EXHIBIT 4.2
THIS NOTE AND THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS NOTE AND THE CLASS A COMMON STOCK ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO NUMEREX CORP. THAT SUCH REGISTRATION IS NOT
REQUIRED.
CONVERTIBLE TERM NOTE
FOR VALUE RECEIVED, NUMEREX CORP., a Pennsylvania corporation (the
"BORROWER"), hereby promises to pay to LAURUS MASTER FUND, LTD., c/o Ironshore
Corporate Services Ltd., P.O. Box 1234 G.T., Queensgate House, South Church
Street, Grand Cayman, Cayman Islands, Fax: 345-949-9877 (the "HOLDER") or its
registered assigns or successors in interest, on order, the sum of FOUR MILLION
FIVE HUNDRED THOUSAND DOLLARS ($4,500,000), or such lesser principal amount as
may be from time to time owing to the Holder hereunder, together with any
accrued and unpaid interest hereon, on January 13, 2007 (the "MATURITY DATE") if
not sooner paid.
Capitalized terms used herein without definition shall have the
meanings ascribed to such terms in that certain Securities Purchase Agreement
dated as of the date hereof between the Borrower and the Holder (the "PURCHASE
AGREEMENT").
The following terms shall apply to this Note:
ARTICLE I
INTEREST & AMORTIZATION
1.1. Interest Rate and Payment. Subject to Article IV and Section
5.1 hereof, interest payable on this Note shall accrue at a rate per annum equal
to eight percent (8%) (the "CONTRACT RATE"). Interest shall be payable monthly
in arrears commencing on February 1, 2004, on the first day of each consecutive
calendar month thereafter (each, a "REPAYMENT DATE"), and on the Maturity Date,
whether by acceleration or otherwise.
1.2. Monthly Principal Payments. Amortizing payments of the
aggregate principal amount outstanding under this Note at any time (the
"PRINCIPAL AMOUNT") shall begin on July 1, 2004 and shall recur on the first
calendar day of each succeeding month thereafter (each, an "AMORTIZATION DATE")
until the Maturity Date. The Borrower shall make monthly payments to the Holder
as follows: beginning on the first Amortization Date and ending on the
Amortization Date of January 1, 2005, the Borrower shall pay to the Holder
$78,000 per month on each Repayment Date; beginning on the Amortization Date of
February 1, 2005 and ending on the Amortization Date of July 1, 2005, the
Borrower shall pay to the Holder $120,000 per month on each Repayment Date; and
beginning on the Amortization Date of August 1, 2005 and ending on the Maturity
Date, the Borrower shall pay to the Holder one eighteenth (1/18th) of the
remaining principal balance due under this Note in equal monthly installments on
each Repayment Date;
each of the aforementioned monthly payments shall be made together with any
accrued and unpaid interest to date on such portion of the Principal Amount plus
any and all other amounts which are then owing under this Note but have not been
paid (collectively, the "MONTHLY AMOUNT").
ARTICLE II
BORROWER PAYMENT OPTIONS
2.1. (a) Payment of Monthly Amount in Cash or Common Stock. Subject
to the terms hereof, the Borrower shall have the sole option to determine
whether to satisfy payment of the Monthly Amount on each Repayment Date either
in cash or in shares of its Class A common stock, no par value per share (the
"COMMON STOCK"), or a combination of both. Each month, ten (10) days prior to a
Repayment Date, the Borrower shall deliver to the Holder a written irrevocable
notice in the form of Exhibit B attached hereto electing to pay the Monthly
Amount payable on the next Repayment Date in either cash or Common Stock, or a
combination of both (each, a "REPAYMENT ELECTION NOTICE") (the date by which
such notice is required to be given being hereinafter referred to as the "NOTICE
DATE"). If a Repayment Election Notice is not delivered to the Holder by the
applicable Notice Date for such Repayment Date, then the Monthly Amount due on
such Repayment Date shall be paid in cash. Any portion of the Monthly Amount
paid in cash on a Repayment Date, shall be paid to the Holder an amount equal to
102% of the cash portion of the Monthly Amount then payable in satisfaction of
such obligation. If the Borrower repays all or a portion of the Monthly Amount
in shares of Common Stock, the number of such shares to be issued for such
Repayment Date shall be the number determined by dividing (x) the portion of the
Monthly Amount to be paid in shares of Common Stock, by (y) the Fixed Conversion
Price. For purposes hereof, the "FIXED CONVERSION PRICE" means $4.56; provided,
however, that upon the occurrence of any stock split, stock dividend,
combination of shares or reverse stock split pertaining to the Common Stock, the
Fixed Conversion Price shall be proportionately increased or decreased as
necessary to reflect the proportionate change in the shares of Common Stock
issued and outstanding as a result of such stock split, stock dividend,
combination of shares or reverse stock split.
