able to bear the economic risk of an
investment in the Securities and, at the present time, is able to afford
a complete loss of such investment.
(f) Access to Information. The Purchaser acknowledges receipt of
the Disclosure Materials and further acknowledges that it has been
afforded (i) the opportunity to ask such questions as it has deemed
necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the
Securities and the merits and risks of investing in the Securities; (ii)
access to information about the Company and the Company's financial
condition, results of operations, business, properties, management and
prospects sufficient to enable it to evaluate its investment; and (iii)
the opportunity to obtain such additional information which the Company
possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment and to verify the accuracy and completeness of the
information contained in the Disclosure Materials.
(g) Reliance. The
Purchaser understands and acknowledges that (i) the Securities are being
offered and sold to it without registration under the Securities Act in
a private placement that is exempt from the registration provisions of
the Securities Act under Section 4(2) of the Securities Act or
Regulation D promulgated thereunder and (ii) the availability of such
exemption, depends in part on, and the Company will rely upon the
accuracy and truthfulness of, the foregoing representations and the
Purchaser hereby consents to such reliance.
(h) Organization. The Purchaser represents and warrants
that it has not been organized or recapitalized specifically for the
purpose of purchasing the Securities.
The Company acknowledges and agrees that the Purchaser makes
no representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this
Section 2.2.
ARTICLE III
OTHER AGREEMENTS OF THE PARTIES
3.1 Transfer Restrictions.
(a) The Purchaser may only dispose of the Securities
held by it, pursuant to an effective registration statement under the
Securities Act, to the Company or pursuant to an available exemption
from the registration requirements of the Securities Act. In connection
with any transfer of Securities other than pursuant to an effective
registration statement or to the Company, except as otherwise set forth
herein, the Company may require the transferor thereof to provide to the
Company a written opinion of counsel experienced in the area of United
States securities laws selected by the transferor, the form and
substance of which opinion shall be reasonably satisfactory to counsel
to the Company, to the effect that such transfer does not require
registration of such transferred securities under the Securities Act.
Notwithstanding the foregoing, the Company hereby consents to and agrees
to register any transfer of Securities by the Purchaser to an Affiliate
of the Purchaser, or any transfer among any such Affiliates, provided
that transferee certifies to the Company that it is an "accredited
investor" as defined in Rule 501(a) under the Securities Act. Any such
transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of the Purchaser under this
Agreement and the Registration Rights Agreement.
(b) The Purchaser agrees to the imprinting, so long as is
required by this Section 3.1(b), of the following legend on the
Securities:
[NEITHER THESE SECURITIES NOR THE SECURITIES INTO WHICH THESE
SECURITIES ARE CONVERTIBLE HAVE] [THE SECURITIES REPRESENTED
HEREBY HAVE NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE
UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT
BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE
WITH APPLICABLE STATE SECURITIES LAWS.
[FOR SHARES ONLY] THE SHARES REPRESENTED BY THIS CERTIFICATE
ARE SUBJECT TO CERTAIN RESTRICTIONS ON CONVERSION SET FORTH IN A
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT, DATED AS OF MARCH
24, 1998, EXECUTED BY THE ORIGINAL HOLDER HEREOF. A COPY OF THAT
AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICE OF USCI, INC.
The Underlying Shares issuable upon conversion of the Shares
or as payment of dividends thereon or exercise of the Warrants shall not
contain the legend set forth above nor any other legend if the
conversion of such Shares or the payment of such dividends thereon or
exercise of the Warrants occurs at any time while an Underlying Shares
Registration Statement is effective under the Securities Act or in the
event there is not an effective Underlying Shares Registration Statement
at such time, if in the written opinion of counsel to the Company
experienced in the area of United States securities laws such legend is
not required under applicable requirements of the Securities Act
(including judicial interpretations and pronouncements issued by the
staff of the Commission). The Company agrees that it will provide the
Purchaser, upon request, with a certificate or certificates representing
Underlying Shares, free from such legend at such time as such legend is
no longer required hereunder.
3.2 Stop Transfer Instruction.
The Company may not make any notation on its
records or give instructions to any transfer agent of the Company which
enlarge the restrictions of transfer set forth in Section 3.1.
3.3 Furnishing of Information. As long as the Purchaser owns
Securities, the Company covenants to timely file (or obtain extensions
in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof
pursuant to Section 13(a) or 15(d) of the Exchange Act and to promptly
furnish the Purchaser with true and complete copies of all such filings.
