Contract
Exhibit
10.5
THIS
SECURITY HAS 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THIS SECURITY AND MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
Original
Issue Date: November 30, 2007
$7,250,000
SENIOR
SECURED NOTE
DUE
MAY 30, 2011
THIS
NOTE
is one of a series of duly authorized and issued Senior Secured Notes of
Associated
Third Party Administrators,
a
California corporation, having a principal place of business at 0000 Xxxxx
Xxxx
Xxxx, Xxxxxxx, XX 00000 (including UPBS, the “Company”),
designated as its Senior Secured Note, due May 30, 2011 (the “Note(s)”).
FOR
VALUE
RECEIVED, the Company promises to pay to CAMOFI
Master LDC
or its
registered assigns (the “Holder”),
the
principal sum of $7,250,000 on May 30, 2011 or such earlier date as the Notes
are required or permitted to be repaid as provided hereunder (the “Maturity
Date”),
and
to pay interest to the Holder on the aggregate then outstanding principal amount
of this Note in accordance with the provisions hereof. This Note is subject
to
the following additional provisions:
Section
1. Definitions.
For the
purposes hereof, in addition to the terms defined elsewhere in this Note: (a)
capitalized terms not otherwise defined herein have the meanings given to such
terms in the Purchase Agreement, and (b) the following terms shall have the
following meanings:
“Acquisition”
means
the acquisition of the Company by UBPS pursuant to the Acquisition
Agreement.
“Additional
Notes”
means
additional Notes with the terms hereof given to the Holder in lieu of cash
interest pursuant to Section 2(a) hereof.
“Alternate
Consideration”
shall
have the meaning set forth in Section 5(e)(iii).
“Business
Day”
means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday in the United States or a day on which banking institutions in the
State
of New York are authorized or required by law or other government action to
close.
“Capital
Expenditure”
means,
with respect to any Person for any period, the sum of the aggregate of all
expenditures by such Person and its Subsidiaries during such period that in
accordance with GAAP are or should be included in “property, plant and
equipment” or in a similar fixed asset account on its balance sheet, whether
such expenditures are paid in cash or financed and including all Capitalized
Lease Obligations paid or payable during such period.
“Capitalized
Lease”
means,
with respect to any Person, any lease of real or personal property by such
Person as lessee which is (i) required under GAAP to be capitalized on the
balance sheet of such Person or (ii) a transaction of a type commonly known
as a
“synthetic lease” (i.e.,
a lease
transaction that is treated as an operating lease for accounting purposes but
with respect to which payments of rent are intended to be treated as payments
of
principal and interest on a loan for Federal income tax purposes).
“Capitalized
Lease Obligations”
means,
with respect to any Person, obligations of such Person and its Subsidiaries
under Capitalized Leases, and, for purposes hereof, the amount of any such
obligation shall be the capitalized amount thereof determined in accordance
with
GAAP.
“Change
of Control Transaction”
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) other than a group including Xxxxxxx
Xxxxxxxxx of effective control (whether through legal or beneficial ownership
of
capital stock of the Company, by contract or otherwise) of in excess of 40%
of
the voting securities of the Company, or (ii) a replacement at one time or
within a three year period of more than one-half of the members of the Company's
board of directors which is not approved by a majority of those individuals
who
are members of the board of directors on the date hereof (or by those
individuals who are serving as members of the board of directors on any date
whose nomination to the board of directors was approved by a majority of the
members of the board of directors who are members on the date hereof), or (iii)
Xxxxxxx
Xxxxxxxxx
shall no
longer be employed by the Company as Chief Executive Officer on a full time
basis, 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) or (ii).
“Common
Stock”
means
the common stock, par value $.00001 per share, of UBPS and stock of any other
class into which such shares may hereafter have been reclassified or
changed.
“Consolidated
EBITDA”
means,
with respect to any Person for any period, the Consolidated Net Income of such
Person and its Subsidiaries for such period, plus (i) without duplication,
the
sum of the following amounts of such Person, and its Subsidiaries for such
period and to the extent deducted in determining Consolidated Net Income of
such
Person for such period: (A) Consolidated Net Interest Expense, (B) income tax
expense, (C) depreciation expense, (D) amortization expense, (E) all rental
expense determined on a consolidated basis in accordance with GAAP, less cash
rents due under Operating Lease Obligations, minus (ii) the aggregate amount
of
cash lease payments paid or payable during such period in respect of the
Capitalized Leases and all non-cash charges and adjustments required by GAAP
(e.g. stock compensation expense and fair value adjustments) and minus a one
time bonus paid to employees of the Company in connection with the Acquisition
(and paid out of the seller’s consideration therefrom) in an amount not to
exceed $200,000 in the aggregate ( the “One Time Bonus”).
“Consolidated
Net Income”
means,
with respect to any Person for any period, the net income (loss) of such Person
and its Subsidiaries for such period, determined on a consolidated basis and
in
accordance with GAAP, but excluding from the determination of Consolidated
Net
Income (without duplication) (a) any extraordinary or non recurring gains or
losses or gains or losses from Dispositions, (b) restructuring charges, (c)
any
tax refunds, net operating losses or other net tax benefits and (d) effects
of
discontinued operations.
