UNIVERSAL BUSINESS PAYMENT SOLUTIONS
ACQUISITION CORPORATION


 





 



 


SECURED CONVERTIBLE NOTE AGREEMENT


 


December ___, 2012


 





 



 



    	 



    	 



    

 


Exhibit A – Schedule of Purchasers

Exhibit B – Form of Secured Convertible Promissory Note


Exhibit C – LLC Interests Collateral

Exhibit D – Form of Registration Rights Agreement


 



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UNIVERSAL BUSINESS PAYMENT SOLUTIONS
ACQUISITION CORPORATION


 


SECURED CONVERTIBLE NOTE AGREEMENT


 


This Secured Convertible
Note Agreement (the “Agreement”), is made as of December ___, 2012, by and among Universal Business Payment
Solutions Acquisition Corporation, a Delaware corporation (the “Company”), and each of the parties listed on
the Schedule of Purchasers attached hereto as Exhibit A (each a “Purchaser” and collectively, the “Purchasers”).


 


ARTICLE 1



The Notes


 


1.1Authorization
of Notes. The Company has duly authorized the sale and issuance to the Purchasers of Secured Convertible Promissory Notes,
in the form attached hereto as Exhibit B (the “Notes”) in the principal amount of up to Ten Million Dollars
($10,000,000), with a maturity date of December 31, 2014. The proceeds from the Notes will be used to facilitate the closings under
(a) the Agreement and Plan of Merger, dated as of July 6, 2012, as amended, by and among the Company, JP Merger Sub, LLC, WLES,
L.P. and certain other parties thereto and (b) the Agreement and Plan of Merger, dated as of July 6, 2012, as amended, by and among
the Company, ADC Merger Sub, Inc., AD Computer Corporation, Payroll Tax Filing Services, Inc., and certain other stockholders party
thereto (such agreements collectively, the “Acquisition Agreements”).


 


ARTICLE 2



Closings; Delivery


 


2.1Closing.
At the Closing (as defined below), the Company will issue to each Purchaser, and each Purchaser is obligated to purchase
severally, and not jointly, from the Company, Notes in the principal amount set forth opposite such Purchaser’s name in Exhibit
A attached hereto (“Purchaser’s Commitment”), or a total principal amount of up to Ten Million
Dollars ($10,000,000) for the Purchasers collectively. The closing of such purchase and sale of the Notes hereunder (the
“Closing”) shall be held at the offices of Dechert LLP, 2929 Arch Street, Philadelphia, PA 19104 at 10:00
a.m. local time on the date hereof or at such other place or time upon which the Company and the Purchasers mutually agree
(the “Closing Date”). The obligations of the Company to issue and the Purchasers to purchase the Notes
shall arise immediately prior to the consummation of the transactions contemplated by the Acquisition Agreements.


 


2.2Delivery.
At the Closing, the Company shall deliver to each Purchaser a Note in the principal amount for such Purchaser determined as provided
herein, against payment of the purchase price therefor by check payable to the Company or by wire transfer made pursuant to the
Company’s instructions.


 



    	 



    	 



    

 


ARTICLE 3


 


Representations,
Warranties and Covenants of the Company


 


In this Agreement,
any reference to a “Material Adverse Effect” means any event, change or effect that is materially adverse to
the business, operations, assets, liabilities, condition (financial or otherwise) or results of operations of the Company.


 


The Company represents
and warrants to each of the Purchasers at the Closing as follows:


 


3.1Corporate
Organization. The Company is a corporation duly organized and validly existing under the laws of the State of Delaware
and has all requisite corporate power and authority to carry on its business as presently conducted and as presently proposed
to be conducted by it. The Company is duly qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a Material Adverse Effect. JetPay, LLC (“JetPay”) is a limited
liability company duly organized, validly existing and in good standing under the laws of the State of Texas and has all
requisite limited liability company power and authority to carry on its business as presently conducted and as presently
proposed to be conducted by it. JetPay is duly qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a Material Adverse Effect. ADC is a corporation duly organized, validly existing
and in good standing under the laws of the Commonwealth of Pennsylvania and has all requisite corporate power and authority
to carry on its business as presently conducted and as presently proposed to be conducted by it. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a
Material Adverse Effect.


 


3.2Authorization.
The Company has all requisite corporate power and authority to execute and deliver this Agreement, to sell and issue the Notes
hereunder, and to carry out and perform its obligations hereunder and thereunder. All corporate action on the part of the Company,
its directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement and the Notes
by the Company, the authorization, sale, issuance and delivery of the Notes and the performance of the Company’s obligations
hereunder or thereunder has been taken. This Agreement and the Notes, when executed and delivered by the Company, will constitute
the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their respective terms,
except as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance and other laws of general
application affecting enforcement of creditors’ rights generally and as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies.


