NOTE PURCHASE AGREEMENT
EXECUTION
COPY
NOTE
PURCHASE AGREEMENT, dated as of April 19, 2007 (this “Agreement”), by and among
SDS Capital Group SPC, Ltd. (“SDS”, or a “Seller”), BayStar Capital II, L.P.
(“BayStar”, or a “Seller,” together with SDS, the “Sellers”), and Universal
Property Development & Acquisition Corporation (the
“Purchaser”).
WHEREAS,
the Sellers are the holders of the outstanding promissory notes of Heartland
Oil
and Gas, Inc. (the “Company”) set forth on Schedule
2.1
hereto
(the “Notes”); and
WHEREAS,
the each Seller desires to sell and transfer to the Purchaser, and the Purchaser
desires to purchase from each Seller, the outstanding promissory notes of the
Company set forth on Schedule
1.4
(the
“Purchased Notes”), upon the terms and conditions set forth herein.
NOW
THEREFORE, the parties hereto agree as follows:
ARTICLE
1
PURCHASE
AND SALE OF PURCHASED NOTES
Section
1.1 Purchase
and Sale of Purchased Notes; Assignment of Rights.
Upon
the following terms and conditions, and in consideration of and in express
reliance upon such terms and conditions and the representations, warranties
and
covenants of this Agreement, each Seller shall, for the purchase price set
forth
below (the “Purchase Price”), (a) sell to the Purchaser, and the Purchaser shall
purchase from each Seller, the Purchased Notes, (b) assign to Purchaser all
of
each Seller’s rights, claims, and causes of actions arising out of or relating
to such Seller’s purchase of the Purchased Notes (including, without limitation,
those relating to such Seller’s purchase and ownership of the Purchased Notes
and each Seller’s right to receive any accrued but unpaid interest on the
Purchased Notes), (c) with respect to SDS, assign to Purchaser all of SDS’
rights under the Security Agreement dated September 29, 2006 by and between
SDS Capital Group SPC, Ltd., Heartland Oil and Gas Corp. and the Company’s
subsidiaries (the “SDS Security Agreement”), and (d) with respect to BayStar,
assign to Purchaser all of BayStar’s rights under that certain Security
Agreement dated September 29, 2006 by and between BayStar Capital II, L.P.,
BayStar Capital II, L.P., Heartland Oil and Gas Corp. and the Company’s
subsidiaries (the “BayStar Security Agreement”).
Section
1.2 Purchase
Price.
The
aggregate consideration to be paid by the Purchaser to the Sellers (or their
designees) in exchange for the sale, transfer and delivery of the Purchased
Notes to the Purchaser and other obligations and covenants of Seller made herein
shall be (i) $1,500,000 payable in cash (the “Cash Payment”) plus
(ii) a
number of shares of the Purchaser’s common stock calculated by dividing
$1,250,000 by the volume weighted average price of a share of the Purchaser’s
common stock as reported on the OTC Bulletin Board for the ten trading day
period ending on the trading day immediately prior to the Closing Date minus
$0.01 (the “Initial VWAP”) as set forth in Schedule
1.4
(the
“Purchaser Stock”) plus
(iii)
five percent (5%) of the outstanding common stock or membership interests,
as
applicable (in each case calculated on a post-issuance basis), of the Company
and certain subsidiaries of the Company (each, a “Subsidiary”) as set forth on
Schedule
1.2
(the
“Company Stock”) . The Purchase Price shall be allocated between the respective
Purchased Notes held by SDS and BayStar as set forth on Schedule
1.2
and
Schedule
1.4.
Section
1.3 Make
Whole Provision.
(a) Make
Whole Calculation.
If on
any day between the 12-month anniversary and the 28-month anniversary of the
Closing (as defined below) (the “Make Whole Date”), (i) the volume weighted
average price of a share of the Purchaser’s common stock as reported on the OTC
Bulletin Board (or any other exchange or automated quotation system on which
the
Purchaser’s common stock may then be trading) for the 20 trading day period
ending on the trading day immediately prior to the Make Whole Date minus $0.01
(the “Make Whole VWAP”) is less than the Adjusted Initial VWAP (as defined in
1.3(b) below) and (ii) a Seller continues to hold all or any portion of the
Purchaser Stock, such Seller has the option (the “Make Whole Option”) to cause
the Purchaser to issue to such Seller an additional number of shares of
Purchaser’s common stock (the “Additional Stock”) calculated pursuant to the
following formula:
Amount
of
Purchaser * (1-(Make Whole VWAP / Initial VWAP)) = Shares of Additional Stock
Stock
held by Seller
exercising
Make
Whole
Option
;
provided, however, that in lieu of issuing the Additional Shares to the Seller
exercising the Make Whole Option, Purchaser may, at its option, pay to such
Seller an equivalent amount in cash, which amount shall be calculated by
multiplying the number of Additional Stock otherwise issuable by the Make Whole
VWAP. Each Seller may exercise its Make Whole Option one time only.