(b) Monthly Amount Common Stock Payment Guidelines. Subject to Sections
2.1 and 2.2 hereof, if the Borrower has elected to pay all or a portion of the
Monthly Amount due on such Repayment Date in shares of Common Stock and the
closing price of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market (as defined in Section 4.7 hereof) for the seven (7) trading
days preceding a Repayment Date was less than 110% of the Fixed Conversion
Price, then the Borrower shall pay the Monthly Amount in cash instead. Any part
of the Monthly Amount due on such Repayment Date that the Borrower did not elect
to pay in shares of Common Stock shall be paid by the Borrower in cash on such
Repayment Date. Any part of the Monthly Amount due on such Repayment Date which
the Borrower elected to pay in shares of Common Stock but which must be paid in
cash (because the closing price of the Common Stock for the seven (7) trading
days preceding the applicable Repayment Date was less than 110% of the Fixed
Conversion Price) shall be paid within three (3) business days of the applicable
Repayment Date.
2.2. No Effective Registration. Notwithstanding anything to the
contrary herein, the Borrower shall not repay any part of its obligations to the
Holder hereunder in shares of
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Common Stock if (i) there fails to exist an effective current Registration
Statement (as defined in the Registration Rights Agreement) covering resale of
the shares of Common Stock to be issued in connection with such payment, or (ii)
an Event of Default hereunder exists and is continuing, unless such Event of
Default is cured within any applicable cure period or is otherwise waived in
writing by the Holder in whole or in part at the Holder's option.
2.3. Optional Prepayments in Common Stock. Subject to Section 2.2
hereof, if the average closing price of the Common Stock on the Principal Market
is greater than 110% of the Fixed Conversion Price for a period of at least five
(5) consecutive trading days, then the Borrower may, at its sole option, provide
the Holder written notice (a "PREPAYMENT CALL NOTICE") requiring the conversion
at the then applicable Fixed Conversion Price of all or a portion of the
outstanding principal, interest and fees outstanding under this Note (subject to
compliance with this Section 2.3 and Section 3.2, together with accrued interest
on the amount being prepaid, as of the date set forth in such Prepayment Call
Notice (the "PREPAYMENT CALL DATE"). The Prepayment Call Date shall be at least
ten (10) trading days following the date of the Prepayment Call Notice. On the
Prepayment Call Date, the Borrower shall deliver to the Holder certificates
evidencing the shares of Common Stock issued in satisfaction of the principal
and interest being prepaid. Notwithstanding the foregoing, the Borrower's right
to issue shares of Common Stock in satisfaction of its obligations under this
Note shall be subject to the limitation that the market price of the Common
Stock issued in connection with any Prepayment Call Notice shall exceed the
Fixed Conversion Price as of the Prepayment Call Date and for the seven (7)
trading days immediately preceding the Prepayment Call Date. If the price of the
Common Stock falls below 110% of the Fixed Conversion Price as of, or during the
seven (7) trading day period immediately preceding, the Prepayment Call Date,
then the Prepayment Call Notice shall be null and void and no conversion shall
be required hereunder.
The Borrower shall not be permitted to give the Holder more than one
Prepayment Call Notice under this Note during any 22-day period.
Any principal amount of this Note which is prepaid pursuant to this
Section 2.3 shall be deemed to constitute payments of outstanding principal
applying to Monthly Amounts for the remaining Repayment Dates in chronological
order.