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“Consolidated
Interest Expense”
means,
with respect to any Person, for any period, gross interest expense of such
Person and its Subsidiaries for such period determined on a consolidated basis
and in accordance with GAAP (excluding the interest component of any Capitalized
Lease Obligations), less
interest
income determined on a consolidated basis and in accordance with GAAP.
“Consolidated
Total Indebtedness”
means,
with respect to any Person at any date, all indebtedness on the balance sheet
of
such Person, determined on a consolidated basis in accordance with
GAAP.
“Disposition”
means
any transaction, or series of related transactions, pursuant to which any Person
or any of its Subsidiaries sells, assigns, transfers or otherwise disposes
of
any property or assets (whether now owned or hereafter acquired) to any other
Person, in each case, whether or not the consideration therefor consists of
cash, securities or other assets owned by the acquiring Person.
“Effectiveness
Date”
shall
have the meaning given to such term in the Registration Rights Agreement.
“Effectiveness
Period”
shall
have the meaning given to such term in the Registration Rights Agreement.
“Escrow
Agreements”
means
those certain Escrow Agreements between the Company and ATPA dated as of the
closing date pursuant to which the Company has placed the Escrow Amount into
escrow to be released to the stockholders of ATPA upon the satisfaction of
certain conditions contained therein.
“Escrow
Amount”
means
the $3,500,000 placed in escrow by the Company pursuant to the Escrow Agreements
and in connection with the Acquisition.
“Event
of Default”
shall
have the meaning set forth in Section 9.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“Fixed
Charge Coverage Ratio”
means,
with respect to any Person for any period, the ratio of (i) Consolidated EBITDA
of such Person and its Subsidiaries for such period minus
Capital
Expenditures made by such Person and its Subsidiaries during such period to
(ii)
the sum of (A) all principal of indebtedness (including any earn-outs from
acquisitions) of such Person and its Subsidiaries scheduled to be paid or
prepaid during such period plus
(B)
Consolidated Interest Expense of such Person and its Subsidiaries for such
period paid in cash, plus
(C)
income taxes paid or payable by such Person and its Subsidiaries during such
period.
“Fundamental
Transaction”
shall
have the meaning set forth in the Warrant.
“Late
Fees”
shall
have the meaning set forth in the second paragraph to this
Note.
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of
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“Mandatory
Prepayment Amount”
for
any
Notes shall equal the sum of (i) 125% of the principal amount of Notes to be
prepaid, plus all accrued and unpaid interest thereon, and (ii) all other
amounts, costs, expenses and liquidated damages due in respect of such
Notes.
“Monthly
Redemption”
shall
mean the redemption of the Note pursuant to Section 6(a) hereof.
“Monthly
Redemption Amount”
shall
mean, as to a Monthly Redemption, 1/36th of the original principal amount in
the
aggregate.
“Monthly
Redemption Date”
means
the 30th
of each
month, commencing June 30, 2008 and ending upon the full redemption of this
Note.
“Notes”
shall
mean this Note and any Additional Notes issued hereunder.
“Operating
Lease Obligations”
means
all obligations for the payment of rent in cash for any real or personal
property under leases or agreements to lease, other than Capitalized Lease
Obligations.
“Original
Issue Date”
shall
mean the date of the first issuance of the Notes or Additional Note regardless
of the number of transfers of any Note or Additional Note and regardless of
the
number of instruments which may be issued to evidence such Note or Additional
Note .
“Permitted
Indebtedness”
means
indebtedness satisfactory to the Holders that is unsecured and subordinated
to
the Notes and after the incurrence of such indebtedness, on a pro forma basis,
the Company would be in compliance with the covenants set forth in Section
8
hereof, for the most recently completed fiscal quarter.
“Permitted
Investments”
means
(i) marketable direct obligations issued or unconditionally guaranteed by the
United States Government or issued by any agency thereof and backed by the
full
faith and credit of the United States, in each case, maturing within six months
from the date of acquisition thereof; (ii) commercial paper, maturing not more
than 270 days after the date of issue rated P 1 by Xxxxx'x or A 1 by Standard
& Poor's; (iii) certificates of deposit maturing not more than 270 days
after the date of issue, issued by commercial banking institutions and money
market or demand deposit accounts maintained at commercial banking institutions,
each of which is a member of the Federal Reserve System and has a combined
capital and surplus and undivided profits of not less than $500,000,000; (iv)
repurchase agreements having maturities of not more than 90 days from the date
of acquisition which are entered into with major money center banks included
in
the commercial banking institutions described in clause (iii) above and which
are secured by readily marketable direct obligations of the United States
Government or any agency thereof, (v) money market accounts maintained with
mutual funds having assets in excess of $2,500,000,000; and (vi) tax exempt
securities rated A or higher by Xxxxx'x or A+ or higher by Standard &
Poor's.
“Person”
means
a
corporation, an association, a partnership, organization, a business, an
individual, a government or political subdivision thereof or a governmental
agency.
