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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
November 12, 1999
Date of Report (Date of earliest event reported)
NUMEREX CORP.
(Exact name of registrant as specified in its charter)
Pennsylvania 0-22920 11-2948749
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification Number)
1600 Parkwood Circle
Suite 200
Atlanta, Georgia 30339
(770) 693-5950
(Address of principal executive offices, including zip code,
and telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
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<PAGE>
Item 2. Acquisition or Disposition of Assets
On November 12, 1999, Numerex Corp. (the "Corporation") sold the stock of its
wholly owned subsidiary, Bronzebase Limited, to British Telecommunications plc
("BT"). Bronzebase Limited is an English limited liability company which owns
all of the stock of Versus Technology Limited. The consideration for the sale
was 12,500,000 pounds (approximately U.S. $20,000,000), payable in cash at
closing. However, 750,000 pounds has been retained and placed in escrow pending
a post-closing net asset statement. The terms of the transaction were negotiated
between the Corporation and BT at arm's length. Numerex and BT also entered into
separate agreements which, among other things, allow Numerex to retain licensing
rights to market, sell and develop derived channel technology in certain
territories, principally the Americas.
This summary of the sale of Bronzebase Limited is qualified in its entirety by
reference to the terms of the Agreement Relating to the Sale and Purchase of the
Whole of the Issued Share Capital of Bronzebase Limited, which is filed as an
exhibit to, and incorporated by reference into this Form 8-K.
Item 5. Other Events.
Effective as of November 1, 1999, the Corporation and BellSouth Wireless, Inc.
("BellSouth") completed the previously reported restructuring of certain aspects
of their Cellemetry joint venture operating agreement. Cellemetry is 60% owned
by the Corporation and 40% owned by BellSouth.
Under the terms of the restructuring, the original operating agreement for
Cellemetry LLC, a Delaware limited liability company, has been modified and the
original Cellemetry business plan has been modified, revised and extended
through November 1, 2004. Greater flexibility has been created for third party
investment capital and performance tests and related rights have been reset to
November 2, 2002 in accordance with a modified business plan. The Corporation
has conveyed 100% of the capital stock of its formerly wholly owned subsidiary,
Uplink Security, Inc., a Georgia corporation, to Cellemetry. The Corporation has
also agreed to provide up to $5.5 million in debt financing to Cellemetry. In
addition, the Corporation issued preferred stock to BellSouth that is redeemable
or convertible to approximately 6% of the Corporation's common stock, and that
includes certain registration rights for the common stock upon such conversion.
This summary of the restructured operating agreement is qualified in its
entirety by reference to the terms of the Series A Preferred Stock Purchase
Agreement, First Amendment to the Operating Agreement, and Terms of Convertible
Preferred Stock, Series A, each of which is filed as an exhibit to, and
incorporated by reference into this Form 8-K.
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<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Not applicable.
(b) PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) AT JULY
31, 1999
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
FOR THE NINE MONTH PERIOD ENDED JULY 31, 1999
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited)
FOR THE YEAR ENDED OCTOBER 31, 1998
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<PAGE>
NUMEREX CORP.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
JULY 31, 1999
(IN THOUSANDS U.S. DOLLARS)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
NMRX Adjustments Consolidated
---- ----------- ------------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and Cash Equivalents 4,566 18,005 (i,ii) 22,571
Accounts Receivable, net 9,775 (4,066)(i) 5,709
Inventory 5,695 (1,966)(i) 3,729
Prepaid Taxes 323 0 323
Prepaid Expenses 329 (13)(i) 316
------- ------- -------
20,688 11,960 32,648
PROPERTY AND EQUIPMENT, NET 3,566 (740)(i) 2,826
GOODWILL, NET 8,277 (403)(i) 7,874
INTANGIBLE ASSETS, NET 11,860 (1,177)(i) 10,683
OTHER ASSETS 383 0 383
------- ------- -------
TOTAL ASSETS 44,774 9,640 54,414
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short Term Debt 0 0 0
Accounts Payable 3,632 (689)(i) 2,943
Income Taxes 1,679 753 (i,ii) 2,432
Other Current Liabilities 2,593 (646)(i) 1,947
Obligations under capital leases, current position 30 0 30
------- ------- -------
TOTAL CURRENT LIABILITIES 7,934 (582) 7,352
------- ------- -------
LONG TERM LIABILITIES
Obligations under capital leases 99 0 99
------- ------- -------
MINORITY INTEREST 7,652 0 7,652
------- ------- -------
SHAREHOLDERS' EQUITY
Common Stock 29,870 0 29,870
Additional paid-in capital 370 0 370
Treasury Stock (5,222) 0 (5,222)
Cumulative Translation Adjustment (150) (29)(i) (179)
Retained Earnings 4,221 10,251 (i,ii) 14,472
------- ------- -------
29,090 10,222 39,312
------- ------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 44,774 9,640 54,414
======= ======= =======
</TABLE>
(i) Record the sale of Bronzebase Limited.
(ii) Record the estimated income tax liability on the gain on the sale.
The accompanying notes are an integral part
of these pro forma financial statements.
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<PAGE>
NUMEREX CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE NINE MONTH PERIOD ENDED JULY 31, 1999
(IN THOUSANDS U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
NMRX Adjustments Consolidated
---- ----------- ------------
<S> <C> <C> <C>
Net Sales 22,941 (9,905)(i) 13,036
Cost of sales 9,542 (3,213)(i) 6,329
Selling, general, administrative and other expenses 16,582 (1,790)(i) 14,792
------- ------- -------
OPERATING INCOME (LOSS) (3,183) (4,902) (8,085)
Interest and other income (net) 227 392 (i,ii) 619
Equity in net loss of affiliate 0 0 0
Minority interest 1,967 0 1,967
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES (989) (4,510) (5,499)
Provision for income taxes 1,418 (1,418)(i) 0
------- ------- -------
NEW INCOME (LOSS) (2,407) (3,092) (5,499)
======= ======= =======
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment (321) 321 (i) 0
------- ------- -------
Comprehensive Income (loss) (2,728) (2,771) (5,499)
======= ======= =======
BASIC AND DILUTED EARNINGS (LOSS)
PER (0.23) (0.53)
======= =======
NUMBER OF SHARES USED IN PER SHARE
CALCULATION
BASIC 10,343 10,343
======= =======
DILUTED 10,414 10,414
======= =======
</TABLE>
(i) Record the sale of Bronzebase Limited.
(ii) Record the estimated interest income on cash at an approximate 5.0% rate.
The accompanying notes are an integral part
of these pro forma financial statements.
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<PAGE>
NUMEREX CORP.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE YEAR ENDED OCTOBER 31, 1998
(IN THOUSANDS U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Pro Forma Pro Forma
NMRX Adjustments Consolidated
---- ----------- ------------
<S> <C> <C> <C>
Net sales 25,129 (11,381)(i) 13,748
Cost of sales 12,234 (5,154)(i) 7,080
Inventory write-downs 2,192 (200)(i) 1,992
Selling, general, administrative and other expenses` 20,378 (2,931)(i) 17,447
Special charges 1,591 (466)(i) 1,125
------- ------- -------
OPERATING INCOME (LOSS) (11,266) (2,630) (13,896)
Interest and other income (net) 1,070 168 (i,ii) 1,238
Equity in net loss of affiliate 420 0 420
Minority interest 733 0 733
------- ------- -------
INCOME (LOSS) BEFORE INCOME TAXES (9,833) (2,462) (12,345)
Provision for income taxes 1,274 (1,274)(i) 0
------- ------- -------
NET INCOME (LOSS (11,157) (1,188) (12,345)
======= ======= =======
Other comprehensive income (loss), net of tax
Foreign currency translation adjustment (594) 440 (154)
------- ------- -------
Comprehensive income (loss) (11,751) (748) (12,499)
======= ======= =======
BASIC AND DILUTED EARNINGS (LOSS) PER
SHARE (1.03) (1.16)
======= =======
NUMBER OF SHARES USED IN PER SHARE
CALCULATION
BASIC 10,818 10,818
======= =======
DILUTED 10,818 10,818
======= =======
</TABLE>
(i) Record the sale of Bronzebase Limited.
(ii) Record the estimated interest income on cash at an approximate 5.0% rate.
The accompanying notes are an integral part
of these pro forma financial statements.
NOTES
The pro forma condensed consolidated balance sheet as at July 31, 1999 and the
pro forma condensed consolidated statements of income for the nine month period
then ended and the year ended October 31, 1998 give effect to the sale of
Bronzebase Limited. The adjustments related to the pro forma condensed
consolidated balance sheet assume the transaction was consummated at July 31,
1999, while the adjustments to the pro forma condensed
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consolidated income statements assume the transaction was consummated at the
beginning of the period presented. The sale occurred on November 12, 1999.
The pro forma information is based on the historical financial statements of
Numerex Corp. ("NMRX"). The pro forma adjustments required are to eliminate
Bronzebase Limited and to reflect the associated interest income.
These pro forma statements are not necessarily indicative of the results that
actually would have occurred if the sale had been in effect as of and for the
periods presented or what may be achieved in the future.
(c) Exhibits.
The exhibits listed in the Exhibit Index are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
Numerex Corp. has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
NUMEREX CORP.
By: /s/ Peter J. Quinn
-------------------------------
Vice President Finance
Date: November 24, 1999
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<PAGE>
EXHIBIT INDEX
2.1 Agreement Relating to the Sale and Purchase of the Whole of the Issued
Share Capital of Bronzebase Limited
99.1 Preferred Stock Purchase Agreement between Numerex Corp. and BellSouth
Wireless, Inc. effective as of November 1, 1999
99.2 First Amendment to the Operating Agreement of Cellemetry LLC effective
as of November 1, 1999
99.3 Terms of Convertible Preferred Stock
8
Exhibit 2.1
Dated 12 November 1999
----------------------
NUMEREX CORP.
and
BRITISH TELECOMMUNICATIONS PLC
AGREEMENT
Relating to the sale and purchase
of the whole of the issued share capital of
Bronzebase Limited
<PAGE>
This Agreement is made on 12 November 1999.
Between:
(1) Numerex Corp. whose principal place of business is at 1600 Parkwood
Circle, #200 Atlanta, GA, USA ("the Vendor"); and
(2) British Telecommunications Plc whose registered office is at 81, Newgate
Street, London ECIA 7AJ ("the Purchaser").
RECITALS
A. The Vendor is the beneficial owner of the entire issued share capital of
BRONZEBASE LIMITED ("the Company"). At the date hereof such entire issued
share capital comprises 10,000 ordinary shares of 1 pound each all of
which are fully paid.
B. Short details of the Company are set out in Part 2 of Schedule 1.
C. The Company is the beneficial owner of the entire issued share capital of
Versus Technology Limited ("the Subsidiaries"). Short details of each of
the Subsidiaries are set out in Part 3 of Schedule 1.
D. The Vendor wishes to sell and the Purchaser wishes to acquire the entire
issued share capital of the Company subject to the terms and conditions
of this Agreement.
E. The Vendor currently operates three businesses derived exclusively from
the IPR of the Vendor based on transmitting and/or monitoring information
across certain types of networks. The first business of the Vendor
(described in this Agreement as the "Business") is classified as "derived
channel multiplexing" and has as its main aim the deployment and
monitoring of a secure protocol across a fixed line copper-wired network.
The second business of the Vendor consists of the same activities across
a wireless network. The third business of the Vendor concerns the
transmission of information across fixed line optical fibre networks.
F. In addition to Recitals A-D above, the Vendor wishes to sell and the
Purchaser wishes to acquire all Non-Group Business IPR.
It is agreed as follows:
1. Interpretation
In this Agreement, including its Schedules, the headings shall not affect
its interpretation and words denoting the singular shall include the
plural and vice versa and words denoting any gender shall include all
genders.
1.1 Definitions
Accounts means collectively the Audited Accounts and the Management
Accounts;
Accounts Date means 31 October 1997;
Agreed Net Asset Value means the sum of pounds 3,219,000;
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Agreed Rate means 4 per cent above the base rate from time to time of
NatWest Bank plc;
Audited Accounts means the audited accounts of the Company and of each of
the Subsidiaries and the audited consolidated group accounts of the Group
for the financial period ended on 31 October in any given year;
1998 Balance Sheet Date means 31 October 1998;
1999 Balance Sheet Date means 31 October 1999;
Balance Sheet means a document setting out the consolidated balance sheet
of the Group as at the 1999 Balance Sheet Date prepared in accordance
with clause 9;
Business means the research into, provision, support and maintenance,
including the enabling, assisting or licensing of third parties to do the
same, of a means of utilising a copper or aluminum wired local access
telephone line and discrete network equipment components (incorporating
software and firmware) to provide both a constantly monitored, secure
communication link and a means of transporting low rate data messages in
either direction without undue disruption to standard voice and data
signalling within the voiceband (this is known as derived channel
multiplexing) as these activities have been carried on in the past 2
years prior to Completion by the Vendor or its subsidiaries;
Business Day means a day on which banks are open for business in England
(excluding Saturdays, Sundays and public holidays);
Business IPR means all IPR required for use as part of or in the course
of the Business or the grant of the IPR Licence and the International
Support Agreement and all IPR used by a Group Company. For the avoidance
of doubt this includes the Protocol and the Software;
CHAPS means clearing houses automated payment systems;
Company means Bronzebase Limited details of which are contained in Part 2
of Schedule 1;
Completion means the completion of the sale and purchase of the Shares
pursuant to Clause 6;
Completion Date means the day on which Completion takes place;
Disclosure Letter means the letter of even date with this Agreement from
the Vendor to the Purchaser disclosing:
(i) information constituting exceptions to the Warranties; and
(ii) details of other matters referred to in this Agreement;
Encumbrance means any claim, charge, mortgage, security, lien, option,
equity, power of sale or hypothecation;
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<PAGE>
Environmental Laws means all the laws of any jurisdiction in which the
Business is conducted (including, without limitation, the laws of the
European Community) relating to pollution or protection of the
environment, or to health and safety matters (including, without
limitation, laws relating to workers and public or consumer health and
safety, hygiene, emissions, discharges or threatened releases of
Hazardous Substances into the environment or the production, processing,
distribution, management, use, treatment, storage, burial, disposal,
transport or handling of any Hazardous Substances) and all bylaws, codes,
regulations, decrees, demands or demand letters, injunctions, judgements,
notices or notice demands, orders or plans issued, promulgated or
approved thereunder or in connection therewith;
Escrow Account means the joint interest bearing deposit account held with
the Escrow Bank opened in the joint names of the Vendor and the Purchaser
into which the Purchaser is to pay the Retention at Completion pursuant
to this Agreement;
Escrow Bank means National Westminster Bank plc at 15 Bishopsgate, London
EC2P 2AP, sort code 50-00-00;
Exercise Notice means the notice set out Schedule 9
Group or Group Companies means the Company and the Subsidiaries and Group
Company means any one of them;
Hazardous Substances means wastes, pollutants, contaminants or other
substances (including without limitation liquids, solids, gases, ions,
living organisms, noise) that may be harmful to human health or other
life or the environment or a nuisance to any person;
ICTA 1988 means the Income and Corporation Tax Act 1988;
Indemnity means the indemnity set out in clause 10.1;
International Support Agreement means the agreed form support agreement
set out at Schedule 8;
Intra-Group Indebtedness means all debts outstanding between members of
the Group, on the one hand, and members of the Retained Group, on the
other;
IPR means all patents, including patent applications and any subsequent
patents or patent applications derived therefrom, all copyright including
Software, all trade marks and service marks, all title rights, database
rights, all design rights and registered designs, all semiconductor
topography rights, all confidential information, know-how and show-how
and any and all other such registered or non-registered proprietary
rights or information in which intellectual property rights subsist
anywhere in the world;
IPR Individuals means Stratton Nicolaides, Geoff Girdler, Peter Quinn and
Ed Comer,
IPR Licence means the agreed form IPR licence set out at Schedule 8;
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<PAGE>
Losses means losses, damage, harm, expenses, claims and charges
(including, without limitation, all reasonable legal and other
professional fees incurred or suffered by the Party);
Licences means the agreed form Service Agreement, IPR Licence and
International Support Agreement, agreed forms of which are attached to
this Agreement at Schedule 8;
Management Accounts means the unaudited consolidated group accounts of
the Group for the financial period ended at the Management Accounts Date;
Management Accounts Date means 31 August 1999;
Net Asset Value means the amount by which the aggregate of the fixed and
current assets of the Group exceeds the aggregate of the liabilities
(being the actual, contingent and prospective liabilities so far as the
same can be quantified and whether current or not) as at the 1999 Balance
Sheet Date which amount shall be calculated using the information
contained in the Balance Sheet subject to the accounting policies,
procedures and adjustments set out in Schedule 13.