As long as the Purchaser owns Securities, if the Company is not
required to file reports pursuant to Section 13(a) or 15(d) of the
Exchange Act, it will prepare and furnish to the Purchaser and make
publicly available in accordance with Rule 144(c) promulgated under the
Securities Act annual and quarterly financial statements, together with
a discussion and analysis of such financial statements in form and
substance substantially similar to those that would otherwise be
required to be included in reports required by Section 13(a) or 15(d) of
the Exchange Act, as well as any other information required thereby, in
the time period that such filings would have been required to have been
made under the Exchange Act. The Company further covenants that it will
take such further action as any holder of the Shares may reasonably
request, all to the extent required from time to time to enable such
Person to sell Underlying Shares without registration under the
Securities Act within the limitation of the exemptions provided by Rule
144 promulgated under the Securities Act, including the legal opinion
referenced above in this Section. Upon the request of any such Person,
the Company shall deliver to such Person a written certification of a
duly authorized officer as to whether it has complied with such
requirements.
3.4 Blue Sky Laws.
In accordance with the Registration Rights Agreement, the Company shall
qualify or exempt the issuance and sale of the Underlying Shares under
the securities or Blue Sky laws of such jurisdictions as the Purchaser
may request and shall continue such qualification or exemption at all
times through the third anniversary of the Closing Date; provided,
however, that neither the Company nor its Subsidiaries shall be required
in connection therewith to qualify as a foreign corporation where they
are not now so qualified or to take any action that would subject the
Company to general service of process in any such jurisdiction where it
is not then so subject or subject the Company to any material tax in any
such jurisdiction where it is not then so subject.
3.5 Integration.
The Company shall not sell, offer for sale or solicit offers to buy or
otherwise negotiate in respect of any security (as defined in Section 2
of the Securities Act) that would be integrated with the offer or sale of the
Securities in a manner that would require the registration under
the Securities Act of the sale of the Securities to the Purchaser.
3.6 Certain Agreements.
As long as the Purchaser owns Shares, the Company shall
not and shall cause the Subsidiaries not to, without the consent of the
holders of all of the Shares then outstanding, (i) amend its certificate
of incorporation, bylaws or other charter documents so as to adversely
affect any rights of any Purchaser; (ii) declare, authorize, set aside
or pay any dividend or other distribution with respect to the Common
Stock except as permitted under the Certificates of Designation and as
would not adversely affect the rights of any Purchaser hereunder or
under such Certificates of Designation; (iii) repay, repurchase or offer
to repay, repurchase or otherwise acquire shares of its Common Stock in
any manner; or (iv) enter into any agreement with respect to any of the
foregoing.
3.7 Listing and Reservation of Underlying Shares
(a) The Company shall (i) not later than the fifth Business Day following
the applicable Closing Date prepare and file with the NASDAQ (as well as
any other national securities exchange or market or trading or quotation
facility on which the Common Stock is then listed) an additional shares
listing application or a letter acceptable to the NASDAQ covering and
listing a number of shares of Common Stock which is at least equal to
the number of shares required to be reserved pursuant to Section 2.1(d),
(ii) take all steps necessary to cause the such shares to be approved
for listing in the NASDAQ (as well as on any other national securities
exchange or market or trading or quotation facility on which the Common
Stock is then listed) as soon as possible thereafter, and (iii) provide
to the Purchaser evidence of such listing, and the Company shall
maintain the listing of its Common Stock thereon. In the event that the
number of Underlying Shares as are issuable upon conversion in full of
the then number of outstanding Shares, as payment or dividends thereon,
and upon exercise of the then unexercised portion of the Warrants
exceeds 185% of the number of Underlying Shares previously listed on
account thereof with NASDAQ (and other required exchanges) the Company
shall take the necessary actions to immediately list a number of
Underlying Shares as equal to 200% of the number of Underlying Shares
then issuable upon conversion of the Shares and as payment of dividends
and exercise of Warrants.
(b) The Company shall reserve for issuance upon conversion
of the Shares and for payment of dividends thereupon in shares of Common
Stock pursuant to the terms of the Certificates of Designation and upon
exercise of the Warrants in accordance with their terms, as many shares
as may be required to fulfill such conversion, dividend and exercise
obligations, but in no event less than the number of shares to be listed
on the NASDAQ (and such other national securities exchange or market or
trading or quotation facility on which the Common Stock is then listed,
traded or quoted) as set forth in Section 3.7(a).
