SECURITIES PURCHASE AGREEMENT
Exhibit
10.4
This
Securities Purchase Agreement (this “Agreement”)
is
dated as of November 30, 2007 between Associated
Third Party Administrators,
a
California corporation whose principal place of business is located at 0000
Xxxxx Xxxx Xxxx, Xxxxxxx, XX 00000 (“ATPA” or the “Company”),
United Benefits & Pension Services, Inc. (solely with respect to Article 4)
and each of the Purchaser(s) identified on the signature pages hereto (including
their successors and assigns, the “Purchaser(s)”).
WHEREAS,
subject to the terms and conditions set forth in this Agreement and pursuant
to
Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”)
and
Rule 506 promulgated thereunder, the Company desires to issue and sell to each
Purchaser, and each Purchaser, severally and not jointly, desires to purchase
from the Company, securities of the Company as more fully described in this
Agreement.
NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement,
and for other good and valuable consideration the receipt and adequacy of which
are hereby acknowledged, the Company and each Purchaser, severally and not
jointly, agrees as follows:
ARTICLE
I.
DEFINITIONS
1.1 Definitions.
In
addition to the terms defined elsewhere in this Agreement: (a) capitalized
terms
that are not otherwise defined herein have the meanings given to such terms
in
the Notes (as defined herein), and (b) the following terms have the meanings
indicated in this Section 1.1:
“Acquisition
Agreement”
means
the Agreement and Plan of Merger pursuant to which UBPS or a subsidiary thereof
is acquiring all of the stock of the Company.
“Acquisition”
means
the acquisition of ATPA by UBPS, pursuant to the Acquisition
Agreement.
“Action”
shall
have the meaning ascribed to such term in Section 3.1(j).
“Additional
Notes”
means
any notes issued to the Holders in payment of Interest.
“Agent”
means
CAMOFI Master LDC, in its capacity as agent of the Purchasers for the purposes
of holding the Security Documents on their behalf as described in Section
5.19.
“Affiliate”
means
any Person that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a Person, as such
terms are used in and construed under Rule 144 under the Securities
Act.
With
respect to a Purchaser, any investment fund or managed account that is managed
on a discretionary basis by the same investment manager as any Purchaser will
be
deemed to be an Affiliate of such Purchaser.
“Change
of Control”
means
the occurrence of any of (i) an acquisition after the date hereof by an
individual or legal entity or “group” (as described in Rule 13d-5(b)(1)
promulgated under the Exchange Act), 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 Closing Date (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 Closing Date), or
(iii)
Xxxxxxx Xxxxxxxxx shall no longer be employed by the Company or UBPS 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).
“Closing”
means
the closing of the purchase and sale of the Securities pursuant to Section
2.1.
“Closing
Date”
means
the Business Day when all of the Transaction Documents have been executed and
delivered by the applicable parties thereto, and all conditions precedent to
(i)
the Purchasers’ respective obligations to pay the Subscription Amount and (ii)
the Company’s obligations to deliver the Securities have been satisfied or
waived.
“Commission”
means
the Securities and Exchange Commission.
“Common
Stock”
means
the common stock of UBPS, par value $.00001 per share, and any securities into
which such common stock shall hereinafter have been reclassified.
“Common
Stock Equivalents”
means
any securities of the Company or the Subsidiaries which would entitle the holder
thereof to acquire at any time Common Stock, including without limitation,
any
debt, preferred stock, rights, options, warrants or other instrument that is
at
any time convertible into or exchangeable for, or otherwise entitles the holder
thereof to receive, Common Stock.
“Company
Counsel”
means
Xxxxxx Xxxxxx Xxxxxxxx LLP.
“Disclosure
Schedules”
shall
have the meaning ascribed to such term in Section 3.1 hereof.
“Effective
Date”
means
the date that the initial Registration Statement filed by the Company pursuant
to the Registration Rights Agreement is first declared effective by the
Commission.
“Eligible
Market”
means
the following markets or exchanges the Nasdaq SmallCap Market, the American
Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
the
OTC Bulletin Board.
“Equity
Offering”
means
the private offering by UBPS of units consisting of shares of Common Stock
and
warrants to acquire shares of Common Stock for minimum gross proceeds of
$4,500,000 and maximum gross proceeds of $9,000,000.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder.
-
2
-
“Exempt
Issuance”
means
the issuance of (a) shares of Common Stock or options to employees, officers
or
directors of
the
Company or UBPS, not to exceed 25,000 shares or (b) options pursuant to any
stock or option plan duly adopted by a majority of the members of the Board
of
Directors of the Company or UBPS prior to closing not to exceed 10% of the
fully
diluted shares and on terms approved by the Purchasers or (c) securities upon
the exercise of any securities issued hereunder, or convertible securities,
options or warrants issued and outstanding on the date of this Agreement,
provided that such securities have not been amended since the date of this
Agreement to increase the number of such securities or to decrease the exercise,
exchange or conversion price of any such securities, or (d) shares of Common
Stock issued to secure the senior subordinated promissory note issued in lieu
of
funding up to $2.5 million of the Escrow Amount or (e) the Performance Incentive
Shares.
“GAAP”
shall
have the meaning ascribed to such term in Section 3.1(h) hereof.
“Guarantee(s)”
means
the Guarantee(s), dated the date hereof, among UBPS, each of the Subsidiaries
(other than TBOL)and the Purchasers, in the form of Exhibit
E
attached
hereto.
“Issued
Shares”
means
collectively the shares of Common Stock to be issued by the UBPS and delivered
to the Purchasers at the Closing in accordance with Section 2.2(a) hereof and
as
set forth on Schedule 3.1(g) attached hereto.
“Liens”
means
a
lien, charge, security interest, encumbrance, right of first refusal, preemptive
right or other restriction.
“Material
Adverse Effect”
shall
have the meaning assigned to such term in Section 3.1(b) hereof.
“Material
Permits”
shall
have the meaning ascribed to such term in Section 3.1(m).
“Notes”
means
the Senior Secured Notes due, subject to the terms therein, May 30, 2011, issued
by the Company to each of the Purchasers hereunder, in the form of Exhibit
A
and any
Additional Notes issued to the Holders in payment of interest pursuant
thereto.
“Performance
Incentive Shares” means
up
to a total of 417,362 shares of Common Stock to be issued to the President
and
Chief Executive Officer and the Chief Financial Officer of UBPS upon the Company
achieving certain budgeted performance levels.
“Person”
means
an individual or corporation, partnership, trust, incorporated or unincorporated
association, joint venture, limited liability company, joint stock company,
government (or an agency or subdivision thereof) or other entity of any
kind.
“Proceeding”
means
an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
“Registration
Rights Agreement”
means
the Registration Rights Agreement, dated the date hereof, among UBPS and the
Purchasers, in the form of Exhibit
C
attached
hereto.
“Registration
Statement”
means
a
registration statement meeting the requirements set forth in the Registration
Rights Agreement and covering the resale of the Warrant Shares by any Purchaser
as provided for in the Registration Rights Agreement.
-
3
-
“Required
Approvals”
shall
have the meaning ascribed to such term in Section 3.1(e).
“Required
Minimum”
means,
as of any date, the maximum aggregate number of shares of Common Stock then
issued or potentially issuable in the future pursuant to the Transaction
Documents, including the Issued Shares and any Warrant Shares issuable upon
exercise in full of all Warrants and ignoring any exercise limits set forth
therein.
“Rule
144”
means
Rule 144 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same effect as
such
Rule.
“Securities”
means
the Notes, the Issued Shares, the Warrants and the Warrant Shares.
“Securities
Act”
means
the Securities Act of 1933, as amended.
“Security
Agreement”
means
the Security Agreement, dated the date hereof, between the Company, UBPS, the
Subsidiaries (other than TBOL) and the Agent on behalf of the Purchasers, in
the
form of Exhibit
D
attached
hereto.
“Security
Documents”
means
the Security Agreement, the Guarantee(s) and any other documents and filings
required thereunder in order to grant the Agent (on behalf of the Purchasers)
a
perfected security interest in all of the assets of UBPS and the Company,
including all UCC-1 filing receipts and mortgages on the real
property.
“Subscription
Amount”
means,
as to any Purchaser, the aggregate amount to be paid for the Notes, the Issued
Shares and Warrants purchased hereunder as specified below such Purchaser’s name
on the signature page of this Agreement and next to the heading “Subscription
Amount”, in United States Dollars and in immediately available
funds.
“Subsidiary”
means
any subsidiary of the Company as set forth on Schedule
3.1(a).
“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”
means
this Agreement, the Notes, the Warrants, the Security Agreement, the
Guarantee(s), the Registration Rights Agreement and any other documents or
agreements executed in connection with the transactions contemplated
hereunder.
“UBPS”
means
United Benefits & Pension Services, Inc., a Delaware corporation, and the
company acquiring ATPA and the parent of the Company.
-
4
-
“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. New York City Time to 4:02 p.m. New York City
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 Purchasers holding
a
majority of the principal amount of Notes then outstanding.
“Warrants”
means
the Common Stock purchase warrants, in the form of Exhibit
B delivered
to each Purchaser at the Closing in accordance with Section 2.2(a) hereof,
which
Warrants shall be exercisable immediately and have a term of exercise equal
to
five years.
“Warrant
Shares”
means
the shares of Common Stock issuable upon exercise of the Warrants.
ARTICLE
II.
PURCHASE
AND SALE
2.1 Closing.
On the
Closing Date, upon the terms and subject to the conditions set forth herein,
concurrent with the execution and delivery of this Agreement by the parties
hereto, the Company agrees to sell, and each of the Purchasers severally (and
not jointly) agree to the principal amount of the Notes set forth as the
“Subscription Amount” on such Purchaser’s signature page to this Agreement (not
to exceed $8,000,000 in the aggregate principal amount), secured by a first
priority lien, more fully described in the Security Agreement, on all assets
of
the Company, UBPS and the Subsidiaries (other than TBOL), the Issued Shares
and
the Warrants, to be issued on a pro rata basis to each Purchaser based on such
Purchaser’s Subscription Amount.
At
the
Closing, each Purchaser shall deliver to the Company via wire transfer
immediately available funds equal to its Subscription Amount and the Company
shall deliver to each Purchaser its Note, Warrants and Issued Shares as
determined pursuant to Section 2.2(a), and the other items set forth in Section
2.2 issuable at the Closing. Upon satisfaction of the conditions set forth
in
Section 2.2, the Closing shall occur at the offices of the Company, or such
other location as the parties shall mutually agree.
2.2 Deliveries.
|
a)
|
On
the Closing Date, the Company shall deliver to each Purchaser the
following:
|
|
(i)
|
this
Agreement duly executed by the Company and UBPS;
|
|
|
(ii)
|
a
duly executed Note with a principal amount equal to such Purchaser’s
Subscription Amount, registered in the name of such
Purchaser;
|
|
|
(iii)
|
duly
executed Warrants registered in the name of each Purchaser to purchase
an
aggregate number of shares of Common Stock of the Company, as set
forth on
Schedule 3.1(g) attached hereto, with an exercise price per share
equal to
$.00001;
|
|
|
(iv)
|
the
Issued Shares registered in the name of each Purchaser;
|
|
|
(v)
|
the
Registration Rights Agreement duly executed by
UBPS;
|
-
5
-
|
(vi)
|
the
Security Agreement, duly executed by the Company, UBPS and the
Subsidiaries, along with all the Security Documents;
|
|
|
(vii)
|
the
Guarantee(s), duly executed by UBPS and the Subsidiaries;
|
|
|
(viii)
|
lock-up
agreements executed by all control shareholders and insiders, including
Xxxxxxx Xxxxxxxxx, Xxxxxx Xxxxxxx, the Company’s CFO and Xxxx
Xxxxxxx;
|
|
|
(ix)
|
a
UCC-1 financing statement naming the Purchasers as secured parties
to be
filed simultaneously with the Closing; prior to the Closing the
Purchasers
shall have received evidence satisfactory to them that there are
no liens
on the assets of the Company and its Subsidiaries (other than TBOL);
|
|
|
(x)
|
a
use of proceeds statement, duly executed by the chief executive
officer of
the Company, attesting to the use of proceeds from the issuance
of the
Notes; and
|
|
| (xi) |
a
legal opinion of Company Counsel in the form of Exhibit
F.
|
|
b)
|
On
the Closing Date, each Purchaser shall deliver or cause to be delivered
to
the Company the following:
|
|
(i)
|
this
Agreement duly executed by such
Purchaser;
|
|
(ii)
|
the
Purchaser’s Subscription Amount by wire transfer to the account of the
Company;
|
|
(iii)
|
the
Registration Rights Agreement duly executed by such Purchaser; and
|
|
(iv)
|
the
Security Agreement, duly executed by such
Purchaser.
|
2.3
Closing Conditions.
|
a)
|
The
obligations of the Company hereunder in connection with the Closing
are
subject to the following conditions being
met:
|
|
(i)
|
the
accuracy in all material respects when made and on the Closing Date
of the
representations and warranties of the Purchasers contained
herein;
|
|
(ii)
|
all
obligations, covenants and agreements of each Purchaser required
to be
performed at or prior to the Closing Date shall have been performed;
and
|
|
(iii)
|
the
delivery by each Purchaser of the items set forth in Section 2.2(b)
of
this Agreement.