Non-Group Business IPR means all that Business IPR which is not legally
and beneficially owned by the Group;
Non-Group Business IPR Assignments means the assignments in the form set
out in Schedule 7 to this Agreement;
Option means the option set out in Clause 4 of this Agreement;
Option Securities means all the issued shares in Versus Australia;
Payment Account Details means, in relation to any payment to be made
under or pursuant to this Agreement, the name, account number, sort code,
account location and other details specified by the payee and necessary
to effect payment (whether by cheque, banker's draft telegraphic or other
electronic means of transfer) to the payee;
Pension Scheme means the Versus Technology Limited Pension and Death
Benefit Scheme administered by Legal & General;
Protocol means the set of rates enabling the secure communication of
signals within and between discrete network equipment components that are
used within the Business;
Properties means the leasehold properties brief details of which are set
out in Schedule 3 and Property means any one of them;
Purchaser's Account means the account in the name of Versus Technology
Limited, account number 0065145 at Lloyds TSB Bank plc, of Aldershot,
sort code 30-90-09;
Purchaser's Solicitors means Ashurst Morris Crisp of Broadwalk House, 5
Appold Street, London EC2 2HA;
Relevant Capacity means for its or his own account or for that of any
person, firm or company (other than the Purchaser and the Group
Companies) or in any other manner
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<PAGE>
and whether through the medium of any company controlled by it or him
(for which purpose there shall be aggregated with its or his shareholding
or ability to exercise control the shares held or control exercised by
any person connected with the Vendor) or as principal, partner, director,
employee, consultant or agent;
Relevant Dates means respectively the 1998 Balance Sheet Date as concerns
the Audited Accounts and at 31 August 1999 as concerns the Management
Accounts;
Relevant Employee means Mr Geoffrey Girdler, Mr K Manser and Mr Tom
Kneis;
Restricted Period means five years from, but excluding, the Completion
Date;
Retained Group means the Vendor, any holding company of the Vendor and
any subsidiary of the Vendor or any such holding company (but excluding
any Group Company);
Retention means the sum of 750,000 pounds together with interest which
accrues thereon or so much thereof as remains subject to the provisions
of this Agreement from time to time;
Service Agreement means the agreed form service agreement set out at
Schedule 8;
Shares means 10,000 ordinary shares of 1 pound each of the Company being
the whole of the issued share capital of the Company;
Software means those software programmes deployed within the discrete
network components supplied in the course of the Business for the purpose
of relaying, encoding, decoding, monitoring and reacting to the Protocol
and the status information contained within the Protocol, excluding, for
the avoidance of doubt, non-bespoke ordinarily commercially available
software;
Subsidiaries means the subsidiaries of the Company details of which are
contained in Part 3 of Schedule 1;
Tax Deed of Covenant means the deed of covenant against Taxation in the
agreed terms to be entered into at Completion;
Taxation bears the meaning given in the Tax Deed of Covenant;
Telemetry means the provision, support and maintenance including the
enabling, assisting or licensing of third parties to do the same, of a
remote monitoring business or service whereby remote equipment is
monitored and/or remote events are captured and reported using any fixed
or radio network including via the first two business models identified
in recital (E) excluding the third business referred to in that recital;
Telemetry Notice means a notice which may be delivered only after the end
of month 24 of the Restricted Period, giving six months notice of the
intention to commence establishing a Telemetry business in the UK such
notice period to reduce between months 25 to 30 inclusive of the
Restricted Period by one month for every two months passed so that at the
end of month 30 of the Restricted Period only 3 months notice need be
given;
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<PAGE>
Transaction means every event, act, omission, or transaction done or
omitted to be done by any Group Company or which in any way concerns or
affects any Group Company whether or not done or omitted to be done by
any Group Company;
Vendor's Account means the account in the name of Arnold & Porter,
account number 81009457 at Citibank plc, of Hammersmith Grove sort code
30-00;
Vendor's Solicitors means Arnold & Porter, Tower 42, 25 Old Broad Street,
London EC2N 1HQ;
VTL means Versus Technology Limited;
Versus Australia means Versus Technology (Australia) Pty Limited details
of which are set out in Part 4 of Schedule 1;
Warranties means the warranties and representations set out in Schedule
2 and Warranty means any one of them;
Written Representations means the written representations delivered by
the Vendor's Solicitors to the Purchaser's Solicitors dated 22 October
1999 in answer to the Purchaser's Solicitors information request dated 20
September 1999 together with certain other correspondence listed in
Schedule 12.
1.2 Subordinate Legislation
Any reference to a statutory provision shall include any subordinate
legislation made from time to time under that provision;
1.3 Modification etc. of Statutes
Any reference to a statutory provision shall include such provision as
from time to time modified or re-enacted or consolidated whether before
or after the date of this Agreement so far as such modification,
re-enactment or consolidation applies or is capable of applying to any
transactions entered into under this Agreement prior to Completion and
(so far as liability thereunder may exist or can arise) shall include
also any past statutory provision (as from time to time modified,
re-enacted or consolidated) which such provision has directly or
indirectly replaced;
1.4 Connected Persons
A person shall be deemed to be connected with another if that person is
connected with such other within the meaning of Section 839 of the Income
and Corporation Taxes Act 1998;
1.5 Accounts
Any reference to accounts shall include the directors' and auditors'
reports, relevant balance sheets and profit and loss accounts and related
notes together with all documents which are or would be required by law
to be annexed to the accounts of the company concerned to be laid before
that company in general meeting in respect of the accounting reference
period in question;
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1.6 Companies Act 1985
The words holding company and subsidiary shall have the same meanings in
this Agreement as their respective definitions in the Companies Act 1985;
1.7 Interpretation Act 1978
The Interpretation Act 1978 shall apply to this Agreement in the same way
as it applies to an enactment;
1.8 SSAPs etc.
A reference to a SSAP means a Statement of Standard Accounting Practice
as adopted by the Accounting Standards Board and published by the
Institute of Chartered Accountants of England and Wales and a reference
to a FRS means a Financial Reporting Standard developed and issued by the
Accounting Standards Board and which may, where directed by the
Accounting Standards Board, supersede a SSAP;
1.9 Schedules etc.
Reference to this Agreement shall include any Recitals and Schedules to
it and references to Clauses and Schedules are to Clauses of and
Schedules to this Agreement;
1.10 Information
Any reference to books, records or other information means books, records
or other information in any form including paper, electronically stored
data, magnetic media, film and microfilm; and
1.11 If any statement in this Agreement (including the Schedules) is qualified
by the expression "to the best of Vendor's information or belief" or "so
far as the Vendor is aware" or any similar expression, that statement
shall be qualified to mean that it has been made with the actual
knowledge of Mr Stratton Nicolaides, Mr Peter Quinn and Mr Geoff Girdler
(and, with respect to the warranties set out in clause 8.6 of Schedule 2,
Mr Ed Comer) on the basis of having made due and careful enquiry of the
subject matter of the statement.
1.12 Materiality
Where any word, phrase or other statement in this Agreement (including,
in particular, the Schedules) is qualified by the word "material" or
"materiality" or any similar word, that word, phrase or other statement
shall be qualified to mean only those matters concerning an amount of
consideration, damages, liability, gain, loss, charge or other payment
(as the context may allow), whether actual or potential, in excess of
10,000 pounds shall be relevant.
2. Agreement to Sell the Shares and the Non-Group Business IPR
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<PAGE>
2.1 Sale of Shares
The Vendor shall sell with full title guarantee the shares and procure
the sale of the Non-Group Business IPR and the Purchaser, relying on the
several representations, warranties and undertakings contained in this
Agreement, shall purchase the same free from all Encumbrances and
together with all rights and advantages now and hereafter attaching
thereto.
3. Consideration
3.1 The consideration for the purchase of the Shares shall be the sum of
12,400,000 pounds to be paid to the Vendor on Completion of which 750,000
pounds shall be paid to the Escrow Account and held under the terms set
out in Schedule 10 and for the purchase of the Non-Group Business IPR
shall be the sum of 100,000 pounds.
3.2 Wherever in this Agreement provision is made for the payment by one party
to another, such payment shall be effected by crediting the account
specified in the Payment Account Details of the party entitled to the
payment by way of CHAPS on or before the due date for payment unless the
payee by notice to the payer, not later than three Business Days prior to
the due date for payment, elects to be paid by banker's draft drawn on
any international bank reasonably acceptable to the payer and having an
office in London.
4. The Option
4.1 The Vendor grants to the Purchaser an option to purchase all the Option
Securities at a price to be agreed on the terms set out in this Clause 4.
The parties agree that Versus Australia will be sold under this Option
with no net assets or liabilities.
4.2 Exercise Of The Option
(a) The Purchaser may exercise the Option only by serving an Exercise
Notice in accordance with clause 10.9 on the Vendor during the
period beginning on 15 January 2000 and ending on 15 September
2000 (inclusive).
(b) The Option may be exercised only in respect of all the Option
Securities.
(c) Exercise of the Option shall oblige the Vendor, subject to the
agreement of appropriate warranties and indemnities similar to
those set out in this Agreement, to sell and the Purchaser to
purchase the Option Securities.
(d) The Option Securities shall be sold together with all rights
attaching to the Option Securities at the date of service of the
Exercise Notice (including any dividend or other distributions
declared but not paid or made).
(e) If the Option is not duly exercised within the relevant period
specified in this clause, it shall cease to be exercisable and
shall lapse.
4.3 Completion of the sale and purchase of the Option Securities following
exercise of the Option shall take place at the offices of the Purchaser's
Solicitors on the date which is five days after the date of service of
the Exercise Notice.
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4.4 The Vendor will, at the Purchaser's written notice given prior to 15
September 2000 inclusive, use its best endeavours to procure the novation
(substantially in the form set out in Schedule 6) to the Purchaser or its
subsidiaries of the contract between Versus Australia and Telstra
Corporation Limited dated 22 June 1999, and such other contracts with
Versus Australia as are reasonably necessary to enable the completion of
Versus Australia's obligations under the contract with Telstra
Corporation Limited.
5. [This Clause has intentionally been left blank]
6. Completion
6.1 Date and Place
Subject to Clause 3, Completion shall take place at the offices of the
Purchaser's Solicitors on 11 November 1999 or at such other place or on
such other date as may be agreed between the Purchaser and the Vendor.
6.2 Vendor's Obligations on Completion
On Completion the Vendor shall:
6.2.1 deliver or make available to the Purchaser duly executed transfers
of the Shares in favour of the Purchaser or as it may direct
accompanied by the relevant share certificates (or an express
indemnity in a form satisfactory to the Purchaser in the case of
any certificate found to be missing);
6.2.2 deliver or make available to the Purchaser the written
resignations of each of the directors and secretaries of each
Group Company from his office as a director or secretary to take
effect on the date of Completion with acknowledgements signed by
each of them in the form attached at Schedule 16 to the effect
that he has no claim against any Group Company for compensation
for loss of office (whether contractual, statutory or otherwise),
redundancy or otherwise;
6.2.3 deliver or make available to the Purchaser the written
resignations of each of the Relevant Employees from their
employment with as an employee of the Group Company to take effect
on the date of Completion with acknowledgements signed by each of
them in agreed form to the effect that he has no claim against any
Group Company for compensation for breach of contract (whether
contractual, statutory or otherwise), redundancy or otherwise;
6.2.4 deliver or make available to the Purchaser the certificates of
incorporation, corporate seals (if any), cheque books, pay-in
books and statutory books of each Group Company (duly written
up-to-date), the share certificates in respect of each of the
Subsidiaries and transfers of all shares in the Subsidiaries held
by nominees in favour of the Purchaser or as it may direct;
6.2.5 deliver or make available to the Purchaser the Tax Deed of
Covenant duly executed by the Covenantors named in it,
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6.2.6 deliver or make available to the Purchaser all the financial and
accounting books and records of each Group Company and all
documents of title relating to the Properties;
6.2.7 deliver or make available to the Purchaser (if the Purchaser so
requires) irrevocable powers of attorney (in the form attached at
Schedule 11) executed by each of the holders of the Shares in
favour of the Purchaser to enable the Purchaser (pending
registration of the relevant transfers) to exercise all voting and
other rights attaching to the Shares and to appoint proxies for
this purpose;
6.2.8 deliver or make available to the Purchaser evidence satisfactory
to the Purchaser that the provisions of paragraph 5.2 of Schedule
2 ("Arrangements with Connected Persons etc.") have been duly
complied with insofar as they require certain matters to be dealt
with prior to completion;
6.2.9 deliver or make available to the Purchaser bank statements of all
bank accounts of all Group Companies as at the close of business
on the day prior to the date of Completion together with faxed
confirmation from the bank at which such accounts are held of the
current balance and details of pending transaction as at the date
of Completion;
6.2.10 procure, as soon as reasonably practicable, and in any event
within five working days, the change of name of Versus Australia
to a name not incorporating the name "Versus" or anything similar
thereto and, within a further 20 working days, the cessation of
use of "Versus" or anything similar thereto as a trading name by
Versus Australia; and
6.2.11 as soon as reasonably practicable (and in any event within 6
months) use its best efforts to procure and evidence the novation
or assignment to the Purchaser of all agreements, undertakings or
arrangements relating to the Business, including the agreement
between Detection Systems Inc. and the Vendor dated on or around
12 January 1998.
6.2.12 procure the release, within 10 working days, of any Encumbrances
over the members of the Company Group or its assets, whether fixed
or floating, evidence such release to the Purchaser to its
reasonable satisfaction, and file all necessary documents at
Companies House in order to secure the removal of any entries
relating to such a charge on the register.
6.3 Intellectual Property Rights and Service Agreements
6.3.1 On Completion the Vendor shall assign to the Purchaser, or procure
the assignment of, the legal and beneficial title to all Non-Group
Business IPR (including by means of the duly executed Non-Group
Business IPR Assignments).
6.3.2 After Completion the Vendor shall use its best efforts to secure
the novation (or where that novation is refused, despite those
best efforts, assign) to the Purchaser of all IPR licences granted
by or to the Vendor relating to Business IPR including those
identified in Schedule 4 parts 3 and 4.
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6.3.3 On Completion the Vendor and Purchaser shall execute the Licences.
6.4 Board Resolutions of the Group Companies
On Completion the Vendor shall procure the passing of Board Resolutions
of each Group Company inter alia:
6.4.1 revoking all existing authorities to bankers in respect of the
operation of its bank accounts and giving authority in favour of
such persons as the Purchaser may nominate to operate such
accounts;
6.4.2 accepting the resignations referred to in Clause 6.2.2 and
appointing such persons as the Purchaser may nominate as directors
and secretary;
6.4.3 approving the registration of the share transfers referred to in
Clause 6.2 subject only to their being duly stamped;
6.4.4 changing its registered office in accordance with instructions
given by the Purchaser, and
6.4.5 in the case of the Company, confirming it is the beneficial owner,
free from encumbrances, of the entire issued share capital of the
Subsidiaries;
and shall hand to the Purchaser duly certified copies of such
Resolutions.
6.5 Indebtedness
The Vendor hereby irrevocably and unconditionally undertakes forthwith to
pay to the Purchaser an amount, if any, equal to:-
(a) the aggregate amount of all bank and other similar borrowings of
the Group outstanding at Completion;
(b) the aggregate of all sums paid by the Group to the Retained Group
after the Balance Sheet Date up to and including Completion (or
paid after Completion in respect of Intra-Group Indebtedness owed
by the Group to the Retained Group at Completion) in the repayment
of any Intra-Group Indebtedness owed by the Group to the Retained
Group or in the payment to the Retained Group of any dividend or
other distributions or any other payment.
6.6 Payment of Price
Against compliance with the foregoing provisions the Purchaser shall
satisfy the purchase consideration in the manner specified in Clause 3
and shall deliver to the Vendor a duly executed counterpart of the Tax
Deed of Covenant.
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6.7 Access
Upon reasonable notice the Purchaser will facilitate access to Grant
Thornton and Group personnel which is reasonably necessary to facilitate
the Vendor receiving information which is reasonably necessary for the
preparation of its consolidated accounts.
7. Warranties
7.1 Incorporation of Schedule 2
7.1.1 The Vendor warrants and represents to the Purchaser and its
successors in title in the terms set out in Schedule 2 subject
only to:
(a) any matter which is fairly, accurately and fully disclosed in the
Disclosure Letter and any matter expressly provided for under the
terms of this Agreement; and
(b) any matter or thing hereafter done or omitted to be done pursuant
to this Agreement or otherwise at the request in writing or with
the approval in writing of the Purchaser.
7.1.2 The Vendor acknowledges that the Purchaser has entered into this
Agreement in reliance upon the Warranties and on the undertakings
contained in Clause 8. Save as expressly otherwise provided, the
Warranties shall be separate and independent and shall not be
limited by reference to any other paragraph of the said Schedule
or by anything in this Agreement or the Tax Deed of Covenant.
7.1.3 Subject to Clause 7.1.1 above, claims may be made whether or not
the Purchaser prior to signing this Agreement knew or could have
discovered (whether by any investigation made by it or on its
behalf into the affairs of any Group Company or otherwise) any
facts which might result in any Warranty not having been complied
with or carried out or any Warranty is otherwise untrue or
misleading SAVE THAT no such claim may be made by the Purchaser
where at the Completion Date the Purchaser knew of facts which it
knew constituted a claim under the Warranties.
7.1.5 To the extent that the Warranties and representations contained in
Schedule 2 relate to any arrangements; or agreements between the
Purchaser and any Group Company the Purchaser shall not have a
claim in relation to such arrangements and agreements SAVE THAT
this clause 7.15 shall not prevent the Purchaser from making a
claim with respect to any third party litigation brought against a
Group Company in relation to the arrangements or agreements
referred to in this clause which arises in respect of the period
prior to Completion.
7.2 Limitation of Liability
The Vendor and the Purchaser agree to perform and observe the provisions
of Schedule 5.
7.4 This Clause has intentionally been left blank
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8 Restrictions on the Vendor
8.1 Restrictions
The Vendor undertakes with the Purchaser and its successors in title as
trustee for itself and the Group Companies that the Vendor will not and
will procure that any subsidiary undertaking, fellow subsidiary
undertaking or holding company or director of the Vendor will not and
will procure that no person, firm or company carrying on with the consent
or privity of the Vendor any business in succession to the Vendor will
not in any Relevant Capacity during the Restricted Period:
8.1.1 directly or indirectly carry on any business which is of the same
or similar type to the Business except by way of a valid Licence
nor be concerned or interested within such area in any such
business save through the holding or being interested in not more
than 6 per cent of the outstanding share capital of a company the
shares of which are listed on any recognised stock exchange;
8.1.2 carry on any business in competition with the Business outside a
valid Licence or canvass or solicit the custom of any person, firm
or company who has within two years prior to Completion been a
regular customer of any Group Company; or
8.1.3 induce or seek to induce any present employee (other than Geoff
Girdler and Tom Kneis) of any Group Company to become employed
whether as employee, consultant or otherwise by the Vendor or any
subsidiary undertaking or fellow subsidiary undertaking or holding
company of the Vendor.