3.8 Purchaser Ownership of Common Stock The Purchaser agrees not
to convert Shares or exercise its Warrants to the extent such conversion
or exercise would result in the Purchaser beneficially owning (as
determined in accordance with Section 13(d) of the Exchange Act and the
rules thereunder) in excess of 4.999% of the then issued and outstanding
shares of Common Stock, including shares issuable upon conversion of the
Shares held by such Purchaser after application of this Section. To the
extent that the limitation contained in this Section applies, the
determination of whether Shares are convertible (in relation to other
securities owned by a Purchaser) and of which Shares are convertible
shall be in the sole discretion of the Purchaser, and the submission of
Shares for conversion shall be deemed to be such Purchaser's
determination of whether such Shares are convertible (in relation to
other securities owned by a Purchaser) and of which portion of such
Shares are convertible, in each case subject to such aggregate
percentage limitation, and the Company shall have no obligation to
verify or confirm the accuracy of such determination. Nothing
contained herein shall be deemed to restrict the right of the Purchaser
to convert Shares at such time as such conversion will not violate the
provisions of this Section. The provisions of this Section will not
apply to any conversion pursuant to Section 5(a)(ii) of the Certificates
of Designation, and may be waived by the Purchaser upon not less than 75
days prior notice to the Company, and the provisions of this Section
shall continue to apply until such 75th day (or later, if stated in the
notice of waiver).
3.9 No Violation of Applicable Law. Notwithstanding any provision of this
Agreement to the contrary, if the redemption of the Shares or Underlying
Shares otherwise required under this Agreement or the Registration
Rights Agreement would be prohibited by the relevant provisions of the
Delaware General Corporation Law, such redemption shall be effected as
soon as it is permitted under such law; provided, however, that from the
5th day after such redemption notice until such redemption price is paid
in full, interest on any such unpaid amount shall accrue at the rate of
15% per annum.
3.10 Notice of Breaches.
(a) Each of the Company and the Purchaser shall give
prompt written notice to the other of any breach of any representation,
warranty or other agreement contained in this Agreement or in the
Registration Rights Agreement, as well as any events or occurrences
arising after the date hereof and prior to the Series B Closing Date and
the Series C Closing Date which would reasonably be likely to cause any
representation or warranty or other agreement of such party, as the case
may be, contained herein to be incorrect or breached as of such Closing
Date. However, no disclosure by either party pursuant to this Section
3.9 shall be deemed to cure any breach of any representation, warranty
or other agreement contained herein or in the Registration Rights
Agreement.
(b) Notwithstanding the generality of Section 3.9(a), the
Company shall promptly notify the Purchaser of any notice or claim
(written or oral) that it receives from any lender of the Company to the
effect that the consummation of the transactions contemplated hereby and
by the Registration Rights Agreement violates or would violate any
written agreement or understanding between such lender and the Company,
and the Company shall promptly furnish by facsimile to the holders of
the Shares a copy of any written statement in support of or relating to
such claim or notice.
3.11 Conversion and Exercise Obligations of the Company. The Company covenants
to convert the Shares and to deliver
Underlying Shares in accordance with the terms and conditions and time
period set forth in the respective Certificates of Designation and to
deliver Underlying Shares upon exercise of Warrants in accordance with
the terms and conditions and time periods set forth in the Warrants.
3.12 Right of First Refusal; Subsequent Registrations; Certain Corporate
Actions. (a) The Company
shall not, directly or indirectly, without the prior written consent of
Encore Capital Management, L.L.C. ("Encore"), offer, sell, grant any
option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition) any of its
or its Affiliates' equity or equity-equivalent securities or any
instrument that permits the holder thereof to acquire Common Stock at
any time over the life of the security or investment at a price that is
less than the market price of the Common Stock at the time of issuance
of such security or investment (a "Subsequent Placement" for a period of
180 days after any Closing Date, except (i) the granting of options or
warrants to employees, officers and directors, and the issuance of
shares upon exercise of options granted, under any stock option plan
heretofore or hereinafter duly adopted by the Company, (ii) shares
issued upon exercise of any currently outstanding warrants and upon
conversion of any currently outstanding convertible preferred stock in
each case disclosed in Schedule 3.1(c), and (iii) shares of Common Stock
issued upon conversion of Shares, as payment of dividends thereon, or
upon exercise of the Warrants in accordance with their respective terms,
unless (A) the Company delivers to Encore a written notice (the
"Subsequent Placement Notice") of its intention effect such Subsequent
Placement, which Subsequent Placement Notice shall describe in
reasonable detail the proposed terms of such Subsequent Placement, the
amount of proceeds intended to be raised thereunder, the Person with
whom such Subsequent Placement shall be affected, and attached to which
shall be a term sheet or similar document relating thereto and (B)
Encore shall not have notified the Company by 5:00 p.m. (New York City
time) on the tenth (10th) Trading Day after its receipt of the
Subsequent Placement Notice of its willingness to cause the Purchaser to
provide (or to cause its sole designee to provide), subject to
completion of mutually acceptable documentation, financing to the
Company on substantially the terms set forth in the Subsequent Placement
Notice. If Encore shall fail to notify the Company of its intention to
enter into such negotiations within such time period, the Company may
effect the Subsequent Placement substantially upon the terms and to the
Persons (or Affiliates of such Persons) set forth in the Subsequent
Placement Notice; provided, that the Company shall provide Encore with a
second Subsequent Placement Notice, and Encore shall again have the
right of first refusal set forth above in this paragraph (a), if the
Subsequent Placement subject to the initial Subsequent Placement Notice
shall not have been consummated for any reason on the terms set forth in
such Subsequent Placement Notice within thirty (30) Trading Days after
the date of the initial Subsequent Placement Notice with the Person (or
an Affiliate of such Person) identified in the Subsequent Placement
Notice.