|
|
b)
|
The
respective obligations of each Purchaser hereunder in connection
with the
Closing are subject to the following conditions being
met:
|
-
6
-
|
(i)
|
the
accuracy in all material respects when made and on the Closing Date
of the
representations and warranties of the Company contained
herein;
|
|
(ii)
|
all
obligations, covenants and agreements of the Company required to
be
performed at or prior to the Closing Date shall have been
performed;
|
|
(iii)
|
such
Purchaser shall be satisfied with the results of its due diligence
investigation of the Company;
|
|
(iv)
|
such
Purchaser shall be satisfied with the Company’s current and projected uses
of cash;
|
|
(v)
|
such
Purchaser shall be satisfied with the Acquisition and the Company’s and
UBPS’ respective audited financial statements (to the extent available)
and UBPS’s unaudited financial
statements;
|
|
(vi)
|
such
Purchaser shall be satisfied with the Company’s pro forma
capitalization;
|
|
(vii)
|
such
Purchaser shall be satisfied with the quality and amount of the
collateral;
|
|
(viii)
|
no
statute, rule, regulation, executive order, decree, ruling or injunction
shall have been enacted, entered, promulgated or endorsed by any
court or
governmental authority of competent jurisdiction that prohibits the
consummation of any of the transactions contemplated by the Transaction
Documents;
|
|
(ix)
|
The
Company has obtained Board approval relating to the issuance of
the
Securities to the Purchasers under the Transaction
Documents;
|
|
(x)
|
the
delivery by the Company of the items set forth in Section 2.2(a)
of this
Agreement;
|
|
(xi)
|
since
the date of execution of this Agreement, no event or series of events
shall have occurred that reasonably could be expected to have or
result in
a Material Adverse Effect with respect to the Company and its
Subsidiaries;
|
|
(xii)
|
no
banking moratorium have been declared either by the United States
or New
York State authorities, no suspension of trading shall have been
declared
on the New York Stock Exchange or the NASDAQ Stock Market, nor shall
there
have occurred any material outbreak or escalation of hostilities
or other
national or international calamity of such magnitude in its effect
on, or
any material adverse change in, any financial markets which, in each
case,
in the reasonable judgment of such Purchaser, makes it impracticable
or
inadvisable to purchase the Notes at the
Closing;
|
|
(xiii)
|
the
Company’s pro-forma balance sheet shall contain at least $1.3 million in
cash value of insurance policies and at least $650,000 in cash after
satisfying in full all closing
obligations;
|
-
7
-
|
(xiv)
|
the
Consolidated EBITDA of ATPA for the period April 30, 2007 to October
31,
2007 shall be at least $1.775 million.
|
|
(xv)
|
neither
the Company nor any of its Subsidiaries shall have any outstanding
indebtedness, other than (A) that in favor of the Purchasers pursuant
to
the Notes and (B) indebtedness set forth on Schedule 3.1(z) hereto;
|
|
(xvi)
|
the
Company shall have sold (or shall sell TBOL by January 31,2008) 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 obligation therewith;
|
|
(xvii)
|
such
Purchaser shall be satisfied with the four-year non-competition agreements
with Xxxx Xxxxxxx and the other shareholders of the Company entering
into
such agreements;
|
|
(xviii)
|
such
Purchaser shall be satisfied with the two-year consulting agreement
with
Xxxx Xxxxxxx and the two-year employment agreements with the employees
of
the Company entering into such
agreements;
|
|
(xix)
|
such
Purchaser shall be satisfied with the employment agreements and option
plans of the principals of the Company and UBPS;
and
|
|
(xx)
|
at
least $4.5 million of additional equity shall have been contributed
to the
Company in the Equity Offering on terms satisfactory to the Purchasers,
at
least $750,000 shall be from the Company’s management team on terms and at
times satisfactory to the
Purchasers.
|
ARTICLE
III.
REPRESENTATIONS
AND WARRANTIES
3.1 Representations
and Warranties of the Company.
Except
as set forth in the Disclosure
Schedule
which
shall be deemed a part hereof, each of the Company and its Subsidiaries hereby
makes the representations and warranties set forth below to each Purchaser.
Additionally,
all of the representations and warranties contained in the Acquisition Agreement
are hereby incorporated by reference as if fully set forth herein
(a) Subsidiaries.
All of
the direct and indirect subsidiaries of the Company are set forth in Schedule
3.1 (a) of the Disclosure Schedule. The Company owns, directly or indirectly,
all of the capital stock or other equity interests of each Subsidiary free
and
clear of any Liens, and all the issued and outstanding shares of capital stock
of each Subsidiary are validly issued and are fully paid, non-assessable and
free of preemptive and similar rights to subscribe for or purchase
securities.
-
8
-
(b) Organization
and Qualification.
Each of
the Company and the Subsidiaries is an entity duly incorporated or otherwise
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization (as applicable), with the
requisite power and authority to own and use its properties and assets and
to
carry on its business as currently conducted. Neither the Company nor any
Subsidiary is in violation or default of any of the provisions of its respective
certificate or articles of incorporation, bylaws or other organizational or
charter documents. Each of the Company and the Subsidiary is duly qualified
to
conduct business and is in good standing as a foreign corporation or other
entity in each jurisdiction in which the nature of the business conducted or
property owned by it makes such qualification necessary, except where the
failure to be so qualified or in good standing, as the case may be, could not
have or reasonably be expected to result in (i) a material adverse effect on
the
legality, validity or enforceability of any Transaction Document, (ii) a
material adverse effect on the results of operations, assets, business,
prospects or financial condition of the Company and the Subsidiary, taken as
a
whole, or (iii) a material adverse effect on the Company’s ability to perform in
any material respect on a timely basis its obligations under any Transaction
Document (any of (i), (ii) or (iii), a “Material
Adverse Effect”)
and no
Proceeding has been instituted in any such jurisdiction revoking, limiting
or
curtailing or seeking to revoke, limit or curtail such power and authority
or
qualification.
(c) Authorization;
Enforcement.
The
Company and each of its Subsidiaries have the requisite corporate power and
authority to enter into and to consummate the transactions contemplated by
each
of the Transaction Documents and otherwise to carry out its respective
obligations thereunder. The execution and delivery of each of the Transaction
Documents by the Company and each of its Subsidiaries and the consummation
by it
of the transactions contemplated thereby have been duly authorized by all action
on the part of the Company and each of its Subsidiaries and no further action
is
required by the Company and each of its Subsidiaries in connection therewith.
Each Transaction Document has been (or upon delivery will have been) duly
executed by the Company and each of its Subsidiaries and, when delivered in
accordance with the terms hereof, will constitute the valid and binding
obligation of the Company and each of its Subsidiaries enforceable against
the
Company and each of its Subsidiaries in accordance with its terms except (i)
as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally and (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.
(d) No
Conflicts.
Except
as set forth in Disclosure Schedule 3.1(d), the execution, delivery and
performance of the Transaction Documents by the Company and each of its
Subsidiaries and the consummation by the Company and each of its Subsidiaries
of
the other transactions contemplated thereby do not and will not: (i) conflict
with or violate any provision of the Company’s or any Subsidiary’s certificate
or articles of incorporation, bylaws or other organizational or charter
documents, or (ii) conflict with, or constitute a default (or an event that
with
notice or lapse of time or both would become a default) under, result in the
creation of any Lien (except pursuant to the Security Agreement dated on the
date hereof) upon any of the properties or assets of the Company or any
Subsidiary, or give to others any rights of termination, amendment, acceleration
or cancellation (with or without notice, lapse of time or both) of, any
agreement, credit facility, debt or other instrument (evidencing a Company
or
Subsidiary debt or otherwise) or other understanding to which the Company or
any
Subsidiary is a party or by which any property or asset of the Company or any
Subsidiary is bound or affected, or (iii) conflict with or result in a violation
of any law, rule, regulation, order, judgment, injunction, decree or other
restriction of any court or governmental authority to which the Company or
a
Subsidiary is subject (including federal and state securities laws and
regulations), or by which any property or asset of the Company or a Subsidiary
is bound or affected; except in the case of each of clauses (ii) and (iii),
such
as could not, individually or in the aggregate, have or reasonably be expected
to result in a Material Adverse Effect.
-
9
-
(e) Filings,
Consents and Approvals.
Except
as set forth in the Disclosure Schedule 3.1(e), the Company is not required
to
obtain any consent, waiver, authorization or order of, give any notice to,
or
make any filing or registration with, any court or other federal, state, local
or other governmental authority or other Person in connection with the
execution, delivery and performance by the Company of the Transaction
Documents.
(f) Issuance
of the Securities.
The
Securities are duly authorized and, when issued and paid for in accordance
with
the applicable Transaction Documents, will be duly and validly issued, fully
paid and nonassessable, free and clear of all Liens imposed by the Company
other
than restrictions on transfer provided for in the Transaction Documents. The
Warrant Shares, when issued in accordance with the terms of the Transaction
Documents, will be validly issued, fully paid and nonassessable, free and clear
of all Liens imposed by the Company. The Company has reserved from its duly
authorized capital stock a number of shares of Common Stock for issuance of
the
Warrant Shares at least equal to the Required Minimum on the date hereof. The
Company has not, and to the knowledge of the Company, no Affiliate of the
Company has sold, offered for sale or solicited offers to buy or otherwise
negotiated in respect of any security (as defined in Section 2 of the Securities
Act) that would be integrated with the offer or sale of the Securities in a
manner that would require the registration under the Securities Act of the
sale
of the Securities to the Purchaser..
(g) Capitalization.
The pro
forma capitalization of the Company is as set forth on Schedule 3.1(g). Other
than as set forth on Schedule 3.1(g), the Company and the Subsidiaries have
no
indebtedness. Except as set forth on Schedule 3.1(g), the Company has not issued
any capital stock since April 17, 2007. No Person has any right of first
refusal, preemptive right, right of participation, or any similar right to
participate in the transactions contemplated by the Transaction Documents.
Except as set forth on Schedule 3.1(g), as a result of the purchase and sale
of
the Securities, there are no outstanding options, warrants, script rights to
subscribe to, calls or commitments of any character whatsoever relating to,
or
securities, rights or obligations convertible into or exchangeable for, or
giving any Person any right to subscribe for or acquire, any shares of Common
Stock, or contracts, commitments, understandings or arrangements by which the
Company or any Subsidiary is or may become bound to issue additional shares
of
Common Stock, or securities or rights convertible or exchangeable into shares
of
Common Stock. The issuance and sale of the Securities will not obligate the
Company or any Subsidiary to issue shares of Common Stock or other securities
to
any Person (other than the Purchaser) other than pursuant to the terms of UBPS’s
sale of Units in its Equity Offering and will not result in a right of any
holder of the Company’s or any of its Subsidiaries’ securities to adjust the
exercise, conversion, exchange or reset price under such securities. All of
the
outstanding shares of capital stock of the Company and its Subsidiaries are
validly issued, fully paid and nonassessable, have been issued in compliance
with all federal and state securities laws, and none of such outstanding shares
was issued in violation of any preemptive rights or similar rights to subscribe
for or purchase securities. No further approval or authorization of any
stockholder, the Board of Directors of the Company or any of its Subsidiaries
or
others is required for the issuance and sale of the Securities. There are no
stockholders agreements, voting agreements or other similar agreements with
respect to the Company’s or any of its Subsidiaries’ capital stock to which the
Company or any of its Subsidiaries is a party or, to the knowledge of the
Company, between or among any of the Company’s stockholders or any stockholder
of its Subsidiaries. The Company has no outstanding indebtedness except for
the
indebtedness described in Section 2.3(b)(xiv).
-
10
-
(h) Financial
Statements.
Except
as set forth on Schedule 3.1(h), the financial statements of the Company and
its
Subsidiaries, have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during the periods
involved (“GAAP”),
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company and its consolidated subsidiaries as of and
for the dates thereof and the results of operations and cash flows for the
periods then ended, subject, in the case of unaudited statements, to normal,
immaterial, year-end audit adjustments.
(i) Material
Changes.
Since
the date of the latest audited or unaudited financial statements, (i) there
has
been no event, occurrence or development that has had or that could reasonably
be expected to result in a Material Adverse Effect, (ii) each of the Company
and
its Subsidiaries has not incurred any liabilities (contingent or otherwise)
other than (A) trade payables and accrued expenses incurred in the ordinary
course of business consistent with past practice; (B) liabilities to be assumed
as a result of the acquisition of ATPA; (C) commitments to pay transaction
costs
to brokers, bankers, accountants, lawyers and other professionals advising
the
Company to all the transactions contemplated under this Agreement, and (D)
liabilities not required to be reflected in the Company's financial statements
pursuant to GAAP, (iii) each of the Company and its Subsidiaries has not altered
its method of accounting, (iv) neither the Company nor any Subsidiary of the
Company has declared or made any dividend or distribution of cash or other
property to its stockholders or purchased, redeemed or made any agreements
to
purchase or redeem any shares of its capital stock and (v) other than as set
forth on Schedule 3.1(i), each of the Company and its Subsidiaries has not
issued any equity securities to any officer, director or Affiliate, except
pursuant to existing Company stock option plans.
(j) Litigation.
Other
than as set forth in the Disclosure Schedule under the caption “Legal
Proceedings,” there is no action, suit, inquiry, notice of violation, proceeding
or investigation pending or, to the knowledge of the Company, threatened against
or affecting the Company, any Subsidiary or any of their respective properties
before or by any court, arbitrator, governmental or administrative agency or
regulatory authority (federal, state, county, local or foreign) (collectively,
an “Action”)
which
(i) adversely affects or challenges the legality, validity or enforceability
of
any of the Transaction Documents or the Securities or (ii) could, if there
were
an unfavorable decision, have or reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any Subsidiary, nor any director or
officer thereof, is or has been the subject of any Action involving a claim
of
violation, to the best of the Company’s knowledge, or liability under federal or
state securities laws or a claim of breach of fiduciary duty. To the knowledge
of the Company or any Subsidiary, there has not been and there is not pending
or
contemplated, any investigation by the Commission involving the Company or
any
Subsidiary or any current or former director or officer of the Company or any
Subsidiary.