9.1.4 directly or indirectly carry on any Telemetry business, or attempt
to establish a Telemetry business, in the U.K. nor be concerned or
interested within the U.K. in any such business save through the
holding or being interested in not more than 6 per cent of the
outstanding share capital of a company the shares of which are
listed on any recognised stock exchange SAVE THAT at any time
after two years from the Completion Date the Vendor may deliver a
Telemetry Notice to the Purchaser which shall give the Purchaser
the right of first refusal to participate as co-partner with the
Vendor in a U.K. Telemetry business on reasonable commercial
terms, those terms being specified in the Telemetry Notice. The
Vendor and Purchaser agree to discuss those terms on a commercial
basis and they shall have until the end of that notice period to
reach agreement on those terms. At the end of the notice period
set out in the Telemetry Notice the restriction on the Vendor in
this clause 8.1.4 shall cease. For the avoidance of doubt this
Clause 8.1.4 shall not grant any rights, or be taken to grant any
rights, over IPRs. The two year restriction period referred to in
this clause shall cease to apply with immediate effect upon an
assignment of this Agreement to any third party which in Numerex's
reasonable opinion is a material competitor to Numerex other than
upon any assignment to a related party to BT.
8.2 The Purchaser undertakes with the Vendor and its successors in title for
a period of two years from the Completion Date, that the Purchaser will
not and will procure that any subsidiary undertaking, fellow subsidiary
undertaking or holding company will
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<PAGE>
not and will procure that no person, firm or company carrying on with the
consent or privity of the Purchaser any business in succession to the
Purchaser not in any Relevant Capacity during the Restricted Period
induce or seek to induce Geoff Girdler or Tom Kneis to become employed
whether as employee, consultant or otherwise by the Purchaser or any
subsidiary undertaking or follow subsidiary undertaking or holding
company of the Purchaser.
8.3 Reasonableness of Restrictions
The Vendor and the Purchaser each agree that it considers that the
restrictions contained in this Clause 8 are no greater than is reasonable
and necessary for the protection of their respective interests of the
Purchaser but if any such restriction shall be held to be void but would
be valid if deleted in part or reduced in application, such restriction
shall apply with such deletion or modification as may be necessary to
make it valid and enforceable.
9. Net Asset Value
9.1 The Vendor and the Purchaser shall together use all reasonable endeavours
to procure that, as soon as practicable following Completion, the Balance
Sheet together with the statement (the "Statement") of the Net Asset
Value as at the 1999 Balance Sheet Date, are prepared in accordance with
the provisions of this Clause 9. The Balance Sheet shall be prepared on
the basis of the accounting policies and procedures set out in Schedule
13.
9.2 The Vendor confirms:-
(a) that is has undertaken a stock take and valuation of all stock as
at the 1999 Balance Sheet Date in conjunction with the Group on
the 1999 Balance Sheet Date; and
(b) that it has arranged for the Balance Sheet and the Statement to be
prepared by Grant Thornton in conjunction with the Group at the
Vendor's expense with a view to a draft of such Balance Sheet and
the Statement being delivered to the Purchaser within forty
Business Days of Completion together with the unqualified
accountants' report attached at Schedule 14.
9.3 The Purchaser shall notify the Vendor within twenty Business Days of
receipt of such draft Balance Sheet and Statement whether or not it
accepts them for the purposes of this Agreement. So as to allow the
Purchaser to make its appraisal, the Vendor shall procure that the
Purchaser and/or its accountants shall, if they so elect, be given full
access to Grant Thornton's working papers and also be allowed to speak to
the accounting personnel and audit team members who prepared the draft
Balance Sheet and Statement.
9.4 If the Purchaser notifies the Vendor that it does not accept such draft
Balance Sheet and Statement.-
(a) it shall, at the same time, set out in a notice in writing its
reasons in full for such non-acceptance and specify the
adjustments which, in its opinion, should be made to the draft
Balance Sheet and the Statement in order to
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<PAGE>
comply with the requirements of this Agreement and deliver a copy
of such notice to the Vendor; and
(b) the parties shall use all reasonable endeavours to meet and
discuss the objections of the Purchaser and to reach agreement
upon the adjustments (if any) required to be made to the draft
Balance Sheet and Statement.
9.5 If the Purchaser is satisfied with the draft Balance Sheet and Statement
(either as originally submitted or after adjustments agreed between the
Purchaser and the Vendor), then the draft Balance Sheet and Statement
(incorporating any agreed adjustments) shall constitute the Balance Sheet
and the Statement for the purposes of this Agreement.
9.6 If the Purchaser and the Vendor do not reach agreement within twenty
Business Days of the Purchaser's notice of non-acceptance pursuant to
Clause 9.4 (or such other period as the parties mutually agree), then the
matters in dispute (and only those) shall be referred, on the application
of either party, for determination by an independent firm of
internationally recognised chartered accountants to be agreed upon by the
Purchaser and the Vendor or, failing agreement, to be selected, on the
application of either the Purchaser or the Vendor, by the President for
the time being of the Institute of Chartered Accountants in England and
Wales or his duly appointed deputy. The following provisions shall apply
to such determination:-
(a) the Purchaser and/or the Purchaser's accountants and the Vendor
and/or the Vendor's accountants shall each promptly prepare a
written statement on the matters in dispute which (together with
the relevant documents) shall be submitted to such independent
firm for determination;
(b) in giving such determination, the firm shall state what
adjustments (if any) are necessary to the draft Balance Sheet and
Statement in respect of the matters in dispute in order to comply
with the requirements of this Agreement;
(c) any such firm shall act as an expert (and not as an arbitrator) in
making any such determination which shall be final and binding on
the parties (in the absence of manifest error);
(d) each party shall bear the costs and expenses of all counsel and
other advisers, witnesses and employees retained by it and the
costs and expenses of the independent firm of accountants shall be
borne between the Purchaser and the Vendor in such proportions as
the firm shall in its discretion determine or, in the absence of
any such determination, equally between the Purchaser and the
Vendor.
9.7 When the Purchaser and the Vendor reach (or pursuant to Clause 9.6 are
deemed to reach) agreement on the Balance Sheet and the Statement or when
the Balance Sheet and the Statement are finally determined at any stage
in accordance with the procedures set out in this Clause 9;-
(a) the Balance Sheet and the Statement as so agreed or determined
shall be the Balance Sheet and the Statement for the purposes of
this Agreement and shall be final and binding on the parties; and
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(b) the Net Asset Value as at the 1999 Balance Sheet Date shall be as
set out in the Statement.
9.8 Subject to any rule of law or any regulatory body or any provision of any
contract or arrangement entered into prior to the date of this Agreement
to the contrary, the Vendor shall procure that each member of the
Retained Group shall, and the Purchaser shall procure that the Group
shall, promptly provide each other, their respective advisers, and the
independent firm of chartered accountants appointed pursuant to this
Clause 9 to determine the Balance Sheet and the Statement and the
Purchaser's accountants and the Vendor's accountants with all information
(in their respective possession or control) relating to the operations of
the Retained Group and/or the Group, as the case may be, including access
at all reasonable times to all Retained Group and Group employees, books
and records, and all co-operation and assistance, as may in any such case
be reasonably required to:
(a) enable the production of the Balance Sheet and the Statement; and
(b) enable any independent firm of chartered accountants appointed
pursuant to this Clause 9 to determine the Balance Sheet and the
Statement.
The Purchaser and the Vendor hereby authorise each other, their
respective advisers and the independent firm of chartered accountants
appointed pursuant to this clause 9 to take copies of all information
which they have agreed to provide under this clause 9.8.
9.9 If the Net Asset Value as at the 1999 Balance Sheet Date, as determined
in accordance with Clause 9.1, is:-
(a) less than the Agreed Net Asset Value, then the Vendor shall make a
payment to the Purchaser which payment shall be satisfied by a
payment from the Retention held in the Escrow Account to the
extent that funds are available and thereafter directly from the
Vendor in respect of any outstanding balance;
(b) more than the Agreed Net Asset Value, then the Purchaser shall
make a payment to the Vendor (in either case such payment being
the "Final Payment"),
of an amount equal to the difference between the Net Asset Value as at
the 1999 Balance Sheet Date and the Agreed Net Asset Value, within seven
Business Days of the agreement or determination of the Balance Sheet (the
"Final Payment Date") together with interest on the principal amount
thereof at the Agreed Rate computed from the Completion Date to the date
of actual payment thereof both dates exclusive on the basis of the actual
number of days elapsed and a 365 day year. Any payment shall be by means
of telegraphic transfer of funds to the Purchaser's Account or the
Vendor's Account, as the case may require.
10. Other Provisions
10.1 Indemnity
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10.1.1 The Vendor shall be liable for and shall indemnify the Purchaser
and the Group (together with their officers, servants and agents)
against any and all liability, loss, damages, costs, legal costs,
professional and other expenses of any nature whatsoever incurred
or suffered by the Purchaser, or the Group, whether direct,
indirect or consequential (including but without limitation any
economic loss or other loss of profits, business or goodwill)
arising out of any dispute or contractual tortious or other claims
or proceedings brought against the Purchaser or the Group by a
third party claiming relief against the Purchaser or Group by
reason of:-
(a) any breach of clause 2 of the licence between Bronzebase
Limited and Detection Systems Inc. dated April 1997 (the
"Technology Licence") resulting from any licence of
Business IPR entered into by the Purchaser or its
subsidiaries (after the Completion Date only) or the Group
Companies, the Vendor or its subsidiaries (at any time) (or
any breach of the terms of those subsequent licences
resulting from clause 2 of the Technology Licence) up to a
maximum of 50,000 pounds in relation to products supplied
prior to the Completion Date and 400,000 pounds in relation
to products supplied thereafter,
(b) any hindrance, inability or additional expense incurred in
the prosecution or defence of any application, claim or
dispute of any nature whatsoever as a result of the
Business IPR which is registered or applied for not being
registered or applied for in the name of a company within
the Group (save for that Business IPR marked "No" in
Schedule 4 Part 1); and
(c) any proceeding, claim or demand by any Relevant Employee in
relation to the employment or the termination of employment
and/or loss of office of any Relevant Employee.
10.1.2 No claim may be made by the Purchaser under the Indemnity:
(a) to the extent such claim arises from any failure by the
Purchaser to take reasonable steps to mitigate its loss;
(b) set out in clause 10.1.1(a) to the extent such claim arises
from any licences entered into after Completion other than
non-exclusive licences between the Purchaser and a third
party for the manufacture and/or distribution of only those
products known as a Home STU or Serial STU (which are more
fully described in the specifications set out at Part 1 of
Schedule 15 and in accordance with the Overview document
set out in Part 2 of Schedule 15) which is substantially in
the terms of one of the following agreements which are
attached at Part 3 of Schedule 15:
(i) the Manufacturer's Licence for the Serial STU
between Cooper Security Limited and VTL dated 22
February 1999;
(ii) the Manufacturer's Licence for the Home STU between
DA Detection Systems and VTL dated 2 September 1998;
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(iii) the Original Equipment Manufacturer's (OEM)
Agreement for the Serial STU between DA Detection
Systems and VTL dated 2 September 1998; or
(iv) the Original Equipment Manufacturer's (OEM)
Agreement for the Home STU between DA Detection
Systems and Versus Technology dated 2 September,
1998.
10.1.3 The Purchaser shall:
(a) promptly give the Vendor full details of any claim under
the Indemnity;
(b) make no admissions in respect of the matter under which the
Purchaser is claiming on the Indemnity; and,
(c) allow the Vendor to conduct the defence and any settlement
negotiations relating to any claim made against which the
Purchaser wishes to claim on the Indemnity, with the
Purchaser providing such reasonable information and
assistance as may be required by the Vendor SAVE THAT the
Vendor shall only have these rights where the claim in
respect of which an indemnity is sought is of a total value
of less than 1,000,000 pounds. Where the total value of the
claim in respect of which an indemnity is sought under this
10.1 exceeds 1,000,000 pounds then the Purchaser shall have
the right, but not the obligation to conduct the defence
and any settlement negotiations with the Vendor providing
such reasonable information and assistance as may be
required by the Purchaser. The Purchaser shall not, in the
course of such conduct, reach any settlement without the
prior written consent of the Vendor, such consent not to be
unreasonably witheld or delayed.
10.2 Deliberately left blank
10.3 Successors and Assigns
10.3.1 The Vendor agrees that the benefit of every provision in this
Agreement is given to the Purchaser for itself and its successors
in title and assigns. Accordingly, the Purchaser (and its
successors and assigns) may, without the consent of the Vendor,
assign to the beneficial owner for the time being of the Shares
the benefit of all or any of the Vendor' obligations under this
Agreement, and/or any benefit arising under or out of this
Agreement.
10.3.2 The Vendor agrees that, upon the request of the Purchaser or his
successors in title or assigns, this Agreement may be novated (in
whole or in part) in favour of the beneficial owner for the time
being of the Shares, and the Vendor shall execute a Novation
Agreement substantially in the terms set out in Schedule 6 and the
Purchaser, in turn, agrees to meet the Vendor's reasonable costs
for doing so. If the Vendor fails to execute any such Agreement
within 14 days of the request by the Purchaser, the Purchaser may
execute it on behalf of the Vendor and for such purpose the Vendor
hereby irrevocably appoints the Purchaser as the Vendor's attorney
for the purpose
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of executing any such Agreement. The Vendor agrees to ratify and
confirm any action taken by the Purchaser by virtue of this power
of attorney.
10.4 Variation
No variation of this Agreement shall be effective unless in writing and
signed by or on behalf of each of the parties to this Agreement.
10.5 Time of the Essence
Any time, date or period referred to in any provision of this Agreement
may be extended by mutual agreement between the parties but as regards
any time, date or period originally fixed or any time, date or period so
extended time shall be of the essence.
10.6 Further Assurance
10.6.1. The Purchaser shall for the six months after Completion provide
all reasonable assistance to the Vendor in applying for, and
carrying on, the registration of change of proprietor or
registered assignee of, or for the removal of the registration of
Encumbrances over, the Business IPR (not being the Non-Group
Business IPR) which is registered or capable of registration
(including the IPR set out in Part 1.1 of Schedule 4) necessary
in order to ensure that this IPR is registered in the current
name of a member of the Group, such application and carrying on
to be done by or on behalf of the Vendor;
10.6.2. Once the period in 10.6.1 is finished, the Purchaser shall be
entitled on notice to take over the activities described in
clause 10.6.1 and from such notice being given the Vendor shall
provide all reasonable assistance to the Purchaser in applying
for the registration of change of proprietor or registered
assignee of, or for the removal of the registration of
Encumbrances over, the Business IPR (not being the Non-Group
Business IPR) which is registered or capable of registration
(including the IPR set out in Part 1 of Schedule 4) necessary in
order to ensure that this IPR is registered in the current name
of a member of the Group, such application and carrying on to be
done by or on behalf of the Purchaser;
10.6.3 The Vendor shall pay, within 30 days of invoice by the Purchaser
or the Group, all the costs including agents fees incurred by the
Purchaser or Group relating to the recordal of the Business IPR
(not being the Non-Group Business IPR) which is registered or for
which registration is applied either from activities authorised
prior to Completion or from the actions set out in 10.6.1 and
10.6.2 above.
10.6.4 The Purchase shall carry out the registration of, and pay the
costs incurred in, the registration in change of ownership of the
Non-Group Business IPR effected by the Non-Group Business IPR
Assignments.
10.6.5 Save as set out in this clause 10.6, at any time after the date
of this Agreement the Vendor shall, at the Purchaser's expense,
use its best
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endeavours to and to procure that any necessary third party shall
execute such other documents and do such other acts and things as
the Purchaser may reasonably require for the purpose of giving to
the Purchaser the full benefit of all the provisions of this
Agreement.
10.7 Costs
The Vendor shall bear all legal and accountancy costs and expenses
incurred by it and the Group in connection with this Agreement, the Tax
Deed of Covenant and the sale of the Shares. The Purchaser shall bear all
such costs and expenses incurred by it.
10.8 Interest
If the Vendor or the Purchaser default in the payment when due of any sum
payable under this Agreement or the Tax Deed of Covenant (whether
determined by agreement or pursuant to an order of a court or otherwise)
the liability of the Vendor or the Purchaser (as the case may be) shall
be increased to include interest on such sum from the date when such
payment is due until the date of actual payment (as well after as before
judgement) at a rate per annum of 4 per cent above the base rate from
time to time of National Westminster Bank PLC. Such interest shall accrue
from day to day.
10.9 Notices
10.9.1 Any notice or other communication requiring to be given or served
under or in connection with this Agreement or with any arbitration
or intended arbitration under this Agreement shall be in writing
and shall be sufficiently given or served if delivered or sent:
In the case of any of the Vendor to Numerex Corp at:
1600 Parkwood Circle
Atlanta, Georgia, USA
Fax: 001 770 693 5951
Attention: Andrew J Ryan
In the case of the Purchaser to BT Group Legal at:
81 Newgate Street
London
ECIA 7AJ
Fax: (0171) 356 6151
Attention: Karl Upston-Hooper
Ref: M138204
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10.9.2 Any such notice or other communication shall be delivered by hand
or sent by courier, fax or prepaid first class post. If sent by
courier or fax such notice or communication shall conclusively be
deemed to have been given or served at the time of despatch, in
case of service in the United Kingdom, or on the following
Business Day in the case of international service. If sent by post
such notice or communication shall conclusively be deemed to have
been received two Business Days from the time of posting, in the
case of inland mail in the United Kingdom or three Business Days
from the time of posting in the case of international mail.
10.10 Severance
If any term or provision in this Agreement is held to be illegal or
unenforceable, in whole or in part, under any enactment of rule of law,
such term or provision or part shall to that extent be deemed not to form
part of this Agreement but the enforceability of the remainder of this
Agreement shall not be affected.
10.11 Counterparts
This Agreement may be executed in any number of counterparts each of
which shall be deemed an original, but all the counterparts shall
together constitute one and the same instrument.