(b) Except Underlying Shares and other "Registrable
Securities" (as such term is defined in the Registration Rights
Agreement) required to be registered in accordance with the Registration
Rights Agreement and other securities of the Company permitted to be
registered pursuant to Section 6(b) of the Registration Rights
Agreement, and other than Company securities to be registered for resale
in connection with financings permitted pursuant to paragraph (a)(i)
through (iii) of this Section, the Company shall not, without the prior
written consent of the Purchaser, (i) issue or sell any of its or any of
its Affiliates' equity or equity-equivalent securities pursuant to
Regulation S promulgated under the Securities Act, or (ii) register for
resale any securities of the Company for a period of not less than 90
Trading Days after the later to occur of (1) the date that an Underlying
Shares Registration Statement is declared effective by the Commission
(provided, that in the event that the Underlying Shares Registration
Statement filed in connection with the Series A Closing does not cover
the Underlying Shares issuable upon conversion or exercise of the Series
B Shares, Series C Shares, Series B Warrants and Series C Warrants, then
each such 90 Trading Day period shall commence on the date that the
Underlying Shares Registration Statements covering the Underlying Shares
issuable in respect of the Series B Shares and Series B Warrants and
Series C Shares and Series C Warrants are respectively declared
effective by the Commission) and (2) the 90th Trading Day after the
Series B Closing Date and Series C Closing Date, as applicable. Any
days that the Purchaser is unable to sell Underlying Shares under an
Underlying Shares Registration Statement shall be added to such 90
Trading Day period.
3.13 Press Release. The Company shall issue a press release within two
Business Days of each Closing Date, as applicable, relating to the issue
and sale of the Shares and Warrants to the Purchaser at such Closing
Date, which press releases shall be approved by the Purchaser.
3.14 Annual Report on Form 10-K. The Company shall file an
Annual Report on Form 10-K for the fiscal year ended December 31, 1997
prior to March 31, 1998.
3.15 Use of Proceeds. The Company shall use all of the proceeds from
the sale of the Shares for working capital and general corporate
purposes and not for the satisfaction of any portion of Company
borrowings or to redeem Company equity or equity-equivalent securities.
Pending application of the proceeds of this placement in the manner
permitted hereby, the Company will invest such proceeds in interest
bearing accounts and/or short-term, investment grade interest bearing
securities.
3.16 Reimbursement . In the event that the Purchaser, other than by
reason of its gross negligence or willful misconduct, becomes involved
in any capacity in any action, proceeding or investigation brought by or
against any Person, including stockholders of the Company, in connection
with or as a result of the consummation of the transactions contemplated
pursuant to the Transaction Documents, the Company will reimburse the
Purchaser for its reasonable legal and other expenses (including the
cost of any investigation and preparation) incurred in connection
therewith. In addition, other than with respect to any matter in which
the Purchaser is a named party, the Company will pay the Purchaser the
charges, as reasonably determined by the Purchaser, for the time of any
officers or employees of the Purchaser devoted to appearing and
preparing to appear as witnesses, assisting in preparation for hearings,
trials or pretrial matters, or otherwise with respect to inquiries,
hearings, trials, and other proceedings relating to the subject matter
of this Agreement. The reimbursement obligations of the Company under
this paragraph shall be in addition to any liability which the Company
may otherwise have, shall extend upon the same terms and conditions to
any Affiliate of the Purchaser and partners, directors, agents,
employees and controlling persons (if any), as the case may be, of the
Purchaser and any such Affiliate, and shall be binding upon and inure to
the benefit of any successors, assigns, heirs and personal
representatives of the Company, the Purchaser and any such Affiliate and
any such Person. The Company also agrees that neither the Purchaser nor
any such Affiliates, partners, directors, agents, employees or
controlling persons shall have any liability to the Company or any
person asserting claims on behalf of or in right of the Company in
connection with or as a result of the consummation of the Transaction
Documents except to the extent that any losses, claims, damages,
liabilities or expenses incurred by the Company result from the gross
negligence or willful misconduct of the Purchaser or entity in
connection with the transactions contemplated by this Agreement. The
Purchaser shall not, without the prior written consent of the Company,
effect any settlement of any action in respect of which the Company is a
party.