(k) Labor
Relations.
No
material labor dispute exists or, to the knowledge of the Company or Subsidiary,
is imminent with respect to any of the employees of the Company or any
Subsidiary which could reasonably be expected to result in a Material Adverse
Effect.
-
11
-
(l) Compliance,
Material Contracts.
Neither
the Company nor any Subsidiary (i) is in default under or in violation of (and
no event has occurred that has not been waived that, with notice or lapse of
time or both, would result in a default by the Company or any Subsidiary under),
nor has the Company or any Subsidiary received notice of a claim that it is
in
default under or that it is in violation of, any indenture, loan or credit
agreement, services, marketing or processing agreement or any other agreement
or
instrument to which it is a party or by which it or any of its properties is
bound (whether or not such default or violation has been waived), (ii) is in
violation of any order of any court, arbitrator or governmental body, or (iii)
is or has been in violation of any statute, rule or regulation of any
governmental authority, including without limitation all foreign, federal,
state
and local laws applicable to its business except in each case as could not
have
a Material Adverse Effect. Schedule 3.1(l) contains a true, correct and complete
list of all contracts which are material to the operation of the business of
the
Company or any Subsidiary (“Material
Contracts”).
Except as set forth on Schedule 3.1(l), each Material Contract is in full force
and effect and is enforceable in accordance with its terms, and no material
defaults enforceable against the Company or any Subsidiary exist thereunder.
Neither the Company nor any Subsidiary has received notice from any party to
any
Material Contract stating that it intends to terminate or amend such
contract.
(m) Regulatory
Permits and Licenses.
The
Company and the Subsidiaries possess all certificates, authorizations,
memberships, sponsorships and permits issued by the appropriate federal, state,
local or foreign regulatory authorities or other Person necessary to conduct
their respective businesses and are in good standing under all such
certificates, authorizations, memberships, sponsorship and permits, except
where
the failure to possess such permits could not have or reasonably be expected
to
result in a Material Adverse Effect (“Material
Permits”),
and
neither the Company nor any Subsidiary has received any notice of proceedings
relating to the revocation or modification of any Material Permit.
(n) Title
to Assets.
The
Company and the Subsidiaries have good and marketable title in fee simple to
all
real property owned by them that is material to the business of the Company
and
the Subsidiaries and good and marketable title in all personal property owned
by
them that is material to the business of the Company and the Subsidiaries,
in
each case free and clear of all Liens, except for Liens as do not materially
affect the value of such property and do not materially interfere with the
use
made and proposed to be made of such property by the Company and the
Subsidiaries and Liens for the payment of federal, state or other taxes, the
payment of which is neither delinquent nor subject to penalties. Any real
property and facilities held under lease by the Company and the Subsidiaries
are
held by them under valid, subsisting and enforceable leases of which the Company
and the Subsidiaries are in compliance.
(o) Intellectual
Property.
The
Company and the Subsidiaries have, or have rights to use, all patents, patent
applications, trademarks, trademark applications, service marks, trade names,
copyrights, licenses and other similar rights necessary or material for use
in
connection with their respective businesses and which the failure to so have
could have a Material Adverse Effect (collectively, the “Intellectual
Property Rights”).
Neither the Company nor any Subsidiary has received a written notice that the
Intellectual Property Rights used by the Company or any Subsidiary violates
or
infringes upon the rights of any Person. To the knowledge of the Company, all
such Intellectual Property Rights are enforceable and there is no existing
infringement by another Person of any of the Intellectual Property Rights of
others.
(p) Insurance.
The
Company and the Subsidiaries are insured by insurers of recognized financial
responsibility against such losses and risks and in such amounts as are prudent
and customary in the businesses in which the Company and the Subsidiaries are
engaged, at least equal to the aggregate Subscription Amount. The Company
maintains a director’s and officer’s insurance policy in the amount of $8.0
Million. To the best of the Company’s knowledge, such insurance contracts and
policies are accurate and complete. Neither the Company nor any Subsidiary
has
any reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business without a
significant increase in cost.
-
12
-
(q) Transactions
With Affiliates and Employees.
None of
the officers or directors of the Company or any Subsidiary and, to the knowledge
of the Company or any Subsidiary, none of the employees of the Company or any
Subsidiary is presently a party to any transaction with the Company or any
Subsidiary (other than for services as employees, officers and directors),
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 any Subsidiary,
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 per year other than (i) for payment of salary or
consulting fees for services rendered, (ii) reimbursement for expenses incurred
on behalf of the Company or any Subsidiary and (iii) for other employee
benefits, including stock option agreements under any stock option plan of
the
Company.
(r) Reserved.
(s) Certain
Fees.
Except
as set forth on Schedule 3.1(s), no brokerage or finder’s fees or commissions
are or will be payable by the Company to any broker, financial advisor or
consultant, finder, placement agent, investment banker, bank or other Person
with respect to the transactions contemplated by this Agreement. The Purchasers
shall have no obligation with respect to any fees or with respect to any claims
made by or on behalf of other Persons for fees of a type contemplated in this
Section that may be due in connection with the transactions contemplated by
this
Agreement.
(t) Private
Placement.
Assuming the accuracy of the Purchasers representations and warranties set
forth
in Section 3.2, no registration under the Securities Act is required for the
offer and sale of the Securities by the Company to the Purchasers as
contemplated hereby.
(u) Investment
Company.
The
Company is not, and is not an Affiliate of, and immediately after receipt of
payment for the Securities, will not be or be an Affiliate of, an “investment
company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
(v) Registration
Rights.
Except
as contemplated by the transactions hereunder or as set forth on Schedule
3.1(v), no Person has any right to cause the Company to effect the registration
under the Securities Act of any securities of the Company.
(w) Reserved
(x) Application
of Takeover Protections.
The
Company and its Board of Directors have taken all necessary action, if any,
in
order to render inapplicable any control share acquisition, business
combination, poison pill (including any distribution under a rights agreement)
or other similar anti-takeover provision under the Company's Articles of
Incorporation (or similar charter documents) or the laws of its state of
incorporation that is or could become applicable to the Purchasers as a result
of the Purchasers and the Company fulfilling their obligations or exercising
their rights under the Transaction Documents, including without limitation
as a
result of the Company's issuance of the Securities and the Purchasers’ ownership
of the Securities.
-
13
-
(y) Disclosure.
The
Company confirms that neither it nor any other Person acting on its behalf
has
provided any of the Purchasers or their agents or counsel with any information
that constitutes or might constitute material, nonpublic information. The
Company understands and confirms that each Purchaser will rely on the foregoing
representations and covenants in effecting transactions in securities of the
Company. All disclosure provided to the Purchasers regarding the Company, its
Subsidiaries, its business and the transactions contemplated hereby, including
the Disclosure Schedules to this Agreement, furnished by or on behalf of the
Company with respect to the representations and warranties made herein are
true
and correct with respect to such representations and warranties and do not
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading. The Company
acknowledges and agrees that no Purchaser makes or has made any representations
or warranties with respect to the transactions contemplated hereby other than
those specifically set forth in Section 3.2 hereof.
(z) No
Integrated Offering.
Assuming
the accuracy of the Purchaser’s representations and warranties set forth in
Section 3.2, and except for the transactions related to the Unit offering by
UPBS of Common Stock and Warrants in a private placement offering, neither
UBPS,
the Company, nor any of its Subsidiaries or Affiliates, nor any Person acting
on
its or their behalf has, directly or indirectly, made any offers or sales of
any
security or solicited any offers to buy any security, under circumstances that
would cause this offering of the Securities to be integrated with prior
offerings by the Company or its Subsidiaries for purposes of the Securities
Act
or any applicable shareholder approval provisions..
(aa) Solvency.
For
purposes of this representation, the term “Company” shall include all of its
Subsidiaries. Based on the financial condition of the Company as of the Closing
Date after giving effect to the receipt by the Company of the proceeds from
the
sale of the Securities hereunder and the application of the proceeds thereof,
(i) the Company's fair saleable value of its assets exceeds the amount that
will
be required to be paid on or in respect of the Company's existing debts and
other liabilities (including known contingent liabilities) as they mature;
(ii)
the Company's assets do not constitute unreasonably small capital to carry
on
its business for the current fiscal year as now conducted and as proposed to
be
conducted including its capital needs taking into account the particular capital
requirements of the business conducted by the Company, and projected capital
requirements and capital availability thereof; and (iii) the current cash flow
of the Company, together with the proceeds the Company would receive, were
it to
liquidate all of its assets, after taking into account all anticipated uses
of
the cash, would be sufficient to pay all amounts on or in respect of its debt
when such amounts are required to be paid. The Company does not intend to incur
debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt).
The
Company has no knowledge of any facts or circumstances which lead it to believe
that it will file for reorganization or liquidation under the bankruptcy or
reorganization laws of any jurisdiction within one year from the Closing Date.
Schedule 3.1(z) sets forth all outstanding secured and unsecured Indebtedness
of
the Company, or for which the Company has commitments. For the purposes of
this
Agreement, “Indebtedness”
shall
mean (a) any liabilities for borrowed money or amounts owed in excess of $50,000
(other than trade accounts payable incurred in the ordinary course of business),
(b) all guaranties, endorsements and other contingent obligations in respect
of
Indebtedness of others, whether or not the same are or should be reflected
in
the Company's balance sheet (or the notes thereto), except guaranties by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of business; and (c) the present value
of
any lease payments
in excess of $50,000 due under leases required to be capitalized in accordance
with GAAP. Neither
the Company nor any Subsidiary is in default with respect to any
Indebtedness.
-
14
-
(bb) Environmental
Matters.
The
Company and each its Subsidiaries (a) is in compliance in all material respects
with any and all Environmental Laws (as herein defined), (b) has received all
permits, licenses or other approvals required of it under applicable
Environmental Laws to conduct its respective businesses and (c) is in compliance
in all material respects with all terms and conditions of any such permit,
license or approval. The term “Environmental
Laws”
means
all federal, state, local or foreign laws relating to pollution or protection
of
human health or the environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata), including,
without limitation, laws relating to emissions, discharges, releases or
threatened releases of chemicals, pollutants, contaminants, or toxic or
hazardous substances or wastes (collectively, “Hazardous
Materials”)
into
the environment, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials, as well as all authorizations, codes, decrees, demands
or
demand letters, injunctions, judgments, licenses, notices or notice letters,
orders, permits, plans or regulations issued, entered, promulgated or approved
thereunder.
(cc) Tax
Status.
Except
for matters that would not, individually or in the aggregate, have or reasonably
be expected to result in a Material Adverse Effect, except as disclosed in
Schedule 3.1(cc), the Company and each Subsidiary has filed all necessary
federal, state and foreign income and franchise tax returns and has paid or
accrued all taxes shown as due thereon, and the Company has no knowledge of
a
tax deficiency which has been asserted or threatened against the Company or
any
Subsidiary.
(dd) No
General Solicitation.
Neither
UBPS, the Company nor any person acting on behalf of UBPS, the Company has
offered or sold any of the Securities by any form of general solicitation or
general advertising. The Company has offered the Securities for sale only to
the
Purchasers and certain other “accredited investors” within the meaning of Rule
501 under the Securities Act.
(ee) Foreign
Corrupt Practices.
For
purposes of this representation, the term “Company” shall include all of its
Subsidiaries. Neither the Company, nor to the knowledge of the Company, any
agent or other person acting on behalf of the Company, has (i) directly or
indirectly, used any corrupt funds for unlawful contributions, gifts,
entertainment or other unlawful expenses related to foreign or domestic
political activity, (ii) made any unlawful payment to foreign or domestic
government officials or employees or to any foreign or domestic political
parties or campaigns from corporate funds, (iii) failed to disclose fully any
contribution made by the Company (or made by any person acting on its behalf
of
which the Company is aware) which is in violation of law, or (iv) violated
in
any material respect any provision of the Foreign Corrupt Practices Act of
1977,
as amended.
(ff) Seniority.
As of
the Closing Date, no indebtedness, equity or other security of the Company
is
senior to, or pari
passu
with,
the Notes in right of payment, whether with respect to interest or upon
liquidation or dissolution, or otherwise, other than indebtedness in favor
of
the Purchasers pursuant to the Notes.
(gg) No
Disagreements with Accountants and Lawyers.
There
are no disagreements of any kind presently existing, or reasonably anticipated
by the Company or any Subsidiary to arise, between the accountants and lawyers
formerly or presently employed by the Company or any Subsidiary and the Company
and each Subsidiary is current with respect to any fees owed to its accountants
and lawyers. By making this representation, each of the Company and its
Subsidiaries does not, in any manner, waive the attorney/client privilege or
the
confidentiality of the communications between the Company and its Subsidiaries
and its lawyers.
-
15
-
(hh) Acknowledgment
Regarding Purchaser’s Purchase of Securities.