10.12 Restrictive Trade Practices
Notwithstanding any other provision of this Agreement, no provision of
this Agreement which is of such a nature as to make the Agreement liable
to registration under the Restrictive Trade Practices Act 1976 shall take
effect until the day after that on which particulars thereof have been
duly furnished to the Director General of Fair Trading pursuant to the
said Act. For the purposes of this Clause 10.12, "Agreement" shall
include any agreement forming part of the same arrangement.
10.13 Governing Law and Submission to Jurisdiction
This Agreement and the documents to be entered into pursuant to it, save
as expressly referred to therein, shall be governed by and construed in
accordance with English law and all the parties irrevocably agree that
the courts of England are to have exclusive jurisdiction to settle any
disputes which may arise out of or in connection with this Agreement and
such documents.
10.14 Appointment of Process Agent
10.14.1 The Vendor hereby irrevocably appoints Arnold & Porter of Tower
42, 25 Old Broad Street, London, EC2N 1HQ as its agent for the
service of process in England in relation to any matter arising
out of this Agreement, service upon whom shall be deemed
completed whether or not forwarded to or received by the Vendor.
10.14.2 The Vendor shall inform the Purchaser, in writing, of any change
in the address of its process agent within 28 days.
21
<PAGE>
10.14.3 If such process agents cease to have an address in England, the
Vendor irrevocably agrees to appoint new process agents
acceptable to the Purchaser and to deliver to the Purchaser
within 14 days a copy of a written acceptance of appointment by
the process agents.
10.14.4 Nothing contained in this Agreement shall affect the right to
serve process in any other manner permitted by law or the right
to bring proceedings in any other jurisdiction for the purposes
of the enforcement or execution of any judgement or other
settlement in any other courts.
10.15 Entire Agreement
Subject to the Disclosure Letter, the Written Representations and Tax
Deed of Covenant, this Agreement and the documents in the agreed form
contains the whole agreement between the parties and supersedes all
previous understandings, transactions or communications, whether written
or oral relating to their subject matter and may not be amended or varied
except in writing, signed by a duly authorised representative of each
party.
10.16 Announcements
No party shall disclose the making of this Agreement nor its terms nor
any other Agreement referred to in this Agreement (except those matters
set out in the press release in the agreed terms) and each party shall
procure that each of its Related Persons and its professional advisers
shall not make any such disclosure without the prior consent of the other
party unless disclosure is:-
(a) to its professional advisers; or
(b) required by law or the rules of the London Stock Exchange or other
regulatory body and disclosure shall then only be made by that
party:-
(i) after it has taken all such steps as may be reasonable in
the circumstances to agree the contents of such
announcement with the other party before making such
announcement and provided that any such announcement shall
be made only after notice to the other party/parties; and
(ii) to the person or persons in the manner required by law or
the London Stock Exchange or as otherwise agreed between
the parties
provided that this clause 10.16 does not apply to announcements,
communications or circulars made or sent by the Buyer after
Completion to customers, clients or suppliers of any Group Company
to the extent that it informs them of the Buyer's acquisition of
the Shares or to any announcements containing only information
which has become generally available.
(c) The restrictions contained in this clause 10.16 shall apply
without limit of time and whether or not this Agreement is
terminated.
22
<PAGE>
In witness whereof this Agreement has been duly executed.
Signed for and on behalf of Signed for and on behalf of
Numerex Corp. British Telecommunications plc
By: /s/ S. J. Nicolaides By: /s/ Simon Scott
--------------------------- --------------------------
S. J. Nicolaides Simon Scott
Title: C.O.O. Numerex Corp. Title: G.M. BT Telecom plc
12/11/99 12/11/99
---------------------- -----------------------
Date Date
23
Exhibit 99.1
SERIES A PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES A PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
effective as of the 1st day of November, 1999, by and between NumereX Corp., a
Pennsylvania corporation (the "Company"), and BellSouth Wireless, Inc., a
Georgia corporation ("BellSouth").
RECITALS
A. The Company and BellSouth own collectively 100% of the membership
interests of Cellemetry LLC, a Delaware limited liability company ("Cellemetry")
pursuant to the terms of that certain Operating Agreement of Cellemetry dated as
of May 15, 1998 (the "Operating Agreement").
B. Simultaneously with the Closing (as defined below), each of the
Company and BellSouth intend to execute and deliver an amendment to the
Operating Agreement in substantially the form attached hereto as Exhibit 1 (the
"First Amendment").
C. In consideration of, among other things, BellSouth executing and
delivering the First Amendment, the Company has agreed to issue to BellSouth
30,000 shares of Series A Preferred Stock of the Company on the terms and
conditions set forth in this Agreement.
Now, therefore, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby agree as
follows:
1. Acquisition and Issuance of Stock.
1.1 Sale and Issuance of Series A Preferred Stock. As of the
Closing (as defined below), the Company will have authorized the issuance,
pursuant to the terms and conditions of this Agreement, of 30,000 shares of the
Company's Series A Preferred Stock (the "Series A Preferred Stock") having the
rights, preferences and restrictions set forth in the resolutions of the Board
of Directors of the Company adopted on October 25, 1999 attached hereto as
Exhibit 2 (the "Resolutions").
1.2 Closing. The issuance of the Series A Preferred Stock shall
take place at the offices of Hunton & Williams, 600 Peachtree St., N.E., Suite
4100, Atlanta, Georgia, concurrently with the execution of this Agreement, or at
such other time and place as the Company and BellSouth mutually agree upon
(which time and place are designated as the "Closing"). The time, place, and
date of the Closing are referred to in this Agreement as the "Closing Date." At
the Closing the Company shall deliver to BellSouth a certificate representing
30,000 shares of the Series A Preferred Stock.
<PAGE>
2. Representations and Warranties of the Company. The Company hereby
represents and warrants to BellSouth that:
2.1 Organization, Good Standing and Qualification. The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania. 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 on the financial
condition, assets, liabilities (contingent or otherwise), results of operations
or business of the Company and its Subsidiaries (as defined below) taken as a
whole, or the Company's ability to consummate the transactions contemplated by
this Agreement ("Material Adverse Effect").
2.2 Capitalization. The authorized capital of the Company consists
of:
(a) Preferred Stock. 3,000,000 Shares of Preferred Stock, no
par value (the "Preferred Stock"), no shares of which currently are issued and
outstanding.
(b) Common Stock. 30,000,000 shares of Class A Common Stock, no
par value (the "Class A Common Stock"), of which 11,609,492 shares are issued
and outstanding and 5,000,000 shares of Class B Common Stock, no par value, no
shares of which are issued and outstanding.
(c) Subsidiaries. Exhibit 3 identifies each "significant
subsidiary" (as defined in Rule 1.02(w) of Regulation S-X under the Securities
Act) and its respective jurisdiction of incorporation or organization (together,
"Subsidiaries").
(d) Preemptive Rights. There are no preemptive rights
authorized, issued or outstanding with respect to the capital stock of the
Company.
2.3 Authorization. All corporate action on the part of the Company,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, and the performance of all obligations
of the Company hereunder, and the authorization, issuance (or reservation for
issuance), sale and delivery of the Series A Preferred Stock being sold
hereunder and the Class A Common Stock issuable upon conversion of the Series A
Preferred Stock has been taken, and this Agreement constitutes the valid and
legally binding obligation of the Company, enforceable 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.
2.4 Valid Issuance of Preferred and Class A Common Stock. The
Series A Preferred Stock, when issued and delivered in accordance with the terms
of this Agreement for the consideration expressed herein, will be duly and
validly issued, fully paid, and nonassessable, and will be free and clear of all
liens, claims and encumbrances of the Company. The Class A Common Stock issuable
upon conversion of the Series A Preferred Stock has been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Resolutions,
<PAGE>
will be duly and validly issued, fully paid, and nonassessable and will be free
and clear of all liens, claims and encumbrances of the Company.
2.5 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal or state governmental authority on the part of the
Company is required in connection with the consummation of the transactions
contemplated by this Agreement, except for such filings or registrations
contemplated by Section 6 hereof.
2.6 No Conflicts. None of (a) the execution, delivery or
performance by the Company of this Agreement, (b) the issuance of the Series A
Preferred Stock and (c) the issuance of the Class A Common Stock on conversion
of the Series A Preferred Stock violate, conflict with or constitute a breach of
any of the terms or provisions of, or a default under (or an event that with
notice or the lapse of time, or both, would constitute a default), or require
consent (other than consents that have already been obtained) under, or result
in the imposition of a lien on any properties of the Company or any of its
Subsidiaries or an acceleration of any indebtedness of the Company pursuant to
(1) the Articles of Incorporation or Bylaws of the Company, (2) any bond,
debenture, note, indenture, mortgage, deed of trust or other agreement or
instrument to which the Company or any of its Subsidiaries, is a party or by
which the Company, any of the Subsidiaries or their properties are bound, (3)
any statute, rule or regulation applicable to the Company, any of the
Subsidiaries or any of their assets or properties, or (4) any judgment, order or
decree of any court or governmental agency or authority having jurisdiction over
the Company or any of its Subsidiaries or any of their assets or properties,
except in the case of (2), (3) or (4), for such violations, conflicts, breaches,
defaults, consents, liens or acceleration of indebtedness that could not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
2.7 SEC Filings. The Company has timely filed (after giving effect
to permitted extensions) all required reports, schedules, forms, statements and
other documents with the Securities and Exchange Commission (the "SEC") since
October 31, 1998 (the "SEC Documents"). As of their respective dates, the SEC
Documents complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as the case may be and the rules and regulations of the SEC promulgated
thereunder applicable to such SEC Documents and as of their filing dates, none
of the SEC Documents contained any untrue statement of a material fact or
omitted to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The financial statements of the Company included
in the SEC Documents comply as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with U.S. generally accepted
accounting principles ("GAAP") (except, in the case of unaudited statements as
permitted by Form 10-Q of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto) and fairly
present the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates thereof and the consolidated results of their
operation and cash flows (or changes in financial position prior to the approval
of Financial Accounting Standards Boards Statement of Financial Accounting
Standards No. 95) for the period then
<PAGE>
ending in accordance with GAAP (subject, in the case of the unaudited
statements, to normal year end audit adjustments). Except as set forth in the
filed SEC Documents or as previously disclosed to BellSouth in writing, neither
the Company nor any of its subsidiaries has any liabilities or obligations of
any nature (whether accrued, absolute, contingent or otherwise) which could
reasonably be expected to have a Material Adverse Effect.
2.8 Absence of Certain Changes or Events. Except as disclosed in
the SEC Documents or as previously disclosed to BellSouth in writing, since the
date of the most recent audited financial statements included in the SEC
Documents, there has not been (i) any declaration, setting aside or payment of
any dividend or distribution (whether in cash, stock or property) with respect
to any of the Company's capital stock, (ii) any split, combination or
reclassification of any of its capital stock or any issuance or the
authorization of any issuance of any of its capital stock or any other
securities in respect of, in lieu of or in substitution for shares of its
capital stock, (iii) any damage, destruction or loss of property, whether or not
covered by insurance, that has or could reasonably be expected to have a
Material Adverse Effect, or (iv) any change in accounting methods, principles or
practices by the Company affecting its assets, liabilities, or business, except
insofar as may have been required by a change in GAAP and except to the extent
any such change has not or could not reasonably be expected to have a Material
Adverse Effect.
2.9 Litigation. Except as disclosed in the SEC Documents or as
previously disclosed to BellSouth in writing, there is no suit, action,
governmental investigation, or proceeding pending, or to the knowledge of the
Company, threatened against the Company, any of the Subsidiaries or any of their
properties that, individually or in the aggregate, could have a Material Adverse
Effect. There are no actions, suits or proceedings instituted, pending or, to
the knowledge of the Company, threatened against the Company, any of the
Subsidiaries or against any of their properties that would, individually or in
the aggregate, have a Material Adverse Effect.
2.10 No Defaults. The Company is not in violation of any term of
(i) its Articles of Incorporation or Bylaws, (ii) any provision of any mortgage,
indenture, contract, agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which they are bound, or (iii) any judgment decree
or order binding upon the Company or any of the Subsidiaries or any statute,
rule or regulation applicable to the Company or any of the Subsidiaries that,
either individually or in the aggregate, reasonably could be expected to have a
Material Adverse Effect.
2.11 Intellectual Property.
(a) To its knowledge, the Company owns, or possesses adequate
licenses or other valid rights to use, all existing United States and foreign
parents, trademarks, trade names, service marks, copyrights, trade secrets and
applications therefor that are material to its business as currently conducted
(the "Intellectual Property Rights"), provided, however, the Company makes no
representation or warranty with respect to Intellectual Property Rights
contributed to Cellemetry by BellSouth.
<PAGE>
(b) The validity of the Intellectual Property Rights and the
title thereto of the Company is not being questioned in any litigation to which
the Company is a party.
(c) The conduct of the business of the Company as now
conducted does not, to the Company's knowledge, infringe any valid patents,
trademarks, trade names, service marks or copyrights of others. The consummation
of the transactions completed hereby will not result in the loss or impairment
of any Intellectual Property Rights, provided, however, the Company makes no
representation or warranty with respect to Intellectual Property Rights
contributed to Cellemetry by BellSouth.
3. Representations and Warranties of BellSouth. BellSouth hereby
represents and warrants that:
3.1 Organization, Good Standing and Qualification. BellSouth is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Georgia. BellSouth 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 on BellSouth.
3.2 Authorization. All corporate action on the part of BellSouth,
its officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, and the performance of all obligations
of BellSouth hereunder has been taken or will be taken prior to the Closing, and
this Agreement constitutes the valid and legally binding obligation of
BellSouth, enforceable 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.
3.3 Governmental Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal or state governmental authority on the part of
BellSouth is required in connection with the consummation of the transactions
contemplated by this Agreement.
3.4 No Conflicts. None of the execution, delivery or performance by
BellSouth of this Agreement, (b) the acquisition by BellSouth of the Series A
Preferred Stock and (c) the issuance to BellSouth of the Class A Common Stock on
conversion of the Series A Preferred Stock violate, conflict with or constitute
a breach of any of the terms or provisions of, or a default under (or an event
that with notice or the lapse of time, or both, would constitute a default), or
require consent (other than consents that have already been obtained) under, or
result in the imposition of a lien on any properties of BellSouth or an
acceleration of any indebtedness of BellSouth pursuant to (1) the Certificate of
Incorporation or Bylaws of BellSouth, (2) any bond, debenture, note, indenture,
mortgage, deed of trust or other agreement or instrument to which BellSouth is a
party or by which BellSouth or its properties is bound, (3) any statute, rule or
regulation applicable to BellSouth or any of its assets or properties, or (4)
any judgment, order or decree of any court or governmental agency or authority
having jurisdiction over BellSouth or any of its assets or properties, except in
the case of (2), (3) and (4), for such violations, conflicts, breaches,
defaults, consents, liens or acceleration of indebtedness that could not, either
<PAGE>
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.5 Purchase Entirely for Own Account. This Agreement is made with
BellSouth in reliance upon BellSouth's representation to the Company, which by
BellSouth's execution of this Agreement BellSouth hereby confirms, that the
Series A Preferred Stock to be received by BellSouth and the Class A Common
Stock issuable upon conversion thereof (collectively, the "Securities") will be
acquired for investment for BellSouth's own account, not as a nominee or agent,
and not with a view to the resale or distribution of any part thereof, and that
BellSouth has no present intention of selling, granting any participation in, or
otherwise distributing the same. By executing this Agreement, BellSouth further
represents that BellSouth does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participations to such
person or to any third person, with respect to any of the Securities.
3.6 Disclosure of Information. BellSouth believes it has received
all the information it considers necessary or appropriate for deciding whether
to acquire the Series A Preferred Stock. BellSouth further represents that it
has had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the offering of the Series A Preferred
Stock and the business, properties, prospects and financial condition of the
Company.
3.7 Investment Experience. BellSouth has previously invested in
securities in companies in the development stage and acknowledges that it is
able to fend for itself, can bear the economic risk of its investment, and has
such knowledge and experience in financial or business matters that it is
capable of evaluating the merits and risks of the investment in the Series A
Preferred Stock.
3.8 Accredited Investor. BellSouth is an "accredited investor"
within the meaning of Securities and Exchange Commission ("SEC") Rule 501 of
Regulation D, as presently in effect.
3.9 Restricted Securities.
(a) BellSouth understands that the shares of Series A Preferred
Stock it is acquiring 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 such securities may be resold without registration under
the Securities Act only in certain limited circumstances. In this connection,
BellSouth represents that it is familiar with SEC Rule 144, as presently in
effect, and understands the resale limitations imposed thereby and by the
Securities Act. BellSouth agrees that any shares acquired by it pursuant to this
Agreement will not be sold or otherwise disposed of without registration under
the Securities Act and compliance with other applicable securities laws, except
in accordance with Rule 144 under the Securities Act, or similar rule
promulgated by the Securities and Exchange Commission under the Securities Act
as the same may, from time to time be in effect.
<PAGE>
(b) It is understood that the certificate(s) evidencing the
Securities may bear one or all of the following legends:
(i) "These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
(ii) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented
by the certificate so legended.
4. The Company's Obligations at Closing. At Closing on the Closing
Date:
4.1 First Amendment. The Company shall execute and deliver an
original counterpart of the First Amendment and take the actions contemplated by
the First Amendment, including making the capital contributions contemplated by
Schedule 4.6(a) thereof.
4.2 Statement with Respect to Shares and Certificates. The Company
shall file a Statement with Respect to Shares, attaching the Resolutions, with
the Pennsylvania Department of State, and, upon effectiveness thereof, shall
issue to BellSouth certificate(s) evidencing 30,000 shares of Series A Preferred
Stock.
4.3 Opinion of Company Counsel. The Company shall cause Arnold &
Porter, counsel for the Company, to deliver an opinion, dated as of the Closing
Date, in substantially the form attached hereto as Exhibit 4.