(b) Initial
VWAP Adjustment.
For
purposes of Section 1.3(a), the Initial VWAP shall be adjusted (the “Adjusted
Initial VWAP”) as follows: (i) the Initial VWAP per share shall be reduced by
the amount of any cash dividend paid to the holders between the Closing and
the
Make Whole Date; (ii) the Initial VWAP per share shall be adjusted as
appropriate to reflect any stock split, stock combination or dividend of
Purchaser’s common stock occurring between the Closing and the Make Whole Date;
and (iii) in the event a dividend or distribution of securities of any entity
other than the Purchaser is declared on the Purchaser’s common stock, the
Initial VWAP per share shall be reduced by an amount equal to the volume
weighted average price of a share of such security as reported on the primary
national securities exchange or automatic quotation system on which such
securities are listed or quoted for the 30 trading day period ending on the
trading day immediately prior to the date of such dividend on distribution;
provided, however, that no adjustment to the Initial VWAP shall be made pursuant
to this Section 1.3(b)(iii) unless (x) a registration statement under the
Securities Act of 1933, as amended (the “Act”)shall be effective and available
for the resale by Sellers of all of the securities issued in the dividend or
distribution declared on Purchaser’s common stock, (y) such securities will not
be “restricted securities” in the hands of the Sellers as defined in Rule
144(a)(3) under the Act, and (z) such securities are, and have been for each
day
of the period beginning 60 trading days prior to the date of such dividend,
listed or quoted on the Nasdaq Capital Market, the Nasdaq Global Market, the
Nasdaq Global Select Market, the New York Stock Exchange, the American Stock
Exchange or any other national securities exchange or automated
quotation.
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Section
1.4 Purchased
Note Exchange and Transfer.
At the
Closing, each Seller shall instruct the Company to accept certain of the Notes
listed on Schedule
2.1,
reissue
new promissory notes in the aggregate amount listed on Schedule
1.4
and
transfer the Purchased Notes to the Purchaser in exchange for the amount of
consideration set forth on Schedule
1.2
and
Schedule
1.4.
A form
of the letter directing the Company to exchange and transfer the Purchased
Notes
(the “Letter of Direction”) is attached as Exhibit
A.
Section
1.5 Closing.
(a) The
closing (the “Closing”) of the purchase and sale of the Purchased Notes to be
acquired by the Purchaser from the Sellers under this Agreement and the
assignment of rights described in Section 1.1 shall take place at the offices
of
Drinker Xxxxxx & Xxxxx LLP at 10:00 a.m., New York time on the date hereof
or at such other time and place or on such date as the Purchaser and the Sellers
may agree upon (such date on which the Closing occurs, the “Closing Date”).
(b) At
the
Closing, the Purchaser shall deliver (or cause to be delivered) to each
Seller:
(i) the
Cash
Payment by wire transfer of immediately available funds to such account or
accounts designated by each Seller; and
(ii) share
certificates representing the Purchaser Stock to be issued to such
Seller.
(c) Within
ten (10) business days following the Closing, the Purchaser shall cause the
Company and each Subsidiary to issue and deliver certificates representing
the
Company Stock in the amounts set forth on Schedule
1.2.
(d) At
the
Closing, each Seller shall deliver (or cause to be delivered) to the Purchaser:
(i) all
of
the original documentation evidencing each Purchased Note being sold by such
Seller;
(ii) an
assignment of all of each Seller’s rights, interests and title in the Purchased
Notes and under the Security Agreement in the form attached hereto as Exhibit
B;
(iii) any
and
all consents of the Company, or other third parties, necessary for the valid
assignment of the Purchased Notes by each Seller to Purchaser; and
(iv) any
and
all consents of the Company, or other third parties, necessary for the valid
assignment of the Security Agreement by each Seller to Purchaser.
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(e) At
the
Closing, each Seller shall deliver (or cause to be delivered) to the Company
the
Letter of Direction.
ARTICLE
2
REPRESENTATIONS
AND WARRANTIES
Section
2.1 Representations
and Warranties of the Sellers.
Each of
the Sellers hereby represents and warrants to the Purchaser, severally as to
such Seller and not as to any other Seller, as follows:
(a) Valid
Title.
Schedule
2.1
sets
forth the outstanding principal balance of each Note held by such Seller as
of
the date of this Agreement. Such Seller has the right to transfer good, valid
and marketable title in and to the Notes held
by
such Seller,
free
and clear of any mortgages, pledges, charges, liens, security interests or
other
encumbrances. Upon transfer from such Seller in accordance with this Agreement,
Purchaser shall have good, valid and marketable title in and to the Purchased
Notes held by such Seller, free and clear of any mortgages, pledges, charges,
liens, security interests or other encumbrances.
(b) Other
Claims.
Each
Seller warrants and represents that, other than the Notes held by such Seller,
the security interests evidenced by the SDS Security Agreement with respect
to
SDS and the security interests evidenced by the BayStar Security Agreement
with
respect to BayStar, there are no other promissory notes, security interests
or
other evidence of debt that such Seller owns or holds directly or beneficially
relative to the Company or any of its affiliates, subsidiaries, officers or
directors.