ARTICLE IV
4.1 Conditions Precedent to the Obligation of the Purchaser to Purchase the
Series B Shares. The obligation of the Purchaser to acquire and pay for the
Series B Shares is subject to the satisfaction or waiver by the
Purchaser, at or before the Series B Closing of each of the following
conditions:
(i) Series A Closing . The Series A Closing shall have occurred;
(ii) Accuracy of the Company's Representations and Warranties The
representations and warranties of the Company contained herein shall
be true and correct in
all material respects as of the date when made and as of the Series B
Closing Date as though made on and as of the Series B Closing Date.
(iii) Performance by the Company . The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at
or prior to the Series B Closing Date;
(iv) Underlying Shares Registration Statement
The Underlying Shares Registration Statement shall have been declared
effective under the Securities Act by the Commission. On the Series B
Closing Date, the Underlying Shares Registration Statement shall be
effective, not subject to any actual or threatened stop order and not be
subject to any actual or threatened suspension at any time between the
Series A Closing Date and the Series B Closing Date;
(v) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents relating to the issuance or
conversion of any of the Shares or exercise of the Warrants;
(vi) Adverse Changes Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report
on Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect and no
material adverse change in the condition (financial or otherwise) or
prospects of the Company shall have occurred which is not disclosed in
the Disclosure Materials;
(vii) Litigation. No material litigation shall have been instituted
or threatened against the Company;
(viii) Management. In the reasonable judgment of the Purchaser, there
have been no substantial changes in the senior management of the
Company;
(ix) No Suspensions of Trading in Common Stock. The
trading in the Common Stock shall not have been suspended by the
Commission or on the NASDAQ (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company) at any time since the Series A Closing Date;
(x) Listing of Common Stock The Common Stock shall have been at
all times since the Series A Closing Date listed for trading on the
NASDAQ;
(xi) Change of Control No Change of Control in the Company shall
have occurred. "Change of Control" means the occurrence of any of (i)
an acquisition after the date hereof by an individual or legal entity or
"group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange
Act) of in excess of 33% of the voting securities of the Company, (ii) a
replacement of more than one-half of the members of the Company's board
of directors which is not approved by those individuals who are members
of the board of directors on the date hereof in one or a series of
related transactions, (iii) the merger of the Company with or into
another entity, consolidation or sale of all or substantially all of the
assets of the Company in one or a series of related transactions or (iv)
the execution by the Company of an agreement to which the Company is a
party or by which it is bound, providing for any of the events set forth
above in (i), (ii) or (iii);
(xii) Legal Opinion.
The Company shall have delivered to the Purchaser the
opinion of the Company's outside counsel, in substantially the form
attached hereto as Exhibit D dated the Series B Closing Date;
(xiii) Required Approvals. All Required Approvals shall have been
obtained;
(xiv) Shares of Common Stock. On the Series B Closing Date, the
Company shall have duly reserved the number of Underlying Shares
required by this Agreement to be reserved for issuance upon conversion
of Series B Shares and payment of dividends thereon;
(xv) Delivery of Stock Certificates . The Company shall have
delivered to the Purchaser or its designee the stock certificate(s)
representing the Series B Shares, registered in the name of the
Purchaser or its designee, each in form satisfactory to the Purchaser;
(xvi) Performance of Conversion/Exercise Obligations.
The Company shall have (a) delivered Underlying Shares
upon conversion of Series A Shares and otherwise performed its
obligations in accordance with the terms, conditions and timing
requirements of the Series A Certificate of Designation and (b)
delivered Underlying Shares upon exercise of the Series A Warrants and
otherwise performed its obligations in accordance with the terms of the
Series A Warrants;
(xvii) Closing Threshold
For the thirty (30) Trading Days immediately prior
to the Series B Closing Date, (i) the Per Share Market Value shall have
been equal to or greater than $4.00, (ii) there shall be a minimum of
twelve (12) market makers actively making a market in the Common Stock,
and (iii) the average weekly dollar volume of the Common Stock traded on
the NASDAQ shall be at least $1,000,000;
(xviii) Transfer Agent Instructions
The Irrevocable Transfer Agent Instructions, in the form of Exhibit F
attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent; and
(xix) Shareholder Approval. No approval of the shareholders of the
Company shall be required in order to issue the Underlying Shares
issuable upon conversion in full of the Series B Shares to be issued and
sold at the Series B Closing.