2.4. Optional Redemption in Cash. (a) Subject to Section 2.4(b),
the Borrower will not have the option of redeeming or prepaying in cash any
Principal Amount during the twelve (12) months immediately following the date
hereof. Thereafter, the Borrower will have the option of redeeming or prepaying
any Principal Amount ("OPTIONAL REDEMPTION") by paying to the Holder a sum of
money equal to: (i) 110% of the Principal Amount if such redemption or
prepayment occurs after twelve (12) months from the date hereof and prior to the
end of the eighteenth (18th) month from the date hereof; (ii) 105% of the
Principal Amount if such redemption or prepayment occurs during the period
commencing on the first day following the eighteenth (18th) month anniversary of
the date hereof and prior to the end of the twenty-fourth (24th) month from the
date hereof; and (iii) 103% of the Principal Amount if such redemption or
prepayment occurs at any time thereafter but before the Maturity Date. Each such
redemption or prepayment made pursuant to this Section 2.4 shall include all
accrued but unpaid interest on that portion of the Principal Amount so prepaid
or redeemed and any and all other sums due, accrued or payable to the Holder
arising under this Note or the Purchase Agreement or any Related
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Document (as defined in the Purchase Agreement) (the "REDEMPTION AMOUNT")
outstanding on the day written notice of redemption (the "NOTICE OF REDEMPTION")
is given to the Holder, which Notice of Redemption shall specify the date for
such Optional Redemption (the "REDEMPTION PAYMENT DATE"). A Notice of Redemption
shall not be effective with respect to any portion of this Note for which the
Holder has a pending election to convert pursuant to Section 3.1 and the
Redemption Amount shall be determined as if such election to convert had been
completed immediately prior to the date of the Notice of Redemption. The
Redemption Payment Date shall be not earlier than the day after the date of the
Notice of Redemption and not later than seven (7) days after the date of the
Notice of Redemption. On the Redemption Payment Date, the Redemption Amount must
be paid in good funds to the Holder. In the event the Borrower fails to pay the
Redemption Amount by the Redemption Payment Date, then such Redemption Notice
will be null and void.
(b) Notwithstanding anything contained herein to the contrary, if
during the period commencing on the date hereof and ending on January 13, 2005
the Borrower consummates any Permitted Non-Core Asset Sale (as hereinafter
defined), then the Borrower shall prepay the Principal Amount then due under
this Note in an amount equal to (i) fifty percent (50%) of the net proceeds of
each such Non-Core Asset Sale (i.e., gross proceeds less the reasonable costs of
such sales, which shall include, without limitation, reasonable fees, costs and
expenses of legal, financial, investment banking, accounting or other
professional advisors, broker commissions, closing costs, taxes, diligence fees
and other costs of readying the Permitted Non-Core Assets for sale) plus (ii)
the Premium, if any, with such prepayments to be made concurrently with the
consummation of each Permitted Non-Core Asset Sale. For purposes hereof, (1) the
term "PERMITTED NON-CORE ASSET SALE" shall mean a sale of any of the assets set
forth on Annex A hereto so long as (a) the Holder shall have been provided not
less than ten (10) business days prior written notice of each such sale, and (b)
no Event of Default shall have occurred and be continuing at the time of each
such sale; and (2) the term "PREMIUM" shall mean (a) zero percent (0%) in the
event the aggregate net cash proceeds arising from all Permitted Non-Core Asset
Sales equals an amount less than $1,500,000 and (b) ten percent (10%) of the
Principal Amount in excess of $1,500,000 required to be paid by the terms of
this Section 2.4(b) in the event the aggregate net cash proceeds arising from
all Permitted Non-Core Asset Sales equals or exceeds $1,500,000.
(c) If the Borrower consummates any Permitted Non-Core Asset Sale
after January 13, 2005, then the Borrower shall prepay an amount equal to (i)
fifty percent (50%) of the net proceeds of each such Non-Core Asset Sale (i.e.,
gross proceeds less the reasonable costs of such sales, which shall include,
without limitation, reasonable fees, costs and expenses of legal, financial,
investment banking, accounting or other professional advisors, broker
commissions, closing costs, taxes, diligence fees and other costs of readying
the Permitted Non-Core Assets for sale) plus (ii) the Adjusted Premium, with
such prepayments to be made concurrently with the consummation of each Permitted
Non-Core Asset Sale. For purposes hereof, the term "ADJUSTED PREMIUM" shall
mean: (a) 110% of the Principal Amount if such prepayment occurs after twelve
(12) months from the date hereof and prior to the end of the eighteenth (18th)
month from the date hereof; (b) 105% of the Principal Amount if such prepayment
occurs during the period commencing on the first day following the eighteenth
(18th) month anniversary of the date hereof and prior to the end of the
twenty-fourth (24th) month from the date hereof; and (c) 103%
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of the Principal Amount if such prepayment occurs at any time thereafter but
before the Maturity Date.