(c) Enforceability;
Authorization.
This
Agreement has been duly executed and delivered by such Seller and this Agreement
constitutes a legal, valid and binding obligation of such Seller enforceable
against it in accordance with the terms hereof, subject to: (i) judicial
principles limiting the availability of specific performance, injunctive relief,
and other equitable remedies; and (ii) bankruptcy, insolvency, reorganization,
moratorium or other similar laws now or hereafter in effect generally relating
to or affecting creditors’ rights generally. Such Seller has the power,
authority and capacity to execute this Agreement and any other documentation
relating to this Agreement, including to deliver this Agreement and any other
documentation relating to this Agreement that it is required by this Agreement
to deliver, and to perform its obligations under this Agreement.
(d) No
Violations of Laws or Agreements, Consents or Defaults.
(i) The
execution and delivery of this Agreement by such Seller and the consummation
by
it of the transactions contemplated by this Agreement will not result in any
breach or violation of any of the terms or provisions of, or constitute a
default under, (A) the certificate of incorporation or bylaws of such Seller
or
(B) any statute, order, decree, proceeding, rule, or regulation of any court
or
governmental agency or body, United States or foreign, having jurisdiction
over
such Seller or any assets of such Seller.
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(ii) The
delivery by such Seller of this Agreement and the consummation by such Seller
of
the transactions contemplated hereby will not result in a breach or violation
of
the term of, or constitute a default under, or require notice to any third
party
under, any agreement, instrument, or commitment to which such Seller is party
or
by which such Seller is bound, and no consent or approval is required from
any
third party for the transactions contemplated by this Agreement other than
such
consents or approvals that the failure to receive which are not reasonably
expected to have a material adverse effect on the transactions contemplated
by
this Agreement.
(iii) Such
Seller is not in default under, or in violation of any provision of, its
certificate of incorporation, bylaws, any promissory note, indenture or any
evidence of indebtedness or security thereto, lease, purchase contract or other
commitment, or any other agreement that is material to the business of such
Seller.
(e) Status
of Investor.
Such
Seller is an “accredited investor” as such term is defined in Rule 501(a) of
Regulation D promulgated under the Act and has such knowledge and experience
in
financial and business matters that it is capable of evaluating the merits
and
risks of its purchase of the Purchaser
Stock and the Company Stock
and,
after having been furnished with or having the opportunity to access such
information concerning the Company as it has considered necessary, has concluded
that it is able to bear those risks associated with the Purchaser Stock and
the
Company Stock and an investment in the Company. Such Seller is not a
broker-dealer.
(f) Investment
Purpose.
Such
Seller is acquiring the Purchaser Stock and Company Stock in the ordinary course
of its business and for its own account and not with a view to or for
distributing or reselling any of such Purchaser Stock or Company Stock or any
arrangement or understanding with any other persons regarding the distribution
of such Purchaser Stock or Company Stock. Such Seller will not, directly or
indirectly, offer, sell, pledge, transfer or otherwise dispose of (or solicit
any offers to buy, purchase or otherwise acquire or take a pledge of) any of
the
Purchaser Stock or the Company Stock except in compliance with the Act,
applicable state securities laws, blue sky laws and the respective rules and
regulations promulgated thereunder or an exemption from such registration is
available. By making the representations in this Section 2.1(d), such Seller
does not agree to hold either the Purchaser Stock or the Company Stock for
any
minimum or other specific term and reserves the right, subject to the terms
of
this Agreement and any other documents or agreements executed by the such Seller
in connection with this Agreement, to dispose of either the Purchaser Stock
or
the Company Stock at any time pursuant to an exemption under the Act, or an
interpretation thereof, or a registration statement filed pursuant to the Act
registering such transfer.
(g) No
Registration.
Such
Seller understands and agrees that the Purchaser
Stock and Company Stock
have not
been registered under the Act pursuant to an exemption under the Act, or an
interpretation thereof, and cannot be offered for sale, sold or otherwise
transferred unless the Purchaser Stock or Company Stock, as applicable, are
transferred pursuant to an exemption under the Act, or an interpretation
thereof, or a registration statement filed pursuant to the Act registering
such
transfer. Such Seller acknowledges that if it transfers any of the Purchaser
Stock or Company Stock, as applicable, pursuant to an exemption under the Act,
or an interpretation thereof, the Purchaser may require an opinion of counsel
for such Seller satisfactory to it that any such transfer is being made pursuant
to an exemption from registration.
-5-
(h) General
Solicitation.
Such
Seller is neither acquiring the Purchaser Stock nor the Company Stock as a
result of or subsequent to any advertisement, article, notice or other
communication regarding the Purchaser Stock or the Company Stock published
in
any newspaper, magazine or similar media or broadcast over television or radio
or presented at any seminar or any other general solicitation or general
advertisement.