“Purchase
Agreement”
means
the Securities Purchase Agreement, dated as of November 30, 2007 to which the
Company and the original Holder are parties, as amended, modified or
supplemented from time to time in accordance with its terms.
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“Primary
Contracts”
means
one or more of the Company’s or UBPS’ contracts with Operating Engineers,
Southern California Laborers, Sheet Metal National Pension Fund, Automotive
Industries and Bay Area Painters.
“Qualified
Financing”
means
an equity financing for the account of the Company in which shares of common
stock, or securities, directly or indirectly, convertible into or exchangeable
or exercisable for shares of common stock are issued, which financing results
in
cumulative aggregate proceeds to the Company of at least
$15,000,000.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated as of the date of the Purchase
Agreement, to which the Company and the original Holders are parties, as
amended, modified or supplemented from time to time in accordance with its
terms.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement, covering among other things the resale of the Warrant Shares
and naming the Holder as a “selling stockholder” thereunder.
“Securities
Act”
means
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder.
“Subsidiary”
shall
have the meaning given to such term in the Purchase Agreement.
“TBOL”
means
Trust Benefits Online, LLC.
“Trading
Day”
means
a
day on which the Common Stock is traded on a Trading Market.
“Trading
Market”
means
the following markets or exchanges on which the Common Stock is listed or quoted
for trading on the date in question: the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
the
OTC Bulletin Board.
“Transaction
Documents”
shall
have the meaning set forth in the Purchase Agreement.
“VWAP”
means,
for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
the daily volume weighted average price of the Common Stock for such date (or
the nearest preceding date) on the primary Trading Market on which the Common
Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
on
a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
function; (b) if the Common Stock is not then listed or quoted on the
Trading Market and if prices for the Common Stock are then reported in the
“Pink
Sheets” published by the Pink Sheets, LLC (or a similar organization or agency
succeeding to its functions of reporting prices), the most recent bid price
per
share of the Common Stock so reported; or (c) in all other cases, the fair
market value of a share of Common Stock as determined by a nationally
recognized-independent appraiser selected in good faith by Holders holding
a
majority of the principal amount of Notes then outstanding.
Section
2. Interest.
a) Payment
of Interest in Cash.
The
Company shall pay interest to the Holder on the aggregate and then outstanding
principal amount of this Note at the rate 14% per annum, payable quarterly
in
arrears beginning on February 1, 2008, and each May 1, August 1, November 1,
and
January 1 thereafter and on the Maturity Date (except that, if any such date
is
not a Business Day, then such payment shall be due on the next succeeding
Business Day) and on each Monthly Redemption Date (as to that principal amount
then being redeemed) (each such date, an “Interest
Payment Date”),
in
cash. Notwithstanding the foregoing, the Company, at its option, shall have
the
right to pay up to 2% per annum of Interest in Additional Notes upon 10 Business
Days notice to the Holder so long as at such time no default or Event of Default
exists.
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b) Company’s
Election to Pay Interest in Additional Notes.
Subject
to the terms and conditions herein, the decision whether to pay the 3% Interest
hereunder in Additional Notes or cash shall be at the discretion of the Company.
Not less than 10 Business Days prior to each Interest Payment Date, the Company
shall provide the Holder with written notice of its election to pay such portion
of the interest hereunder either in cash or Additional Notes (the Company may
indicate in such notice that the election contained in such notice shall
continue for later periods until revised). Within 5 Business Days prior to
an
Interest Payment Date, the Company’s election (whether specific to an Interest
Payment Date or continuous) shall be irrevocable as to such Interest Payment
Date. Subject to the aforementioned conditions, failure to timely provide such
written notice shall be deemed an election by the Company to pay the interest
on
such Interest Payment Date in cash.
c) Interest
Calculations.
Interest shall be calculated on the basis of a 360-day year and shall accrue
daily commencing on the Original Issue Date until payment in full of the
principal sum, together with all accrued and unpaid interest and other amounts
which may become due hereunder, has been made. Interest shall be compounded
monthly. Interest hereunder will be paid to the Person in whose name this Note
is registered on the records of the Company regarding registration and transfers
of Notes (the “Note
Register”).
Except as otherwise provided herein, if at any time the Company pays interest
partially in cash and partially in Additional Notes, then such payment shall
be
distributed ratably among the Holders based upon the principal amount of Notes
held by each Holder.
d) Late
Fee.
All
overdue accrued and unpaid interest to be paid hereunder shall entail a late
fee
at the rate of 18% per annum (or such lower maximum amount of interest permitted
to be charged under applicable law) (“Late
Fee”)
which
will accrue daily, from the date such interest is due hereunder through and
including the date of payment. Notwithstanding anything to the contrary
contained herein, if on any Interest Payment Date the Company has elected to
pay
a portion of the interest in Additional Notes and is not able to pay accrued
interest in the form of Additional Notes because it does not then satisfy the
conditions for payment in the form of Additional Notes set forth above, then,
the
Company shall pay cash.
e) Optional
Prepayment.
