Exhibit 10.65
AGREEMENT dated as of April 26, 1999 by and among USCI, INC., a
Delaware corporation having an office at 0000-X Xxxxx Xxxxxx Xxxx., Xxxxxxxx,
XX 00000 (the "Company"), JNC OPPORTUNITY FUND LTD., having an office c/o
Encore Capital Management, 00000 Xxxxxxx Xxxxxx Xxxxx, Xxxxx 000, Xxxxxx,
Xxxxxxxx 00000 ("JNC"), XXXXXX XXXXXXXXX, having an office at 0000 00xx
Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Xxxxxx"), XXXXXXX XXXXXXXXX, having an
office at 0000 00xx Xxxxxx, Xxxxxxxx, Xxx Xxxx 00000 ("Xxxxxxx"), HUBERFELD
XXXXXX FAMILY FOUNDATION, INC., having an office at 000 X. 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (the "Foundation"), and XXXXX XXXXXXXXX/XXXXX XXXXXX
PARTNERSHIP, having an office at 000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
(the "Partnership"). JNC, George, Michael, the Foundation and the
Partnership are hereinafter sometimes collectively referred to as the
"Selling Shareholders."
WHEREAS, JNC is the registered and beneficial owner of 435 shares
of Series A Convertible Preferred Stock of the Company ("Series A Shares");
500 shares of Series B Convertible Preferred Stock of the Company ("Series B
Shares"); and 500 shares of Series C Convertible Preferred Stock of the
Company ("Series C Shares");
WHEREAS, Xxxxxx and Xxxxxxx are registered and beneficial owners of
125 shares of Series D Preferred Stock of the Company ("Series D Shares" and,
collectively with the Series A Shares, Series B Shares and Series C Shares,
the "Preferred Shares");
WHEREAS, the Foundation is the registered and beneficial owner of
93.75 Series D Shares.
WHEREAS, the Partnership is the registered and beneficial owner of
131.25 Series D Shares.
WHEREAS, the holders of the Preferred Shares have each notified the
Company of their intent to convert Preferred Shares into shares of Common
Stock of the Company subject to the terms and conditions set forth in this
Agreement;
NOW, THEREFORE, for good and valuable consideration each Selling
Shareholder and the Company hereby agree as follows:
1. Conversion of Preferred Shares. The Company shall on the date
hereof issue at $0.02 per share 75,000,000 of its authorized but unissued
Common Stock to the holders of the Preferred Shares, upon the conversion of
Preferred Shares as follows:
Preferred Shares Conversion Summary
Selling Shareholder Value Converted
------------------- ---------------
JNC $500,000
Xxxxxx $250,000
Xxxxxxx $250,000
the Foundation $208,350
the Partnership $291,650
2. Amendment of Certificates of Designation for the Preferred
Shares. The balance of the Preferred Shares shall be convertible into shares
of Common Stock at the option of the holders thereof at a conversion price
equal to the lesser of $1.00 per share or 85% of the average closing bid
price of the Common Stock during the five consecutive trading days prior to
conversion (or, if none, the share price in the good faith opinion of the
Board of Directors). The Company will promptly amend the Certificates of
Designation for the Preferred Shares to provide for the conversion price set
forth above. In consideration therefor, the Selling Shareholders shall do
the following: (1) waive all dividends that accrue after the date of this
Agreement with respect to the Preferred Shares; (2) waive all defaults which
have accrued with respect to the Preferred Shares; and (3) confirm that all
warrants to acquire Common Stock owned by them are canceled.
3. Amendment of Stock Option Plan. (a) The Board of Directors of
the Company is increasing by 5,5000,000 the number of options which may be
granted under the Company's 1997 Stock Option Plan (the "Plan"), which
options will be granted to senior management at 10 cents per share, and which
options will vest on such terms as the Board or a committee of the Board
deems most advisable to incentives members of senior management. Although
the amendment to the Plan will be submitted to shareholders for approval in
order to be in a position to grant ISO's, the Board shall be permitted to
grant non-ISO options without shareholder approval.
(b) The Company will promptly file a registration statement
on Form S-8 to cover the grant of these options and the sale of the shares
acquired upon exercise thereof.
4. Special Provisions for Xxxxxx Xxxxxxxxx. The Company shall
issue to Xx. Xxxxxx Xxxxxxxxx 5,000,000 shares of the authorized but
uninsured Common Stock of the Company in consideration of the services
rendered by Xx. Xxxxxxxxx in the reorganization of the Company including the
restructuring of the Foothill Capital Corp. Credit Facility ("Credit
Facility") and the negotiation of payment schedules for certain outstanding
Company indebtedness. Should the Company within the next three years issue
additional common stock (other than pursuant to (i) conversions of any
Preferred Shares, (ii) shares issued under stock option plans whether now
existing or adopted hereafter or (iii) creditor claims contemplated under
Section 5 of this Agreement), the Company shall also for no consideration
issue additional shares to Xx. Xxxxxxxxx in an amount so that he at all times
owns not less than 5% of the outstanding Common Stock.