(i) Brokers
and Finders.
Such
Seller has no knowledge of any person who will be entitled to or make a claim
for payment of any finder fee or other compensation as a result of the
consummation of the transactions contemplated by this Agreement.
(j) Legend.
Such
Seller understands and agrees that until such time as (i) it provides to the
Purchaser or its transfer agent, as required, an opinion of counsel to the
effect that a transfer of all or some of the Purchaser Stock or all or some
of
the Subsidiary Stock, as applicable, may be made without registration under
the
Act, (ii) the Purchaser Stock or the Subsidiary Stock, as applicable, may be
transferred by the Purchaser pursuant to Rule 144(k) of the Act, or (iii) the
resale of the Purchaser Stock or the Subsidiary Stock, as applicable, is
registered under the Act, the certificate for the Purchaser Stock and the
Subsidiary Stock, as applicable, or any substitution therefor, will bear a
restrictive legend (the “Legend”)
in
substantially the following form:
THIS
COMMON STOCK HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. NO SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE
144 UNDER SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR
AN
OPINION OF COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER
FROM
THE SECURITIES AND EXCHANGE COMMISSION.
Section
2.2 Representations
and Warranties of the Purchaser.
(a) Enforceability;
Authorization.
This
Agreement has been duly executed and delivered by the Purchaser and this
Agreement constitutes a legal, valid and binding obligation of the Purchaser
enforceable against the Purchaser in accordance with the terms hereof, subject
to: (i) judicial principles limiting the availability of specific performance,
injunctive relief, and other equitable remedies; and (ii) bankruptcy,
insolvency, reorganization, moratorium or other similar laws now or hereafter
in
effect generally relating to or affecting creditors’ rights generally. The
Purchaser has the power, authority and capacity to execute this Agreement and
any other documentation relating to this Agreement, including to deliver this
Agreement and any other documentation relating to this Agreement that it is
required by this Agreement to deliver, and to perform its obligations under
this
Agreement, including issuing the Purchaser Stock and causing the issuance of
the
Company Stock, and has taken all necessary action to authorize such execution,
delivery and performance.
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(b) No
Violations of Laws or Agreements, Consents or Defaults.
(i) The
execution and delivery of this Agreement by Purchaser and the consummation
by
Purchaser of the transactions contemplated by this Agreement will not result
in
any breach or violation of any of the terms or provisions of, or constitute
a
default under, (A) the certificate of incorporation or bylaws of Purchaser
or
(B) any statute, order, decree, proceeding, rule, or regulation of any court
or
governmental agency or body, United States or foreign, having jurisdiction
over
Purchaser or any assets of Purchaser.
(ii) The
delivery by Purchaser of this Agreement and the consummation by Purchaser of
the
transactions contemplated hereby will not result in a breach or violation of
the
term of, or constitute a default under, or require notice to any third party
under, any agreement, instrument, or commitment to which Purchaser is party,
by
which Purchaser is bound, or to which any of Purchaser’s assets are subject, and
no consent or approval is required from any third party for the transactions
contemplated by this Agreement other than such consents or approvals that the
failure to receive which are not reasonably expected to have a material adverse
effect on the transactions contemplated by this Agreement or the Purchaser’s
business, or the assets of Purchaser.
(iii) Purchaser
is not in default under, or in violation of any provision of, its certificate
of
incorporation, bylaws, any promissory note, indenture or any evidence of
indebtedness or security thereto, lease, purchase contract or other commitment,
or any other agreement that is material to the business of
Purchaser.
(c) Status
of Investor.
The
Purchaser is an “accredited
investor” as such term is defined in Rule 501(a) of Regulation D promulgated
under the Act and
has
such knowledge and experience in financial and business matters that it is
capable of evaluating the merits and risks of its purchase of the Purchased
Notes and, after having been furnished with or having the opportunity to access
such information concerning the Company as it has considered necessary, has
concluded that it is able to bear those risks associated with the Purchased
Notes and an investment in the Company. The Purchaser is not a
broker-dealer.
(d) Investment
Purpose.
The
Purchaser is acquiring the Purchased Notes in the ordinary course of its
business and for its own account and not with a view to or for distributing
or
reselling any of such Purchased Notes or any arrangement or understanding with
any other persons regarding the distribution of such Purchased Notes. The
Purchaser will not, directly or indirectly, offer, sell, pledge, transfer or
otherwise dispose of (or solicit any offers to buy, purchase or otherwise
acquire or take a pledge of) any of the Purchased Notes except in compliance
with the Act, applicable state securities laws, blue sky laws and the respective
rules and regulations promulgated thereunder or an exemption from such
registration is available. By making the representations in this Section 2.2(c),
the Purchaser does not agree to hold the Purchased Notes for any minimum or
other specific term and reserves the right, subject to the terms of this
Agreement and any other documents or agreements executed by the Purchaser in
connection with this Agreement, to dispose of the Purchased Notes at any time
pursuant to an exemption under the Act, or an interpretation thereof, or a
Registration Statement filed pursuant to the Act registering such transfer.