5. BellSouth's Obligations at Closing. At Closing on the Closing Date:
5.1 First Amendment. BellSouth shall deliver original counterparts
of the First Amendment executed by BellSouth and BellSouth Corporation.
6. Registration Rights.
6.1 Shelf Registration. From and after the date on which BellSouth
shall have the right to convert the Series A Preferred Stock into shares of
Class A Common Stock (the "Conversion Eligibility Date"), BellSouth shall be
entitled to one right to demand that the Company register for resale ("Demand
Registration") the Class A Common Stock issuable upon conversion of the shares
of Series A Preferred Stock issued pursuant to this Agreement (the "Registrable
Securities") on a registration statement on Form S-3, as in effect on the date
hereof or any registration form under the Securities Act subsequently adopted by
the SEC that permits inclusion or incorporation of substantial information by
reference to other documents filed by the Company with the SEC ("Registration
Statement"), subject to the right of the Company's Board of Directors to delay
such registration for not more than 90 days upon its determination that such
<PAGE>
registration is not in the best interests of the Company at such time. The
Registration Statement shall be filed as a "shelf" registration statement
pursuant to Rule 415 under the Securities Act, or any successor rule. The
Company shall use its best efforts to keep such "shelf" registration
continuously effective as long as the delivery of a prospectus is required under
the Securities Act in connection with the disposition of the Registrable
Securities registered thereby and in furtherance of such obligation, shall
supplement or amend such Registration Statement if, as and when required by the
rules, regulations and instructions applicable to the form used by the Company
for such registration or by the Securities Act or by any other rules and
regulations thereunder applicable to shelf registrations. Notwithstanding the
foregoing, upon a determination by the Company and written notice to BellSouth
that it is not in the best interests of the Company and its shareholders to keep
such Registration Statement effective, the Company may suspend use of the
Registration Statement by BellSouth; provided, however, that such suspensions
may not exceed more than 90 days, in the aggregate, during any 12 month period.
6.2 Piggyback Registration Rights. Except as set forth herein, on
not more than three occasions after the Conversion Eligibility Date, whenever
the Company proposes to register any of its securities in an offering under the
Securities Act and the registration form to be used may be used for the
registration of Registrable Securities, whether or not for sale for its own
account, the Company shall give prompt written notice to BellSouth of its
intention to effect such a registration, and shall include in such registration
(a "Piggyback Registration") all Registrable Securities with respect to which
the Company has received written requests from BellSouth for inclusion therein
within 15 days after delivery of the Company's notice. Notwithstanding the
foregoing, in connection with any offering involving an underwriting of shares
of the Company's capital stock, the Company shall not be required under this
Section 6.2 to include any of the Registrable Securities in such underwriting
unless BellSouth accepts the terms of the underwriting as agreed upon between
the Company and the underwriters selected by it (or by other persons entitled to
select the underwriters), and then only in such quantity as the underwriters
determine in their sole discretion will not jeopardize the success of the
offering by the Company. If the total amount of securities, including
Registrable Securities, requested by BellSouth to be included in such offering
exceeds the amount of securities that the underwriters determine in their sole
discretion is compatible with the success of the offering, then the Company
shall be required to include in the offering only that number of such
securities, including Registrable Securities, that the underwriters determine in
their sole discretion will not jeopardize the success of the offering (the
securities so included to be apportioned pro rata among the selling stockholders
with registration rights arising prior to the date of this Agreement according
to the total amount of securities entitled to be included therein owned by each
such selling stockholder or in such other proportions as shall mutually be
agreed to by such selling stockholders).
6.3 Registration Obligations of the Company. In connection with any
Demand Registration or Piggyback Registration, the Company shall use
commercially reasonable efforts to effect the registration, which efforts shall
include the following:
(a) The Company shall prepare and file with the SEC the
Registration Statement promptly following receipt of request from BellSouth and
in no event later than sixty (60) days following receipt of such request. The
Company shall file such post-effective
<PAGE>
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act, as would permit or facilitate the sale or distribution
of all of the Registrable Securities.
(b) The Company shall use commercially reasonable efforts to
cause any such Registration Statement to be declared effective as expeditiously
as reasonably possible.
(c) The Company shall prepare and file with the SEC such
amendments and supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be necessary to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such Registration Statement and notify BellSouth of
the filing and effectiveness of such Registration Statement and any amendments
or supplements.
(d) The Company shall furnish such numbers of copies of a
current prospectus conforming with the requirements of the Securities Act,
copies of the Registration Statement, any amendment or supplement thereto and
any documents incorporated by reference therein and such other documents as
BellSouth may reasonably require in order to facilitate the disposition of
Securities owned by BellSouth.
(e) The Company shall notify BellSouth immediately of the
happening of any event as a result of which the prospectus (including any
supplements thereto or thereof) included in such Registration Statement, as then
in effect, includes an untrue statement of material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and use its
best efforts to promptly update and/or correct such prospectus.
(f) The Company shall notify BellSouth immediately of the
issuance by the SEC or any state securities commission or agency of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose. The Company shall use
commercially reasonable efforts to prevent the issuance of any stop order and,
if any stop order is issued, to obtain the lifting thereof at the earliest
possible time.
6.4 Rule 144. The Company shall make and keep public information
available, as those terms are understood and defined under Rule 144, so as to
make such Rule available to BellSouth.
6.5 Grant of Registration Rights to Others. Except as provided in
this Agreement, the Company shall not grant to any other person Piggyback
Registration Rights with respect to any equity securities of the Company, or any
securities convertible or exchangeable into or exercisable for such securities,
on terms that are more favorable than those set forth in this Section 6 without
granting to BellSouth similar rights.
6.6 Expenses. The Company shall pay all expenses incurred by the
Company in complying with Section 6 of this Agreement, including, without
limitation, all registration and filing fees, fees and expenses of complying
with securities and blue sky laws, printing expenses
<PAGE>
and fees and disbursements of the Company's counsel and independent public
accountants; provided, that, all underwriting discounts and selling commissions
applicable to the shares covered by any registration effected pursuant to this
Agreement shall be borne by BellSouth.
6.7 Transfer of Registration Rights. The Registration Rights of
BellSouth under Section 6 hereof may be assigned only to a party who acquires
shares of the Series A Preferred Stock issued in accordance with the terms of
this Agreement and/or an equivalent number (on an as-converted basis) of
Registrable Securities issued upon conversion thereof; provided, however, that
no party may be assigned any of the foregoing rights except in accordance with
Section 9.1.
6.8 Registration Rights Indemnification.
(a) To the extent permitted by law, the Company will indemnify
BellSouth, each of its officers, directors, partners and agents, any underwriter
(as defined in the Securities Act) for BellSouth and each person, if any, who
controls BellSouth or such underwriter within the meaning of the Securities Act
or the Exchange Act against all "Damages" (as defined in Section 7.5) incurred
by such party arising out of or based upon any untrue statement (or alleged
untrue statement) of a material fact contained in the Registration Statement,
any prospectus or any form of prospectus or in any amendment or supplement
thereto or in any preliminary prospectus, or arising out of or relating to any
omission or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, except to the extent,
but only to the extent, that (1) such untrue statements or omissions are based
upon information furnished in writing to the Company by BellSouth or such
underwriter or controlling person expressly for use therein or (2) BellSouth or
such underwriter or controlling person's failed to deliver a copy of the
Registration Statement or prospectus or any amendments or supplements thereto
after the Company furnished such person with a sufficient number of copies of
the same. The indemnity agreement contained in this Section 6.8(a) shall not
apply to amounts paid in settlement of any claim for indemnity hereunder if such
settlement is effected without the prior written consent of the Company (which
consent shall not be unreasonably withheld).
(b) To the extent permitted by law, BellSouth will indemnify
the Company, each of its officers, directors, partners and agents, any
underwriter (as defined in the Securities Act) for the Company and each person,
if any, who controls the Company or such underwriter within the meaning of the
Securities Act or the Exchange Act against all Damages incurred by such party
arising out of or based upon any untrue statement (or alleged untrue statement)
of a material fact contained in the Registration Statement, any prospectus or
any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising out of or relating to any omission or alleged
omission of a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent, that (1) such
untrue statements or omissions are based upon information furnished in writing
by BellSouth or such underwriter or controlling person expressly for use therein
or (2) BellSouth or such underwriter on controlling person failed to deliver a
copy of the Registration Statement or prospectus or any amendments or
supplements thereto after the Company furnished such person with a sufficient
number of copies of the same. The indemnity agreement contained in this
<PAGE>
Section 6.8(b) shall not apply to amounts paid in settlement of any such Damages
if such settlement is effected without the prior written consent of BellSouth
(which consent will not be unreasonably withheld). BellSouth shall be liable
under this Section 6.8(b) for only that amount as does not exceed the net
proceeds actually received by BellSouth as a result of the sale of Registrable
Securities pursuant to such Registration Statement.
6.9 Conduct of Indemnification Proceedings. With respect to
indemnification proceedings under this Section 6, the indemnified party promptly
shall notify the indemnifying party of any claim with respect to which it seeks
indemnification (an "Indemnity Claim") asserted by such party or by a third
party, stating, to the extent known, with detailed specificity the nature and
basis of the Indemnity Claim. The failure to give promptly any such notice shall
not relieve the indemnifying party from any liability hereunder with respect to
the subject matter of any Indemnity Claim except to the extent that the
indemnifying party actually has been materially prejudiced by such failure. If
the indemnifying party shall have confirmed in writing its obligation to
indemnify for any liability asserted in any Indemnity Claim, then the
indemnifying party shall have, at its election, the right to compromise or
defend such Indemnity Claim involving the assertion of liability by a third
party at the indemnifying party's sole expense, through counsel chosen by it,
provided that, in conducting such defense, settlement and compromise: (i) the
indemnifying party shall cause its counsel to consult with the indemnified party
and, if applicable, the indemnified party's counsel and keep them fully advised
of the progress of the defense, settlement and compromise; and (ii) the
indemnifying party promptly shall reimburse the indemnified party for the full
amount of any Damages resulting from such Indemnity Claim, except to the extent
otherwise provided in this Section 6. If the indemnifying party is required
hereunder or elects to conduct the defense of such Indemnity Claim, the
indemnified party shall cooperate with the indemnifying party in connection
therewith and shall be entitled to participate in the defense thereof and to
appoint counsel for that purpose, except that the cost of any such participating
counsel shall be solely for the account of the indemnified party and the
indemnifying party shall have no responsibility therefor unless: (i) the
indemnifying party shall not have notified the indemnified party that it will
assume the defense of such Indemnity Claim and have designated counsel
reasonably acceptable to the indemnified party within a reasonable time of the
notice of such Indemnity Claim; or (ii) the named parties to any proceeding with
respect to such Indemnity Claim (including any impleaded parties) include both
the indemnified party and the indemnifying party and representation of both
parties by the same counsel would be, in the opinion of counsel selected by the
indemnifying party, inappropriate due to actual or potential differing interests
between them. If the indemnifying party is not entitled to, or elects not to,
assume the defense of an Indemnity Claim, the indemnifying party shall not be
obligated to pay the fees and expenses of more than one counsel for all parties
indemnified by such indemnifying party with respect to such Indemnity Claim,
unless in the opinion of counsel selected by the indemnifying party, a conflict
of interest may exist between such indemnified party and any other of such
indemnified parties with respect to such claim. As long as the indemnifying
party is contesting any Indemnity Claim in good faith in accordance with the
foregoing requirements, the indemnified party shall not pay or settle any such
Indemnity Claim. No indemnifying party, in the defense of any Indemnity Claim,
shall, except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or
<PAGE>
plaintiff to such indemnified party of a release from all liability in respect
to such Indemnity Claim.
7. Indemnification.
7.1 The Company agrees to indemnify and hold BellSouth harmless
against, and to reimburse BellSouth for any Damages imposed on or incurred by
BellSouth because of or arising out of or related to or in connection with (i)
any breach of the Company's representations or warranties or any failure to
perform or violation of any agreement or covenant on the part of the Company
under this Agreement, (ii) the matter confirmed in writing to BellSouth by
letter of even date herewith, and (iii) any and all actions, suits, proceedings,
demands, assessments, judgments, out-of-pocket costs and reasonable attorneys'
fees (in preparation, at a trial and on appeal) of any nature incident to the
foregoing. The indemnity agreement contained in this Section 7.1 shall not apply
to amounts paid in settlement of any such Damages if such settlement is effected
without the consent of the Company (which consent will not be unreasonably
withheld).
7.2 BellSouth agrees to indemnify and hold the Company harmless
against, and to reimburse the Company for any Damages imposed on or incurred by
BellSouth because of or arising out of or related to or in connection with: (i)
any breach of any of BellSouth's representations or warranties or any failure to
perform or violation of any agreement or covenant on the part of BellSouth under
this Agreement or any other agreement referred to herein or contemplated hereby;
and (ii) any and all actions, suits, proceedings, demands, assessments,
judgments, out-of-pocket costs and reasonable attorneys' fees (in preparation,
at trial and on appeal) of any nature incident to the foregoing. The indemnity
agreement contained in this Section 7.2 shall not apply to amounts paid in
settlement of any such Damages if such settlement is effected without the
consent of BellSouth (which consent will not be unreasonably withheld).
7.3 The indemnified party promptly shall notify the indemnifying
party of any claim with respect to which it seeks indemnification under this
Section 7 (a "Damage Claim") asserted by such party or by a third party,
stating, to the extent known, with detailed specificity the nature and basis of
the Damage Claim. The failure to give promptly any such notice shall not relieve
the indemnifying party from any liability hereunder with respect to the subject
matter of any Damage Claim except to the extent that the indemnifying party
actually has been materially and prejudiced by such failure. If the indemnifying
party shall have confirmed in writing its obligation to indemnify for any
liability asserted in any Damage Claim, then the indemnifying party shall have,
at its election, the right to compromise or defend such Damage Claim involving
the assertion of liability by a third party at the indemnifying party's sole
expense, through counsel chosen by it, provided that, in conducting such
defense, settlement and compromise: (i) the indemnifying party shall cause its
counsel to consult with the indemnified party and, if applicable, the
indemnified party's counsel and keep them fully advised of the progress of the
defense, settlement and compromise; and (ii) the indemnifying party promptly
shall reimburse the indemnified party for the full amount of any Damages
resulting from such Damage Claim except to the extent otherwise provided in this
Section 7. If the indemnifying party is required hereunder or elects to conduct
the defense of such Damage Claim, the indemnified party shall cooperate with the
indemnifying party in connection therewith and shall be entitled to participate
in the defense thereof and to appoint counsel for that purpose, except that the
cost of any such
<PAGE>
participating counsel shall be solely for the account of the indemnified party
and the indemnifying party shall have no responsibility therefor unless: (i) the
indemnifying party shall not have notified the indemnified party that it will
assume the defense of such Damage Claim and have designated counsel reasonably
acceptable to the indemnified party within a reasonable time of the notice of
such Damage Claim; or (ii) the named parties to any proceeding with respect to
such Damage Claim (including any impleaded parties) include both the indemnified
party and the indemnifying party and representation of both parties by the same
counsel would be, in the opinion of counsel selected by the indemnifying party,
inappropriate due to actual or potential differing interests between them. If
the indemnifying party is not entitled to, or elects not to, assume the defense
of a Damage Claim, the indemnifying party shall not be obligated to pay the fees
and expenses of more than one counsel for all parties indemnified by such
indemnifying party with respect to such Damage Claim, unless in the opinion of
counsel selected by the indemnifying party, a conflict of interest may exist
between such indemnified party and any other of such indemnified parties with
respect to such Damage Claim. As long as the indemnifying party is contesting
any Damage Claim in good faith in accordance with the foregoing requirements,
the indemnified party shall not pay or settle any such Damage Claim. No
indemnifying party, in the defense of any Damage Claim, shall, except with the
consent of the indemnified party, consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such Damage Claim.
7.4 From and after the Closing Date, notwithstanding anything
contained in this Agreement to the contrary, no Damages incurred by either party
as a result of any inaccuracy of any representation or warranty under this
Agreement or any breach of the covenants, agreements or obligations contained in
this Agreement shall give rise to any claim for indemnification by such party
unless such Damages aggregate more than $10,000 (the "Threshold"), and then only
to the extent such Damages exceed the Threshold. In no event shall the
indemnification obligation of either party pursuant to this Section 7 exceed in
the aggregate $6,000,000.
7.5 For purposes of this Section 7, "Damages" shall mean all
damages, and includes, without limitation, consequential damages, punitive
damages, liabilities, costs, losses, diminution in value, fines, penalties,
demands, claims, cost recovery actions, lawsuits, administrative proceedings,
orders, response action costs, compliance costs, investigation expenses,
arbitration expenses, consultant fees, attorneys' and paralegals' fees, and
litigation expenses
8. Reservation of Class A Common Stock and Series A Preferred Stock.
The Company shall at all times reserve and keep available such number of its
authorized shares of Class A Common Stock as shall be sufficient to effect a
conversion of all of the shares of Series A Preferred Stock as are then
outstanding into Class A Common Stock. If at any time the number of authorized
but unissued shares of Class A Common Stock shall not be sufficient to effect
the issuance to BellSouth of the number of shares of Class A Common Stock
issuable upon conversion by BellSouth of the then outstanding shares of Series A
Preferred Stock, the Company shall forthwith take such corporate action as may
be necessary to increase its authorized but unissued shares of Class A Common
Stock to such number of shares as shall be
<PAGE>
sufficient for such purpose. The Company shall obtain any authorization,
consent, approval or other action by, or make any filing with, any court or
administrative body that may be required under applicable federal or state
securities laws in connection with the issuance of the shares of Class A Common
Stock upon conversion of the shares of Preferred Stock.