The
Company shall have the right to prepay, in cash, all or a portion of the Notes
at any time after the second anniversary of the Closing Date at 110% of the
principal amount thereof plus accrued interest to the date of repayment.
f) Mandatory
Repayment.
If (i)
the Company shall be a party to any Change of Control Transaction or Fundamental
Transaction, (ii) the Company shall agree to sell or dispose any of its assets
in one or more transactions (whether or not such sale would constitute a Change
of Control Transaction) and other than a sale or sales of the assets in the
ordinary course of business aggregating less than $100,000 and other than the
sale or disposition of the assets of TBOL or (iii) upon a Qualified Financing,
the Company will be required to offer to repay, in cash, the aggregate principal
amount of the Notes at 110% of the principal amount thereof plus accrued
interest to such date of repayment. Additionally, (i) any Escrow Amount not
paid
to the stockholders of ATPA (whether by failure to meet certain conditions
set
forth in Escrow Agreement or otherwise) and (ii) in the event that any life
insurance policies owned by the Company are surrendered, the cash value received
from such policies, in each case shall be offered the Holder as a repayment
of
principal at 110% of the principal amount thereof plus accrued interest to
the
date of repayment, which the Holder has the sole right to accept or reject.
Notwithstanding the foregoing, in the event that UBPS has raised equity on
terms
satisfactory to the Holder in the gross amount of at least $10.3 million, the
Company shall not be required to make the offer in respect of clause (ii) of
the
immediately preceding sentence upon the surrender of any of the Company’s life
insurance policies.
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Section
3. Registration
of Transfers and Exchanges.
a) Different
Denominations.
This
Note is exchangeable for an equal aggregate principal amount of Notes of
different authorized denominations as requested by the Holder surrendering
the
same. No service charge will be made for such registration of transfer or
exchange.
b) Investment
Representations.
This
Note has been issued subject to certain investment representations of the
original Holder set forth in the Purchase Agreement and may be transferred
or
exchanged only in compliance with the Purchase Agreement and applicable federal
and state securities laws and regulations.
c) Reliance
on Note Register.
Prior
to due presentment to the Company for transfer of this Note, the Company and
any
agent of the Company may treat the Person in whose name this Note is duly
registered on the Note Register as the owner hereof for the purpose of receiving
payment as herein provided and for all other purposes, whether or not this
Note
is overdue, and neither the Company nor any such agent shall be affected by
notice to the contrary.
Section
4. Reserved.
Section
5. Reserved.
Section
6. Monthly
Redemption
a) Monthly
Redemption.
Beginning June 30, 2008, on each Monthly Redemption Date the Company shall
redeem the Holder’s Monthly Redemption Amount plus accrued but unpaid interest,
the sum of all liquidated damages and any other amounts then owing to such
Holder in respect of the Note. The Monthly Redemption Amount due on each Monthly
Redemption Date shall be paid in cash.
b) Redemption
Procedure.
The
payment of cash pursuant to a Monthly Redemption shall be made on the Monthly
Redemption Date. If any portion of the cash payment for a Monthly Redemption
shall not be paid by the Company by the respective due date, interest shall
accrue thereon at the rate of 18% per annum (or the maximum rate permitted
by
applicable law, whichever is less) until the payment of the Monthly Redemption
Amount, plus all amounts owing thereon is paid in full. Alternatively, if any
portion of the Monthly Redemption Amount remains unpaid after such date, the
Holders subject to such redemption may elect, by written notice to the Company
given at any time thereafter, to invalidate ab initio
such
redemption, notwithstanding anything herein contained to the
contrary.
Section
7. Negative
Covenants.