(xx) Officer's Certificate. On the Series B Closing Date the Company
shall deliver to the Purchaser an Officer's Certificate dated the Series
B Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of the Series B Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section
4.1 as of the Series B Closing Date.
4.2 Conditions Precedent to the Obligation of the Purchaser to
Purchase the Series C Shares.
The obligation of the Purchaser to acquire and pay for the
Series C Shares is subject to the satisfaction or waiver by the
Purchaser, at or before the Series C Closing of each of the following
conditions:
(i) Series B Closing. The Series B Closing shall have occurred;
(ii) Accuracy of the Company's Representations and Warranties
The representations and
warranties of the Company contained herein shall be true and correct in
all material respects as of the date when made and as of the Series C
Closing Date as though made on and as of the Series C Closing Date;
(iii) Performance by the Company The Company shall have
performed, satisfied and complied in all material respects with all
covenants, agreements and conditions required by the Transaction
Documents to be performed, satisfied or complied with by the Company at
or prior to the Series C Closing Date;
(iv) Underlying Shares Registration Statement
The Underlying Shares Registration Statement covering the Series B
Shares and Series B Warrants shall have been declared effective under
the Securities Act by the Commission. On the Series C Closing Date,
such Underlying Shares Registration Statement shall be effective, not
subject to any actual or threatened stop order and not be subject to any
actual or threatened suspension at any time between the Series B Closing
Date and the Series C Closing Date;
(v) No Injunction. No statute, rule, regulation, executive order, decree,
ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court of governmental authority of competent
jurisdiction which prohibits the consummation of any of the transactions
contemplated by the Transaction Documents relating to the issuance or
conversion of any of the Shares or exercise of the Warrants;
(vi) Adverse Changes. Since the date of the financial statements
included in the Company's Quarterly Report on Form 10-Q or Annual Report
on Form 10-K, whichever is more recent, last filed prior to the date of
this Agreement, no event which had a Material Adverse Effect and no
material adverse change in the condition (financial or otherwise) or
prospects of the Company shall have occurred which is not disclosed in
the Disclosure Materials;
(vii) Litigation. No material litigation shall have been instituted
or threatened against the Company;
(viii) Management. In the reasonable judgment of each Purchaser, there
have been no substantial changes in the senior management of the
Company;
(ix) No Suspensions of Trading in Common Stock The
trading in the Common Stock shall not have been suspended by the
Commission or on the NASDAQ (except for any suspension of trading of
limited duration solely to permit dissemination of material information
regarding the Company at any time since the Series A Closing Date);
(x) Listing of Common Stock The Common Stock shall have been at
all times since the Series A Closing Date listed for trading on the
NASDAQ;
(xi) Change of Control. No Change of Control in the Company shall
have occurred;
(xii) Legal Opinion.
The Company shall have delivered to the Purchaser the
opinion of the Company's outside counsel, in substantially the form
attached hereto as Exhibit D dated the Series C Closing Date;
(xiii) Required Approvals.
All Required Approvals shall have been obtained;
(xiv) Shares of Common Stock. On the Series C Closing Date, the
Company shall have duly reserved the number of Underlying Shares
required by this Agreement to be reserved for issuance upon conversion
of Series C Shares and payment of dividends thereon;
(xv) Delivery of Stock Certificates. The Company shall have
delivered to the Purchaser or its designee the stock certificate(s)
representing the Series C Shares, registered in the name of the
Purchaser or its designee, each in form satisfactory to the Purchaser;
(xvi) Performance of Conversion/Exercise Obligations.
The Company shall have (a) delivered Underlying Shares
upon conversion of Series A Shares and Series B Shares and otherwise
performed its obligations in accordance with the terms, conditions and
timing requirements of each of the Series A Certificate of Designation
and Series B Certificate of Designation and (b) delivered Underlying
Shares upon exercise of the Series A Warrants and the Series B Warrants
(as the case may be) and otherwise performed its obligations in
accordance with the terms of such Warrants;
(xvii) Closing Threshold.
