SUBORDINATED SECURED PROMISSORY NOTE AND PLEDGE AGREEMENT
Exhibit
10.3
SUBORDINATED
SECURED PROMISSORY NOTE AND PLEDGE AGREEMENT
FOR
VALUE
RECEIVED, UNITED BENEFITS & PENSION SERVICES, INC. (the “Maker”), a Delaware
corporation, promises to pay to the order of Xxx Xxxxxx (“Holder”), as agent for
the Company Stockholders (as defined below), the principal sum of TWO MILLION
FIVE HUNDRED THOUSAND DOLLARS AND NO CENTS ($2,500,000.00), in accordance with,
and subject to, the terms of that certain Client Escrow Agreement, dated as
of
even date herewith (the “Escrow Agreement”), by and among the Maker, the Holder,
and the JPMorgan Chase Bank, N.A., as escrow agent (the “Escrow Agent”).
Interest
shall accrue on all outstanding principal from the date hereof at a rate per
annum equal to three and 99/100 percent (3.99%). Interest shall be computed
on
the basis of the actual number of days elapsed and a year of 360 days.
On
any
date on which the Escrow Agent is directed or permitted to pay any funds to
any
Company Stockholder (as defined in the Escrow Agreement) pursuant to the Escrow
Agreement (each, a “Payment Date”), a portion of the outstanding principal
amount of this Subordinated Secured Promissory Note and Pledge Agreement (the
“Note and Pledge Agreement”) shall become immediately due and payable to the
extent of and in an amount equal to such payment (an “Escrow Payment”),
provided, that any portion of the outstanding principal balance of this Note
and
Pledge Agreement in excess of such Escrow Payment shall not become due and
payable as of such date and shall continue to remain outstanding in accordance
with the terms hereof. Each Escrow Payment shall become so due and payable
without presentment, protest or other notice of any kind all of which are
expressly waived by the Maker. The Maker assents to extensions of the time
of
payment, release, or forbearance or other indulgence, without notice. No delay
on the part of the Holder in exercising any rights with respect hereto shall
operate as a waiver of such rights. In the event that the Escrow Agent is
directed or permitted to pay any amounts to the Maker pursuant to the Escrow
Agreement, the outstanding principal balance of this Note and Pledge Agreement
shall be reduced by such amount.
The
unpaid principal balance of this Note and Pledge Agreement and any accrued
and
unpaid interest hereunder may be paid by the Maker to the Escrow Agent at any
time, in whole or in part, without premium or penalty. Any prepayments under
this Note and Pledge Agreement shall first be applied to accrued and unpaid
interest and then to the principal balance of this Note and Pledge Agreement.
In
addition, the Maker shall prepay to the Escrow Agent the unpaid principal amount
of this Note and Pledge Agreement and interest accrued hereunder in an amount
equal to the amount of the net proceeds received by the Maker from any financing
transactions pursuant to the Private Placement which are consummated following
the date hereof (after payment of any and all fees, expenses and commissions
in
connection with the Private Placement (including, without limitation, any legal
and accounting fees and expenses incurred in connection therewith)), which
amount shall be remitted by the Maker to the Holder promptly after the Maker’s
receipt thereof. As used herein, the “Private Placement” shall mean the private
offering by Parent of (a) units, each consisting of (i) shares of the Maker’s
common stock, par value $0.00001 per share, (the “Common Stock”) and (ii)
warrants to acquire shares of Common Stock, for minimum gross proceeds of
$4,500,000 and maximum gross proceeds of $9,000,000, and (b) 14% senior secured
notes in the principal amount of $8,000,000 (the “Senior Notes”). Promptly
following any payment of any portion of the principal amount owed under this
Note and Pledge Agreement to the Maker, or any prepayment described above,
the
number of Pledged Shares (as defined below) shall be reduced by the quotient
of
(a) the amount of such principal payment or prepayment and (b) $2.50 (rounded
down to the next whole number), and shall promptly be returned by the Escrow
Agent to the Maker.
In
the
event of nonpayment, the Maker agrees that, in addition to all other remedies,
it will pay all reasonable counsel fees incurred in connection with any lawsuit
brought by the Holder for enforcement or collection of this Note and Pledge
Agreement.
As
collateral security for the prompt and complete payment and performance of
the
obligations of Maker hereunder when due, the Maker hereby pledges to the Holder
for its benefit, and grants to the Holder for its benefit and the benefit of
the
Company Stockholders, a first priority security interest in and to one million
(1,000,000) shares of Common Stock (the “Pledged Shares”), which shall be held
by the Escrow Agent on behalf of the Holder pursuant to the Escrow
Agreement..
This
Note
and Pledge Agreement secures, and the Pledged Shares are security for, the
indefeasible payment in full when due of the obligations of the Maker now or
hereafter existing pursuant to this Note and Pledge Agreement (all such
obligations of the Maker being the “Secured Obligations”). The Holder and the
Escrow Agent acknowledge and agree (A) that the obligations evidenced by this
Note and Pledge Agreement are subordinate in right of payment of all obligations
(whether for principal, interest, fees, expenses or otherwise) under the Senior
Notes and any guarantee issued by the Maker with respect to the obligations
thereunder (the “Senior Indebtedness”), which shall be senior in right of
payment to such obligations under this Note and Pledge Agreement, and (B) to
execute such agreements and instruments in favor of the holder of any Senior
Notes reasonably requested or required by such holder to effect such
subordination on terms satisfactory to the holder of Senior Notes.
Notwithstanding any other provision contained in this Note and Pledge Agreement,
payments on account of principal of and interest on this Note may be made from
time to time, subject to the specifications set forth below.