So long
as any portion of this Note is outstanding, the Company and UBPS will not and
will not permit any of its Subsidiaries to directly or
indirectly:
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a) other
than Permitted Indebtedness, enter into, create, incur, assume or suffer to
exist any indebtedness or liens of any kind, on or with respect to any of its
property or assets now owned or hereafter acquired or any interest therein
or
any income or profits therefrom that is
senior
to, subordinated to or pari passu
with, in
any respect, the Company’s obligations under the Notes,
other
than the subordinated promissory note on terms approved by the Purchasers issued
in lieu of funding up to $2.5 million of the Escrow Amount;
b) amend
its
articles of incorporation, create or amend any certificate of designations,
bylaws or other charter documents;
c) repay,
repurchase or offer to repay, repurchase, make any payment in respect of or
otherwise acquire any of its Common Stock, Preferred Stock, or other equity
securities or other subordinated debt, other than to the extent permitted or
required under the Transaction Documents or as otherwise permitted by the
Transaction Documents:
provided, the Company shall be entitled to make payments required under the
subordinated promissory note referred to in subsection 7 (a) above in accordance
with its terms;
d) make
any
loan, advance, guarantee obligations, offer, other extension of credit or
capital contributions to, or hold or invest in, or purchase or otherwise acquire
any shares of the capital stock, bonds, notes, debentures or other securities
of, or make any other investment in, any other Person, or permit any of its
Subsidiaries to do any of the foregoing, except for: (i) investments
existing on the date hereof, as set forth on Disclosure Schedule, but not any
increase in the amount thereof as set forth in such Disclosure Schedule or
any
other modification of the terms thereof; (ii) Permitted Investments; (iii)
acquisitions on terms satisfactory to the Holders, so long as pro-forma for
such
acquisitions the Company and UBPS are in compliance with the provisions of
Sections 7 and 8 hereof; and (iv) the subordinated promissory note referred
to
in subsection 7(a) above;
e) make
Capital Expenditures in excess of (i) $375,000 for the period commencing on
the
closing date and ending on April 30, 2008, (ii) $1,395,000 for the period
commencing on May 1, 2008 and ending April 30, 2009, and (iii) $1,000,000 for
the period commencing on May 1, 2009 and ending April 30, 2010 and the period
beginning on May 1, 2010 and ending on the maturity date;
f) create
or
otherwise cause, incur, assume, suffer or permit to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary (i) to pay dividends or to make any other distribution on any
shares of capital stock of such Subsidiary owned by the Company (or UBPS) or
any
of its Subsidiaries, (ii) to pay or prepay or to subordinate any
indebtedness owed to the Company (or UBPS) or any of its Subsidiaries,
(iii) to make loans or advances to the Company (or UBPS) or any of its
Subsidiaries or (iv) to transfer any of its property or assets to the
Company (or UBPS) or any of its Subsidiaries, or permit any of its Subsidiaries
to do any of the foregoing;
g) engage
in
any transactions with any officer, director, employee or any affiliate of the
Company, including any contract, agreement or other arrangement providing for
the furnishing of services to or by, providing for rental of real or personal
property to or from, or otherwise requiring payments to or from any officer,
director or such employee or, to the knowledge of the Company or UBPS, any
entity in which any officer, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, in each case in excess
of $10,000 other than (i) for payment of salary or consulting fees for services
rendered pursuant to such person’s employment agreement existing on the date
hereof, (ii) for other employee benefits pursuant to the Company’s or UBPS’
stock option plan as in existence on the date hereof, (iii) any payments in
connection with the Acquisition Agreement or any documents executed in
connection therewith or contemplated thereby, and (iv) issuance of the
Performance Incentive Shares to the extent that the Company satisfies the
budgeted performance criteria approved by the Purchasers. Notwithstanding the
foregoing, all payments of cash or securities in excess of $25,000 to such
parties in regard to bonuses to such party’s base salary, pursuant to equity
incentive or stock option plans or in regard to reimbursements of expenses
or
fringe benefits shall be subject to the approval of the Purchasers;
or
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h) create
or
acquire any Subsidiary after the date hereof unless (i) such Subsidiary is
a
wholly-owned Subsidiary of the Company or
UBPS
and (ii)
such Subsidiary becomes party to the Security Agreement and the Guaranty (either
by executing a counterpart thereof or an assumption or joinder agreement in
respect thereof) and, to the extent required by the Purchaser, satisfied each
condition of this Agreement and the Transaction Documents as if such Subsidiary
were a Subsidiary on the Closing Date;
i) enter
into any agreement with any holder of the Company’s or
UBPS’
securities without the prior written consent of the Holder;
j) re-price,
cancel and reissue or otherwise amend any option or warrant in a manner that
would have the effect of lowering the exercise price of such option or
warrant;
k) effectuate
any forward or reverse stock split: and
l) enter
into any agreement with respect to any of the foregoing.
Section
8.
Other
Covenants.
a) Within
sixty days from the Closing Date, the Company will obtain (i) a key man life
insurance policy on the life of Xxxxxxx Xxxxxxxxx (the “Key Man Policy”) in an
amount not less than the aggregate principal amount of the Notes, naming the
Note Holders as beneficiaries and (ii) a director’s and officer’s liability
policy (the “D&O Policy”) in an amount not less than the aggregate principal
amount of the Notes.
b) So
long
as any principal or interest on the Notes shall remain unpaid, the Company
(including UBPS) and its Subsidiaries shall not permit the ratio of Consolidated
Total Indebtedness as of the end of any fiscal quarter to Consolidated EBITDA
of
the Company and its Subsidiaries for the four (4) consecutive fiscal quarters
of
the Company and its Subsidiaries (the “Leverage
Ratio”)
ending
on such date to be greater than 2.6x.
Provided,
however, that for the fiscal quarter ended January 31, 2008, the Consolidated
EBITDA shall be calculated as four-thirds the Consolidated EBITDA for the prior
three consecutive fiscal quarters.