9. Miscellaneous.
9.1 Restrictions on Assignment and Transfer. Except as permitted by
the Resolutions, BellSouth shall not sell, assign, pledge, hypothecate or
otherwise transfer, other than to an affiliate of BellSouth, (i) this Agreement
or any of its rights or obligations hereunder or (ii) any of its right, title or
interest in the shares of Series A Preferred Stock issued pursuant to this
Agreement. Any sale, assignment, pledge, hypothecation or other transfer in
violation of this Section 9.1 shall be void ab initio and the purported
transferee shall acquire no rights in any of the foregoing.
9.2 Survival of Warranties; Termination of Indemnification. The
warranties, representations and covenants of the Company and BellSouth, and
indemnities related thereto, contained in or made pursuant to this Agreement
shall survive the execution and delivery of this Agreement and the Closing until
the earlier of (i) the sale, assignment, pledge, hypothecation or transfer of
the shares of Series A Preferred Stock issued pursuant to this Agreement to a
party other than an affiliate of BellSouth, (ii) the redemption of the Series A
Preferred Stock by the Company, or (iii) expiration of the applicable statute of
limitations, and shall in no way be affected by any investigation of the subject
matter thereof made by or on behalf of BellSouth or the Company.
9.3 Successors and Assigns. Except as otherwise provided herein,
the terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors and assigns of the parties (including
transferees of any Securities). Nothing in this Agreement, express or implied,
is intended to confer upon any party other than the parties hereto or their
respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided
in this Agreement.
9.4 Governing Law. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania without regard to
the application of principles of conflict of laws.
9.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
9.6 Titles and Subtitles. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
9.7 Notices. Unless otherwise provided, any notice required or
permitted under this Agreement shall be given in writing and shall be deemed
effectively given upon
<PAGE>
personal delivery to the party to be notified, or upon deposit with the United
States Post Office, by registered or certified mail, or with a nationally
recognized overnight courier specifying next day delivery with written
verification of receipt, postage prepaid and addressed to the party to be
notified at the address indicated for such party on the signature page hereof,
or at such other address as such party may designate by ten (10) days' advance
written notice to the other parties.
9.8 Finder's Fee. Each party represents that it neither is nor will
be obligated for any finders' fee or commission in connection with this
transaction. BellSouth agrees to indemnify and to hold harmless the Company from
any liability for any commission or compensation in the nature of a finders' fee
(and the costs and expenses of defending against such liability or asserted
liability) for which BellSouth or any of its officers, partners, employees, or
representatives is responsible. The Company agrees to indemnify and hold
harmless BellSouth from any liability for any commission or compensation in the
nature of a finders' fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
9.9 Expenses. Irrespective of whether the Closing is effected, the
Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement, and
BellSouth shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. If any
action at law or in equity is necessary to enforce or interpret the terms of
this Agreement or the Articles of Amendment, the prevailing party shall be
entitled to reasonable attorney's fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
9.10 Amendments and Waivers. Any term of this Agreement may be
amended and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and BellSouth. Any
amendment or waiver effected in accordance with this paragraph shall be binding
upon each holder of any securities acquired under this Agreement at the time
outstanding (including securities into which such securities are convertible),
each future holder of all such securities, and the Company.
9.11 Severability. If one or more provisions of this Agreement are
held to be unenforceable under applicable law, such provision shall be excluded
from this Agreement and the balance of the Agreement shall be interpreted as if
such provision were so excluded and shall be enforceable in accordance with its
terms.
9.12 Entire Agreement. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations, or covenants except as specifically set forth herein or
therein.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Series A
Preferred Stock Purchase Agreement as of the date first above written.
BellSouth Wireless, Inc.
By: \s\ John J. Jenkins
--------------------------
Name: John J. Jenkins
Title: Vice President
NumereX Corp.
By: \s\ Stratton J. Nicolaides
----------------------------
Name: Stratton J. Nicolaides
Title: Chief Operating Officer
[REMAINDER OF SIGNATURE PAGE TO SERIES A PURCHASE AGREEMENT INTENTIONALLY
LEFT BLANK]
Exhibit 99.2
FIRST AMENDMENT TO OPERATING AGREEMENT
OF
CELLEMETRY LLC
A Delaware Limited Liability Company
This FIRST AMENDMENT TO OPERATING AGREEMENT OF CELLEMETRY LLC (this
"Amendment"), effective as of November 1, 1999, is made, executed and agreed to,
for good and valuable consideration, by Numerex Corp., a Pennsylvania
corporation ("Numerex"), BellSouth Wireless, Inc., a Georgia corporation
("BellSouth") and BellSouth Corporation, a Georgia corporation ("BellSouth
Corporation").
RECITALS
A. BellSouth, Numerex and BellSouth Corporation are parties to the
Operating Agreement of Cellemetry LLC, a Delaware limited liability company (the
"Company") dated as of May 15, 1998 (the "Operating Agreement"), pursuant to
which Numerex and BellSouth own, respectively, sixty percent (60%) and forty
percent (40%) of the Percentage Interests of the Company.
B. Simultaneously with the execution and delivery of this Amendment,
each of Numerex and BellSouth intend to execute and deliver that certain
Preferred Stock Purchase Agreement providing for the issuance by Numerex to
BellSouth of 30,000 shares of Series A Preferred Stock of Numerex.
C. The parties to this Amendment acknowledge and confirm that, as of
the date of this Amendment, each of the Class I Member and the Class II Member
has fully performed all of its respective obligations under the Operating
Agreement and otherwise is in compliance with all terms and conditions of the
Operating Agreement.
D. The parties to the Operating Agreement desire to amend the Operating
Agreement on the terms and conditions set forth in this Amendment.
TERMS AND CONDITIONS
1. Incorporation of Recitals. The foregoing Recitals are hereby
incorporated by this reference as if the same were set forth in full herein.
<PAGE>
2. Defined Terms.
a. Terms used in this Amendment with initial capital letters
but not separately defined in this Amendment shall have the meanings ascribed to
them in the Operating Agreement.
b. The following additional defined terms are added to Section
1.1 of the Operating Agreement:
"Numerex Loan" shall mean any loan made to the Company by or
on behalf of Numerex pursuant to Section 4.8, including all interest accrued
thereon.
"Prime Rate" shall mean the Prime Rate reported from time to
time in The Wall Street Journal under "Money Rates" as of the relevant date(s),
such rate to change as and when such reported rates change.
3. Business Plan.
a. The defined term "Initial Business Plan" set forth in
Section 1.1 of the Operating Agreement is hereby deleted in its entirety. All
references in the Operating Agreement to the term "Initial Business Plan" are
hereby deleted. All references in the Operating Agreement to the "Initial or
Modified Business Plan" shall hereafter be references to the Modified Business
Plan.
b. The Members hereby adopt the business plan attached hereto
as Exhibit 1 as the business plan for the Company for the period beginning on
November 1, 1999 and continuing through and including November 1, 2004. The term
"Modified Business Plan" as set forth in Section 1.1 of the Operating Agreement
shall mean the business plan attached hereto as Exhibit 1.
4. Class III Shares. Section 3.1.4 of the Operating Agreement is hereby
deleted in its entirety. Pursuant to the terms of the Company's option plan, the
Company granted to certain of its employees (the "Option Holders") options to
acquire Class III Shares. No Class III shares have been issued. Numerex is in
the process of preparing to offer to exchange such options for options to
acquire shares of the capital stock of Numerex. The parties intend that, upon
receiving the consent of the Option Holders to such exchange, there will be no
outstanding rights to acquire Class III Shares. All references in the Operating
Agreement to "Class III Members" and "Class III Shares" are hereby deleted.
5. Capital Accounts; Capital Contributions; Numerex Loans.
a. The defined term "Additional Capital Contribution" set
forth in Section 1.1 of the Operating Agreement is hereby deleted in its
entirety. The term "additional Capital Contribution" shall be substituted for
the term "Additional Capital Contribution" wherever in the Operating Agreement
the term "Additional Capital Contribution" appears.
- 2 -
<PAGE>
b. Simultaneous with the execution and delivery of this
Agreement, Numerex shall transfer to the Company pursuant to the Contribution
Agreement, attached hereto as Exhibit 3, the assets described therein.
c. Section 4.4 of the Operating Agreement is hereby deleted in
its entirety and the following is inserted in lieu thereof:
"4.4 Negative Capital Accounts. No Member shall be required to
pay to the Company or to any other Member any deficit or
negative balance which may exist from time to time in such
Member's Capital Account."
d. Section 4.5 of the Operating Agreement is hereby deleted in
its entirety and the following is inserted in lieu thereof.
"4.5 Company Capital. No Member shall be paid interest on any
Capital Contribution to the Company or on such Member's
Capital Account, and no Member shall have any right to demand
the return of such Member's Capital Contribution (except upon
dissolution of the Company pursuant to Article XIV), or to
cause a partition of the Company's assets."
e. Schedule A to the Operating Agreement is hereby deleted in
its entirety and Schedule A attached hereto is substituted in lieu thereof.
Schedule 4.6(a) to the Operating Agreement is hereby deleted in its entirety and
Schedule 4.6(a) to this Amendment is inserted in lieu thereof. The reference in
Section 3.1.7 to the license described in Schedule 4.6(a)(v) shall be deemed to
be a reference to the license (or sublicense) owned by Uplink relating to
gateway router and radio module technologies. In Section 12.17(iv), the words
"(or the Agreed Value contributed to the Company pursuant to footnote 4 of
Schedule 4.6(a), if applicable)" are hereby deleted.
f. The parties acknowledge and agree that, as of the date of
this Amendment, they have made the respective capital contributions to the
Company set forth on Schedule B attached hereto.
g. As part of its Capital Contributions to the Company
referenced in Section 5.f. of this Amendment, the Class I Member shall,
simultaneously with its execution of this Amendment, execute and deliver to the
Company a promissory note substantially in the form attached hereto as Exhibit 2
(the "Promissory Note"). The Promissory Note shall evidence the Class I Member's
obligation to contribute cash to the Company on the terms and conditions set
forth therein.
h. Section 4.7(a) of the Operating Agreement is hereby deleted
in its entirety and the following is inserted in lieu thereof:
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<PAGE>
"(a) Class I Member. Except as provided in Section
4.7(c), the Class I Member shall not be required to
make any additional contribution to the capital of
the Company after October 31, 1999."
i. Section 4.7(b) of the Operating Agreement is hereby deleted
in its entirety and the following is inserted in lieu thereof:
"(b) Class II Member. Except as provided in Section
4.7(c), the Class II Member shall not be required to
make any additional contribution to the capital of
the Company after October 31, 1999."
j. The first sentence of Section 4.7(c) of the Operating
Agreement is hereby deleted and the following is inserted in lieu thereof:
"(c) After November 1, 2002, and after Numerex has
satisfied its obligations set forth in Section 4.8,
the Company shall make calls for any additional
Capital Contributions pursuant to the approved
Budget."
k. A new Section 4.8 is added to the Operating Agreement as
follows:
"4.8 Numerex Loans. In the event that the Board
reasonably determines from time to time that the
Company requires additional cash for operations,
Numerex shall make one or more loans to the Company
in the aggregate amount of up to $5,500,000. If the
Board reasonably determines that the Company requires
additional cash for operations after such time as
Numerex shall have made Numerex Loans in the
aggregate amount of $5,500,000, Numerex shall
thereafter have the right, but not the obligation, to
make one or more additional loans to the Company.
Each loan made by Numerex to the Company after
November 5, 1999, other than any cash advance made
pursuant to the terms of the Promissory Note, shall
constitute a Numerex Loan. Each Numerex Loan shall
bear interest at the Prime Rate commencing on the
date such Numerex Loan was made. Until such time as
the entire principal amount of all Numerex Loans,
including all interest accrued thereon, is repaid to
Numerex in accordance with Section 6.2(a), the
outstanding principal amount of all such Numerex
Loans shall bear interest cumulatively at the Prime
- 4 -
<PAGE>
Rate, compounded quarterly. In no event shall any
distributions be made pursuant to Article VI, until
such time as all Numerex Loans shall have been repaid
in full."
6. Uplink Loan. Section 5.1.5 of the Operating Agreement is hereby
deleted.
7. Distributions. Section 6.2(a) of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(a) As and when determined by the Board, Net Cash
shall be distributed not later than the thirtieth
(30th) day following the close of each quarter to the
Members in proportion to their respective Percentage
Interests in the Company."
8. Actions by Board; Committees; Delegation of Authority and Duties.
a. The last sentence of Section 7.2.1 is deleted, and the
following is inserted in lieu thereof:
"Notwithstanding anything in this Agreement to the
contrary, the following actions shall require the
prior approval of at least one Class II Manager,
provided, that, in the case of Sections 7.2.1(c),
(d), (f) and (q) below, the consent of the Class II
Manager shall not be unreasonably withheld,
conditioned or delayed."
b. Section 7.2.1(k) is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"(k) adopting a new business plan or making any
material change to the Modified Business Plan."
c. Section 7.2.1(n) is hereby deleted.
d. Section 7.2.1(q) is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"(q) appointment of the independent public
accountants, which, shall be a nationally recognized
accounting firm, or such other accounting firm as is
mutually acceptable to the members."
9. Schedule 12.3 to the Operating Agreement is hereby deleted in its
entirety and Schedule 12.3 attached hereto is inserted in lieu thereof.
- 5 -
<PAGE>
10. Put Rights. Section 12.13 of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"At any time after November 1, 2002, and until
November 1, 2004, the Class II Member may request
(the "Initial Request"), on one occasion, that the
Company undertake an initial public offering ("IPO").
In addition, after November 1, 2004, the Class II
Member may request (the "Second Request"), on one
occasion, that the Company undertake an IPO. Such
request(s) shall be presented to the Company and be
in the form of a letter of intent or similar proposal
from an investment banking firm (and approved by that
firm's commitment committee(s) for IPO selection)
with a national reputation which expresses a
willingness to conduct an IPO on the Company's behalf
as a firm commitment underwriting, which would
include shares to be issued by the Company and sold
by Class I and Class II Members as selling
shareholders. In the event that the Class I Member
elects not to proceed with the IPO pursuant to the
First Request or the Second Request, for a period of
six months commencing on the date of such request,
the Class II Member shall have the right to require
that the Class I Member purchase all or a portion of
its Outstanding Shares by delivering notice to the
Class I Member of the exercise of such right ("Put
Notice"). In the event that the Class II Member
timely delivers the Put Notice, the Class I Member
shall purchase for cash the Class II Member's
Outstanding Shares specified in the Put Notice, for a
price equal to (a) the Fair Market Value multiplied
by (b) a fraction, the numerator of which is the
number of Class II Shares subject to the Put Notice
and the denominator of which is the total number of
Outstanding Shares, provided, that, in no event shall
the aggregate purchase price paid by the Class I
Member for all of the outstanding Class II Shares
exceed $17.00 million. If the Class I Member
purchases some or all of the Class II Shares pursuant
to this Section 12.13 and the Company subsequently
completes an IPO within one year of such purchase,
then the Class I Member shall pay to the Class II
Member an amount equal to the difference, if any,
between the net price per share realized by the
Company in the IPO and the price
- 6 -
<PAGE>
per share paid by the Class I Member to the Class II
Member, multiplied by the number of shares purchased
by the Class I Member from the Class II Member
pursuant to this Section 12.13.
11. Failure to Achieve Goals. The first paragraph of Section 12.17 is
hereby deleted and the following is inserted in lieu thereof:
"If the Company either (A) has not achieved
$9,780,500 of "service revenue cumulative" (as set
forth on Table 8 of the Modified Business Plan) by
November 1, 2002, (B) has losses in excess of
$13,648,750 of "income before taxation cumulative"
(as set forth on Table 8 of the Modified Business
Plan) by November 1, 2002, or (C) becomes insolvent
or bankrupt at any time during the first three years
after the date hereof, then, at Numerex's election,
BellSouth may, as its sole remedy, either (a) put all
of the outstanding Class II Shares to the Class I
Member for $17.00 million, or (b) take the actions
set forth below."
12. Third Party Investment. A new Section 12.21 is hereby added to the
Operating Agreement as follows:
"12.21 Third Party Investment. The Board may after
the date of this Amendment seek to identify one or
more third parties expressing an interest in making a
strategic investment (the "Third Party Investment")
of new capital in the Company in exchange for Shares
representing up to fifteen percent (15%) of the
Percentage Interests, and to negotiate with such
party or parties the terms of such Third Party
Investment. Notwithstanding anything to the contrary
set forth in Section 7.2.1 of the Operating
Agreement, BellSouth shall not unreasonably withhold,
condition or delay its consent to any Third Party
Investment proposed by the Board (whether or not the
proposed investor is a Prohibited Transferee) unless
BellSouth's Percentage Interest would be less than
thirty-four percent (34%) after giving effect to such
Third Party Investment."
- 7 -
<PAGE>
13. Liquidation and Termination.
a. Section 14.2(c) of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(c) the liquidator shall pay, satisfy or discharge
from Company funds all of the debts, liabilities and
obligations of the Company (including, without
limitation, all Numerex Loans and all expenses
incurred in liquidation) or otherwise make adequate
provision for payment and discharge thereof
(including, without limitation, the establishment of
a cash escrow fund for contingent liabilities in such
amount and for such term as the liquidator may
reasonably determine."
b. Section 14.2(e)(iii) of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(iii) after allocations of Profits and Losses have
been made pursuant to Article VI to pay to the
Members the amounts of the remaining positive
balances in their Capital Accounts (determined as of
the date of such distribution);"
14. Deficit Capital Accounts. Section 14.3 of the Operating Agreement
is hereby deleted in its entirety and the following is inserted in lieu thereof:
"14.3 Deficit Capital Accounts. No Member shall have
any obligation to restore a deficit balance, if any,
in its Capital Account in the event of the occurrence
of an event of dissolution pursuant to Section 14.1."
15. Notices. The reference to Blank Rome Comisky & McCauley LLP and the
accompanying address is hereby deleted and the following is inserted in lieu
thereof:
"Arnold & Porter
555 12th Street, N.W.