2.5. Mandatory Redemption Upon Failure to Cause an Effective
Registration Statement to be Filed. If on or prior to January 13, 2005, the
Borrower shall fail to file and cause to exist a current effective Registration
Statement (as defined in the Registration Rights Agreement) covering resale of
the shares of Common Stock underlying this Note and the Common Stock Purchase
Warrant, dated as of the date hereof, granted by the Borrower to the Holder,
then Holder shall have the right, upon six (6) month's prior written notice to
the Borrower, to demand repayment in full of all amounts outstanding under this
Note, including, but not limited to, any penalties set forth in this Article IV
and all accrued and unpaid interest and fees thereon.
ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. (a) The Holder shall have the
right, but not the obligation, to convert all or any portion of the then
aggregate outstanding principal amount of this Note, together with interest and
fees due hereon, into shares of Common Stock subject to the terms and conditions
set forth in this Article III.
(b) Notwithstanding anything contained herein to the contrary,
during the six (6) month period following an effective current Registration
Statement (as defined in the Registration Rights Agreement), so long as no Event
of Default shall have occurred and be continuing, the Holder shall limit the
number of shares of Common Stock to which it voluntarily converts a portion of
this Note, on a monthly basis, to not greater than ten percent (10%) of the
total number of shares of the Borrower's Common Stock that traded during the
month immediately preceding such voluntary conversion by the Holder. In
addition, so long as no Event of Default shall have occurred and be continuing,
during the period commencing on the date hereof and ending on January 13, 2006,
the Holder shall not sell the Borrower's Common Stock at a price per share less
than the lower of (a) $3.80 per share or (b) the volume weighted average closing
price (the "VWAP") of the Borrower's Common Stock for the three (3) trading days
immediately preceding the date hereof (the "FLOOR PRICE"), unless, in each case,
the VWAP of the Borrower's Common Stock remains below the Floor Price for any
ninety (90) day period.
3.2. Conversion Limitation. Notwithstanding anything contained
herein to the contrary, pursuant to the terms of this Note, the Holder shall not
be entitled to convert on a Conversion Date (as defined in Section 3.3(b)) that
number of shares of Common Stock which would be in excess of the sum (i) the
number of shares of Common Stock actually owned by the Holder and its affiliates
on a Conversion Date and (ii) the number of shares of Common Stock issuable upon
the conversion of this Note and exercise of the warrants held by such Holder and
its affiliates with respect to which the determination of this proviso is being
made on a Conversion Date, which would result in beneficial ownership by the
Holder and its affiliates of more than 4.99% of the outstanding shares of Common
Stock of the Borrower on such date. For the purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
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Holder may void the limitation described in this Section 3.2 upon 75 days prior
notice to the Borrower or without any notice requirement upon an Event of
Default.
3.3. Procedures for Conversion. (a) In the event that the Holder
elects to convert this Note into Common Stock, the Holder shall give written
notice of such election by delivering to the Borrower an executed and completed
notice of conversion (the "NOTICE OF CONVERSION"), such Notice of Conversion
shall provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees being converted. On each Conversion Date (as hereinafter
defined) and in accordance with the Notice of Conversion, the Holder shall make
the appropriate reduction to the Principal Amount, accrued interest and fees as
entered in its records and shall provide written notice thereof to the Borrower
within two (2) business days after the Conversion Date. Each date on which a
Notice of Conversion is delivered or telecopied to the Borrower in accordance
with the provisions hereof shall be deemed a Conversion Date (the "CONVERSION
DATE"). A form of Notice of Conversion to be employed by the Holder is annexed
hereto as Exhibit A.