c) So
long
as any principal or interest on the Notes shall remain unpaid, the Company
and
its Subsidiaries shall not permit the Fixed Charge Coverage Ratio of the Company
(including UBPS) and its Subsidiaries for each period of four (4) consecutive
fiscal quarters of the Company (including UBPS) and its Subsidiaries for which
the last quarter ends on a date set forth below to be less than the amount
set
forth opposite such date:
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|
Fiscal
Quarter End
|
Fixed
Charge Coverage Ratio
|
|
|
January
31, 2008
|
1.38
|
|
|
April
30, 2008
|
1.40
|
|
|
July
31, 2008
|
1.20
|
|
|
October
31, 2008
|
1.06
|
|
|
January
31, 2009
|
0.94
|
|
|
April
30, 2009
|
0.86
|
|
|
July
31, 2009
|
0.88
|
|
|
October
30, 2009
|
0.91
|
|
|
January
31, 2010
|
0.94
|
|
|
April
30, 2010
|
0.97
|
|
|
July
31, 2010
|
1.01
|
|
|
October
31, 2010
|
1.05
|
|
|
January
31, 2010
|
1.09
|
|
|
April
30, 2010
|
1.13
|
Provided,
however, that for the fiscal quarter ended January 31, 2008, the Consolidated
EBITDA shall be calculated as four-thirds the Consolidated EBITDA for the prior
three consecutive fiscal quarters.
In
addition, Consolidated Interest Expense for such periods shall be determined
on
a pro-forma basis as if the Indebtedness incurred was incurred on the first
day
of the period.
d) So
long
as any principal or interest on the Notes shall remain unpaid, the Company
(including UBPS) and its Subsidiaries shall achieve a Consolidated EBITDA for
the four (4) consecutive fiscal quarters of the Company ending on the date
set
forth below equal to or greater than the amount set forth opposite such
date.
|
Fiscal
Quarter End
|
Minimum
Consolidated EBITDA
|
|
|
January
31, 2008
|
$3,168,300
|
|
|
April
30, 2008
|
$3,211,500
|
|
|
July
31, 2008
|
$3,639,680
|
|
|
October
31, 2008
|
$4,035,550
|
|
|
January
31, 2009
|
$4,342,130
|
|
|
April
30, 2009
|
$4,664,610
|
|
|
July
31, 2009
|
$4,863,990
|
|
|
October
30, 2009
|
$5,023,560
|
|
|
January
31, 2010
|
$5,183,280
|
|
|
April
30, 2010
|
$5,343,150
|
|
|
July
31, 2010
|
$5,553,170
|
|
|
October
31, 2010
|
$5,763,200
|
|
|
January
31, 2011
|
$5,973,230
|
|
|
April
30, 2011
|
$6,183,250
|
Provided,
however, that for the fiscal quarter ended January 31, 2008, the Consolidated
EBITDA shall be calculated as four-thirds the Consolidated EBITDA for the prior
three consecutive fiscal quarters.
e) Within
thirty (30) calendar days after the end of each such fiscal quarter, the Company
shall deliver to Holder’s General Counsel a certificate from its Principal
Accounting Officer certifying compliance with the ratios set forth in 8(b),
8(c)
and 8(d) above (including the calculations evidencing such
compliance).
10
of
16
f) On
or
prior to January 31, 2008, UBPS shall have sold TBOL on terms satisfactory
to
the Purchasers, including having retained at least 40% of the equity thereof
and
having no further liabilities or further funding obligations
therewith.
Section
9. Events
of Default.
a) “Event
of Default”,
wherever used herein, means any one of the following events (whatever the reason
and whether it shall be voluntary or involuntary or effected by operation of
law
or pursuant to any judgment, decree or order of any court, or any order, rule
or
regulation of any administrative or governmental body):
i. any
default in the payment of (A) the principal of amount of any Note, or (B)
interest (including Late Fees) on, or liquidated damages in respect of, any
Note, in each case free of any claim of subordination, as and when the same
shall become due and payable (whether on the Maturity Date or by acceleration
or
otherwise) which default, solely in the case of an interest payment or other
default under clause (B) above, is not cured, within 3 Business
Days;
ii. the
Company or UBPS shall fail to observe or perform any other covenant or agreement
contained in this Note or any of the other Transaction Documents which failure
is not cured, if possible to cure, within the earlier to occur
of
(A)
5
Business
Days
after notice of such default sent by the Holder or by any other
Holder
and (B)
10 Business
Days
after the Company shall become or should have become aware of such
failure;
iii. a
default
or event of default (subject to any grace or cure period provided for in the
applicable agreement, document or instrument) shall occur under (A) any of
the
Transaction Documents other than the Notes, or (B) any other material agreement,
lease, document or instrument to which the Company, UBPS or any Subsidiary
is
bound, which
default, solely in the case of a default under this clause (B) above, is not
cured, within 10 Trading Days;
iv. any
representation or warranty made herein,
in any
other Transaction Document, in any written statement pursuant hereto or thereto,
or in any other report, financial statement or certificate made or delivered
to
the Holder or any other holder of Notes shall
be
untrue or incorrect in any material respect as of the date when made or deemed
made;
v. either
of
(i) the Key Man Policy (once obtained) or (ii) the D&O Policy shall lapse,
no longer be in full force and effect or have its face-value
reduced;
vi. any
of
the Company’s Primary Contracts shall be terminated, for any reason and not
renewed within 60 days of such termination on terms that would be materially
adverse to the company;
vii. a
judgment is rendered in respect of (a) litigation claims against ATPA for acts
incurred prior to the Closing Date in an amount exceeding the Escrow Amount
or
(b) litigation claims against ATPA or UBPS for acts incurred after the Closing
Date in an amount exceeding $250,000;
11
of
16
viii. (i)
the
Company, UBPS or any of its Subsidiaries shall commence, or there shall be
commenced against the Company, UBPS or any such Subsidiary, a case under any
applicable bankruptcy or insolvency laws as now or hereafter in effect or any