The
Company acknowledges and agrees that each of the Purchasers is acting solely
in
the capacity of an arm's length purchaser with respect to the Transaction
Documents and the transactions contemplated hereby. The Company further
acknowledges that no Purchaser is acting as a financial advisor or fiduciary
of
the Company (or in any similar capacity) with respect to this Agreement and
the
transactions contemplated hereby and any advice given by any Purchaser or any
of
their respective representatives or agents in connection with this Agreement
and
the transactions contemplated hereby is merely incidental to the Purchaser’s
purchase of the Securities. The Company further represents to the Purchasers
that the Company’s decision to enter into this Agreement has been based solely
on the independent evaluation of the transactions contemplated hereby by the
Company and its representatives. The Company further acknowledges that in
addition to purchasing Securities, the Purchasers or their affiliates may
directly or indirectly own Common Stock and Warrants in UBPS and that such
parties, exercising their rights hereunder may adversely impact their other
holdings as well as the other equity holders in the Company.
(ii) Accountants.
The
Company’s accountants are set forth on Schedule 3.1(ii) of the Disclosure
Schedule.
(jj) Acknowledgement
Regarding Purchasers’ Trading Activity.
Anything
in this Agreement or elsewhere herein to the contrary notwithstanding (except
for Section 4.15 below), it is understood and acknowledged by the Company (i)
that none of the Purchasers have been asked to agree, nor has any Purchaser
agreed, to desist from purchasing or selling, long and/or short, securities
of
the Company, or “derivative” securities based on securities issued by the
Company or to hold the Securities for any specified term; (ii) that future
open
market or other transactions by any Purchaser, including Short Sales, and
specifically including, without limitation, Short Sales or “derivative”
transactions, after the closing of this or future private placement
transactions, may negatively impact the market price of the Company’s
publicly-traded securities; (iii) that each Purchaser shall not be deemed to
have any affiliation with or control over any arm’s length counter-party in any
“derivative” transaction. The Company further understands and acknowledges that
(a) one or more Purchasers may engage in hedging activities at various times
during the period that the Securities are outstanding, including, without
limitation, during the periods that the value of the Warrant Shares deliverable
with respect to Securities are being determined and (b) such hedging activities
(if any) could reduce the value of the existing stockholders' equity interests
in the Company at and after the time that the hedging activities are being
conducted. The Company acknowledges that such aforementioned hedging activities
do not constitute a breach of any of the Transaction Documents.
3.2 Representations
and Warranties of the Purchasers.
Each
Purchaser hereby, for itself and for no other Purchaser, represents and warrants
as of the date hereof and as of the Closing Date to the Company as
follows:
(a) Organization;
Authority.
Such
Purchaser is an entity duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization with full right,
corporate or partnership power and authority to enter into and to consummate
the
transactions contemplated by the Transaction Documents and otherwise to carry
out its obligations thereunder. The execution, delivery and performance by
such
Purchaser of the transactions contemplated by this Agreement have been duly
authorized by all necessary corporate or similar action on the part of the
Purchaser. Each Transaction Document to which it is a party has been duly
executed by such Purchaser, and when delivered by such Purchaser in accordance
with the terms hereof, will constitute the valid and legally binding obligation
of such Purchaser, enforceable against it in accordance with its terms, except
(i) as limited by general equitable principles and applicable bankruptcy,
insolvency, reorganization, moratorium and other laws of general application
affecting enforcement of creditors’ rights generally, (ii) as limited by laws
relating to the availability of specific performance, injunctive relief or
other
equitable remedies and (iii) insofar as indemnification and contribution
provisions may be limited by applicable law.
-
16
-
(b) Purchaser
Representation.
Such
Purchaser understands that the Securities are “restricted securities” and have
not been registered under the Securities Act or any applicable state securities
law and is acquiring the Securities as principal for its own account and not
with a view to or for distributing or reselling such Securities or any part
thereof, has no present intention of distributing any of such Securities in
violation of the Securities Act or any applicable securities laws and has no
arrangement or understanding with any other persons regarding the distribution
of such Securities (this representation and warranty not limiting the
Purchaser’s right to sell the Securities pursuant to the Registration Statement
or otherwise in compliance with applicable federal and state securities laws).
Nothing contained herein shall be deemed a representation or warranty by such
Purchaser to hold Securities for any period of time.
(c) Purchaser
Status.
At the
time such Purchaser was offered the Securities, it was, and at the date hereof
it is, and on each date on which it exercises any Warrants it will be either:
(i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2), (a)(3),
(a)(7) or (a)(8) under the Securities Act or (ii) a “qualified institutional
buyer” as defined in Rule 144A(a) under the Securities Act.
(d) Experience
of the Purchaser.
Such
Purchaser, either alone or together with its representatives, has such
knowledge, sophistication and experience in business and financial matters
so as
to be capable of evaluating the merits and risks of the prospective investment
in the Securities, and has so evaluated the merits and risks of such investment.
Such Purchaser is able to bear the economic risk of an investment in the
Securities and, at the present time, is able to afford a complete loss of such
investment.
(e) General
Solicitation.
Such
Purchaser is not purchasing the Securities as a result of any advertisement,
article, notice or other communication regarding the Securities 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.
The
Company acknowledges and agrees that the Purchasers do not make or have not
made
any representations or warranties with respect to the transactions contemplated
hereby other than those specifically set forth in this Section
3.2.
ARTICLE
IV.
OTHER
AGREEMENTS OF THE PARTIES
4.1 Transfer
Restrictions.
(a) The
Securities may only be disposed of in compliance with state and federal
securities laws. In connection with any transfer of Securities other than
pursuant to an effective registration statement or Rule 144, to UBPS or to
an
affiliate of a Purchaser or in connection with a pledge as contemplated in
Section 4.1(b), UBPS may require the transferor thereof to provide to UBPS
an
opinion of counsel selected by the transferor and reasonably acceptable to
UBPS,
the form and substance of which opinion shall be reasonably satisfactory to
UBPS, to the effect that such transfer does not require registration of such
transferred Securities under the Securities Act. As a condition of transfer,
any
such transferee shall agree in writing to be bound by the terms of this
Agreement and shall have the rights of a Purchaser under this Agreement and
the
Registration Rights Agreement.
-
17
-
(b) The
Purchasers agree to the imprinting, so long as is required by this Section
4.1(b), of a legend on any of the Securities in the following form:
[NEITHER]
THESE SECURITIES [NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE
[EXERCISABLE] HAVE [NOT] BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT
TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS. THESE SECURITIES AND THE SECURITIES ISSUABLE
UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA
FIDE
MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.
UBPS
acknowledges and agrees that a Purchaser may from time to time pledge pursuant
to a bona fide margin agreement with a registered broker-dealer or grant a
security interest in some or all of the Securities to a financial institution
that is an “accredited investor” as defined in Rule 501(a) under the Securities
Act and who agrees to be bound by the provisions of this Agreement and the
Registration Rights Agreement and, if required under the terms of such
arrangement, the Purchasers may transfer pledged or secured Securities to the
pledgees or secured parties. Such a pledge or transfer would not be subject
to
approval of UBPS and no legal opinion of legal counsel of the pledgee, secured
party or pledgor shall be required in connection therewith. Further, no notice
shall be required of such pledge. At the appropriate Purchaser’s expense, UBPS
will execute and deliver such reasonable documentation as a pledgee or secured
party of Securities may reasonably request in connection with a pledge or
transfer of the Securities, including, if the Securities are subject to
registration pursuant to the Registration Rights Agreement, the preparation
and
filing of any required prospectus supplement under Rule 424(b)(3) under the
Securities Act or other applicable provision of the Securities Act to
appropriately amend the list of Selling Stockholders thereunder.
(c) Certificates
evidencing the Issued Shares and Warrant Shares shall not contain any legend
(including the legend set forth in Section 4.1(b) hereof): (i) while a
registration statement (including the Registration Statement) covering the
resale of such security is effective under the Securities Act, or (ii) following
any sale of such Issued Shares or Warrant Shares pursuant to Rule 144, or (iii)
if such Issued Shares or Warrant Shares are eligible for sale under Rule 144(k),
or (iv) if such legend is not required under applicable requirements of the
Securities Act (including judicial interpretations and pronouncements issued
by
the staff of the Commission). UBPS shall cause its counsel to issue a legal
opinion to UBPS’ transfer agent promptly after the Effective Date if required by
UBPS’ transfer agent to effect the removal of the legend hereunder. If all or
any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the resale of the Warrant Shares, or if such
Warrant Shares may be sold under Rule 144(k) or if such legend is not otherwise
required under applicable requirements of the Securities Act (including judicial
interpretations thereof) then such Warrant Shares shall be issued free of all
legends. UBPS agrees that following the Effective Date or at such time as such
legend is no longer required under this Section 4.1(c), it will, no later than
three Trading Days following the delivery by a Purchaser to UBPS or UBPS’
transfer agent of a certificate representing Issued Shares or Warrant Shares,
as
applicable, issued with a restrictive legend (such third Trading Day, the
“Legend
Removal Date”),
deliver or cause to be delivered to such Purchaser a certificate representing
such shares that is free from all restrictive and other legends. UBPS may not
make any notation on its records or give instructions to any transfer agent
of
UBPS that enlarge the restrictions on transfer set forth in this Section.
Certificates for Warrant Shares or Issued Shares subject to the legend removal
hereunder shall be transmitted by the transfer agent of UBPS to the Purchasers
by crediting the account of the Purchaser’s prime broker with the Depository
Trust Company.
-
18
-
(d) In
addition to the Purchasers’ other available remedies, UBPS shall pay to each
Purchaser, in cash, as partial liquidated damages and not as a penalty, for
each
$1,000 of Warrant Shares or Issued Shares (based on the VWAP of the Common
Stock
on the date such Securities are submitted to UBPS’ transfer agent) delivered for
removal of the restrictive legend and subject to this Section 4.1(c), $10 per
Trading Day (increasing to $20 per Trading Day 5 Trading Days after such damages
have begun to accrue) for each Trading Day after the Legend Removal Date until
such certificate is delivered without a legend. Nothing herein shall limit
each
Purchaser’s right to pursue actual damages for UBPS’ failure to deliver
certificates representing any Securities as required by the Transaction
Documents, and each Purchaser shall have the right to pursue all remedies
available to it at law or in equity including, without limitation, a decree
of
specific performance and/or injunctive relief.
(e) Each
Purchaser, severally and not jointly with the other Purchasers, agrees that
the
removal of the restrictive legend from certificates representing Securities
as
set forth in this Section 4.1 is predicated upon UBPS’ reliance that such
Purchaser will sell any Securities pursuant to either the registration
requirements of the Securities Act, including any applicable prospectus delivery
requirements, or an exemption therefrom.
4.2 Acknowledgment
of Dilution.
UBPS
acknowledges that the issuance of the Securities may result in dilution of
the
outstanding shares of Common Stock, which dilution may be substantial under
certain market conditions. UBPS further acknowledges that its obligations under
the Transaction Documents, including without limitation its obligation to issue
the Warrant Shares pursuant to the Transaction Documents, are unconditional
and
absolute and not subject to any right of set off, counterclaim, delay or
reduction, regardless of the effect of any such dilution or any claim UBPS
may
have against any Purchaser and regardless of the dilutive effect that such
issuance may have on the ownership of the other stockholders of
UBPS.
4.3 Furnishing
of Information.
As long
as any Purchaser owns Securities, UBPS covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period)
all
reports required to be filed by UBPS after the date hereof pursuant to the
Exchange Act. As long as any Purchaser owns Securities, if UBPS is not required
to file reports pursuant to the Exchange Act, it will prepare and furnish to
such Purchaser and make publicly available in accordance with Rule 144(c) such
information as is required for such Purchaser to sell the Securities under
Rule
144 so long as it is a public company. UBPS further covenants that it will
take
such further action as any holder of Securities may reasonably request, all
to
the extent required from time to time to enable such Person to sell such
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rule 144.
-
19
-
4.4 Integration.
UBPS
shall not, and shall use its best efforts to ensure that no Affiliate of UBPS
shall, sell, offer for sale or solicit offers to buy or otherwise negotiate
in
respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities in a manner that
would require the registration under the Securities Act of the sale of the
Securities to the Purchasers.
4.5 Exercise
Procedures.
The
form of Notice of Exercise included in the Warrants sets forth the totality
of
the procedures required of the Purchasers in order to exercise the Warrants.
No
additional legal opinion or other information or instructions shall be required
of the Purchasers to exercise their Warrants. UBPS shall honor exercises of
the
Warrants and shall deliver Warrant Shares in accordance with the terms,
conditions and time periods set forth in the Transaction Documents.
4.6 Publicity.
UBPS
and the Purchasers shall consult with each other in issuing any other press
releases with respect to the transactions contemplated hereby, and neither
UBPS
nor the Purchasers shall issue any such press release or otherwise make any
such
public statement without the prior consent of UBPS, with respect to any press
release of the Purchasers, or without the prior consent of the Purchaser, with
respect to any press release of UBPS, which consent shall not unreasonably
be
withheld, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, UBPS
shall not publicly disclose the name of any Purchaser, or include the name
of
any Purchaser in any filing with the Commission or any regulatory agency or
Trading Market, without the prior written consent of such Purchaser, except
(i)
as required by federal securities law and (ii) to the extent such disclosure
is
required by law or Trading Market regulations, in which case UBPS shall provide
such Purchaser with prior notice of such disclosure permitted under subclause
(i) or (ii).
4.7 Shareholder
Rights Plan.
No
claim will be made or enforced by UBPS or, to the knowledge of UBPS, any other
Person that any Purchaser is an “Acquiring Person” under any shareholder rights
plan or similar plan or arrangement in effect or hereafter adopted by UBPS,
or
that any Purchaser could be deemed to trigger the provisions of any such plan
or
arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between UBPS and any Purchaser. UBPS shall conduct
its business in a manner so that it will not become subject to the Investment
Company Act.