(b) Pursuant to the terms of the Notice of Conversion the Borrower
will issue instructions to the transfer agent (together with such other
documents as the transfer agent may request), within one (1) business day of the
date of the delivery to Borrower of the Notice of Conversion. If the
Registration Statement (as defined in the Registration Rights Agreement) is
effective or the Conversion Shares are eligible for sale pursuant to Rule 144,
Borrower shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
business days after receipt by the Borrower of the Notice of Conversion (the
"DELIVERY DATE"). Upon delivery to Holder of such certificates through DWAC in
accordance with this Section 3.3(b), Holder covenants to Borrower to (i) sell,
transfer or dispose of all Conversion Shares pursuant to the Registration
Statement in accordance with the plan of distribution described therein or the
provisions of Rule 144, as applicable, and (ii) fulfill applicable prospectus
delivery requirements imposed by applicable federal securities laws. In the case
of the exercise of the conversion rights set forth herein the conversion
privilege shall be deemed to have been exercised and the Conversion Shares
issuable upon such conversion shall be deemed to have been issued upon the date
of receipt by the Borrower of the Notice of Conversion. The Holder shall be
treated for all purposes as the record holder of such Common Stock, unless the
Holder provides the Borrower written instructions to the contrary.
3.4. Conversion Mechanics. (a) The number of shares of Common Stock
to be issued upon each conversion of this Note shall be determined by dividing
that portion of the principal and interest and fees to be converted, if any, by
the Fixed Conversion Price. In the event of any conversions of outstanding
principal amount under this Note in part pursuant to this Article III, such
conversions shall be deemed to constitute conversions of outstanding principal
amount applying to Monthly Amounts for the remaining Repayment Dates in
chronological order.
(b) No fractional shares of Common Stock shall be issued upon any
conversion of this Note. In lieu of any fractional share to which Holder would
otherwise be entitled, the Borrower shall pay Holder cash equal to the product
of such fraction multiplied by the fair
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market value as of the date of Conversion of a share of Common Stock, as
determined in good faith by the Borrower's Board of Directors (or an authorized
subcommittee thereof).
ARTICLE IV
EVENTS OF DEFAULT
If an Event of Default (as defined below) occurs and is continuing, the
Borrower's rights under Sections 2.1, 2.3 and 2.4 shall immediately cease and be
of no further effect until such time as the Event of Default has been cured, or
has been waived by the Holder. Upon the occurrence and continuance of an Event
of Default beyond any applicable grace period, the Holder, at its sole and
absolute discretion, may make all sums of principal, interest and other fees
then remaining unpaid hereon and all other amounts payable hereunder due and
payable within five (5) days after written notice from Holder to Borrower (each
occurrence being a "DEFAULT NOTICE PERIOD"), provided, however, that such
Default Notice Period shall not apply to Sections 4.3, 4.6 and 4.9 below. In the
event of such an acceleration, the amount due and owing to the Holder shall be
115% of the Principal Amount (plus accrued and unpaid interest and fees, if
any). If, with respect to any Event of Default other than a payment default
described in Section 4.1 below, within the Default Notice Period the Borrower
cures the Event of Default, the Event of Default will be deemed to no longer
exist and any rights and remedies of Holder pertaining to such Event of Default
will be of no further force or effect.
The occurrence of any of the following events is an "EVENT OF DEFAULT":
4.1. Failure to Pay Principal, Interest or other Fees. The Borrower
fails to pay when due any installment of principal, interest or other fees
hereon in accordance herewith, or the Borrower fails to pay when due any amount
due under any other promissory note issued by Borrower.
4.2. Breach of Covenant. The Borrower breaches any material
covenant or other term or condition of this Note or the Purchase Agreement in
any material respect and such breach, if subject to cure, continues for a period
of thirty (30) days after the occurrence thereof.
4.3. Breach of Representations and Warranties. Any material
representation or warranty of the Borrower made herein, in the Purchase
Agreement, or in any Related Document shall have been materially false or
misleading when made and shall not be cured for a period of ten (10) days after
written notice thereof is received by the Borrower from the Holder.
4.4. Receiver or Trustee. The Borrower shall make an assignment for
the benefit of creditors, or apply for or consent to the appointment of a
receiver or trustee for it or for a substantial part of its property or
business; or such a receiver or trustee shall otherwise be appointed.