 


3.3Capitalization.
Assuming consummation of the transactions contemplated by the Acquisition Agreements, the Company will 100% of the issued and outstanding
equity interests in JetPay.


 


3.4Government
Consents. No consent, approval or authorization of or designation, declaration or filing with any federal, state, local or
foreign governmental authority on the part of the Company is required in connection with the valid execution and delivery of this
Agreement or the offer, sale or issuance of the Notes or the consummation of any other transaction contemplated hereby or thereby,
except filings pursuant to Regulation D of the Securities Act of 1933, as amended (the “Securities Act”) and
qualification (or taking such action as may be necessary to secure an exemption from qualification, if available) under the California
Corporations Code and other applicable blue sky laws of the offer and sale of the Notes, which filings and qualification, if required,
will be accomplished in a timely manner prior to or promptly upon completion of each Closing.


 



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3.5Offering.
Based in part upon the Purchasers’ representations in Article 4 hereof, the offer, and the sale and issuance, of the Notes
and the shares of capital stock of the Company issuable upon conversion of the Notes (the “Conversion Stock”)
constitute a transaction exempt from the registration requirements of Section 5 of the Securities Act.


 


3.6Valid
Issuance of Securities. The Company shall, prior to the conversion of the Notes, reserve from its authorized but unissued shares
of its capital stock for issuance and delivery upon the conversion of the Notes, such number of shares of Conversion Stock, and,
from time to time, will take all steps necessary to amend its Certificate of Incorporation to provide sufficient authorized numbers
of shares of Conversion Stock issuable upon the conversion of the Notes. All such shares shall be duly authorized, and when issued
upon any such conversion, shall be validly issued, fully paid and non-assessable, free and clear of all liens, security interests,
charges and other encumbrances or restrictions on sale and free and clear of all preemptive rights, except encumbrances or restrictions
arising under federal or state securities laws.


 


3.7Compliance
with Other Instruments. The Company is not in violation or default of any provisions of its Certificate of Incorporation or
its bylaws, in each case as amended and currently in effect, or of any provision of any federal, state or local law, statute, rule
or regulation applicable to the Company. The execution, delivery and performance of this Agreement and the Notes, and the consummation
of the transactions contemplated hereby or thereby, will not result in any such violation or be in conflict with or constitute,
with or without the passage of time or the giving of notice, either a default under any such provision, agreement, instrument,
judgment, injunction, order or degree or an event which results in the creation of any material lien, charge, pledge, security
interest, mortgage or other encumbrance (each a “Lien”) upon any assets or properties of the Company.


 


ARTICLE 4


 


Representations,
Warranties and Covenants of the Purchasers


 


Each Purchaser hereby
represents, warrants and covenants, severally and not jointly, to the Company as follows:


 


4.1Accredited
Investor. The Purchaser is an “accredited investor” within the meaning of Regulation D under the Securities Act.


 


4.2Restricted
Securities; Rule 144. The Purchaser understands that the Notes (and the Conversion Stock) are characterized as “restricted
securities” under the federal securities laws inasmuch as they are being acquired from the Company in a transaction not
involving a public offering and that, under such laws and applicable regulations, the Notes (and the Conversion Stock) may be resold
without registration under the Securities Act only in certain limited circumstances. The Purchaser acknowledges that the Notes
(and all capital stock of the Company issuable upon conversion of the Notes) must be held indefinitely unless subsequently registered
under the Securities Act or an exemption from such registration is available. The Purchaser is aware of the provisions of Rule
144 promulgated under the Securities Act which permit limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions.


 



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4.3No
Public Market. The Purchaser understands that no public market now exists for the Notes and that there can be no assurance
that a public market will ever exist for the Notes (or the Conversion Stock).