-7-
(e) No
Registration.
The
Purchaser understands and agrees that the Purchased Notes have not been
registered under the Act pursuant to an exemption under the Act, or an
interpretation thereof, and cannot be offered for sale, sold or otherwise
transferred unless the Purchased Notes are transferred pursuant to an exemption
under the Act, or an interpretation thereof, or a registration statement filed
pursuant to the Act registering such transfer. The Purchaser acknowledges that
if it transfers any of the Purchased Notes pursuant to an exemption under the
Act, or an interpretation thereof, the Company may require an opinion of counsel
for the Purchaser satisfactory to it that any such transfer is being made
pursuant to an exemption from registration.
(f) General
Solicitation.
The
Purchaser is not acquiring the Purchased Notes as a result of or subsequent
to
any advertisement, article, notice or other communication regarding the
Purchased Notes published in any newspaper, magazine or similar media or
broadcast over television or radio or presented at any seminar or any other
general solicitation or general advertisement.
(g) Brokers
and Finders.
The
Purchaser has no knowledge of any person who will be entitled to or make a
claim
for payment of any finder fee or other compensation as a result of the
consummation of the transactions contemplated by this Agreement.
(h) Legend.
The
Purchaser understands and agrees that until such time as (i) the Purchaser
provides to Company, as required, an opinion of counsel to the effect that
a
transfer of all or some or all of the Purchased Notes may be made without
registration under the Act, (ii) the Purchased Notes may be transferred by
the
Purchaser pursuant to Rule 144(k) of the Act, or (iii) the resale of the
Purchased Notes is registered under the Act, the certificate for the Purchased
Notes or any substitution therefor, will bear a restrictive legend (the
“Notes
Legend”)
in
substantially the following form:
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.
NO
SALE OR DISPOSITION MAY BE EFFECTED EXCEPT IN COMPLIANCE WITH RULE 144 UNDER
SAID ACT OR AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION
OF
COUNSEL FOR THE HOLDER SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT
REQUIRED UNDER THE ACT OR RECEIPT OF A NO-ACTION LETTER FROM THE SECURITIES
AND
EXCHANGE COMMISSION.
(i) No
Seller Representation.
Purchaser agrees and acknowledges that the Sellers have not made and make no
representation regarding the Company, the Company’s business, the Company’s
assets (including the assets subject to the SDS Security Agreement and the
BayStar Security Agreement) or the ability of the Company to satisfy any of
its
obligations under the Purchased Notes.
-8-
ARTICLE
3
COVENANTS
OF THE PARTIES
Section
3.1 Mutual
Covenants.
The
parties hereto hereby covenant with each other as follows, which covenants
are
for the benefit of such parties and their respective permitted
assigns:
(a) Further
Assurances.
From
and after the Closing Date, upon the request the Purchaser or either Seller,
the
Sellers and the Purchaser shall execute and deliver such instruments, documents
and other writings as may be reasonably necessary or desirable to confirm and
carry out and to effectuate fully the intent and purposes of this
Agreement.
(b) Commercially
Reasonable Efforts.
Each
party hereto will use commercially reasonable efforts to take, or cause to
be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable, consistent with applicable law, to consummate and make effective
in the most expeditious manner practicable the transactions contemplated hereby,
including without limitation, making all regulatory and other filings required
by applicable law as promptly as practicable after the date hereof.
Section
3.2 Covenants
of Purchaser.
(a) Piggy-Back
Registrations.
If, at
any time prior to the fifth anniversary of the Closing, the Purchaser shall
file
with the SEC a registration statement relating to an offering for its own
account or the account of others under the Act of any of its equity securities
(other than on Form S-4 or Form S-8 or their then equivalents relating to equity
securities to be issued solely in connection with any acquisition of any entity
or business or equity securities issuable in connection with stock option or
other employee benefit plans) (a “Registration Statement”), the Purchaser shall
send to the Sellers written notice of such filing, and if, within 15 days after
the date of such notice, either Seller shall so request in writing, the
Purchaser shall include in such Registration Statement all or any part of the
Purchaser Stock that such Seller requests to be registered. Notwithstanding
the
foregoing, in the event that, in connection with any underwritten public
offering, the managing underwriter(s) thereof shall impose a limitation on
the
number of shares of Purchaser Stock that may be included in the Registration
Statement because, in such underwriter(s)’ judgment, marketing or other factors
dictate such limitation is necessary to facilitate public distribution, then
the
Purchaser shall be obligated to include in such Registration Statement only
such
limited portion of the Purchaser Stock with respect to which either Seller
has
requested inclusion hereunder as the underwriter shall permit; provided,
however, that (i) the Purchaser shall not exclude any Purchaser Stock unless
the
Purchaser has first excluded all outstanding securities the holders of which
are
not contractually entitled to inclusion of such securities in such Registration
Statement or are not contractually entitled to pro rata inclusion with the
Purchaser Stock (ii) after giving effect to the immediately preceding proviso,
any such exclusion of Purchaser Stock shall be made pro rata among the Sellers
seeking to include Purchaser Stock and the holders of other securities having
the contractual right to inclusion of their securities in such Registration
Statement by reason of demand registration rights, in proportion to the number
of shares of Purchaser Stock or other securities, as applicable, sought to
be
included by the Sellers or each such other holder, and (iii) no such reduction
shall reduce the amount of Purchaser Stock included in the registration below
twenty-five (25%) of the total amount of securities included in such
registration. No right to registration of Purchaser Stock under this Section
3.2(a) shall be construed to limit any registration required under Section
3.2(a) hereof. If an offering in connection with which the Sellers are entitled
to registration under this Section 3.2(a) is an underwritten offering, then
if
any of the Purchaser Stock owned by the Sellers is included in such Registration
Statement, each Seller shall, unless otherwise agreed by the Purchaser, offer
and sell such Purchaser Stock in an underwritten offering using the same
underwriter or underwriters and, subject to the provisions of this Agreement,
on
the same terms and conditions as other shares of Purchaser Stock included in
such underwritten offering.