4.8 Non-Public
Information.
UBPS
covenants and agrees that neither it nor any other Person acting on its behalf
will provide any Purchaser or its agents or counsel with any information that
UBPS believes constitutes material non-public information, unless prior thereto
such Purchaser shall have executed a written agreement regarding the
confidentiality and use of such information. UBPS understands and confirms
that
such Purchaser shall be relying on the foregoing representations in effecting
transactions in securities of UBPS.
4.9 Use
of
Proceeds.
UBPS
shall use the net proceeds from the sale of the Securities hereunder and equity
securities issued in the Equity Offering for the Acquisition, working capital
and fees and expenses relating to the Acquisition.
4.10 Reimbursement.
If any
Purchaser becomes involved in any capacity in any Proceeding by or against
any
Person who is a stockholder of UBPS (except as a result of sales, pledges,
margin sales and similar transactions by the Purchasers to or with any current
stockholder), solely as a result of such Purchaser’s acquisition of the
Securities under this Agreement, UBPS will reimburse such Purchaser for its
reasonable legal and other expenses (including the cost of any investigation
preparation and travel in connection therewith) incurred in connection
therewith, as such expenses are incurred. The reimbursement obligations of
UBPS
under this paragraph shall be in addition to any liability which UBPS may
otherwise have, shall extend upon the same terms and conditions to any
Affiliates of such Purchaser who are actually named in such action, proceeding
or investigation, and partners, directors, agents, employees and controlling
persons (if any), as the case may be, of such Purchaser and any such Affiliate,
and shall be binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of UBPS, such Purchaser and any such
Affiliate and any such Person. UBPS also agrees that neither such Purchaser
nor
any such Affiliates, partners, directors, agents, employees or controlling
persons shall have any liability to UBPS or any Person asserting claims on
behalf of or in right of UBPS solely as a result of acquiring the Securities
under this Agreement.
-
20
-
4.11 Indemnification
of Purchasers.
Subject
to the provisions of this Section 4.11, UBPS will indemnify and hold each
Purchaser and its directors, officers, shareholders, partners, employees and
agents (and any other Persons with a functionally equivalent role of a Person
holding such titles notwithstanding a lack of such title or any other title),
each Person who controls such Purchaser (within the meaning of Section 15 of
the
Securities Act and Section 20 of the Exchange Act), and the directors, officers,
shareholders, agents, members, partners or employees (and any other Persons
with
a functionally equivalent role of a Person holding such titles notwithstanding
a
lack of such title or any other title) of such controlling person (each, a
“Purchaser
Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any Purchaser Party may suffer or incur as a result of,
arising from, or relating to (a) any breach of any of the representations,
warranties, covenants or agreements made by UBPS in this Agreement or in the
other Transaction Documents (or any allegation by a third-party that, if true
would constitute such a breach) or (b) any action instituted against a
Purchaser, or any of them or their respective Affiliates, by any stockholder
of
UBPS who is not an Affiliate of such Purchaser, with respect to any of the
transactions contemplated by the Transaction Documents (unless such action
is
based upon a breach of such Purchaser’s representation, warranties or covenants
under the Transaction Documents or any agreements or understandings any
Purchasers may have with any such stockholder or any violations by such
Purchaser of state or federal securities laws or any conduct by such Purchaser
which constitutes fraud, gross negligence or willful misconduct). If any action
shall be brought against any Purchaser Party in respect of which indemnity
may
be sought pursuant to this Agreement, the Purchaser Party shall promptly notify
UBPS in writing, and UBPS shall have the right to assume the defense thereof
with counsel of its own choosing. Any Purchaser Party shall have the right
to
employ separate counsel in any such action and participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense
of
the Purchaser Party except to the extent that (i) the employment thereof has
been specifically authorized by UBPS in writing, (ii) UBPS has failed after
a
reasonable period of time to assume such defense and to employ counsel or (iii)
in such action there is, in the reasonable opinion of such separate counsel,
a
material conflict on any material issue between the position of UBPS and the
position of the Purchaser Party. UBPS will not be liable to any Purchaser Party
under this Agreement (i) for any settlement by a Purchaser Party effected
without UBPS’ prior written consent, which shall not be unreasonably withheld or
delayed; or (ii) to the extent, but only to the extent that a loss, claim,
damage or liability is attributable to any Purchaser Party’s breach of any of
the representations, warranties, covenants or agreements made by the Purchasers
in this Agreement or in the other Transaction Documents.
4.12 Reservation
and Listing of Securities.
(a) UBPS
shall maintain a reserve from its duly authorized shares of Common Stock for
issuance pursuant to the Transaction Documents in such amount as may be required
to fulfill its obligations in full under the Transaction
Documents.
-
21
-
(b) If,
on
any date, the number of authorized but unissued (and otherwise unreserved)
shares of Common Stock is less than the Required Minimum on such date, then
the
Board of Directors of UBPS shall use commercially reasonable efforts to amend
UBPS’ certificate or articles of incorporation to increase the number of
authorized but unissued shares of Common Stock to at least the Required Minimum
at such time, as soon as possible and in any event not later than the 75th
day
after such date.
(c) UBPS
shall, if applicable: (i) in the time and manner required by the Trading Market,
prepare and file with such Trading Market an additional shares listing
application covering a number of shares of Common Stock at least equal to the
Required Minimum on the date of such application, (ii) take all steps necessary
to cause such shares of Common Stock to be approved for listing on the Trading
Market as soon as possible thereafter, (iii) provide to the Purchasers evidence
of such listing, and (iv) maintain the listing of such Common Stock on any
date
at least equal to the Required Minimum on such date on such Trading Market
or
another Trading Market.
4.13 Subsequent
Equity Sales.
In
addition to the limitations set forth herein, from the date hereof until such
time as no Purchaser holds any of the Securities, UBPS shall be prohibited
from
effecting or entering into an agreement to effect any Subsequent Financing
involving a “Variable
Rate Transaction”
or
an
“MFN
Transaction”
(each
as defined below). The term “Variable
Rate Transaction”
shall
mean a transaction in which UBPS issues or sells (i) any debt or equity
securities that are convertible into, exchangeable or exercisable for, or
include the right to receive additional shares of Common Stock either (A) at
a
conversion, exercise or exchange rate or other price that is based upon and/or
varies with the trading prices of or quotations for the shares of Common Stock
at any time after the initial issuance of such debt or equity securities, or
(B)
with a conversion, exercise or exchange price that is subject to being reset
at
some future date after the initial issuance of such debt or equity security
or
upon the occurrence of specified or contingent events directly or indirectly
related to the business of UBPS or the market for the Common Stock or (ii)
enters into any agreements, including but not limited to an equity line of
credit, whereby UBPS may sell securities at a future determined price tied
to
the market price of the Common Stock. The term “MFN
Transaction”
shall
mean a transaction in which UBPS issues or sells any securities in a capital
raising transaction or series of related transactions which grants to an
investor the right to receive additional shares based upon future transactions
of UBPS on terms more favorable than those granted to such investor in such
offering. Any Purchaser shall be entitled to obtain injunctive relief against
UBPS to preclude any such issuance, which remedy shall be in addition to any
right to collect damages. Notwithstanding the foregoing, this Section 4.13
shall
not apply in respect of an Exempt Issuance, except that no Variable Rate
Transaction or MFN Transaction shall be an Exempt Issuance.
4.14 Equal
Treatment of Purchasers.
No
consideration shall be offered or paid to any Person to amend or consent to
a
waiver or modification of any provision of any of the Transaction Documents
unless the same consideration is also offered to all of the parties to the
Transaction Documents. Further, UBPS shall not make any payment of principal
or
interest on the Notes in amounts which are disproportionate to the respective
principal amounts outstanding on the Notes at any applicable time. For
clarification purposes, this provision constitutes a separate right granted
to
each Purchaser by UBPS and negotiated separately by each Purchaser, and is
intended for UBPS to treat the Purchasers as a class and shall not in any way
be
construed as the Purchasers acting in concert or as a group with respect to
the
purchase, disposition or voting of Securities or otherwise.
4.15 Investor
Relations.
Promptly after Closing, UBPS agrees to hire an investor relations firm
satisfactory to the Purchasers.
4.16 Form
D; Blue Sky Filings.
UBPS
agrees to timely file a Form D with respect to the Securities as required under
Regulation D and to provide a copy thereof, promptly upon request of any
Purchaser. UBPS shall take such action as UBPS shall reasonably determine is
necessary in order to obtain an exemption for, or to qualify the Securities
for,
sale to the Purchasers at the Closing under applicable securities or “Blue Sky”
laws of the states of the United States, and shall provide evidence of such
actions promptly upon request of any Purchaser.
-
22
-
4.17Most
Favored Nation Provision.
Any
time UBPS effects a subsequent financing, each Purchaser may elect, in its
sole
discretion, to exchange all or some of its Notes, Issued Shares and Warrants
(treated for this purpose only as a unit) then held by it for the securities
issued in a subsequent financing based on the then outstanding principal amount
of the Note plus any other fees then owed by UBPS to the Purchaser, and the
effective price at which such securities are sold in such subsequent
financing.
4.18 Additional
Participation Right.
For a
period of three years after the Closing Date, each Purchaser shall have the
right to participate in any debt or equity financing (up to 100% of the original
principal amount of the Note) of UBPS on the same terms as those offered to
such
third party providing the financing (potentially to the exclusion of such third
party). UBPS shall give the Purchasers at least ten (10) Business Days advance
notice of such debt or equity financing, which notice shall set forth all of
the
material terms. The Purchasers shall have at least five (5) Business Days to
inform UBPS of their intention to participate.
4.19 Audit
and Collateral Monitoring Fees.
Representatives of the Purchasers may visit the Company or UBPS or conduct
audits, inspections or field examinations of the Company or UBPS and valuations
or appraisals of any or all of the collateral or business or enterprise
valuations of the Company or UBPS at any time and from time to time in a
reasonable manner so as not to unduly disrupt the business of the Company or
UBPS. The Company and/or UBPS, as the case may be, agrees to pay (i) $1,500
per
day per examiner plus all of the examiner’s out of pocket costs and reasonable
expenses incurred in connection with all such visits, audits, inspections,
valuations and field examinations and (ii) the reasonable cost of all audits,
appraisals and business valuations (including enterprise valuation appraisals)
conducted by third party auditors or appraisers on behalf of the Purchasers;
provided
that so
long as no Default or Event of Default has occurred and is continuing, neither
the Company nor UBPS shall be obligated to pay for more than one such audit
and
field examination in any calendar year.
4.20 Board
Composition. The
Purchasers (i) shall have the right to designate one designee for election
to
the Board of Directors of UBPS (and every committee thereof) (the “Board
Designee”) and (ii) shall have the right to designate one designee to attend all
meetings of the Board of Directors of UBPS (and every committee thereof) as
an
observer (the “Board Observer”). If the Board Designee has been designated, he
or she will be entitled to receive copies of all material distributed at all
meetings of the Board of Directors of UBPS (and every committee thereof). Upon
election of the Board Designee, UBPS will execute a customary form of
indemnification agreement in favor of the Board Designee in his or her capacity
as a director of UBPS. At all times during the tenure of the Board Designee,
UBPS shall maintain a directors’ and officers’ liability insurance policy with
coverage in a customary amount from financially sound and reputable insurers.
UBPS shall pay to the Board Designee the same compensation for his or her
services as a director of UBPS as the compensation, if any, paid to non-employee
directors of UBPS.
4.21 Control
Agreements. Within
60
days of the Closing Date, the Company and UBPS shall enter into account control
agreements in form and substance satisfactory to the Purchasers, duly executed
by the applicable financial institution with respect to each deposit account
and
securities account maintained by the Company or UBPS.
-
23
-
ARTICLE
V.
MISCELLANEOUS
5.1 Termination.
This
Agreement may be terminated by any Purchaser, as to such Purchaser’s obligation
hereunder only and without any effect whatsoever on the obligations between
the
Company and the other Purchasers, by written notice to the other parties, if
the
Closing has not been consummated on or before December 15, 2007; provided that
no such termination will affect the right of any party to xxx for any breach
by
the other party (or parties).
5.2 Fees.
At the
Closing, the Company has agreed to (i) reimburse Centrecourt Asset Management
LLC (“Centrecourt”)
$40,000, for its legal fees and expenses of counsel (of which $15,000 has been
previously paid), (ii) pay Centrecourt $25,000 for its due diligence
investigation of the Company (all of which has been previously paid); and (iii)
pay Centrecourt $280,000 as a structuring fee. Except as expressly set forth
in
the Transaction Documents to the contrary, each party shall pay the fees and
expenses of its advisers, counsel, accountants and other experts, if any, and
all other expenses incurred by such party incident to the negotiation,
preparation, execution, delivery and performance of this Agreement. The Company
shall pay all transfer agent fees, stamp taxes and other taxes and duties levied
in connection with the issuance of any Securities.
5.3 Entire
Agreement.
The
Transaction Documents, together with the exhibits and schedules thereto, contain
the entire understanding of the parties with respect to the subject matter
hereof and supersede all prior agreements and understandings, oral or written,
with respect to such matters, which the parties acknowledge have been merged
into such documents, exhibits and schedules.