successor thereto, or the Company, UBPS or any Subsidiary commences any other
proceeding under any reorganization, arrangement, adjustment of debt, relief
of
debtors, dissolution, insolvency or liquidation or similar law of any
jurisdiction whether now or hereafter in effect relating to the Company, UBPS,
or any Subsidiary thereof or (ii) there is commenced against the Company, UBPS,
or any Subsidiary thereof any such bankruptcy, insolvency or other proceeding
which remains undismissed for a period of 60 days; or (iii) the Company, UBPS,
or any Subsidiary thereof is adjudicated by a court of competent jurisdiction
insolvent or bankrupt; or any order of relief or other order approving any
such
case or proceeding is entered; or (iv) the Company, UBPS, or any Subsidiary
thereof suffers any appointment of any custodian or the like for it or any
substantial part of its property which continues undischarged or unstayed for
a
period of 60 days; or (v) the Company, UBPS, or any Subsidiary thereof makes
a
general assignment for the benefit of creditors; or (vi) the Company shall
fail
to pay, or shall state that it is unable to pay, or shall be unable to pay,
its
debts generally as they become due; or (vii) the Company, UBPS, or any
Subsidiary thereof shall call a meeting of its creditors with a view to
arranging a composition, adjustment or restructuring of its debts; or (viii)
the
Company, UBPS, or any Subsidiary thereof shall by any act or failure to act
expressly indicate its consent to, approval of or acquiescence in any of the
foregoing; or (ix) any corporate or other action is taken by the Company, UBPS,
or any Subsidiary thereof for the purpose of effecting any of the
foregoing;
ix. the
Company, UBPS, or any Subsidiary shall default in any of its obligations under
any mortgage, credit agreement or other facility, indenture agreement, factoring
agreement or other instrument under which there may be issued, or by which
there
may be secured or evidenced any indebtedness for borrowed money or money due
under any long term leasing or factoring arrangement of the Company in an amount
exceeding $100,000, whether such indebtedness now exists or shall hereafter
be
created and such default shall result in such indebtedness becoming or being
declared due and payable prior to the date on which it would otherwise become
due and payable;
x. the
Company or UBPS shall redeem or repurchase any of its outstanding shares of
Common Stock or other equity securities of the Company;
xi. any
of
the Security Agreement or the Guarantee shall cease to be in full force and
effect, and
xii. UBPS
shall not have raised at least $2.5 million of equity to fund the balance of
the
Escrow Amount by December 31, 2008.
12
of
16
b) Remedies
Upon Event of Default.
If any
Event of Default occurs, the full principal amount of this Note, together with
interest and other amounts owing in respect thereof, to the date of acceleration
shall become, at the Holder’s election, immediately due and payable in cash. The
aggregate amount payable upon an Event of Default shall be equal to the
Mandatory Prepayment Amount. Commencing 5 days after the occurrence of any
Event
of Default that results in the eventual acceleration of this Note, the interest
rate on this Note shall accrue at the rate of 18% per annum, or such lower
maximum amount of interest permitted to be charged under applicable law. All
Notes for which the full Mandatory Prepayment Amount hereunder shall have been
paid in accordance herewith shall promptly be surrendered to or as directed
by
the Company. The Holder need not provide and the Company hereby waives any
presentment, demand, protest or other notice of any kind, and the Holder may
immediately and without expiration of any grace period enforce any and all
of
its rights and remedies hereunder and all other remedies available to it under
applicable law. Such declaration may be rescinded and annulled by Xxxxxx at
any
time prior to payment hereunder and the Holder shall have all rights as a Note
holder until such time, if any, as the full payment under this Section shall
have been received by it. No such rescission or annulment shall affect any
subsequent Event of Default or impair any right consequent thereon.
Section
10. Miscellaneous.
a) Notices.
Any and
all notices or other communications or deliveries to be provided by the Holders
hereunder shall be in writing and delivered personally, by facsimile, sent
by a
nationally recognized overnight courier service, addressed to the Company,
at
the address set forth above, facsimile number
000-000-0000, Attn: Xxxxxxx Xxxxxxxxx, Chief Executive Officer,
or
such
other address or facsimile number as the Company may specify for such purposes
by notice to the Holders delivered in accordance with this Section. Any and
all
notices or other communications or deliveries to be provided by the Company
hereunder shall be in writing and delivered personally, by facsimile, sent
by a
nationally recognized overnight courier service addressed to each Holder at
the
facsimile telephone number or address of such Xxxxxx appearing on the books
of
the Company, or if no such facsimile telephone number or address appears, at
the
principal place of business of the Holder. Any notice or other communication
or
deliveries hereunder shall be deemed given and effective on the earliest of
(i)
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior
to
5:30 p.m. (New York City time), (ii) the date after the date of transmission,
if
such notice or communication is delivered via facsimile at the facsimile
telephone number specified in this Section later than 5:30 p.m. (New York City
time) on any date and earlier than 11:59 p.m. (New York City time) on such
date,
(iii) the second Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt
by
the party to whom such notice is required to be given.
b) Absolute
Obligation.