-9-
(b) Indemnification
Relating to Registration Statement.
In the
event any Purchaser Stock is included in a Registration Statement pursuant
to
Section 3(a) of this Agreement:
(i) To
the
extent permitted by law, the Purchaser shall indemnify, hold harmless and defend
(A) each Seller and (B) the directors, officers, partners, members, employees
and agents of each Seller and each person, if any, who controls each Seller
within the meaning of Section 15 of the Act or Section 20 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”) (each, an “Seller
Indemnified Person”), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, “Claims”) to which any of them may become
subject insofar as such Claims arise out of or are based upon: (1) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (2) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective
date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Purchaser files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein
any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading,
or
(3) any violation or alleged violation by the Purchaser of the Act, the Exchange
Act or any other law (including, without limitation, any state securities law),
rule or regulation relating to the offer or sale of the Purchaser Stock (the
matters in the foregoing clauses (1) through (3), collectively, “Violations”).
Subject to the restrictions set forth in Section 3.2(b)(ii) with respect to
the
number of legal counsel, the Purchaser shall reimburse Seller and each other
Seller Indemnified Person, promptly as such expenses are incurred and are due
and payable, for any reasonable legal fees or other reasonable expenses incurred
by them in connection with investigating or defending any such Claim.
Notwithstanding anything to the contrary contained herein, the indemnification
agreement contained in this Section 3.2(b)(i) shall not apply to a Claim arising
out of or based upon a Violation which occurs in reliance upon and in express
conformity with information furnished in writing to the Purchaser by such Seller
Indemnified Person expressly for use in the Registration Statement or any such
amendment thereof or supplement thereto. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Seller Indemnified Person and shall survive the transfer of the Purchaser Stock
by the Sellers.
-10-
(ii) Promptly
after receipt by any party entitled to indemnification under this Section 3.2(b)
of notice of the commencement of any action (including any governmental action),
such Seller Indemnified Person shall, if a Claim in respect thereof is made
against Purchaser under this Section 3.2(b), deliver to the Purchaser a written
notice of the commencement thereof, and the Purchaser shall have the right
to
participate in, and, to the extent the Purchaser so desires, to assume control
of the defense thereof with counsel mutually satisfactory to the Purchaser
and
the Seller Indemnified Person; provided, however, that Purchaser shall not
be
entitled to assume such defense and an Seller Indemnified Person shall have
the
right to retain its own counsel with the fees and expenses to be paid by the
Purchaser, if, in the reasonable opinion of counsel retained by the Purchaser,
the representation by such counsel of the Seller Indemnified Person and the
Purchaser would be inappropriate due to actual or potential conflicts of
interest between such Seller Indemnified Person and any other party represented
by such counsel in such proceeding or the actual or potential defendants in,
or
targets of, any such action include both the Seller Indemnified Person and
the
Purchaser and any such Seller Indemnified Person reasonably determines that
there may be legal defenses available to such Seller Indemnified Person that
are
in conflict with those available to Purchaser. The Purchaser shall pay for
only
one separate legal counsel selected by such Seller Indemnified Person. The
failure to deliver written notice to the Purchaser within a reasonable time
of
the commencement of any such action shall not relieve such Purchaser of any
liability to the Seller Indemnified Person under this Section 3.2(b), except
to
the extent that the Purchaser is actually prejudiced in its ability to defend
such action. The indemnification required by this Section 3.2(b) shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
(iii) If
and to
the extent the indemnification provided for in this Section 3.2(b) is held
by a
court of competent jurisdiction to be unavailable to a Seller Indemnified Person
with respect to any losses, claims, damages or liabilities referred to herein,
the Purchaser, in lieu of indemnifying such Seller Indemnified Person
thereunder, shall contribute to the amount paid or payable by such Seller
Indemnified Person as a result of such loss, claim, damage or liability in
such
proportion as is appropriate to reflect the relative fault of the Purchaser
on
the one hand and of the Seller Indemnified Person on the other in connection
with the circumstances that resulted in such loss, claim, damage or liability,
as well as any other relevant equitable considerations. The relative fault