4.5. Judgments. Any money judgment, writ or similar final process
shall be entered or filed against the Borrower or any of its property or other
assets for more than $300,000, and shall remain unvacated, unbonded or unstayed
for a period of ninety (90) days.
4.6. Bankruptcy. Bankruptcy, insolvency, reorganization or
liquidation proceedings or other proceedings or relief under any bankruptcy law
or any law for the relief of debtors shall
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be instituted by or against the Borrower and, in the case of an involuntary case
or proceeding, such case or proceeding is not dismissed within sixty (60) days
following the commencement thereof.
4.7. Stop Trade. An SEC stop trade order or Principal Market
trading suspension of the Common Stock shall be in effect for five (5)
consecutive days or five (5) days during a period of ten (10) consecutive days,
excluding in all cases a suspension of all trading on a Principal Market,
provided that the Borrower shall not have been able to cure such trading
suspension within 30 days of the notice thereof or list the Common Stock on
another Principal Market within 60 days of such notice. The "PRINCIPAL MARKET"
for the Common Stock shall include the NASD OTC Bulletin Board, NASDAQ SmallCap
Market, NASDAQ National Market System, American Stock Exchange, or New York
Stock Exchange, whichever of the foregoing is at the time the principal trading
exchange or market for the Common Stock, or any securities exchange or other
securities market on which the Common Stock is then being listed or traded.
4.8. Default Under Security Agreement. An Event of Default shall
have occurred under and as defined in the Security Agreement, which shall not
have been cured during any applicable cure or grace period.
ARTICLE V
DEFAULT RELATED PROVISIONS
5.1. Payment Grace Period. The Borrower shall have a three (3)
business day grace period to pay any monetary amounts due under this Note or the
Purchase Agreement or any Related Document, after which grace period a default
interest rate of five percent (5%) per annum above the then applicable interest
rate hereunder shall apply to the monetary amounts due.
5.2. Conversion Privileges. The conversion privileges set forth in
Article III shall remain in full force and effect immediately from the date
hereof and until this Note is paid in full or until all of the then outstanding
Principal Amount and interest and other fees payable hereunder shall have been
converted into shares of Common Stock.
ARTICLE VI
MISCELLANEOUS
6.1. Failure or Indulgence Not Waiver. No failure or delay on the
part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
6.2. Notices. Any notice herein required or permitted to be given
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party notified, (ii) when sent by confirmed telex or facsimile
if sent during normal business hours of the recipient, if not, then on the next
business day, (iii) five days after having been sent by registered or certified
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mail, return receipt requested, postage prepaid, or (iv) one (1) business day
after deposit with a nationally recognized overnight courier, specifying next
day delivery, with written verification of receipt. All communications shall be
sent to the Borrower at the address provided in the Purchase Agreement executed
in connection herewith, and to the Holder at the address provided in the
Purchase Agreement for such Holder, with a copy to John E. Tucker, Esq., 825
Third Avenue , 14th Floor, New York, New York 10022, facsimile number (212)
541-4434, or at such other address as the Borrower or the Holder may designate
by ten days advance written notice to the other parties hereto. A Notice of
Conversion shall be deemed given when made to the Borrower pursuant to the
Purchase Agreement.
6.3. Amendment Provision. The term "Note" and all reference
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument issued pursuant to Section 3.5
hereof, as it may be amended or supplemented.
6.4. Assignability. This Note shall be binding upon the Borrower
and its successors and assigns, and shall inure to the benefit of the Holder and
its successors and assigns, and may be assigned by the Holder only pursuant to
the requirements of the Purchase Agreement and applicable federal and state
securities laws.