Except
as expressly provided herein, no provision of this Note shall alter or impair
the obligation of the Company, which is absolute and unconditional, to pay
the
principal of, interest and liquidated damages (if any) on, this Note at the
time, place, and rate, and in the coin or currency, herein prescribed. This
Note
is a direct debt obligation of the Company. This Note ranks pari passu
with all
other Notes now or hereafter issued under the terms set forth
herein.
c) Lost
or Mutilated Note.
If this
Note shall be mutilated, lost, stolen or destroyed, the Company shall execute
and deliver, in exchange and substitution for and upon cancellation of a
mutilated Note, or in lieu of or in substitution for a lost, stolen or destroyed
Note, a new Note for the principal amount of this Note so mutilated, lost,
stolen or destroyed but only upon receipt of evidence of such loss, theft or
destruction of such Note, and of the ownership hereof, and indemnity, if
requested, all reasonably satisfactory to the Company.
13
of
16
d) Security
Interest.
This
Note is a direct debt obligation of the Company and, pursuant to the Security
Agreement is secured by a first priority perfected security interest in all
of
the assets of the Company for the benefit of the Holders.
e) Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of this Note 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 agrees that all legal proceedings
concerning the interpretations, enforcement and defense of the transactions
contemplated by any of the Transaction Documents (whether brought against a
party hereto or its respective affiliates, directors, officers, shareholders,
employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New
York Courts”).
Each
party hereto hereby irrevocably submits to the exclusive jurisdiction of the
New
York Courts for the adjudication of any dispute hereunder or in connection
herewith or with any transaction contemplated hereby or discussed herein
(including with respect to the enforcement of any of the Transaction Documents),
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, or such New York Courts are improper or inconvenient venue
for
such proceeding. 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 via registered or certified mail or
overnight delivery (with evidence of delivery) to such party at the address
in
effect for notices to it under this Note 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. Each party hereto hereby irrevocably waives,
to
the fullest extent permitted by applicable law, any and all right to trial
by
jury in any legal proceeding arising out of or relating to this Note or the
transactions contemplated hereby. If either party shall commence an action
or
proceeding to enforce any provisions of this Note, then the prevailing party
in
such action or proceeding shall be reimbursed by the other party for its
attorney’s fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such action or proceeding.
f) Waiver.
Any
waiver by the Company or the Holder of a breach of any provision of this Note
shall not operate as or be construed to be a waiver of any other breach of
such
provision or of any breach of any other provision of this Note. The failure
of
the Company or the Holder to insist upon strict adherence to any term of this
Note on one or more occasions shall not be considered a waiver or deprive that
party of the right thereafter to insist upon strict adherence to that term
or
any other term of this Note. Any waiver must be in writing.
g) Severability.
If any
provision of this Note is invalid, illegal or unenforceable, the balance of
this
Note shall remain in effect, and if any provision is inapplicable to any person
or circumstance, it shall nevertheless remain applicable to all other persons
and circumstances. If it shall be found that any interest or other amount deemed
interest due hereunder violates applicable laws governing usury, the applicable
rate of interest due hereunder shall automatically be lowered to equal the
maximum permitted rate of interest. The Company covenants (to the extent that
it
may lawfully do so) that it shall not at any time insist upon, plead, or in
any
manner whatsoever claim or take the benefit or advantage of, any stay, extension
or usury law or other law which would prohibit or forgive the Company from
paying all or any portion of the principal of or interest on this Note as
contemplated herein, wherever enacted, now or at any time hereafter in force,
or
which may affect the covenants or the performance of this indenture, and the
Company (to the extent it may lawfully do so) hereby expressly waives all
benefits or advantage of any such law, and covenants that it will not, by resort
to any such law, hinder, delay or impeded the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such
as
though no such law has been enacted.
14
h) Next
Business Day.
Whenever any payment or other obligation hereunder shall be due on a day other
than a Business Day, such payment shall be made on the next succeeding Business
Day.
i) Headings.
The
headings contained herein are for convenience only, do not constitute a part
of
this Note and shall not be deemed to limit or affect any of the provisions
hereof.
j) Seniority.
This
Note is senior in right of payment to any and all other indebtedness of the
Company.
*********************
15
IN
WITNESS WHEREOF, the Company and UBPS has caused this Note to be duly executed
by a duly authorized officer as of the date first above indicated.
|
/s/
Xxxxxxx Xxxxxxxxx
|
|
Name:
Xxxxxxx Xxxxxxxxx
|
|
Title:
Chief Executive Officer
|
|
UNITED
BENEFITS & PENSION SERVICES, INC.
|
|
/s/
Xxxxxxx Xxxxxxxxx
|
|
Title:
Chief Executive Officer
|
16