In
the
event that any event of default under the terms of any Senior Indebtedness
has
occurred and is continuing, the holders of Senior Indebtedness shall be entitled
to receive payment in full in cash of all principal of (and premium and fees,
if
any), and interest on, all Senior Indebtedness before the Holder is entitled
to
receive any payment on account of this Note and Pledge Agreement. The Holder
shall be entitled to assume that no such event which would give rise to
subordination under this Note and Pledge Agreement has occurred unless the
Maker
or any holder or holders of Senior Indebtedness or any trustee therefor shall
have given written notice thereof to the Holder or the Holder has otherwise
received notice of such event. Until the Holder is given the notice provided
for
in the immediately preceding sentence, the Maker shall be obligated to make
payments hereunder when due.
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The
Maker
agrees that at any time and from time to time, at the expense of the Maker,
the
Maker will promptly execute and deliver all further instruments and documents,
including, without limitation, UCC-1 Financing Statements, and take all further
action that may be necessary or desirable, or that the Holder, in the exercise
of his reasonable judgment may request, in order to perfect and protect any
security interest granted or purported to be granted hereby or to enable the
Holder to exercise and enforce its rights and remedies hereunder with respect
to
any Pledged Shares.
Unless
and until an Event of Default (as defined below) hereunder shall have occurred,
neither the Holder nor the Escrow Agent shall be entitled to exercise any voting
and/or consensual rights and powers in respect of the Pledged Shares or to
give
consents, waivers or ratifications in respect thereof.
Simultaneously
herewith, in exchange for $10.00 and other good and valuable consideration,
the
Maker has delivered to the Escrow Agent original stock certificate(s)
representing the Pledged Shares, together with appropriate undated powers for
such Pledged Shares duly executed in blank by the Maker. The Pledged Shares
are
duly authorized, validly issued, fully paid and non-assessable. The Holder
and
the Escrow Agent agree that they will not, without the prior written consent
of
the Maker, for so long as the Secured Obligations are outstanding (i) sell,
assign or transfer or otherwise dispose of, or grant any option or warrant
with
respect to, any of the Pledged Shares, or (ii) create or permit to exist any
mortgage, lien, pledge, attachment, levy, priority or other security interest
or
encumbrance of any kind upon or with respect to any of the Pledged Shares,
except for the security interest under this Note and Pledge
Agreement.
Upon
the
occurrence and during the continuance of any Event of Default, the Holder shall
have the right (in his sole and absolute discretion) to direct the Escrow Agent
to transfer of the certificates representing Pledged Shares, endorsed or
assigned in blank or in favor of the Company Stockholders, to the Company
Stockholders, and shall have the right to exchange the certificates representing
the Pledged Shares for certificates of smaller or larger denominations for
any
purpose consistent with the terms hereof. The number of Pledged Shares to be
so
transferred shall be no greater than the quotient of (a) the Default Amount
(as
defined below) and (b) $2.50. As used herein, an “Event of Default” shall mean
the Maker’s failure make any payment of principal of, or interest on, the
Secured Obligations when due, and any such unpaid amount is referred to as
a
“Default Amount.”
This
Note
and Pledge Agreement shall terminate upon the performance or satisfaction
of all
Secured Obligations (as reduced by the amount of any payments hereunder to
the
Maker), at which time the Escrow Agent shall (i) retransfer and deliver to
the
Maker, or to such person or persons as the Maker shall designate, such of
the
Pledged Shares (if any) as shall not have been distributed pursuant to the
terms
hereof and shall still be held by the Escrow Agent hereunder, together with
appropriate powers or instruments of transfer, (ii) promptly file any and
all
documents, including without limitation, UCC-3 Termination Statements, in
all
jurisdictions and offices as the Maker may reasonably request and (iii) take
any
other actions reasonably necessary in connection with the foregoing.
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This
Note
and Pledge Agreement may not be changed or terminated, nor may any of its
provisions be waived, except by an agreement in writing signed by the party
against whom enforcement of such change or termination is sought. This Note
and
Pledge Agreement shall be governed by and construed in accordance with the
laws
of the State of New York, and shall be binding upon the successors and assigns
of the Maker and inure to the benefit of the Holder, the Escrow Agent and their
respective successors and assigns. Each of the parties hereto hereby irrevocably
consents to the non-exclusive jurisdiction of the courts of the State of New
York and the United States District Court for the Southern District of New
York
and waives trial by jury in any action or proceeding with respect to this
Agreement. If any term or provision of this Note and Pledge Agreement shall
be
held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
This
Note
and Pledge Agreement is the note referred to in, and is subject to the terms
and
conditions of, the Escrow Agreement.
Notwithstanding
anything to the contrary contained in this Note and Pledge Agreement, no legal
representative, employee, officer, director or shareholder of the Maker, whether
disclosed or undisclosed, shall have any personal liability for the payment
of
any sum of money which is or may be payable hereunder, including but not limited
to, the repayment of the indebtedness evidenced hereby. If any Event of Default
shall occur hereunder, the Holder shall proceed solely against the Maker and
the
Pledged Shares for payment of any sums of money under this Note and Pledge
Agreement. The Holder shall not seek or claim recourse against any person or
party hereinabove named or referred to as being exculpated from personal
liability for any deficiency or any money judgment hereunder.
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UNITED
BENEFITS & PENSION SERVICES, INC.
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as
Maker
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By:
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/s/
Xxxxxxx Xxxxxxxxx
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Name: Xxxxxxx
Xxxxxxxxx
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Title:
President
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Acknowledged
and Agreed:
JPMORGAN
CHASE BANK, N.A.,
as
Escrow
Agent
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By:
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/s/
Xxxxx X. XxXxxxx
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/s/
Xxx Xxxxxx
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Name:
Xxxxx X. Xxxxxxx
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Xxx
Xxxxxx
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Title:
Vice President
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Stockholders
Representative, as Holder
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