 


4.4Further
Limitations on Disposition of Conversion Stock. Without in any way limiting the representations set forth above, except with
respect to transfers to fund entities affiliated with Purchasers, or in the case of an individual Purchaser, to an entity wholly-owned
by such individual Purchaser, the Purchaser agrees not to make any disposition of all or any portion of the Conversion Stock issuable
upon conversion of the Notes, unless and until:


 


(a) there is then
in effect a registration statement under the Securities Act covering such proposed disposition and such disposition is made in
accordance with such registration statement;


 


(b) (i) the Purchaser
shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) such Purchaser shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not require, or is exempt from, registration under
the Securities Act; or


 


(c) there is an
applicable exemption under the Securities Act, including but not limited to an exemption under Rule 144 of the Securities Act


 


4.5Registration
Rights. At the Closing, the Company and Purchaser shall enter into a Registration Rights Agreement in the form attached hereto
as Exhibit D. For the avoidance of doubt, the Company agrees to use its best efforts to file a registration statement with respect
to all of the Conversion Stock as soon as practicable following the Closing and to maintain the effectiveness of such registration
statement so long as the Conversion Stock is issuable or the Purchaser holds the Conversion Stock. Furthermore, in the event that
a registration statement is not declared effective by June 30, 2013, the conversion price shall be reduced by $0.15 per share and
then by an additional $0.05 per share for every 30 days after June 30, 2013 that the registration statement has not been declared
effective.


 


4.6Legends.
It is understood that each certificate representing the Conversion Stock issuable upon conversion of the Notes and any securities
issued in respect thereof or in exchange therefor shall bear a legend in substantially the following form (in addition to any legend
required under applicable state securities laws):


 


THIS SECURITY HAS NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THIS SECURITY MAY NOT BE SOLD, OFFERED
FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS SECURITY UNDER SAID ACT AND
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT
REQUIRED.


 



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The
Company hereby agrees to instruct the transfer agent to remove such legend immediately upon the effectiveness of the Company’s
registration statement with respect to the Conversion Shares.


 


4.7No
Transfer of Notes. The Purchaser shall not sell, contract to sell, pledge or otherwise transfer or dispose of the Notes, or
any economic interest therein, without the prior written consent of the Company, which consent shall not be unreasonably withheld,
except to fund entities affiliated with Purchasers, or in the case of an individual Purchaser, to an entity wholly-owned by such
individual Purchaser.


 


4.8Listing.
The Company shall use its reasonable best efforts to maintain a listing on a nationally recognized securities exchange market
for its shares of common stock.


 


ARTICLE 5



Covenants


 


5.1Security
Interest. This Agreement constitutes a “security agreement” within the meaning of the UCC. In order to secure payment
and performance of the Secured Obligations, the Company hereby grants, assigns, transfers, pledges, for the benefit of the Purchasers
hereunder, a security interest in, and a Lien on, all of Company’s right, title, estate, claim and interest in and to any
or all of the items listed on Exhibit C to this Agreement whether now owned or hereafter acquired and wherever located (collectively,
the “LLC Interests Collateral”).


 


5.2Financing
Statements. The Company will promptly cooperate with the Purchasers in executing such financing statements, continuation statements,
assignments, certificates and other documents with respect to the LLC Interests Collateral, pursuant to the applicable Uniform
Commercial Code and otherwise, as any Purchaser may reasonably request in order to enable such Purchaser to perfect and from time
to time to renew the security interest granted, all in form reasonably satisfactory to such Purchaser, and the Company will pay
the costs of filing the same in all public offices where such Purchaser deems such financing to be necessary or desirable.


 


5.3Return
of LLC Interests Collateral. Upon payment in full of the Note and any other amounts due hereunder, or upon the full conversion
of the Note into securities of the Company, the security interest in granted herein shall be released.


 


5.4Further
Assurances. The Company agrees that at any time and from time to time, at its expense, the Company will promptly execute and
deliver all further instruments and documents, and take all further action that any Purchaser may reasonably request, in order
to perfect and protect the security interests granted or purported to be granted hereby and to enable such Purchaser to exercise
and enforce its rights and remedies hereunder with respect to any LLC Interests Collateral.


 



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5.5Company’s
Continuing Rights. Notwithstanding the security interest in the LLC Interests Collateral granted to and created in favor of
the Purchasers under this Agreement, the Company shall have the right until the occurrence and continuance of an Event of Default,
to sell, lease or otherwise dispose of the Assets and to collect the Accounts, in each case only in the ordinary course of the
Company’s business.


 


5.6Limitation
on Debt. For so long as any Note (or portion thereof) remains outstanding, the Company will not raise any additional indebtedness
ranking pari passu with or senior to the Notes and will be precluded from incurring additional subsidiary level indebtedness
such that consolidated debt/EBITDA ratio would exceed 3.0 times EBITDA.


 


5.7Opinion
of Counsel. In connection with the Closing, the Company shall deliver an opinion of Counsel that the membership interests underlying
the LLC Interests Collateral constitute the legal valid binding obligation of the obligor and such interests have been validly
issued under the Texas Limited Liability Company Act.