of
the Purchaser and of the Seller Indemnified Person shall be determined by a
court of law by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Purchaser or by the Seller Indemnified
Person and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission; provided, however,
that (a) the relative fault of the Company and any Seller Indemnified Person
shall be determined without regard to (i) any duty or alleged duty of any Seller
Indemnified Person to identify or describe any Seller Indemnified Person as
an
underwriter with respect to the registration for sale, offer for sale or sale
of
the Purchaser Stock or Company Stock, as applicable, (ii) any allegation or
determination that any Seller Indemnified Person acted as an underwriter (within
the meaning of Section 2(a)(11) of the Act) or (iii) any duty or alleged duty
of
any of the Seller Indemnified Person to investigate or otherwise verify the
accuracy or sufficiency of information relating to the Company in the
Registration Statement (or in any preliminary or final prospectus included
therein) or any amendment thereof or supplement thereto, and (b) in no event
shall the aggregate contribution obligation by any Seller hereunder exceed
the
net proceeds from the offering received by such Seller. The parties hereto
agree
that it would not be just and equitable if contribution pursuant to this Section
3.2(b)(iii) were determined by pro rata allocation or any other method of
allocation that does not take into account the equitable considerations referred
to in this Section 3.2(b)(iii).
-11-
(c) Registrable
Securities.
Purchaser hereby acknowledges and agrees that the common stock of the Company
included in the Company Stock shall be “Registrable Securities” pursuant to that
certain Registration Rights Agreement dated April 6, 2007 (the “UPDA
Registration Rights Agreement”) between Universal Property Development and
Acquisition Corporation and Sheridan Asset Management, LLC (“Sheridan”).
Following the Closing, each Seller shall be entitled to all the same rights
and
privileges granted to Sheridan as a holder of Registrable Securities under
the
UPDA Registration Rights Agreement.
(d) No
Transfer of Subsidiary Assets.
Following the Closing, the Purchaser shall not, and shall not permit any
Subsidiary to, without the prior written consent of each of the Sellers, sell,
transfer or otherwise dispose of any of the assets of such
Subsidiary.
ARTICLE
4
MISCELLANEOUS
Section
4.1 Fees
and Expenses.
Each
party hereto shall pay the fees and expenses of its advisors, 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 and the transactions contemplated
hereby.
Section
4.2 Entire
Agreement; Amendment.
This
Agreement contains the entire understanding and agreement (written or oral)
of
the parties hereto with respect to the subject matter hereof and, except as
specifically set forth herein, neither the Sellers nor the Purchaser make any
representation, warranty, covenant or undertaking with respect to such matters,
and they supersede all prior understandings and agreements with respect to
said
subject matter, all of which are merged herein. No provision of this Agreement
may be waived or amended other than by a written instrument signed by each
party
hereto. Any amendment or waiver effected in accordance with this Section 4.2
shall be binding upon each such party and its permitted assigns.
Section
4.3 Notices.
Any
notice, demand, request, waiver or other communication required or permitted
to
be given hereunder shall be in writing and shall be effective (a) upon hand
delivery by telecopy or facsimile 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
other than on a business day 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 be:
-12-
If
to the
SDS:
SDS
Capital Group
c/o
Ogier
Fiduciary Services (Cayman) Ltd.
000
Xxxxx
Xxxxxx Xxxxxx, PO Box 1234GT
Xxxxxx
Town, Grand Cayman
with
a
copy to:
SDS
Management, LLC
00
Xxxxxx
Xxxxxx, 0xx
Xxxxx
Xxx
Xxxxxxxxx, XX 0000
If
to
BayStar:
BayStar
Capital II, L.P.
c/o
LRG
Capital Group, LLC
00
X. Xxx
Xxxxxxx Xxxxx Xxxx.
Xxxxx
0X
Xxxxxxxx,
XX 00000
Attention:
Xxxx Xxxxxxx
If
to the
Purchaser:
Universal
Property Development & Acquisition Corporation
00000
X.X. Xxxxxxx 0
Xxxxx
000
Xxxx
Xxxxx, XX 00000
Either
party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other party hereto.
Section
4.4 Waivers.
No
waiver by either party 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 any party to exercise any right hereunder
in
any manner impair the exercise of any such right accruing to it
thereafter.
Section
4.5 Headings.
The
article, section and subsection headings in this Agreement are for convenience
only and shall not constitute a part of this Agreement for any other purpose
and
shall not be deemed to limit or affect any of the provisions
hereof.
Section
4.6 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and assigns. Neither party hereto may assign its rights or
obligations under this Agreement (by operation of law or otherwise) without
the
prior written consent of each other party hereto, and any attempted assignment
without such consent shall be void ab initio.