5.4 Notices.
Any and
all notices or other communications or deliveries required or permitted to
be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number set forth on the signature
pages attached hereto prior to 5:30 p.m. (New York City time) on a Business
Day,
(b) the next Business Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile number set forth
on
the signature pages attached hereto on a day that is not a Business Day or
later
than 5:30 p.m. (New York City time) on any Business Day, (c) the second Business
Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom
such
notice is required to be given. The address for such notices and communications
shall be as set forth on the signature pages attached hereto.
5.5 Amendments;
Waivers.
No
provision of this Agreement may be waived or amended except in a written
instrument signed, in the case of amendments, by the Company and Purchasers
holding 75% of the principal amount of Notes then outstanding, or, in the case
of a waiver, by the party against whom enforcement of any such waiver is sought.
No waiver of any default with respect to any provision, condition or requirement
of this Agreement shall be deemed to be a continuing waiver in the future or
a
waiver of any subsequent default or a waiver of any other provision, condition
or requirement hereof, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such
right.
5.6 Construction.
The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof. The language used in this Agreement will be deemed to be the language
chosen by the parties to express their mutual intent, and no rules of strict
construction will be applied against any party.
5.7 Successors
and Assigns.
This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Purchasers holding 75% of the principal amount of Notes then
outstanding. Any Purchaser may assign any or all of its rights under this
Agreement to any Person to whom such Purchaser assigns or transfers any
Securities, provided such transferee agrees in writing to be bound, with respect
to the transferred Securities, by the provisions hereof that apply to such
“Purchaser.”
-
24
-
5.8 No
Third-Party Beneficiaries.
This
Agreement is intended for the benefit of the parties hereto and their respective
successors and permitted assigns and is not for the benefit of, nor may any
provision hereof be enforced by, any other Person, except as otherwise set
forth
in Section 4.11.
5.9 Governing
Law.
All
questions concerning the construction, validity, enforcement and interpretation
of the Transaction Documents 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 this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, employees or agents) shall be commenced exclusively
in
the state and federal courts sitting in the City of New York. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (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, that
such suit, action or proceeding is 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 Agreement and agrees that such service shall constitute good
and sufficient service of process and notice thereof. Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law. The parties hereby waive all rights to a trial by jury. If
either party shall commence an action or proceeding to enforce any provisions
of
the Transaction Documents, then the prevailing party in such action or
proceeding shall be reimbursed by the other party for its attorneys’ fees and
other costs and expenses incurred with the investigation, preparation and
prosecution of such action or proceeding.
5.10 Survival.
The
representations and warranties contained herein shall survive the Closing,
the
delivery of the Securities and exercise of the Warrants, as applicable for
the
applicable statue of limitations.
5.11 Execution.
This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to
the
other party, it being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by facsimile
transmission or by e-mail delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect as if such
facsimile signature page or data file were an original thereof.
5.12 Severability.
If any
provision of this Agreement is held to be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Agreement shall not in any way be affected or impaired thereby and
the
parties will attempt to agree upon a valid and enforceable provision that is
a
reasonable substitute therefor, and upon so agreeing, shall incorporate such
substitute provision in this Agreement.
-
25
-
5.13 Rescission
and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting
any
similar provisions of) the Transaction Documents, whenever any Purchaser
exercises a right, election, demand or option under a Transaction Document
and
the Company does not timely perform its related obligations within the periods
therein provided, then such Purchaser may rescind or withdraw, in its sole
discretion from time to time upon written notice to the Company, any relevant
notice, demand or election in whole or in part without prejudice to its future
actions and rights; provided,
however,
in the
case of a rescission of an exercise of a Warrant, the Purchasers shall be
required to return any shares of Common Stock subject to any such rescinded
exercise notice.
5.14 Replacement
of Securities.
If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof, or in lieu of and substitution
therefor, a new certificate or instrument, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction and
customary and reasonable indemnity, if requested. The applicants for a new
certificate or instrument under such circumstances shall also pay any reasonable
third-party costs associated with the issuance of such replacement
Securities.
5.15 Remedies.
In
addition to being entitled to exercise all rights provided herein or granted
by
law, including recovery of damages, each of the Purchasers and the Company
will
be entitled to specific performance under the Transaction Documents. The parties
agree that monetary damages may not be adequate compensation for any loss
incurred by reason of any breach of obligations described in the foregoing
sentence and hereby agrees to waive in any action for specific performance
of
any such obligation the defense that a remedy at law would be adequate.
5.16 Payment
Set Aside.
To the
extent that the Company makes a payment or payments to any Purchaser pursuant
to
any Transaction Document or a Purchaser enforces or exercises its rights
thereunder, and such payment or payments or the proceeds of such enforcement
or
exercise or any part thereof are subsequently invalidated, declared to be
fraudulent or preferential, set aside, recovered from, disgorged by or are
required to be refunded, repaid or otherwise restored to the Company, a trustee,
receiver or any other person under any law (including, without limitation,
any
bankruptcy law, state or federal law, common law or equitable cause of action),
then to the extent of any such restoration the obligation or part thereof
originally intended to be satisfied shall be revived and continued in full
force
and effect as if such payment had not been made or such enforcement or setoff
had not occurred.
5.17 Usury.
To the
extent it may lawfully do so, the Company hereby agrees not to insist upon
or
plead or in any manner whatsoever claim, and will resist any and all efforts
to
be compelled to take the benefit or advantage of, usury laws wherever enacted,
now or at any time hereafter in force, in connection with any claim, action
or
proceeding that may be brought by any Purchaser in order to enforce any right
or
remedy under any Transaction Document. Notwithstanding any provision to the
contrary contained in any Transaction Document, it is expressly agreed and
provided that the total liability of the Company under the Transaction Documents
for payments in the nature of interest shall not exceed the maximum lawful
rate
authorized under applicable law (the “Maximum
Rate”),
and,
without limiting the foregoing, in no event shall any rate of interest or
default interest, or both of them, when aggregated with any other sums in the
nature of interest that the Company may be obligated to pay under the
Transaction Documents exceed such Maximum Rate. It is agreed that if the maximum
contract rate of interest allowed by law and applicable to the Transaction
Documents is increased or decreased by statute or any official governmental
action subsequent to the date hereof, the new maximum contract rate of interest
allowed by law will be the Maximum Rate applicable to the Transaction Documents
from the effective date forward, unless such application is precluded by
applicable law. If under any circumstances whatsoever, interest in excess of
the
Maximum Rate is paid by the Company to any Purchaser with respect to
indebtedness evidenced by the Transaction Documents, such excess shall be
applied by the Purchasers to the unpaid principal balance of any such
indebtedness or be refunded to the Company, the manner of handling such excess
to be at the Purchasers’ election.
-
26
-
5.18 Liquidated
Damages.
The
Company’s obligations to pay any partial liquidated damages or other amounts
owing under the Transaction Documents is a continuing obligation of the Company
and shall not terminate until all unpaid partial liquidated damages and other
amounts have been paid notwithstanding the fact that the instrument or security
pursuant to which such partial liquidated damages or other amounts are due
and
payable shall have been canceled.
5.19 Agent
(a)
Authorization of Action. Each Purchaser hereby appoints and authorizes CAMOFI
Master LDC (the “Agent”) to be its agent in its name and on its behalf and to
exercise such rights or powers granted to the Agent or the Purchasers (i) under
the Security Documents to the extent specifically provided therein and on the
terms thereof, together with such rights, powers and discretions as are
reasonably incidental thereto. As to any matters not expressly provided for
by
the Security Documents, the Agent shall not be required to exercise any
discretion or take any action, but shall be required to act or to refrain from
acting (and shall be fully protected in so acting or refraining from acting)
upon the instructions of the Purchasers, and any action so taken or not so
taken
by the Agent shall be binding upon all Purchasers; provided, however, that
the
Agent shall not be required to take any action which exposes the Agent to
liability in such capacity, which could result in the Agent incurring any costs
and expenses or which is contrary to this Agreement or applicable
law.
(b)
Indemnification. Each Purchaser hereby agrees to indemnify and hold harmless
the
Agent from and against any and all liabilities, obligations, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever which may be imposed on, incurred by, or asserted against
the
Agent (in its capacity as agent for the Purchasers) in any way relating to
or
arising out of the Security Documents or any action taken or admitted by the
Agent under or in respect of the Security Documents; provided that no Purchaser
shall be liable for any portion of such liabilities, obligations, damages,
penalties, actions, judgments, suits, costs, expenses or disbursements resulting
from the Agent’s gross negligence or willful misconduct. Without limiting the
generality of the foregoing, each Purchaser agrees to reimburse the Agent
promptly upon demand on a pro rata basis in accordance with the then outstanding
indebtedness, liabilities and obligations owing to such Purchaser by the Company
in respect of any out-of-pocket expenses (including counsel fees) incurred
by
the Agent in connection with the preservation of any rights of the Agent or
the
Purchasers under, the enforcement of, or legal advice in respect of the rights
or responsibilities under, the Security Documents, to the extent that the Agent
is not reimbursed for such expenses by the Company or its
Subsidiaries.
(c)
Successor Agent. The Agent may, as hereinafter provided, resign at any time
by
giving not less than 30 days’ written notice thereof to the Purchasers and the
Company. Upon any such resignation, the Purchasers shall have the right to
appoint a successor Agent (the “Successor Agent”), which shall be a Purchaser
and which shall be acceptable to the Company, acting reasonably. Upon the
acceptance of any appointment as Agent hereunder by a Successor Agent, such
Successor Agent shall thereupon succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent and the retiring
Agent shall thereupon be discharged from its further duties and obligations
as
Agent under the Security Documents. After any retiring Agent’s resignation
hereunder as Agent, the provisions of this Section 5.19 shall continue to inure
to its benefit as to any actions taken or omitted to be taken by it while it
was
Agent under the Security Documents. Absent such a resignation by the Agent,
the
Agent’s appointment shall continue until revoked in writing by Purchasers
holding 75% of the outstanding principal amount of the Notes, at which time
such
Purchasers shall appoint a new Agent.
-
27
-
(d)
Taking and Enforcement of Remedies.
(1) Each
of
the Purchasers hereby acknowledges that, to the extent permitted by applicable
law, the remedies provided under the Security Documents to the Purchasers are
for the benefit of the Purchasers collectively and acting together and not
severally and further acknowledges that its rights under the Security Documents
are to be exercised not severally, but collectively by the Agent upon the
decision of the Purchasers; accordingly, notwithstanding any of the provisions
contained in any of the Transaction Documents, each of the Purchasers hereby
covenants and agrees that it shall not be entitled to take any action with
respect to the Security Documents, including, without limitation, any
acceleration of the indebtedness, liabilities or obligations of the Company
or
any of its Subsidiaries, but that any such action shall be taken only by the
Agent with the prior written agreement of the Purchasers, provided that,
notwithstanding the foregoing:
(2) in
the
absence of instructions from the Purchasers and where in the sole opinion of
the
Agent the exigencies of the situation warrant such action, the Agent may without
notice to or consent of the Purchasers take such action on behalf of the
Purchasers as it deems appropriate or desirable in the interest of the
Purchasers; and
(3) the
commencement of litigation before any court shall be made in the name of each
Purchaser individually unless the laws of the jurisdiction of such court permit
such litigation to be commenced in the name of the Agent on behalf of the
Purchasers (whether pursuant to a specific power of attorney in favor of the
Agent or otherwise) and the Agent agrees to commence such litigation in its
name; provided, however, that no litigation shall be commenced in the name
of
any Purchaser without the prior written consent of such Purchaser;
(4) each
of
the Purchasers hereby further covenants and agrees that upon any such written
consent being given by the Purchasers, they shall co-operate fully with the
Agent to the extent requested by the Agent in the collective realization,
including, without limitation, the appointment of a receiver and manager to
act
for their collective benefit; and each Purchaser covenants and agrees to do
all
acts and things to make, execute and deliver all agreements and other
instruments, including, without limitation, any instruments necessary to effect
any registrations, so as to fully carry out the intent and purpose of this
Section 5.19; and each of the Purchasers hereby covenants and agrees that it
has
not heretofore and shall not seek, take, accept or receive any security for
any
of the obligations and liabilities of the Company under the Transaction
Documents or under any other document, instrument, writing or agreement
ancillary thereto other than such security as is provided hereunder and shall
not enter into any agreement with the Company or any of its Subsidiaries
relating in any manner whatsoever to the transactions contemplated hereunder,
unless all of the Purchasers shall at the same time obtain the benefit of any
such security or agreement, as the case may be.
(5) Notwithstanding
any other provision contained in the Transaction Documents, no Purchaser shall
be required to be joined as a party to any litigation commenced against the
Company or any of its Subsidiaries by the Agent under the Transaction Documents
(unless otherwise required by any court of competent jurisdiction) if it elects
not to be so joined in which event any such litigation shall not include claims
in respect of the rights of such Purchaser against the Company or any of its
Subsidiaries under the Transaction Documents until such time as such Purchaser
does elect to be so joined; provided that if at the time of such subsequent
election it is not possible or practicable for such Purchaser to be so joined,
then such Purchaser may commence proceedings in its own name in respect of
its
rights against the Company or any of its Subsidiaries.
-
28
-
5.20 Independent
Nature of Purchasers’ Obligations and Rights.
The
obligations of each Purchaser under any Transaction Document are several and
not
joint with the obligations of any other Purchaser, and no Purchaser shall be
responsible in any way for the performance or non-performance of the obligations
of any other Purchaser under any Transaction Document. Nothing contained herein
or in any other Transaction Document, and no action taken by any Purchaser
pursuant thereto, shall be deemed to constitute the Purchasers as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Purchasers are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated by the
Transaction Documents. Each Purchaser shall be entitled to independently protect
and enforce its rights, including without limitation the rights arising out
of
this Agreement or out of the other Transaction Documents, and it shall not
be
necessary for any other Purchaser to be joined as an additional party in any
proceeding for such purpose. Each Purchaser has been represented by its own
separate legal counsel in their review and negotiation of the Transaction
Documents. The Company has elected to provide all Purchasers with the same
terms
and Transaction Documents for the convenience of the Company and not because
it
was required or requested to do so by the Purchasers.