 


5.8Collateral
Impairment. To the extent the Purchasers determine in their reasonable discretion that the LLC Interests Collateral has become
materially impaired and provide a notice to the Company detailing the analysis underlying such determination, Purchasers shall
have the right to demand that the Company replace within a commercially reasonable time such LLC Interests Collateral with replacement
collateral of JetPay or the Company; provided, however, that in no event shall the Company be obligated to provide such replacement
collateral if the provision of such collateral would cause the Company to breach any existing material contractual obligations
then in effect at the time of such request.


 


5.9Financial
Statements. For so long as any Note (or portion thereof) remains outstanding, the Company shall deliver or cause to be
delivered upon request of the Payees within 15 business days: (i) a balance sheet for each of the Company, ADC and JetPay as
of the last day of the previous calendar month, (ii) a statement of income for each of the Company, ADC and JetPay for
the monthly period ending on the last day of the previous calendar month and (iii) a statement of cash flows for each of the
Company, ADC and JetPay for the monthly period ending on the last day of the previous calendar month.


 


5.10No
Further Liens. For so long as any Note (or portion thereof) remains outstanding, the Company will maintain good title to, or
the right to use, the Assets and the LLC Interests Collateral, as the case may be, free and clear of any Liens or restrictions
on the transfer thereof except for (i) the Permitted Liens or (ii) Liens approved by each of the Purchasers.


 


5.11Definitions.
For purposes of this Agreement, each of the following terms has the meaning set forth below:


 


“Accounts”
means all bona fide rights of the Company, now existing or hereafter acquired, to payment for goods sold or leased or for services
rendered or for royalty payments or payments under any license, which are not evidenced by an instrument or Chattel Paper, whether
or not earned by performance.


 


“Assets”
means all assets of the Company whether now existing or hererafter arising or acquired, including all proceeds thereof, provided,
however, that Assets shall not include the LLC Interests Collateral.


 



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“Chattel Paper”
means a writing or writings which evidence both a monetary obligation and a security interest in, or a lease of, specific goods.
When a transaction is evidenced both by such a security agreement or a lease and by an instrument or a series of instruments, the
group of writings taken together constitutes Chattel Paper.


 


“EBITDA”
means total revenues minus total expenses, plus taxes, depreciation, amortization, and interest expense.


 


“Permitted
Liens” means: (i) Liens for any taxes, fees, assessments or other governmental charges or levies, either not delinquent
or being contested in good faith by appropriate proceedings; (ii) Liens in favor of customs and revenue authorities arising as
a matter of law to secure payments of custom duties in connection with the importation of goods; (iii) deposits in the ordinary
course of business under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure
the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance
or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to
secure statutory obligations (other than liens arising under ERISA or environmental liens) or surety or appeal bonds, or to secure
indemnity, performance or other similar bonds; (iv) leases or subleases and nonexclusive licenses and sublicenses granted to others
in the ordinary course of the Company’s business; (v) easements, reservations, rights-of-way, restrictions, minor defects
or irregularities in title and other similar charges or encumbrances affecting real property that do not materially adversely impact
the Company's ability to utilize such real properties; (vi) Liens of materialmen, mechanics, warehousemen, carriers, artisan’s
or other similar Liens arising in the ordinary course of the Company’s business or by operation of law with respect to amounts
not yet due and payable and (vii) Liens arising out of the Loan Agreement, dated as of May 31, 201, by and among Ten Lords Ltd,
Providence Interactive Capital, LLC, JetPay, JetPay ISO Services, LLC, JetPay Merchant Services, LLC, JT Holdings, L.P., JT Holdings
Management, LLC, WLES, Ltd. and Trent Voigt.


 


“Secured Obligations”
means all money, debts, obligations and liabilities which now are or have been or at any time hereafter may be or become due, owing
or incurred by the Company to the Purchasers, whether direct or indirect, absolute or contingent, due or to become due, or now
existing or hereafter incurred, and which, in all instances, arise under, out of, or in connection with this Agreement and the
Notes.


 


“UCC”
means the Uniform Commercial Code of the State of Delaware as in effect on the date hereof and as amended from time to time hereafter.


 


ARTICLE 6



Miscellaneous


 


6.1Governing
Law. This Agreement shall be governed in all respects by the laws of the State of Delaware, as applied to contracts made and
to be fully performed entirely within such State between residents of such State.


 



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6.2Survival.
The representations, warranties, covenants and agreements made herein shall survive any investigation made by any Purchaser
or the Company and the closing of the transactions contemplated hereby.