6.5. Governing Law. (a) This Note cannot be changed or terminated
orally, and shall be governed by and construed in accordance with the laws of
the State of New York, without regard to principles of conflicts of laws. Any
action brought by either party against the other concerning the transactions
contemplated by this Note shall be brought only in any state or federal court
sitting in the Borough of Manhattan, City of New York; provided that nothing
contained in this Note shall be deemed to preclude Holder from bringing suit or
taking other legal action in any other court of competent jurisdiction and
nothing shall be deemed to preclude the Borrower from asserting any defenses or
counterclaims in any such actions. Both the Borrower and the individual
executing this Note on behalf of the Borrower agree to submit to the
jurisdiction of such courts and waive trial by jury. The Borrower and the
individual executing this Note further consent that any summons, subpoena or
other process or papers (including, without limitation, any notice or motion or
other application to either of the aforementioned courts or a judge thereof) or
any notice in connection with any proceedings hereunder, may be served by
registered or certified mail, return receipt requested, or by personal service
provided a reasonable time for appearance is permitted, or in such other manner
as may be permissible under the rules of said courts. The Borrower and the
individual executing this Note waive any objection to jurisdiction and venue of
any action instituted hereon in the Supreme Court for the State of New York,
County of New York or the United States District Court for the Southern District
of New York and shall not assert any defense based on lack of jurisdiction or
venue or based upon forum non conveniens in any action brought in either such
court.
(b) The prevailing party shall be entitled to recover from the
other party its reasonable attorney's fees and costs; provided, however, that if
the parties hereto agree to settle any claim, action, proceeding or lawsuit
brought by one party hereto against the other party hereto, then each of the
parties shall bear its own costs in connection with such claim, action,
proceeding or lawsuit, unless otherwise directed by a court of competent
jurisdiction.
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(c) In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision
shall be deemed inoperative to the extent that it may conflict therewith and
shall be deemed modified to conform with such statute or rule of law. Any such
provision which may prove invalid or unenforceable under any law shall not
affect the validity or unenforceability of any other provision of this Note.
6.6. Maximum Payments. Nothing contained herein shall be deemed to
establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate of
interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
6.7. Security Interest. The holder of this Note has been granted a
security interest in certain assets of the Borrower and of the guarantors of the
Note, as more fully described in the Security Agreement.
6.8. Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
[Balance of page intentionally left blank; signature page follows.]
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IN WITNESS WHEREOF, the Borrower has caused this Convertible Term Note
to be signed in its name effective as of this 13th day of January, 2004.
NUMEREX CORP.
By: /s/ STRATTON J. NICOLAIDES
--------------------------------
Name: STRATTON J. NICOLAIDES
------------------------------
Title: CEO
-----------------------------
WITNESS:
PAMELA S. LESTER
- --------------------------
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EXHIBIT A
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert all or part of the Note into
Common Stock
[Name and Address of Holder]
The Undersigned hereby elects to convert $_________ of the principal due on
[specify applicable Repayment Date] under the Convertible Term Note issued by
NUMEREX CORP. dated January __, 2004 by delivery of Shares of Common Stock of
NUMEREX CORP. on and subject to the conditions set forth in Article III of such
Note.
1. Date of Conversion _______________________
2. Shares To Be Delivered: _______________________
The Undersigned represents and warrants that all offers and sales by
the Undersigned of the securities issuable upon conversion of the within Note
shall be made pursuant to registration of the Common Stock and prospectus
delivery requirements under the Securities Act of 1933, as amended (the
"Securities Act") or pursuant to an exemption from registration under the
Securities Act.
Date: ____________
By:_______________________________
Name:_____________________________
Title:____________________________
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EXHIBIT B
REPAYMENT ELECTION NOTICE
(To be executed by the Borrower in order to pay all or part of a Monthly Amount
with Common Stock)
[Name and Address of Holder]
NUMEREX CORP. hereby elects to pay $_________ of the Monthly Amount due on
[specify applicable Repayment Date] under the Convertible Term Note issued by it
dated January __, 2004 by delivery of Shares of its Common Stock of on and
subject to the conditions set forth in Article II of such Note.
1. Fixed Conversion Price: $_______________________
2. Amount to be paid: $_______________________
3. Shares To Be Delivered (2 divided by 1): __________________
Date: ____________ NUMEREX CORP.
By:_______________________________
Name:_____________________________
Title:____________________________
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ANNEX A
NON-CORE ASSETS
Any assets owned by any one or more of the following entities as of the
effective date of the Convertible Term Note to which this Annex A has been
attached:
1. Digilog Inc. (a Pennsylvania corporation);
2. DCX Systems Inc. (a Pennsylvania corporation);
3. BNI Solutions LLC (a Delaware limited liability company);
4. DCX Systems Australia PTY Limited (an Australian company); and
5. Broadband Networks, Inc. (a Delaware corporation).
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