Washington, D.C. 20004
Attn: Richard E. Baltz, Esq."
The address for notices for BellSouth Wireless, Inc. set forth in the
Operating Agreement is hereby deleted and the following is inserted in lieu
thereof:
BellSouth Wireless, Inc.
Suite 7H
1100 Peachtree Street
Atlanta, Georgia 30309
Attn: John J. Jenkins
Fax: 404-249-6756
- 8 -
<PAGE>
16. Binding Effect. Subject to the restrictions set forth in this
Amendment, this Amendment is binding on and inures to the benefit of the parties
and their respective heirs, legal representatives, successors, and permitted
assigns.
17. Governing Law; Severability. THIS AMENDMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AMENDMENT TO THE LAWS OF ANOTHER JURISDICTION. In
the event of a direct conflict between the provisions of this Amendment and any
provision of the Certificate or any mandatory provision of the Act or (to the
extent such statute is incorporated into the Act, the Corporation Act), the
applicable provision of the Certificate, the Act or the Corporation Act shall
control. If any provision of this Amendment or the application thereof to any
Person or circumstance is held invalid or unenforceable to any extent, the
remainder of this Amendment and the application of that provision to other
Persons or circumstances is not affected thereby and that provision shall be
enforced to the greatest extent permitted by law.
18. Further Assurances. In connection with this Amendment and the
transactions contemplated hereby, each party hereto shall execute and deliver
any additional documents and instruments and perform any additional acts that
may be necessary or appropriate to effectuate and perform the provisions of this
Amendment and those transactions.
19. Neutral Construction. The parties have negotiated this Amendment
and all of the terms and conditions contained in this Amendment in good faith
and at arms' length, and each party has been represented by counsel during such
negotiations. No term, condition, or provision contained in this Amendment shall
be construed against any party or in favor of any party (i) because such party
or such party's counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (ii) because of any presumption as
to any inequality of bargaining power between or among the parties. Furthermore,
all terms, conditions, and provisions contained in this Amendment shall be
construed and interpreted in a manner which is consistent with all other terms,
conditions, and provisions contained in this Amendment.
20. Arbitration. All claims, demands, disputes, controversies,
differences, or misunderstandings between the parties arising out of, or by
virtue of, this Amendment shall be submitted to and determined by arbitration in
accordance with this Section. In the event of such a claim, demand, dispute,
controversy, difference, or misunderstanding, Numerex on the one hand, and
BellSouth and BellSouth Corporation on the other hand, shall each select one
arbitrator and shall together select a third arbitrator who is neutral and
unbiased, and who shall serve as the chairman of the panel. If the parties are
unable to agree upon the third arbitrator, or if one of the parties is unable to
or fails to select an arbitrator in accordance with this Section, the American
Arbitration Association ("AAA") shall be designated by either party to appoint
such arbitrator(s) to arbitrate the
- 9 -
<PAGE>
matter in accordance with this Section. The matter shall be arbitrated under the
rules of the AAA applicable to commercial arbitrations then obtaining, such
arbitration to be held in Washington, D.C. At any time before a decision of the
arbitration panel has been rendered, the parties may resolve the dispute by
settlement. The decision of a majority of arbitrator(s) shall be the award of
the panel of arbitrators and shall be made in writing setting forth the award,
the reasons for the decision and such award shall be binding and conclusive on
all parties, shall not be appealable and may include a finding for payment of
the costs of such arbitration. Judgment of a court of competent jurisdiction may
be entered upon the award and may be enforced as such in accordance with the
provisions of the award. This Amendment to arbitrate is specifically enforceable
by the parties to this Amendment.
21. Counterparts and Effectiveness. This Amendment may be executed in
several counterparts, each of which shall be treated as originals for all
purposes, and all so executed shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all the parties are not signatory to
the original or the same counterpart. The execution of this Amendment by
facsimile signature shall be sufficient for all purposes and shall be binding on
any party who so executes.
22. Ratification. Except as modified hereby, the Operating Agreement,
and its terms and provisions, are hereby ratified and affirmed, and shall remain
in full force and effect.
23. Administrative Matters. The parties hereby acknowledge and confirm
the following, which shall constitute a separate agreement and not an amendment
to the Operating Agreement:
a. Gordon Ray and Chuck McNew have resigned as Class I
Managers and officers of the Company. The Class I Member has designated Andrew
J. Ryan and Stewart Drennan as the successor Class I Managers.
b. The Chief Operating Officer of the Company is Stewart
Drennan. The Company has agreed to pay Mr. Drennan an annual salary of $150,000.
c. The Vice President - Finance of the Company is Peter Quinn.
The Company has agreed to pay Mr. Quinn an annual salary of $120,000.
d. The Company's independent accountant is Grant Thornton,
LLP.
IN WITNESS WHEREOF, following adoption of this Amendment by the Board,
the Members and the other parties have executed this Amendment as of the date
first set forth above.
BellSouth Wireless, Inc. (the Class II Member)
By: \s\ John J. Jenkins
----------------------------
Name: John J. Jenkins
Title: Vice President
- 10 -
<PAGE>
Numerex Corp. (the Class I Member)
By: \s\ Stratton J. Nicolaides
----------------------------
Name: Stratton J. Nicolaides
Title: Chief Operating Officer
Cellemetry LLC (the Company)
By: \s\ Peter Quinn
-----------------------------
Name: Peter Quinn
Title: Vice President, Finance
<PAGE>
<TABLE>
<CAPTION>
Schedule A
- -------------------------------------------------------------------------------------------------------
Additional
Capital Capital Class I Class II Percentage
Members' Names and Addresses Contributions Contributions Shares Shares Interest
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Numerex Corp. $23,000,000 $0 540,000 60.00%
100 Four Falls Corporate Center,
Suite 407,
Route 23 and Woodmont Road,
West Conshohocken, PA 19428-2961
- -------------------------------------------------------------------------------------------------------
BellSouth Wireless, Inc., $15,333,333 $0 360,000 40.00%
Suite 800
1100 Peachtree Street
Atlanta, GA 30309
- -------------------------------------------------------------------------------------------------------
</TABLE>
- 12 -
<PAGE>
Schedule B
Capital Contributions of Class I Member
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Agreed Value of Capital
Capital Contribution Contribution
- -------------------------------------------------------------------------------------------------------
<S> <C>
1. Previous contributions by the Class I Member to the Capital of $20,189,000
the Company, including contribution of Uplink shares pursuant
to the Contribution Agreement
- -------------------------------------------------------------------------------------------------------
2. Termination of all outstanding options to acquire Class III $1,533,320
Shares in exchange for issuance of options to acquire shares of
the capital stock of Numerex
- -------------------------------------------------------------------------------------------------------
3. Obligations of the Class I Member under the Promissory Note $1,228,157
- -------------------------------------------------------------------------------------------------------
4. Cash contributed by Numerex pursuant to the terms of the $49,523
Contribution Agreement
- -------------------------------------------------------------------------------------------------------
Total $23,000,000
- -------------------------------------------------------------------------------------------------------
</TABLE>
Exhibit 99.3
NUMEREX CORP.
Terms of Convertible Preferred Stock, Series A
1. Designation. The designation of this Series shall be Convertible
Preferred Stock, Series A (hereinafter referred to as the "Series A Preferred
Stock") and the number of shares constituting this Series shall be 30,000.
Shares of this Series shall have an initial preference value of $100.00 per
share (the "Stated Value") and no par value. The terms of the Series A Preferred
Stock, in the respect in which the shares of such Series may vary from shares of
any and all other series of the Corporation's Preferred Stock (the "Preferred
Stock"), are as follows:
2. Voting.
(a) Except as set forth in Sections 2(b) and 2(c) below and as
otherwise required by the Pennsylvania Business Corporation Law or by the
Articles of Incorporation of the Corporation, the shares of Series A Preferred
Stock shall not have voting rights.
(b) In addition to any vote or consent required by the
Pennsylvania Business Corporation Law, the Corporation will not, without the
affirmative votes or written consent of the holders of a majority of the votes
cast of holders of Series A Preferred Stock, voting as a single class (with each
share of Series A Preferred Stock being entitled to one vote):
(i) In any manner, including by amendment of its
Articles of Incorporation or By-laws, alter or change the powers, rights,
preferences or privileges or the qualifications, limitations or restrictions of
Series A Preferred Stock or otherwise amend the Articles of Incorporation or
By-laws of the Corporation to the extent such amendment will have or could have
an adverse effect on a holder of Series A Preferred Stock;
(ii) Create, authorize or issue a new class or series
(or change or reclassify a class or series of shares with junior, subordinate or
inferior rights into a class or series of shares) having rights, preferences or
privileges prior, superior or on parity with the shares of Series A Preferred
Stock or increase the rights, preferences, privileges or number of any class or
series having rights, preferences or privileges on dissolution that are prior,
superior or on parity with those of Series A Preferred Stock;
(iii) Increase or decrease the aggregate number of
authorized shares of Series A Preferred Stock; effect an exchange or
reclassification or create a right of exchange, of all or part of the shares of
Series A Preferred Stock into shares of another class; effect an exchange or
reclassification or create a right of exchange, of all or part of the shares of
another class or series into the shares of Series A Preferred Stock; change the
shares of all or part of Series A Preferred Stock into a different number of
shares of Series A Preferred Stock; or
(iv) Repurchase, redeem or otherwise acquire any
shares of the Corporation's capital stock, other than repurchases of Common
Stock not in excess of the greater
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<PAGE>
of 1,000,000 shares or the number of shares the Corporation may acquire with a
value not in excess of $3,000,000 during any 12 month period, provided that the
Corporation may make any such repurchase only if the Corporation, prior to any
such repurchase, has paid all accrued dividends on the Series A Preferred Stock,
except as authorized pursuant to Section 6 hereof.
(c) Whenever, at any time or times, dividends payable on the
shares of Series A Preferred Stock shall be in arrears in an amount equal to two
consecutive quarterly dividends on shares of the Series A Preferred Stock at the
time outstanding, the holders of Series A Preferred Stock shall have the
exclusive right, voting separately as a class, to elect one director of the
Corporation at the Corporation's next annual meeting of shareholders and at each
subsequent annual meeting of shareholders. At elections for such director,
holders of Series A Preferred Stock shall be entitled to one vote for each share
held. Upon the vesting of such right of the holders of Series A Preferred Stock,
the maximum authorized number of members of the Board of Directors of the
Corporation shall automatically be increased by one. The rights of the holders
of the Series A Preferred Stock, voting separately as a class, to elect members
of the Board of Directors of the Corporation as aforesaid shall continue until
such time as all dividends accumulated on the Series A Preferred Stock shall
have been paid in full, at which time such right shall terminate, except as
herein or by law expressly provided, subject to re-vesting in the event of each
and every subsequent default of the character above mentioned.
Each director elected pursuant to this Section 2(c) shall
continue to serve as such director for the full term for which he shall have
been elected, notwithstanding that prior to the end of such term all dividends
accumulated on the Series A Preferred Stock shall have been paid in full. If the
office of the director elected by the holders of Series A Preferred Stock voting
as a class becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office, or otherwise, the holders of the Series A
Preferred Stock voting as a class may choose a successor who shall hold office
for the unexpired term in respect of which such vacancy occurred. Whenever the
term of office of the director elected by and the special voting powers vested
in the holders of Series A Preferred Stock as provided in this Section 2(c)
shall have expired, the number of directors shall be such number as may be
provided for in the Articles of Incorporation or Bylaws irrespective of any
increase made pursuant to the provisions of this section.
This Section 2(c) shall terminate upon the transfer by
BellSouth Wireless, Inc. of the Series A Preferred Stock to a person other than
a Permitted Transferee.
3. Dividends.
(a) General Dividend Obligation. Before any dividend or other
distribution is made with respect to the Common Stock or any other capital stock
ranking junior to the Series A Preferred, the Corporation shall pay to the
holders of Series A Preferred Stock out of the assets of the Corporation at any
time legally available for the payment of dividends under the provisions of the
Pennsylvania Business Corporation Law, preferential dividends at the times and
in the amounts provided for under this Section 3.
2
<PAGE>
(b) Cumulation of Dividends. Dividends on each share of Series
A Preferred Stock shall be cumulative from the "Date of Issuance" (as defined
below), whether or not declared, at the rate and in the manner prescribed by
Section 3(c) below, from the applicable Date of Issuance through the date on
which such shares of Series A Preferred Stock are converted pursuant to Section
5 herein. For purposes of this Section 3, the date on which the Corporation
shall initially issue any share of Series A Preferred Stock shall be deemed to
be the "Date of Issuance" of such share of Series A Preferred Stock, regardless
of any transfer of such share made on stock records maintained by or for the
Corporation.
(c) Payment of Dividends. Dividends shall cumulate on each
share of Series A Preferred Stock at the simple annual rate of eight percent
(8%) of the Stated Value per share of Series A Preferred Stock commencing with
the Date of Issuance of such share and shall be payable when, as and if declared
by the Board of Directors of the Corporation, in equal quarterly payments on
each January 31, April 30, July 31 and October 31, commencing October 31, 1999.
If such cumulative dividends relating to any previous or current fiscal year, at
the rate specified above, shall not have been paid in full, or declared and a
sum sufficient for such full payment thereof set apart, that deficiency shall
first be fully paid before any dividend or other distribution shall be paid on
or declared and set apart on Common Stock or any other stock ranking junior to
Series A Preferred Stock. Dividends will cease to accrue on shares of Series A
Preferred Stock which are converted into shares of Class A Common Stock.
(d) Distribution of Partial Dividend Payments. If at any time
the Corporation shall pay less than the total amount of all current and
cumulated dividends on all outstanding shares of the Corporation's Preferred
Stock at the time of such payment, such payment shall be distributed among the
holders of Preferred Stock so that the holder of each such share of Preferred
Stock shall receive a partial dividend with respect to such share equal to the
total current and cumulated dividends on such share multiplied by a fraction,
the numerator of which is the total amount of the partial dividend payments to
be made on all Preferred Stock in connection with this Section 3(d) and the
denominator of which is the total amount of current and cumulated dividends due
on all such outstanding shares of Preferred Stock in connection with this
Section 3(d) at the time of such payment.
4. Preferences on Liquidation, etc.
(a) In the event of any:
(i) consolidation, share exchange or merger of the
Corporation with or into another entity;
(ii) sale, transfer or other disposition of all or
substantially all of the Corporation's assets, other than a divestiture or
spin-off of a subsidiary of the Corporation existing as of the Date of Issuance
(excluding Cellemetry LLC or Uplink Security, Inc. (or a subsidiary engaged in a
business similar to the business engaged in by Cellemetry LLC or Uplink
Security, Inc. as of the Date of Issuance));
3
<PAGE>
(iii) the voluntary or involuntary dissolution,
liquidation, or winding up of the affairs of the Corporation; or
(iv) division or conversion of the Corporation as
contemplated by the Pennsylvania Business Corporation Law;
the holders of the shares of the Series A Preferred Stock shall have the option
to receive out of the assets of the Corporation available for distribution to
its shareholders, for each such share of Series A Preferred Stock, $100.00 (as
such amounts are adjusted for stock splits, stock combinations and stock
dividends), plus any cumulated but unpaid dividends thereon through the date of
such distribution (such respective amounts for each share of Series A Preferred
Stock are referred to herein as the "Preference Amount"), prior to any payment
or distribution to the holders of Common Stock and any other capital stock
ranking junior to Series A Preferred Stock. After payment to the holders of
Series A Preferred Stock of the Preference Amount to which such holders are
entitled as above set forth, the holders of shares of Series A Preferred Stock
shall be entitled, together with the holders of the Corporation's Common Stock,
to receive their pro rata share of the remaining assets of the Corporation (or
such other consideration as is available for distribution as a result of such
event) as if such shares of Series A Preferred Stock rank on a parity with
Common Stock.
(b) In the event the assets of the Corporation available for
distribution to shareholders upon the occurrence of any event listed in Section
4(a) above, shall be insufficient to pay in full the amounts payable with
respect to the Series A Preferred Stock and any other shares of Preferred Stock
of the Corporation ranking on a parity with the Series A Preferred Stock as to
the distribution of assets, the holders of the Series A Preferred Stock and the
holders of such other Preferred Stock shall share ratably in any distribution of
assets of the Corporation in proportion to the full respective preferential
amounts to which they are entitled.
(c) If outstanding shares of Series A Preferred Stock are
subdivided into a greater number of shares of Series A Preferred Stock or if
shares of Series A Preferred Stock are issued as stock dividends, the Preference
Amount in effect immediately prior to each such subdivision or stock dividend
shall, simultaneously with the effectiveness of such subdivision or stock
dividend, be proportionately reduced, and, conversely, in case outstanding
shares of Series A Preferred Stock shall be combined into a smaller number of
shares of Series A Preferred Stock, the Preference Amount in effect immediately
prior to each such combination, shall, simultaneously with the effectiveness of
such combination, be proportionately increased.
(d) In the event that assets other than cash, stock or
securities are to be distributed to the holders of Series A Preferred Stock
pursuant to Sections 4(a) and (b), the amount received by such holders upon
receipt of those assets shall be deemed to be the fair value of such assets as
determined in good faith by the Board of Directors of the Corporation and in
accordance with good financial practice. In the event that shares of stock or
other securities are delivered to holders of Series A Preferred Stock pursuant
to Sections 4(a) and (b) above, fair value shall mean per share or unit of such
security, at any date, the average of the daily closing prices for the 20
consecutive trading days ending not later than the day in question. The closing
4
<PAGE>
price for each day shall be the reported last sale price regular way or, in case
no such reported sale takes place on such day, the average of the reported
closing bid and asked prices regular way, in either case on the principal
national securities exchange on which the shares of stock or other securities
delivered to the holders of Series A Preferred Stock are listed or admitted to
trading or, if not listed or admitted to trading on any national securities
exchange, on the National Association of Securities Dealers Automated Quotation
National Market System or, if the shares of stock or other securities delivered
to the holders of Series A Preferred Stock are not listed or admitted to trading
on any national securities exchange or quoted on such National Market System,
the average of the closing bid and asked prices in the over-the-counter market
as furnished by any principal national securities exchange member firm selected
from time to time by the Board of Directors for that purpose. If no market
prices are reported, then the market price shall be the fair value as determined
in good faith by the Board of Directors of the Corporation and in accordance
with good financial practice. In the event such securities are subject to an
agreement or other restriction limiting their free marketability, the loss of
that marketability shall be considered by the Board of Directors in making its
good faith determination of fair value.