 


6.3Successors
and Assigns. Except as otherwise provided herein, the provisions hereof shall inure to the benefit of, and be binding upon,
the successors, assigns, heirs, executors and administrators of the parties hereto. Neither this Agreement nor any term or provision
hereof may be assigned to another party without the prior written consent of the other parties hereto; provided, however,
that the rights of any Purchaser to purchase the Notes shall be assignable to fund entities affiliated with such Purchaser without
the prior written consent of the other parties hereto.


 


6.4Fees
and Expenses. Each party shall bear its own fees and expenses in connection with this Agreement and the transactions contemplated
hereby.


 


6.5Entire
Agreement; Amendment. This Agreement and the other documents delivered pursuant hereto constitute the full and entire understanding
and agreement among the parties with regard to the subjects hereof and thereof. Neither this Agreement nor any term hereof may
be amended, waived, discharged or terminated other than by a written instrument signed by the Company and Purchasers holding a
majority of the then outstanding principal amount of the Notes (or if the Notes have been converted, a majority of the shares of
Conversion Stock, none of which having been sold to the public) or transferees of such Purchasers.


 


6.6Notices,
etc. All notices, demands, requests or other communications that may be or are required to be given, served or sent by any
party permitted herein will be in writing and shall be mailed by first class, registered or certified mail, return receipt requested,
postage prepaid, or transmitted by hand delivery, overnight courier or facsimile transmission, addressed as follows: (a) if to
the Company, to Universal Business Payment Solutions Acquisition Corporation, Radnor Financial Center, 150 North Radnor-Chester
Road, Suite F-200, Radnor PA 19087, Attention: Chief Executive Officer, with a copy to Dechert LLP, 2929 Arch Street, Philadelphia,
PA 19104, Attention: James A. Lebovitz, Facsimile (215) 994-2222 and (b) if to a Purchaser, at the address set forth in Exhibit
A for such Purchaser, or at such other address or addresses as shall have been furnished in writing to the Company. Each notice
or other communication that is mailed, delivered or transmitted in the manner described above shall be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to the addressee (with the return receipt, the delivery
receipt, the fax confirmation sheet or the affidavit of messenger being deemed conclusive evidence of such delivery) or at such
time as delivery is refused by the addressee upon presentation.


 


6.7Delays
or Omissions. No delay or omission to exercise any right, power or remedy accruing to any holder of the Notes (and the Conversion
Stock) upon any breach or default of the Company under this Agreement, shall impair any such right, power or remedy of such holder
nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach
or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or
default theretofore or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any
holder of the Notes (and the Conversion Stock) of any breach or default under this Agreement, or any waiver on the part of such
holder of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any such holder, shall
be cumulative and not alternative.


 



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6.8Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be enforceable against the parties actually
executing such counterparts, and all of which together shall constitute one instrument.


 


6.9Severability.
In the event that any provision of this Agreement becomes or is declared by a court of competent Jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that no such severability
shall be effective if it materially changes the economic benefit of this Agreement to any party.


 



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IN WITNESS WHEREOF,
the parties have executed this Unsecured Convertible Note Agreement as of the date first written above.


 





	 	COMPANY:
	 	 
	 	UNIVERSAL BUSINESS PAYMENT
	 	SOLUTIONS ACQUISITION
	 	CORPORATION,
	 	a Delaware Company
	 	 
	 	By:	 
	 	Name:  Bipin C. Shah
	 	Title:  Chief Executive Officer
	 	Address:    Radnor Financial Center
	 	150 North Radnor-Chester Road
	 	Suite F-200
	 	Radnor, PA  19087
	 	 
	 	PURCHASERS:
	 	 
	 	[                    ]
	 	 
	 	By:	 
	 	Name:
	 	Title:
	 	 
	 	[                   ]
	 	 
	 	By:	 
	 	Name:
	 	Title:




 



    	 



    	 



    

 


EXHIBIT A


 


SCHEDULE OF PURCHASERS


 


	Name and Address	 	 	Loan
                                                                                 Amount	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	Total:	 	$	10,000,000	 



 



    	 



    	 



    

 


EXHIBIT B


 


FORM OF SECURED CONVERTIBLE PROMISSORY
NOTE



    	 



    	 



    

 


EXHIBIT C


 


LLC INTERESTS COLLATERAL


 


50% of
the LLC interests of JetPay, LLC owned by the Company


 



    	 



    	 



    

 


EXHIBIT D


 


Form of Registration Rights Agreement