-
29
-
IN
WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their respective authorized signatories as
of
the date first indicated above.
|
ASSOCIATED
THIRD PARTY ADMINISTRATORS
|
Address
for Notice:
|
|
By:
|
/s/
Xxxxxxx Xxxxxxxxx
|
Telephone:
|
|
Name:
Xxxxxxx Xxxxxxxxx
|
Facsimile:
|
|
|
Title:
Chief Executive Officer
|
|
|
|
UNITED
BENEFITS & PENSION SERVICES, INC.
|
||
|
(with
respect to Article 4 only)
|
||
|
By:
|
/s/
Xxxxxxx Xxxxxxxxx
|
|
|
Name:
Xxxxxxx Xxxxxxxxx
|
||
|
Title:
Chief Executive Officer
|
||
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE
PAGE FOR PURCHASER FOLLOWS]
-
30
-
[PURCHASER
SIGNATURE PAGES TO ATPA PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: CAMOFI
Master LDC____________________________________________
Signature
of Authorized Signatory of Investing Entity:
/s/
Xxxxxxx Smithline_______________________
Name
of
Authorized Signatory: Xxxxxxx
Smithline___________________________________________
Title
of
Authorized Signatory: Director____________________________________________________
Email
Address of Authorized Entity:
________________________________________________
Address
for Notice of Investing Entity:
CAMOFI
Master LDC
c/o
Centrecourt Asset Management LLC
000
Xxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Address
for Delivery of Securities for Investing Entity (if not same as
above):
Subscription
Amount: $7,250,000
Warrant
Shares: 2,494,521
Issued
Shares:
EIN
Number: [PROVIDE
THIS UNDER SEPARATE COVER]
[SIGNATURE
PAGES CONTINUE]
-
31
-
[PURCHASER
SIGNATURE PAGES TO ATPA PURCHASE AGREEMENT]
IN
WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement
to be duly executed by their respective authorized signatories as of the date
first indicated above.
Name
of
Investing Entity: CAMHZN
Master LDC____________________________________________
Signature
of Authorized Signatory of Investing Entity:
/s/
Xxxxxxx Smithline________________________
Name
of
Authorized Signatory: Xxxxxxx
Smithline___________________________________________
Title
of
Authorized Signatory: Director____________________________________________________
Email
Address of Authorized Entity:
________________________________________________
Address
for Notice of Investing Entity:
CAMHZN
Master LDC
c/o
Centrecourt Asset Management LLC
000
Xxxxxxx Xxxxxx, 0xx
Xxxxx
Xxx
Xxxx,
Xxx Xxxx 00000
Address
for Delivery of Securities for Investing Entity (if not same as
above):
Subscription
Amount: $750,000
Warrant
Shares: 258,054
Issued
Shares:
EIN
Number: [PROVIDE
THIS UNDER SEPARATE COVER]
[SIGNATURE
PAGES CONTINUE]
-
32
-
DISCLOSURE
SCHEDULE
This
constitutes the Disclosure Schedule (the “Disclosure
Schedule”)
referred to in, delivered concurrently with, and made a part of the Securities
Purchase Agreement (the “Agreement”),
dated
as of November 30, 2007, by and among Associated Third Party Administrators,
a
California corporation (the “Company”),
United Benfits & Pension Services, Inc., a Delaware corporation (the
“UBPS”)
and
each of the Purchaser(s) identified on the signature pages thereto (the
“Purchasers”).
This
Disclosure Schedule is subject to the following general terms:
|
1.
|
Capitalized
terms used in this Disclosure Schedule have the meaning ascribed
to them
in the Agreement unless otherwise defined
herein.
|
|
2.
|
For
purposes of this Disclosure Schedule, any information, item, or other
disclosure set forth in any portion hereof shall be deemed, to the
extent
applicable, to have been set forth in all other applicable provisions
without need for additional cross-referencing to the extent the matters
to
be excepted from such other provisions is apparent from the text
of the
disclosure.
|
|
3.
|
No
disclosure of any matter contained in this Disclosure Schedule shall
create an implication that such matter meets any standard of materiality,
shall be used as a basis for interpreting the term “material”,
“materially” or “materiality” in the Agreement or that such information is
or is not required to be disclosed in or by the
Agreement.
|
|
4.
|
The
headings contained in this Disclosure Schedule are for reference
purposes
only and shall not affect in any way the meaning or interpretation
of any
disclosure herein or be deemed to alter or affect the express description
of the Section of this Disclosure Schedule as set forth in the
Agreement.
|
|
5.
|
Any
disclosures in this Disclosure Schedule that refer to a document
are
qualified in their entirety by reference to the text of such
document.
|
|
6.
|
Any
information or the dollar thresholds set forth in this Disclosure
Schedule
shall not be used as a basis for interpreting “Material Adverse Effect” or
other similar terms in this Agreement, except as expressly set forth
in
this Disclosure Schedule.
|
|
7.
|
Disclosure
of any matter in this Disclosure Schedule shall not constitute an
addendum
or raise any inference that such matter constitutes a violation of
law or
an admission of any liability, violation or breach of contract or
facts
supporting any liability, violation or breach of
contract.
|
-
33
-
SCHEDULE
3.1(a)
Subsidiaries
1.
Trust
Benefits On Line, LLC, a Delaware limited liability company, is a wholly-owned
subsidiary of the Company.
-
34
-
SCHEDULE
3.1(d)
Conflicts
No
Disclosure
-
35
-
SCHEDULE
3.1(e)
Filings,
Consents and Approvals
1.
Filings
required under the Securities Act of 1933, as amended, together with the rules
and regulations promulgated thereunder.
2.
Filings
required by the “blue sky” laws of any state in which the Securities are offered
or sold.
-
36
-
SCHEDULE
3.1(g)
Capitalization
1.
Equity
Ownership
The
following table shows the actual and fully diluted equity ownership of the
UBPS
Common Stock after giving effect to the completion of (i) the Equity Offering,
(ii) the acquisition by UBPS of the Company, (iii) the offering contemplated
by
this Agreement, and (iv) the conversion of the Secured Convertible Notes
Due
November 30, 2007 issued by UBPS (the “Bridge Notes”) into UBPS Common Stock.
|
Shares
Owned if Minimum Amount is Sold
|
Shares
Owned if Maximum Amount is Sold
|
||||||||||||||||||||||||
|
Actual
|
Fully
Diluted
|
Actual
|
Fully
Diluted
|
||||||||||||||||||||||
|
Amount%
|
Amount%
|
Amount%
|
Amount%
|
||||||||||||||||||||||
|
Investors
in this Offering(1):
Shares
Warrant
Shares(2)
|
1,800,000
|
55.8
|
%
|
1,800,000
900,000
|
25.6
12.8
|
%
%
|
3,600,000
|
71.6
|
%
|
3,600,000
1,800,000
|
36.4
18.2
|
%
%
|
|||||||||||||
|
Investors
in the Debt Offering:
Warrant
Shares(3)
|
2,752,575
|
39.1
|
%
|
2,752,575
|
27.8
|
%
|
|||||||||||||||||||
|
Bridge
Lenders(4)
|
232,000
|
7.2
|
%
|
232,000
|
3.3
|
%
|
232,000
|
4.7
|
%
|
232,000
|
2.3
|
%
|
|||||||||||||
|
ATPA
Stockholders(5)(6)(7)
|
600,000
|
18.6
|
%
|
600,000
|
8.5
|
%
|
600,000
|
11.9
|
%
|
600,000
|
6.1
|
%
|
|||||||||||||
|
Executive
Management of UBPS(6)(8)(9)(10)
|
592,503
|
18.4
|
%
|
592,503
|
8.4
|
%
|
592,503
|
11.8
|
%
|
592,503
|
6.0
|
%
|
|||||||||||||
|
Placement
Agent Warrants(11)
|
162,000
|
2.3
|
%
|
324,000
|
3.3
|
%
|
|||||||||||||||||||
|
Total
|
3,224,503
|
100
|
%
|
7,039,078
|
100
|
%
|
5,024,503
|
100
|
%
|
9,901,078
|
100
|
%
|
|||||||||||||
|
____________________
|
|
|
(1)
|
Includes
up to 24 Units that may be purchased in the Offering by directors,
officers and employees of UBPS.
|
|
(2)
|
Shares
issuable upon exercise of the UBPS Warrants included in the Units
at an
exercise price of $.00001 per share.
|
|
(3)
|
Shares
issuable upon exercise of the Noteholder Warrants at an exercise
price of
$.00001 per share.
|
|
(4)
|
Shares
issuable upon conversion of the Bridge Notes.
|
|
(5)
|
Shares
issuable to ATPA’s stockholders as part of the purchase price to be paid
by UBPS in connection with its acquisition of ATPA pursuant to
the ATPA
Merger Agreement.
|
|
(6)
|
Does
not include shares in an amount equal to 10% of the outstanding
UBPS
Common Stock on a fully diluted basis (703,908 shares if the Minimum
Amount is sold and 990,108 shares if the Maximum Amount is sold)
that will
be available for grant or award of options under a 2007 Stock Incentive
Plan to be adopted by UBPS prior to completion of this Offering.
All
references in the Memorandum to the 2007 Stock Incentive Plan shall
reflect such amounts of shares available for grant of options.
|
|
(7)
|
Does
not include up to 1,000,000 shares issued by UBPS to secure the
promissory
note issued by UBPS to fund the Second Escrow Amount pursuant to
the ATPA
Merger Agreement.
|
|
(8)
|
Does
not include up to 24 Units that may be purchased in this Offering
by
directors, officers and employees of UBPS .
|
|
(9)
|
Includes
60,000 shares of UBPS Common Stock issuable to the Chairman of
the Board
of UBPS in payment of a consulting fee. See “Management - Executive
Compensation”. Of the remaining 532,503 shares, an aggregate of 238,029
shares will be transferred prior to the initial closing of the
Offering by
Xxxxxxx Xxxxxxxxx, the President and Chief Executive Officer of
UBPS, to
the future Chief Financial Officer of UBPS and to Xxxxxx
Xxxx.
|
|
(10)
|
Does
not include up to a total of 417,362 performance incentive shares
if the
Minimum Amount of Units is sold, and if the Maximum Amount of Units
is
sold, of UBPS Common Stock to be issued to Xx. Xxxxxxx Xxxxxxxxx,
and to
the future Chief Financial Officer of UBPS upon the Company achieving
the
following budgeted performance levels: (i) 50% of such shares will
be
issued to such officers upon the Company achieving consolidated
EBITDA (as
defined in the Senior Secured Notes) of $4.75 million for the four
fiscal
quarters ending October 31, 2008; and (ii) 50% of such shares will
be
issued to such officers upon the Company achieving consolidated
EBITDA (as
defined in the Senior Secured Notes) of $5.9 million for the four
fiscal
quarters ending October 31, 2009.
|
|
(11)
|
Shares
issuable upon exercise of the Placement Agent Warrants at an exercise
price of $2.50 per share.
|
2.
The
Company has issued, or will issue simultaneously with the execution of the
Agreement, a Promissory Note (the “Xxxxxxx Note”), dated as of December __,
2007, in favor of Xxxx Xxxxxxx (“Xxxxxxx”) in the Aggregate Principal Amount of
$624,000, pursuant to that certain Stock Repurchase Agreement (the “Xxxxxxx
Repurchase Agreement”), dated October 17, 2007, between Xxxxxxx and the Company.
The Xxxxxxx Note is repayable from the proceeds of the escrowed funds under
the
Acquisition Agreement, only to the extent any such funds are available to
the
shareholders of the Company.
3.
The
Xxxxxxx Repurchase Agreement.
4.
The
Company and Subsidiary have entered into a non-binding letter of intent (the
“LOI”), by and among the Company, Subsidiary, Information Concepts, Inc.
(“ICI”), Xxxxx Xxx Xxxxxxx, Xxxxx Xxxxxx and Xxxxxx Xxxxxx. Although definitive
transaction documents with respect to the transactions contemplated by the
LOI
have not been finalized as of the date hereof, such definitive documents
may
require the Subsidiary to issue additional securities of the
Subsidiary.
-
37
-
SCHEDULE
3.1(h)
Financial
Statements
No
Disclosure
-
38
-
SCHEDULE
3.1(i)
Material
Changes
No
Disclosure
-
39
-
LEGAL
PROCEEDINGS
1.
In
August
2006, the Company notified its errors and omissions insurance carrier of a
threatened claim against the Company, purporting that errors were made in
processing benefits under a plan it administers for the Western Conference
of
Teamsters Group Legal Services Fund purportedly resulting in reimbursement
of
benefit claims in excess of plan requirements (the “Threatened Claim”). The
Company’s errors and omissions insurance carrier has assumed the defense of such
potential claim. Although the Company is not currently able to determine the
outcome of such potential claim, because to date no claim has been formally
made, the Company believes that its maximum exposure would be limited to its
insurance policy deductible of $300,000 and that any actual claim would not
exceed the limit of its insurance coverage of $5.0 million. However, there
can
be no assurance in this regard and any exposure of the Company to liability
in
excess of the amount of its deductible could have a material adverse effect
on
the Company’s consolidated financial condition and results of operations. See
Note 10 to the Audited Consolidated Financial Statements of the Company and
Subsidiary as of April 30, 2006 and 2007 and for the fiscal years ended April
30, 2005, 2006 and 2007.