For the thirty (30) Trading Days immediately prior
to the Series C Closing Date, (i) the Per Share Market Value shall have
been equal or greater than $4.00, (ii) there shall be a minimum of
twelve (12) market makers actively making a market in the Common Stock,
and (iii) the average weekly dollar volume of the Common Stock traded on
NASDAQ shall be a minimum of $1,000,000;
(xviii) Transfer Agent Instructions
The Irrevocable Transfer Agent Instructions, in the form of Exhibit F
attached hereto, shall have been delivered to and acknowledged in
writing by the Company's transfer agent; and
(xix) Shareholder Approval. No approval of the shareholders of the
Company shall be required in order to issue the Underlying Shares
issuable upon conversion in full of the Series C Shares to be issued and
sold at the Series C Closing.
(xx) Officer's Certificate. On the Series C Closing Date the Company
shall deliver to the Purchaser an Officer's Certificate dated the Series
C Closing Date and signed by an executive officer of the Company
confirming the accuracy of the Company's representations, warranties and
covenants as of the Series C Closing Date and confirming the compliance
by the Company with the conditions precedent set forth in this Section
4.2 as of the Series C Closing Date.
ARTICLE IV
MISCELLANEOUS
5.1 Fees and Expenses.
At the Series A Closing, the Company shall pay $15,000 to
the Escrow Agent, in connection with the preparation and negotiation
of the Transaction Documents, and $5,000 to the Purchaser or its
designee for due diligence expenses. At each of the Series B Closing
and Series C Closing, the Company will pay to the Escrow Agent, $7,500
the preparation of any documentation for such Closing. Otherwise,
each party shall pay the fees and expenses of its advisers, counsel,
accountants and other experts, if any, and all other expenses incurred
by such party incident to the negotiation, preparation, execution,
delivery and performance of this Agreement, except as set forth in the
Registration Rights Agreement. The Company shall pay all stamp and
other taxes and duties levied in connection with the issuance of the
Shares pursuant hereto.
5.2 Entire Agreement; Amendments. This Agreement, together with
the Exhibits and Schedules hereto, the Registration Rights Agreement,
the Certificates of Designation, the Escrow Agreement and the Warrants
contain the entire understanding of the parties with respect to the
subject matter hereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters.
5.3 Notices.
Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be deemed to have been
received (a) upon hand delivery (receipt acknowledged) or delivery by
telex (with correct answer back received), telecopy or facsimile (with
transmission confirmation report) at the address or number designated
below (if delivered on a business day during normal business hours
where such notice is to be received), or the first business day
following such delivery (if delivered on a business day after during
normal business hours where such notice is to be received) or (b) on
the second business day following the date of mailing by express
courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The
addresses for such communications shall as set forth below each
parties name on Schedule 1, and if to the Company with copies to the
Law Offices of Xxxxxxx X. Xxxxx, P.A., 00 Xxxxxxx Xxxxxx, X.X. Xxx
000, Xxxxxxx, X.X. 00000 (fax: 000-000-0000) Attn: Xxxxxxx X. Xxxxx,
Esq., and if to any Purchaser with copies to Xxxxxxxx Xxxxxxxxx Xxxxxx
Xxxxxxxx & Xxxxxx LLP, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX
00000, Attn: Xxxx X. Xxxxx, Esq., fax: (000) 000-0000, or such other
address as may be designated in writing hereafter, in the same manner,
by such Person.
5.4 Amendments; Waivers. No provision of this Agreement may be
waived or amended except in a written instrument signed, in the case
of an amendment, by both the Company and the Purchaser; or, in the
case of a waiver, by the party against whom enforcement of any such
waiver is sought. No waiver of any default with respect to any
provision, condition or requirement of this Agreement shall be deemed
to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or
omission of either party to exercise any right hereunder in any manner
impair the exercise of any such right accruing to it thereafter.
Notwithstanding the foregoing, no such amendment shall be effective to
the extent that it applies to less than all of the holders of the
Shares outstanding.
5.5 Headings. The headings herein are for convenience only, do not
constitute a part of this Agreement and shall not be deemed to limit
or affect any of the provisions hereof.
5.6 Successors and Assigns. This Agreement shall be binding upon
and inure to the benefit of the parties and their successors and
permitted assigns. The Company may not assign this Agreement or any
rights or obligations hereunder without the prior written consent of
the Purchaser. No Purchaser may assign this Agreement (other than to
an Affiliate of the Purchaser) or any rights or obligations hereunder
without the prior written consent of the Company, except that any
Purchaser may assign its rights hereunder and under the Transaction
Documents without the consent of the Company as long as such assignee
demonstrates to the reasonable satisfaction of the Company its
satisfaction of the representations and warranties set forth in
Section 2.2. This provision shall not limit the Purchaser's right to
transfer securities or transfer or assign rights hereunder or under
the Registration Rights Agreement.