-13-
Section
4.7 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 or entity.
Section
4.8 Governing
Law.
This
Agreement shall be governed by and construed in accordance with the internal
laws of the State of Delaware, without giving effect to the choice of law
provisions thereof. This Agreement shall not be interpreted or construed with
any presumption against the party causing this Agreement to be
drafted.
Section
4.9 Counterparts.
This
Agreement may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and shall become effective
when counterparts have been signed by each party and delivered to the other
parties hereto, it being understood that all parties need not sign the same
counterpart.
Section
4.10 Severability.
The
provisions of this Agreement are severable and, in the event that any court
of
competent jurisdiction shall determine that any one or more of the provisions
or
part of the provisions contained in this Agreement shall, for any reason, be
held to be invalid, illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other provision or part
of a
provision of this Agreement and this Agreement shall be reformed and construed
as if such invalid or illegal or unenforceable provision, or part of such
provision, had never been contained herein, so that such provisions would be
valid, legal and enforceable to the maximum extent possible.
Section
4.11 Survival.
The
representations and warranties contained herein shall survive so long as the
Purchaser Stock and Purchased Notes are outstanding, notwithstanding any due
diligence investigation conducted by or on behalf of any Purchaser. The
agreements and covenants contained herein shall survive the
Closing.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]
-14-
IN
WITNESS WHEREOF, the parties hereto have caused this Share Purchase Agreement
to
be duly executed by their respective authorized officers as of the date first
above written.
|
PURCHASER
UNIVERSAL
PROPERTY DEVELOPMENT & ACQUISITION
CORPORATION
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
|
SELLERS
SDS
CAPITAL GROUP SPC, LTD.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
|
BAYSTAR
BAYSTAR CAPITAL II, L.P.
|
||
| |
|
|
| By: | ||
|
Name:
Title:
|
||
Schedule
1.2
List
of each Subsidiary of the Company
|
Subsidiary
|
Total
Percentage of outstanding stock or outstanding membership interests
after
giving effect to any UPDA purchase
|
|
|
Heartland
Oil and Gas Corporation
|
5%1
|
|
|
Heartland
Oil and Gas Incorporation
|
5%1
|
|
|
Heartland
Gas Gathering, LLC
|
5%1
|
|
1
With 26.24% of the shares
to be issued in the name of SDS
Capital Group SPC, Ltd. Class B, 42.56% of the shares to be issued in the name
of SDS Capital Group SPC, Ltd. Class D and 31.20% of the shares to be issued
in
the name of BayStar Capital II, LP.
Schedule
1.4
Purchased
Notes held by SDS Capital Group SPC and Transferred to United Property
Development and Acquisition Corporation Pursuant to this
Agreement
|
Principal
Sum
|
Cash
Payment
|
Amount
of Purchaser Stock
|
||
|
$
3,272,000.00
|
$
1,031,935.972
|
18,066,106
shares3
|
||
Purchased
Notes held by BayStar Capital II, LP and Transferred to United Property
Development and Acquisition Corporation Pursuant to this
Agreement
|
Principal
Sum
|
Cash
Payment
|
Amount
of Purchaser Stock
|
||
|
$
1,484,000.00
|
$
468,064.03
|
8,194,398
shares
|
||
| 2 |
With
$393,613.98 to be wired to SDS Capital Group SPC, Ltd. Class B
and
$638,321.99 to be wired to SDS Capital Group SPC, Ltd. Class
D.
|
| 3 |
With
6,891,001 shares to be issued in the name of SDS Capital Group
SPC, Ltd.
Class B and 11,175,105 shares to be issued in the name of SDS
Capital
Group SPC, Ltd. Class D.
|
Schedule
2.1
Heartland
Oil and Gas Company Convertible Senior Secured Promissory Notes held by SDS
Capital Group SPC
|
Issuance
Date
|
Maturity
|
Principal
Sum
|
|||||
|
9/29/2006
|
Earlier
of 3/28/07 or closing of a subsequent equity financing
|
$
|
1,653,124.70
|
||||
|
9/29/2006
|
Earlier
of 3/28/07 or closing of a subsequent equity financing
|
$
|
2,680,778.90
|
||||
|
2/6/2007
|
Earlier
of 3/28/07 or closing of a subsequent equity financing
|
$
|
48,600.00
|
||||
|
2/6/2007
|
Earlier
of 3/28/07 or closing of a subsequent equity financing
|
$
|
78,900.00
|
||||
Heartland
Oil and Gas Company Convertible Senior Secured Promissory Notes held by BayStar
Capital II, LP
|
Issuance
Date
|
Maturity
|
Principal
Sum
|
|||||
|
9/29/2006
|
Earlier
of 3/28/07 or closing of a subsequent equity financing
|
$
|
1,966,097.00
|
||||
|
2/6/2007
|
Earlier
of 3/28/07 or closing of a subsequent equity financing
|
$
|
57,500.00
|
||||