2.
The
Northern California UFCW Wholesale Health & Welfare Trust Fund (the “Trust
Fund”) has, pursuant to a letter dated January 17, 2007, from Xxxxx Xxxxxxx
Xxxxx to Xxxxxxxx Xxxxxx of the Company, claimed that Retiree Self-Pay rate
and
COBRA rate increases that were approved effective August 1, 2004 were never
implemented by the Company (the “UFCW Claim”). The Trust Fund claims that
if the Company had, in fact, increased rates effective August 1, 2004, the
Trust
Fund would have received an additional $262,152 plus $24 for each Non-Bargained
Retiree in premiums. The Trust Fund claims that it should be reimbursed
for the loss of premiums, although it has offered to settle the matter for
$227,008. the Company has asserted that the Trust Fund is recovering lost
premiums by virtue of retiree contribution rates and therefore the Trust Fund
does not have damages other than lost interest.
3.
Claim
by
General Employees Trust Fund claiming improper payment of claims by the
Company.
-
40
-
SCHEDULE
3.1(l)
Compliance,
Material Contracts
Real
Property Leases
1. Office
building Lease, dated December 29, 2004, between PTF
Operating Engineers, LLC (as successor in interest to First Interstate Bank
of
California, as Corporate Trustee of the Pension Trust Fund for Operating
Engineers) and the Company, as
amended on December 1, 1995 and October 28, 2005, and
relating to 0000
Xxxxx Xxxx Xxxx, Xxxxxxx, Xxxxxxxxxx
2. Office
Lease Agreement, dated May 1, 1996, between Sheet Metal Workers’ National
Pension Fund Headquarters Building L.L.C. (as successor in interest to Sheet
Metal Workers’ National Pension Fund Headquarters Building, Inc.) and the
Company, as amended by the First
Amendment to Lease dated November 1, 2002, Second Amendment to Lease dated
November 1, 2002
November
1, 2002 and subsequently amended as of May 1, 2004, and relating to 000 X.
Xxxxxxx Xxxxxx,
Xxxxx 000, Xxxxxxxxxx, Xxxxxxxx
3. Empire
Parkway Center Standard Fully Serviced Lease, dated August 9, 2006, between
Limar Realty Corp. #13 and Limar Realty Corp. # 14 and the Company and relating
to 0000
Xxxxxx Xxx Xxxxxxx, #000, Xxxxxxx, Xxxxxxxxxx
4. Standard
Industrial/Commercial Multi-Tenant Lease-Gross, dated October 10, 2001, between
4401 Santa Xxxxx Corporation and the Company, as amended on July 1, 2005 and
January 1, 2007, and relating to 4399/4401
Santa Xxxxx Ave, #150,200,202,203,204,212A, El Monte, California
5. Lease,
dated October __, 1996, between Xxxxxx X. Xxxxxxxxx and the Company, as amended
on September 1, 1998, and relating to 0000 X.X. 00xx
Xxxxxx,
Xxxxxxxx, Xxxxxx.
6. Lease
Agreement, dated May 31, 2007, between 000 Xxxxxx Xxxxxx, LLC and the Company
and relating to 000 Xxxxxx Xxxxxx, Xxx Xxxxxxxxx, Xxxxxxxxxx
7. Office
Lease (Multi-Tenant), dated July 1, 2004, between Xxxxxx Xxxxxxx Square, LLC
and
the Company, as amended on October 28, 2005 and September 29, 2006, and relating
to 0000
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx
8. Lease
Agreement, dated April 27, 1993, between Jaidan Investment Co. and the Company
(as successor in interest to Xxxx Xxxxxxxxx Associates), as amended as of May
9,
1996, February 1, 2001, March 16, 2004, July 1, 2004 and May 19, 2006, and
relating to 0000
Xxxxxx Xxx Xxx Xxxxx, Xxxxx 000, Xxx Xxxxx, Xxxxxxxxxx
9. Lease,
dated January 11, 1991, between IL-30 X. XxXxxxx Street L.L.C., as beneficiary
of land trust dated June 12, 1997 (as successor in interest to XXX-00 X. XxXxxxx
Xxxxxx L.L.C., successor in interest to LRP North Limited Partnership, successor
in interest to The Prudential Insurance Company of America) and the Company
(as
successor in interest to Xxxx Xxxxxxxxx & Associates), as amended on
December 10, 1996, July 13, 2001 and January 26, 2005, and relating to 00 Xxxxx
Xx Xxxxx, Xxxxx 0000, Xxxxxxx, Xxxxxxxx
10. Lease,
dated August 17, 1999, between C&M Investments, a Sole Proprietorship and
the Company, as amended on September 3, 1999 and February 28, 2000, and relating
to 0000
Xxxxx Xxxxxx, Xxxxx X, Xxxxxxx, Xxxxxxxxxx
11. Lease
Agreement, dated August 8, 1990, between LMP-1,
LLC (as successor in interest to Lake Merit Plaza) and the Company, (as
successor in interest to Xxxx Xxxxxxxxx & Associates), as
amended on November 8, 1993, December 7, 1994, November 17, 1995, August 27,
1999, August 27, 1999 and September 10, 2004, and
relating to 0000 Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxxxx
12. Sublease,
dated July 1, 2004, between San Diego County Construction Laborers’ Pension
Trust Fund and the Company and relating to 0000 Xxxx Xxxxxx, 0xx
xxxxx,
Xxx Xxxxx, Xxxxxxxxxx
-
41
-
13. Office
Lease, dated August 28, 2001, between Xxxxx Station Joint Venture, LLC and
Subsidiary, as amended on January 8, 2003, and relating to EmeryStation, 0000
Xxxxxx Xxxxxx, Xxxxx 000, Xxxxxxxxxx, Xxxxxxxxxx
The
Company has not obtained the consent of any of its landlords under leases
requiring such consent with respect to its entry into the Acquisition Agreement
or the consummation of the Acquisition.
Collective
Bargaining Agreements:
The
Company is a party to the following Collective Bargaining
Agreements:
1. Agreement,
dated as of April 1, 2005, between Office & Professional Employees
International Union Local 3 (San Francisco, CA) and the Company
2. Collective
Bargaining Agreemenrt, effective September 1, 2004 through August 31, 2007,
between Office & Professional Employees International Union Local 29
(Oakland, CA) AFL-CIO and the Company
3. Collective
Bargaining Agreement, dated September 1, 2004, between Office & Professional
Employees International Union Local 11 (Portland, OR) AFL-CIO and the
Company
4. Agreement,
dated September 1, 2004, between Office & Professional Employees
International Union Local 2 (Silver Spring, MD) AFL-CIO and the Company
5. Agreement,
effective September 1, 2004 through August 31, 2007, between Office &
Professional Employees International Union Local 537 (Pasadena, CA) AFL-CIO
and
the Company
6. Collective
Bargaining Agreement, dated March 1, 2007, between United Food & Commercial
Workers International Union Local 1546 (Chicago, IL) and the
Company
7. Agreement,
effective January 1, 2005 between Professional & Clerical Workers Local 2348
and the Company
8. Contract,
effective July 1, 2002 through June 30, 2008, between Freight Checkers, Clerical
Employees and Helpers Union, Local 836, International Brotherhood of Teamsters
and the Company (d/b/a S F Administrators)
Service
Agreements with Major Clients
1. Service
Agreement, effective as of August 1, 1996, between Carpenters Health &
Welfare Trust Fund for California and the Company, as amended on February 23,
1999
2. Master
Agreement, dated February 5, 2003, between Freight Checkers, Clerical Employees
and Helpers Union Local NO. 856 International Brotherhood of Teamsters and
the
Company
3. Third
Party Administrative Services Agreement, dated April 1, 2005, between Sheet
Metal Workers’ National Pension Fund and the Company
4. Third
Party Administrative Services Agreement, dated October 1, 2002, between Sheet
Metal Workers’ National Pension Fund and the Company
5. Third
Party Administrative Services Agreement, dated April 1, 2000, between Sheet
Metal Workers’ National Pension Fund and the Company
6. Third
Party Administrative Services Agreement, dated May 1 1996, between Sheet Metal
Workers’ National Pension Fund and the Company
-
42
-
7. Administrative
Agreement, dated January 1, 0000, xxxxxxx Xxxxxxxx xx Xxx Xxxx Painters and
Tapers Health Fund and the Company
8. Administrative
Agreement, dated October 1, 1998, between Trustees of the Automotive Industries
Pension Trust Fund and the Company, as amended on April 12, 2001
9. Administrative
Agreement, dated June 1, 1998, between Trustees of the Automotive Industries
Pension Welfare Fund and the Company
10. Administrative
Agreement, dated January 1, 2002, between Laborers Health and Welfare Trust
For
Southern California and the Company
11. Administrative
Agreement, dated January 1, 2006, between Trustees of the Pensioned Operating
Engineers Health & Welfare Trust Fund and the Company
12. Administrative
Agreement, dated January 1, 2006, between Trustee of the Operating Engineers
Health & Welfare Trust Fund and the Company
13. Administrative
Agreement, dated January 1, 2000, between Trustees of the Pension Trust Fund
for
Operating Engineers and the Company
14. Administrative
Agreement, dated October 1, 2002, between Building Service Health & Welfare
Trust and the Company (as successor in interest to X.X. Xxxxxxx and
Company
15. Administrative
Services Agreement, effective as of January 1, 1993, between Printing
Specialties and Paper Products Joint Employer and Union Health and Welfare
Fund
and the Company
[The
Company has not obtained the consent of Carpenters Health and Welfare Trust
Fund
for California under the agreement identified in Item 1 above with respect
to
its entry into the Acquisition Agreement or the consummation of the
Acquisition.]
Documents
relating to the Acquisition:
1. The
Acquisition Agreement
2. The
Company is a party to an Employment Agreement, dated as of the date hereof,
with
each of the following employees:
|
(a)
|
Xxxxx
Xxxxx;
|
|
(b)
|
Xxxxxxx
Xxxxxxxxxx;
|
|
(c)
|
Xxxxxx
Xxxxx;
|
|
(d)
|
Xxxxx
Xxxxxxxx;
|
|
(e)
|
Xxxxx
Xxxxxx;
|
|
(f)
|
Xxxxxxx
XxXxxxxxx
|
|
(g)
|
Xxxxxxx
Xxxxxx;
|
|
(h)
|
Xxx
Xxxxxx;
|
|
(i)
|
Xxxx
Xxxxxx;
|
|
(j)
|
Xxxx
X’Xxxxx;
|
|
(k)
|
Xxxxx
Xxxxxxx;
|
|
(l)
|
Xxxxxx
Xxxxxxxx;
|
|
(m)
|
Xxxx
Xxxxxx;
|
|
(n)
|
Xxxx
Xxxxxxx;
|
|
(o)
|
Xxxxx
Xxxxxx-Xxxxx;
|
|
(p)
|
Xxxxx
Xxxxxxxxx;
|
|
(q)
|
Xxxx
Xxxxxx;
|
|
(r)
|
Xxxxxx
Xxxxxx; and
|
-
43
-
|
(s)
|
Xxxx
Xxxx-Xxxxxx.
|
3. Non-Competition
and Non-Solicitation Agreements, dated as of the date hereof, by and between
the
Company and each of the following individuals:
|
(a)
|
Xxxx
Xxxxxxx;
|
|
(b)
|
Xxx
Xxxxxx;
|
|
(c)
|
Xxxxx
Xxxxx;
|
|
(d)
|
Xxxxxxx
Xxxxxxxxxx;
|
|
(e)
|
Xxxxxx
Xxxxx;
|
|
(f)
|
Xxxxx
Xxxxxxxx;
|
|
(g)
|
Xxxxx
Xxxxxx;
|
|
(h)
|
Xxxxxxx
XxXxxxxxx;
|
|
(i)
|
Xxxxxxx
Xxxxxx;
|
|
(j)
|
Xxx
Xxxxxx;
|
|
(k)
|
Xxxx
Xxxxxx;
|
|
(l)
|
Xxxx
X’Xxxxx;
|
|
(m)
|
Xxxxx
Xxxxxxx;
|
|
(n)
|
Xxxxxx
Xxxxxxxx; and
|
|
(o)
|
Xxxx
Xxxxxx.
|
3. Consulting
Agreement, dated as of the date hereof, by and between the Company and Xxxx
Xxxxxxx
4. Stock
Repurchase Agreement, dated October 17, 2007, between the Company and Xxxx
Xxxxxxx
5. The
Xxxxxxx Note.
Other
Contracts:
The
Company has agreed to purchase a license for claim administration software
from
ICI, the potential partner in the reorganization of TBOL. The agreement with
ICI
is not yet finalized, but payments have been made by the
Company.
-
44
-
SCHEDULE
3.1(s)
Certain
Fees
No
Disclosure
-
45
-
SCHEDULE
3.1(v)
Registration
Rights
No
Disclosure
-
46
-
SCHEDULE
3.1(z)
Indebtedness
1. The
Xxxxxxx Note.
2. Capitalized
leases reflected on the Financial Statements of the Company.
-
47
-
SCHEDULE
3.1(cc)
Tax
Status
No
Disclosure
-
48
-
SCHEDULE
3.1(ii)
Accountants
1. Xxxxxx
& Kliegman, LLP
-
49
-