5.7 No Third-Party Beneficiaries. This Agreement is
intended for the benefit of the parties hereto and their respective
permitted successors and assigns and is not for the benefit of, nor
may any provision hereof be enforced by, any other person.
5.8 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the
State of New York without regard to the principles of conflicts of law
thereof. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the state and Federal courts sitting in the City of
New York, borough of Manhattan, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction
contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding,
any claim that it is not personally subject to the jurisdiction of any
such court, that such suit, action or proceeding is improper. Each
party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in
effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and
notice thereof. Nothing contained herein shall be deemed to limit in
any way any right to serve process in any manner permitted by law.
5.9 Survival. The representations, warranties, agreements and
covenants contained herein shall survive each Closing and the delivery
and conversion or exercise (as the case may be) of the Shares and
Warrants.
5.10 Execution. This Agreement may be executed in two or more
counterparts, all of which when taken together shall be considered one
and the same agreement and shall become effective when counterparts
have been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same counterpart.
In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid and binding
obligation of the party executing (or on whose behalf such signature
is executed) the same with the same force and effect as if such
facsimile signature page were an original thereof.
5.11 Publicity. The Company and the Purchaser shall consult with
each other in issuing any press releases or otherwise making public
statements with respect to the transactions contemplated hereby and
neither party shall issue any such press release or otherwise make any
such public statement without the prior written consent of the other,
which consent shall not be unreasonably withheld or delayed, except
that no prior consent shall be required if such disclosure is required
by law, in which such case the disclosing party shall provide the
other party with prior notice of such public statement. The Company
shall not publicly or otherwise disclose the name of the Purchaser
without the Purchaser's prior written consent.
5.12 Severability. In case any one or more of the provisions of
this Agreement shall be invalid or unenforceable in any respect, the
validity and enforceability of the remaining terms and provisions of
this Agreement shall not in any way be affecting or impaired thereby
and the parties will attempt to agree upon a valid and enforceable
provision which shall be a reasonable substitute therefor, and upon so
agreeing, shall incorporate such substitute provision in this
Agreement.
5.13 Remedies. In addition to being entitled to exercise all rights
provided herein or granted by law, including recovery of damages, the
Purchaser will be entitled to specific performance of the obligations
of the Company under the Transaction Documents. Each of the Company
and the Purchaser (severally and not jointly) agree that monetary
damages may not be adequate compensation for any loss incurred by
reason of any breach of its obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific
performance of any such obligation the defense that a remedy at law
would be adequate.
5.14 No Reliance.
Each party acknowledges that (i) it has such knowledge in
business and financial matters as to be fully capable of evaluating
this Agreement, the other Transaction Documents and the transactions
contemplated hereby and thereby, (ii) it is not relying on any advice
or representation of the other party in connection with entering into
this Agreement, the other Transaction Documents or such transactions
(other than the representations made in this Agreement or the other
Transaction Documents), (iii) it has not received from such party any
assurance or guarantee as to the merits (whether legal, regulatory,
tax, financial or otherwise) of entering into this Agreement or the
other Transaction Documents or the performance of its obligations
hereunder and thereunder, and (iv) it has consulted with its own
legal, regulatory, tax, business, investment, financial and accounting
advisors to the extent that it has deemed necessary, and has entered
into this Agreement and the other Transaction Documents based on its
own independent judgment and on the advice of its advisors as it has
deemed necessary, and not on any view (whether written or oral)
expressed by such party.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have caused this
Convertible Preferred Stock Purchase Agreement to be duly executed by
their respective authorized signatories as of the date first indicated
above.
USCI, INC.
By:_____________________________________
Name:
Title:
JNC OPPORTUNITY FUND LTD.
By:_____________________________________
Name:
Title:
CONVERTIBLE PREFERRED STOCK PURCHASE AGREEMENT
Between
USCI, INC.
and
JNC OPPORTUNITY FUND LTD.
Dated as of March 24, 1998
Schedule 1
Company:
USCI, Inc.
0000-X Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxx 00000
Facsimile: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxxxx
Purchaser:
JNC Opportunity Fund Ltd.
Olympia Capital (Cayman) Ltd.
c/o Olympia Capital (Bermuda) Ltd.
Xxxxxxxx Xxxxx, 00 Xxxx Xxxxxx
Xxxxxxxx XX00, Xxxxxxx
Facsimile: (000) 000-0000
Attn: Director
With copies to:
Encore Capital Management, L.L.C.
00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000
Xxxxxx, XX 00000
Facsimile: (000) 000-0000
Attn: Xxxx X. Xxxx