5. Issuance of Common Stock to Creditors. The Company shall
reserve for issuance 3,000,000 shares of its authorized but unissued Common
Stock for settlement of creditor claims.
6. Funding of Foothill Capital Corp. Credit Facility. The
Selling Shareholders or persons introduced by them (the "Lenders") have
entered into a Participation Agreement with Foothill Capital Corp.
("Foothill") under which the Lenders have agreed to acquire 100% of
Foothill's commitment to Ameritel Communications, Inc. to fund $7 million in
Tranche B Loans pursuant to the Participation Agreement and a related Escrow
Agreement. The Commitments are broken down as follows:
JNC $ 4,000,000
Xxxxxx Xxxxxxxxx $ 750,000
Xxxxxxx Xxxxxxxxx $ 750,000
Foundation $ 750,000
Partnership $ 750,000
Total $ 7,000,000
The Tranche B Loans are convertible into the Company's Common Stock
in accordance with the terms thereof at a price equal to $.50 per share.
7. Board of Directors. Upon completion of the conversion of the
Preferred Shares and the funding of the Credit Facility in accordance with
the terms of this Agreement, Xx. Xxxxx Xxxx will continue as an executive
officer of the Company with sales and marketing responsibilities, but will
resign as Chairman of the Board of Directors of the Company, and the current
Board of Directors of the Company shall resign and three designees of the
Selling Shareholders shall be elected to the Company's Board of Directors,
one of which shall be elected President and Chief Executive Officer of the
Company.
8. Registration. (a) The Company will use its best efforts to
promptly, but no later than June 1, 1999, file a registration statement on
Form S-1 or SB-2 (the "Registration Statement") for the public resale by the
Selling Shareholders (which term for the purposes of this Section and the
following Sections shall also include Xxxxxx Xxxxxxxxx) of all of the shares
of Common Stock issued or issuable on conversion of Preferred Shares and on
conversion of the Tranche B Loans contemplated by Section 6. Shares issued
under the Plan shall not be registered on such Registration Statement. The
shares to be covered by the Registration Statement of Form S-1 or SB-2 are
collectively referred to as the "Registered Shares."
(b) The Company shall use its best efforts to cause the
registration Statement to become effective not later than 90 days after the
date of this Agreement, and shall use its best efforts to cause such
Registration Statement to remain effective for four years after the date it
is declared effective by the Securities and Exchange Commission. If required
under law, the Company shall use its best efforts to obtain blue sky
clearances in such states as the Selling Shareholders may reasonably request.
(c) The Company shall pay all expenses of the registration
hereunder, other than Selling Shareholders' underwriting discounts or other
fees incurred on a voluntary basis. Should the Selling Shareholders
determine to sell their Registered Shares in an underwritten offering, the
Company shall reasonably cooperate with the Selling Shareholders, and the
underwriter shall be selected by the joint agreement of JNC and at least one
other Selling Shareholder.
(d) The Company shall supply to each Selling Shareholder a
reasonable number of copies of all registration materials and prospectuses.
The Company and Selling Shareholders shall execute and deliver to each other
indemnity agreement which are conventional in registered offerings of this
type. The Selling Shareholders shall reasonably cooperate with the Company
in the preparation and filing of the Registration Statement and appropriate
amendments thereto.
(e) Each Selling Shareholder may transfer all or any
proportionate part of its registration rights to transferees of the
Securities, provided that such transferee (i) is an accredited investor, (ii)
makes the representations and warranties made by Selling Shareholder in the
following Section, and (iii) agrees to be bound by this Agreement as a
"Selling Shareholder."
(f) Reference is made to a Registration Rights Agreement
dated March 24, 1998 (the "Agreement") between the Company and JNC. The
Registered Shares are deemed "Registerable Securities" under the Agreement,
and the persons for whom such Registered Shares are to be registered under
this Section are deemed "Holders" under the Agreement. To the extent this
Section and the Agreement are inconsistent, the provisions which afford
greater rights to the Holders shall govern.
10. Securities Representations. (a) For purposes of this
Section, the shares of Common Stock of the Company shall be referred to as
the "Securities."
(b) Each Selling Shareholder represents and warrants for
itself that it is purchasing and has purchased the Securities solely for
investment solely for its own account and not with a view to or for the
resale or distribution there of except as permitted under a registration
statement or under any exemption from registration which is available under
the securities law.
(c) Each Selling Shareholder understands that it may sell or
otherwise transfer the Securities or the shares issuable on conversion of the
Tranche B Loans only if such transaction is registered under the Securities
Act of 1933, as amended, under the Registration Statement or otherwise, or if
the Company shall have received the favorable opinion of counsel to the
Selling Shareholder, which opinion shall be reasonably satisfactory to
counsel to the Company, to the effect that such sale or other transfer may be
made in the absence of registration under the Securities Act of 1933, as
amended.
(d) Each Selling Shareholder represents for itself that it
understands that the Securities are not a liquid investment, that it is to
bear the economic risk of losing its entire investment in the Securities,
that an investment in the Company involves substantial risks, that it has
received all information it considers necessary or appropriate for the
purpose of deciding whether to purchase the Securities, and that it has had
an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the investment in the Securities and
the business, properties, prospects and financial condition of the Company.
(e) Each Selling Shareholder represents for itself that is
has not relied upon the advice of a "Purchaser Representative" (as defined in
Regulation D of the Securities Act) in evaluating the risks and merits of
this investment. Such Selling Shareholder represents for itself that it has
the knowledge and experience to evaluate the Securities and the risks and
merits relating thereto.
(f) Each Selling Shareholder represents and warrants for
itself that it is an "accredited investor" as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act of 1933, as amended,
that it has the power and authority to enter into this Agreement, and that
the execution and delivery of, and performance under this Agreement shall not
conflict with any rule, regulation, judgement or agreement applicable to the
Selling Shareholder.
(g) Each of the Foundation and Partnership represents and
warrants that it has not been organized, reorganizes or recapitalized
specifically for the purposes of investing in the Securities.
11. Miscellaneous. (a) This Agreement may not be changed or
terminated except by written agreement signed by all the parties hereto. It
shall be binding upon and inure to the benefit of the parties and their
successors and permitted assigns, and Section 4 hereof shall inure to the
benefit of Xxxxxx Xxxxxxxxx. This Agreement sets forth the entire agreements
of the parties with respect to the specific subject matter hereof. It shall
be enforceable by decrees of specific performance (without bond or other
security) as well as by other available remedies. This Agreement shall be
governed by, and construed in accordance with, the laws of Delaware. The
federal and state courts sitting in the City of New York shall have exclusive
jurisdiction over all matters relating to this Agreement and each party
hereby irrevocably submits to the jurisdiction of the state and federal
courts of the State of New York located in the Borough of Manhattan for such
purposes and hereby waives any claim or defense that such courts are an
inconvenient forum. Trial by jury is expressly waived. The Company shall
reimburse Selling Shareholders for Selling Shareholder's reasonable legal
fees and cost to enforce its right under this Agreement.
(b) All notices, requests, service of process, consents, and
other communications under this Agreement shall be in writing and shall be
deemed to have been delivered (i) on the date personally delivered or (ii)
one day after promptly sent by Federal Express, addressed to the respective
parties at their address set forth in this Agreement or (iii) on the day
transmitted by facsimile so long as a confirmation copy is simultaneously
forwarded by Federal Express, in each case addressed to the respective
parties at their address set forth in this Agreement. Either party hereto
may designate a different address by providing written notice of such new
address to the other party hereto as provided above. Service of process may
be effected in the manner provided for notices hereunder, and such service in
such manner shall be deemed the equivalent or personal service.
(c) The existing rights and obligations of the parties under
all other agreements and instruments entered into between any Selling
Shareholder and the Company remain in effect except as expressly modified
hereunder.
(d) The parties other than the Company are entering into this
Agreement on an individual basis, and do not intend to constitute a "group"
under the securities laws. Their agreements with the Company set forth
herein are several and not joint, so that no such party is liable for any
breach by any other party.
(e) Each of the parties hereto represents and warrants that
the execution, delivery and performance of this Agreement by it and the
consummation by it of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such party and that, when
executed and delivered in accordance with the terms hereof, this Agreement
shall be the legal and binding obligation of such party, enforceable in
accordance with its terms.
(f) This Agreement my be signed in counterparts, each of
which shall be considered an original. A signature delivered by facsimile
shall have the force and effect of an original thereof.
IN WITNESS WHEREOF the parties have caused this Agreement to be
duly executed as of the date first indicated above.
USCI Inc.
By ___________________________
JNC OPPORTUNITY FUND LTD.
By: ENCORE CAPITAL MANAGEMENT, L.L.C.
Its Investment Adviser
By:______________________________
Managing Member
______________________________
Xxxxxx Xxxxxxxxx
______________________________
Xxxxxxx Xxxxxxxxx
XXXXX XXXXXXXXX/XXXXX XXXXXX PARTNERSHIP
By ___________________________
Confirmed
______________________________
Xxxxxx Xxxxxxxxx
HUBERFELD XXXXXX FAMILY FOUNDATION, INC.
By:__________________________