5. Conversion. The holders of shares of Series A Preferred Stock shall
have the following conversion rights:
(a) Right to Convert. Subject to the terms and conditions of
this Section 5, the holders of shares of Series A Preferred Stock shall have the
right, at their option, at any time after November 1, 2003, to convert any such
shares of Series A Preferred Stock into such number of fully paid and
non-assessable shares of Class A Common Stock as is obtained by (A) multiplying
the number of shares of Series A Preferred Stock to be so converted by $100 and
(B) dividing the obtained product by the "Conversion Price," which price shall
initially be $4.80 for each share of Series A Preferred Stock, and which
Conversion Price may be adjusted from time to time pursuant to the provisions of
this Section 5; provided, however, that upon any event giving rise to the
obligation of the Corporation to pay the Preference Amount or the Redemption
Price, as the case may be, the right of conversion shall terminate at the close
of business on the last full business day next preceding the date fixed for
payment of the Preference Amount or the Redemption Price, as the case may be.
Such rights of conversion shall be exercised by the holder thereof by giving
written notice that the holder elects to convert a stated number of shares of
Series A Preferred Stock into Class A Common Stock and by surrender of a
certificate or certificates for the shares so to be converted to the Corporation
at its principal office (or such other office or agency of the Corporation as
the Corporation may designate by notice in writing to the holders of Series A
Preferred Stock) at any time during its usual business hours on the date set
forth in such notice, together with a statement of the name or names (with
address) in which the certificates for shares of Class A Common Stock shall be
issued.
(b) Early Conversion. Subject to the terms and conditions of
this Section 5, the holders of shares of Series A Preferred Stock shall have the
right, at their option to convert shares of Series A Preferred Stock into Class
A Common Stock prior to November 1, 2003, upon the terms and in the manner
prescribed by Section 5(a) above: (A) upon the announcement of a transaction or
event that would result in a "Change of Control" (as defined below) or (B)
during the one year period beginning November 1, 2002 and ending October 31,
2003, if at any time
5
<PAGE>
from the Date of Issuance to the conversion date, the closing price of the
Corporation's Common Stock equals or exceeds an average of $7.00 per share for
any 20 trading days in any 60 day period. For purposes of this Section 5(b), a
"Change of Control" shall be deemed to occur if:
(i) after the Date of Issuance, any person, excluding
employee benefit plans of the Corporation, becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Securities Exchange Act of 1934),
directly or indirectly, of securities of the Corporation representing 25% or
more of the combined voting power of the Corporation's then outstanding
securities, provided, however, that such an acquisition of beneficial ownership
representing between 25% and 49%, inclusive, of such voting power shall not be
considered a Change in Control if the Board of Directors of the Corporation
approves such acquisition either prior to or immediately after its occurrence;
(ii) the Corporation consummates a merger,
consolidation, share exchange, or other reorganization or transaction of the
Corporation (a "Fundamental Transaction") with any other corporation, other than
a Fundamental Transaction that results in the voting securities of the
Corporation outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 51% of the combined voting power immediately
after such Fundamental Transaction of (x) the Corporation's outstanding voting
securities or (y) the surviving entity's outstanding voting securities;
(iii) the shareholders of the Corporation approve a
plan of complete liquidation or winding-up of the Corporation or an agreement
for the sale or disposition (in one transaction or a series of transactions) of
all or substantially all of the Corporation's assets, other than a divestiture
or spin-off of a subsidiary of the Corporation existing as of the Date of
Issuance (excluding Cellemetry LLC or Uplink Security, Inc. (or a subsidiary
engaged in a business similar to the business engaged in by Cellemetry LLC or
Uplink Security, Inc. as of the Date of Issuance)); or
(iv) any event or series of events results in the
directors on the Board of Directors who were directors prior to the event or
series of events (or directors nominated by such directors) ceasing to
constitute a majority of the Board of Directors of the Corporation or of any
parent of or successor to the Corporation.
Notwithstanding anything to the contrary above, a divestiture
or spin-off of Cellemetry LLC or Uplink Security, Inc. (or a subsidiary engaged
in a business similar to the business engaged in by Cellemetry LLC or Uplink
Security, Inc. as of the Date of Issuance) shall constitute a Change in Control.
(c) Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in Section 5(a)
above, which shall be accompanied by surrender of the certificate or
certificates for the share or shares of Series A Preferred Stock to be
converted, the Corporation shall issue and deliver, or cause to be issued and
delivered, to the holder, registered in such name or names as such holder may
direct, a certificate or certificates for the number of shares of Class A Common
Stock (excluding fractional shares) issuable upon
6
<PAGE>
the conversion of such share or shares of Series A Preferred Stock. To the
extent permitted by law, such conversion shall be deemed to have been effected
and the Conversion Price shall be determined as of the close of business on the
date on which such written notice shall have been received by the Corporation
and the certificate or certificates for such share or shares shall have been
surrendered as aforesaid, and at such time the rights of the holder of such
shares or shares of Series A Preferred Stock shall cease, and the person or
persons in whose name or names any certificate or certificates for shares of
Class A Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby.
(d) Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Series A Preferred Stock
into Class A Common Stock. If the number of shares of Series A Preferred Stock
represented by the certificate or certificates surrendered pursuant to Section
5(a) above exceeds the number of shares converted, the Corporation shall, upon
such conversion, execute and deliver to the holder thereof, at the expense of
the Corporation, a new certificate or certificates for the number of shares of
Series A Preferred Stock represented by the certificate or certificates
surrendered which are not to be converted. If any fractional interest in a share
of Class A Common Stock would, except for the provisions of the first sentence
of this Section 5(d), be delivered upon any such conversion, the Corporation, in
lieu of delivering the fractional share thereof, shall pay the current market
price (as provided in Section 5(e)(viii) below) of such fractional share in cash
as reasonably determined by the Board of Directors of the Corporation.
(e) Adjustment of Conversion Price Upon Issuance of Common
Stock. Except as provided in Section 5(g) below, whenever the Corporation shall
issue or sell, or is, in accordance with Sections 5(e)(i) - (e)(viii) below,
deemed to have issued or sold, any shares of Common Stock for a consideration
per share less than the current market price per share (determined as provided
in Section 5(e)(viii) below) of the Common Stock in effect immediately prior to
the time of such issue or sale, then the Conversion Price in effect immediately
prior to the time of such issue or sale shall be reduced by multiplying such
Conversion Price by a fraction of which the numerator shall be the number of
shares of Common Stock outstanding immediately before such issue or sale plus
the number of shares of Common Stock which the aggregate of the offering price
of the total number of additional shares of Common Stock being issued or sold
would purchase at such current market price and the denominator shall be the
number of shares of Common Stock outstanding immediately before such issue or
sale plus the number of additional shares of Common Stock being issued or sold.
No adjustment of the Conversion Price shall be made in an
amount less than $.01 per share, and any such lesser adjustment shall be carried
forward and shall be made at the time and together with the next subsequent
adjustment which together with any adjustments so carried forward shall amount
to $.01 per share or more.
For purposes of this Section 5(e), the following Sections
5(e)(i) through (e)(viii), shall also be applicable:
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(i) Issuance of Rights or Options. Except as limited
by Section 5(g) below, in case at any time the Corporation shall in any manner
grant after the date hereof (whether directly or by assumption in a merger or
otherwise) any rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (such rights or options being herein called
"Options") whether or not such Options are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
Options (determined by dividing (i) the total amount, if any, received or
receivable by the Corporation as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Corporation upon the exercise of all such Options, plus, in the case of such
Options which relate to "Convertible Securities" (as defined in Section 5(e)(ii)
below), the aggregate amount of additional consideration, if any, payable upon
the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of such Options)
shall be less than the current market price per share of the Common Stock in
effect immediately prior to the time of the granting of such Options, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options and thereafter shall be deemed to be outstanding. Except as
otherwise provided in Section 5(e)(iii) below, no adjustment of the Conversion
Price previously adjusted in accordance with the foregoing shall be made upon
the actual issue of such Common Stock or of such Convertible Securities upon
exercise of such Options or upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. In case the
Corporation shall in any manner issue (whether directly or by assumption in a
merger or otherwise) or sell any stock or securities convertible or exchangeable
for Common Stock (such stock or securities being hereafter referred to as
"Convertible Securities"), whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per share
for which Common Stock is issuable upon such conversion or exchange (determined
by dividing (i) the total amount received or receivable by the Corporation as a
consideration for the issue for sale of such Convertible Securities, plus the
minimum aggregate amount of additional consideration, if any, payable to the
Corporation upon the conversion or exchange thereof, by (ii) the total maximum
number of shares of Common Stock issuable upon the conversion or exchange of all
such Convertible Securities) shall be less than the current market price per
share of the Common Stock in effect immediately prior to the time of such issue
or sale, then for the purposes of adjusting the Conversion Price, the total
maximum number of shares of Common Stock issuable upon conversion or exchange of
all such Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that:
(1) except as otherwise provided in Section
5(e)(iii) below, no adjustment of the Conversion Price adjusted in accordance
with (ii) above, shall be made upon
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the actual issue of such Common Stock upon conversion or exchange of such
Convertible Securities; and
(2) if any such issue or sale of such
Convertible Securities is made upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of the Conversion Price have been
or are to be made pursuant to other provisions of this Section 5(e), no further
adjustment of the Conversion Price shall be made by reason of such issue or
sale.
(iii) Change in Option Price or Conversion Price. If
the purchase price provided for in any Option referred to in Section 5(e)(i)
above, the additional consideration, if any, payable upon the conversion or
exchange of any Convertible Securities referred to in Sections 5(e)(i) or (ii)
above, or the rate at which any Convertible Securities referred to in Sections
5(e)(i) or (ii) above are convertible into or exchangeable for Common Stock,
shall change at any time (other than under or by reason of provisions designed
to protect against dilution), the Conversion Price adjusted pursuant to this
Section 5(e) in effect at the time of such event shall forthwith be readjusted
to the Conversion Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such changed
purchase price, additional consideration or conversion rate, as the case may be,
at the time initially granted, issued or sold; and on the expiration of any such
Option or the termination of any such right to convert or exchange such
Convertible Securities, the Conversion Price then in effect hereunder shall
forthwith be increased to the Conversion Price which would have been in effect
at the time of such expiration or termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such expiration or
termination, never been issued, and the Common Stock issuable thereunder shall
no longer be deemed to be outstanding. If the purchase price provided for in any
such Option referred to in Section 5(e)(i) or the rate at which any Convertible
Securities referred to in Section 5(e)(ii) are convertible into or exchangeable
for Common Stock shall be reduced at any time under or by reason of provisions
with respect thereto designed to protect against dilution, then, in case of the
delivery of Common Stock upon the exercise of any such Option or upon conversion
or exchange of any such Convertible Securities, the Conversion Price then in
effect hereunder shall forthwith be adjusted to such respective amount as would
have been obtained had such Option or Convertible Securities never been issued
as to such Common Stock and had adjustments been made upon the issuance of the
shares of Common Stock delivered as aforesaid, but only if as a result of such
adjustment the Conversion Price then in effect hereunder is thereby reduced.
(iv) Stock Dividends. Except as otherwise provided in
Section 5(f) below, in case the Corporation shall declare a dividend or make any
other distribution upon any stock of the Corporation payable in Common Stock,
Options or Convertible Securities, any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
(v) Consideration for Stock. In case any shares of
Common Stock, Options or Convertible Securities shall be issued or sold for
cash, the consideration received therefor shall be deemed to be the amount
received by the Corporation therefor, without
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deduction therefrom of any expenses incurred or any underwriting commissions or
concessions paid or allowed by the Corporation in connection therewith. In case
any shares of Common Stock, Options or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the consideration other
than cash received by the Corporation shall be deemed to be the fair value of
such consideration as determined in good faith by the Board of Directors of the
Corporation, without deduction of any expenses incurred or any underwriting
commissions or concessions paid or allowed by the Corporation in connection
therewith. In case any Options shall be issued in connection with the issue and
sale of other securities of the Corporation, together comprising one integral
transaction in which no specific consideration is allocated to such Options by
the parties thereto, such Options shall be deemed to have been issued without
consideration.
(vi) Record Date. In case the Corporation shall take
a record of the holders of Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities, or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
(vii) Treasury Shares. The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation, and the disposition of any such shares shall
be considered an issue or sale of Common Stock for the purpose of this Section
5(e).
(viii) Current Market Price. For purposes of this
Section 5(e), the current market price per share of Common Stock on any day
shall be deemed to be the daily closing price on the trading day immediately
preceding such day, or if not a trading day, the immediately preceding trading
day. The closing price for each day shall be the reported last sale price
regular way or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in either case
on the National Association of Securities Dealers Automated Quotation National
Market System or, if the Common Stock is not quoted on such National Market
System, on the principal national securities exchange on which the Common Stock
is listed or admitted to trading or, if not quoted on such National Market
System or listed or admitted to trading on any national securities exchange, the
average of the closing bid and asked prices in the over-the-counter market as
furnished by any principal national securities exchange member firm selected
from time to time by the Board of Directors for that purpose. If no market
prices are reported, then the current market price shall be the fair value as
determined in good faith by the Board of Directors of the Corporation and in
accordance with good financial practice and as agreed to by the holders of the
then outstanding Series A Preferred Stock, voting as a class. In the event such
securities are subject to an agreement or other restriction limiting their free
marketability, the loss of that marketability shall be considered by the Board
of Directors of the Corporation in making its good faith determination of fair
value.
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(f) Subdivision or Combination of Stock. In case the
Corporation shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares, the Conversion Price in effect immediately
prior to such subdivision shall be proportionately reduced, and, conversely, in
case the outstanding shares of Common Stock of the Corporation shall be combined
into a smaller number of shares, the Conversion Price in effect immediately
prior to such combination shall be proportionately increased.
(g) Certain Issues of Common Stock Excepted. Anything
herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Conversion Price of Series A Preferred Stock in the
event of the issuance of Common Stock of the Corporation: (i) upon conversion of
any shares of Series A Preferred Stock at any time outstanding; (ii) in
connection with stock options granted to directors, officers or employees of the
Corporation or its subsidiaries under any stock option, stock purchase, stock
appreciation, or bonus plan adopted by the shareholders or directors of the
Corporation and shares of Common Stock (as adjusted pursuant to anti-dilution
provisions contained in such stock options or rights) issued to such directors,
officers and employees pursuant to such stock options or rights.
(h) Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each case the Corporation shall give written
notice thereof, by first class mail, postage prepaid, addressed to each holder
of Series A Preferred Stock at the last registered address of such holder as
shown on the books of the Corporation, which notice shall state the Conversion
Price resulting from such adjustment, setting forth in reasonable detail the
method of calculation and the facts upon which such calculation is based.
(i) Other Notices. In case at any time:
(i) the Corporation shall declare any dividend
on Common Stock payable in cash or stock or make any other distribution to the
holders of its Common Stock;
(ii) the Corporation shall offer for
subscription pro rata to the holders of Common Stock any additional shares of
capital stock of any class or other rights;
(iii) there shall be any capital reorganization
or reclassification of the capital stock of the Corporation, or a consolidation
or merger of the Corporation with, or a sale of all or substantially all its
assets to, another corporation or entity; or
(iv) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Corporation;
then, in any one or more of said cases, the Corporation shall give, by reputable
overnight courier, postage prepaid, addressed to each holder of Series A
Preferred Stock at the last registered address of such holder as shown on the
books of the Corporation, (a) at least 30 days prior written notice of the date
on which the books of the Corporation shall close or a record shall be taken for
such dividend, distribution or subscription rights or for determining the right
to vote in respect of any such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, and (b) in the case of any
such reorganization, reclassification,
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consolidation, merger, sale, dissolution, liquidation or winding up, at least 30
days prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto, and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
(j) Effect of Merger or Share Exchange. Notwithstanding the
provisions of Section 4(a) above, the holders of Series A Preferred Stock may
elect by notice given to the Corporation on or before the later of (x) the day
on which the holders of Common Stock of the Corporation approve the transaction
governed by Sections (j) or (k), and (y) the twentieth (20th) day following the
date of delivery or mailing to such holder of the last proxy statement relating
to the vote on the transaction by the holders of Common Stock of the
Corporation, to be governed by the provisions of this Section 5(j) in
transactions to which this subsection applies. In case the Corporation shall
enter into any consolidation, share exchange or merger of the Corporation with
or into another entity, or sell, transfer or otherwise dispose of all or
substantially all of the Corporation's assets, then, as part of such
consolidation, share exchange, merger, sale, transfer or other disposition,
provision shall be made so that the holders of Series A Preferred Stock shall
thereafter be entitled to receive upon conversion of such shares of Series A
Preferred Stock, the number of shares of stock or other securities or property
of the Corporation, or of the successor corporation resulting from such
consolidation, share exchange, merger, sale, transfer or other disposition, to
which a holder of Common Stock deliverable upon such conversion would have been
entitled on such consolidation, share exchange, merger, sale, transfer or other
disposition. In any such case, appropriate provision (as determined by
resolution of the Board of Directors of the Corporation) shall be made with
respect to the rights and interests thereafter of the holders of Series A
Preferred Stock, to the end that all the provisions hereof (including adjustment
provisions) shall thereafter be applicable, as nearly as reasonably practicable,
in relation to such stock or other securities or property; provided, however,
that such holders of Series A Preferred Stock shall not be entitled to receive
the consideration and distributions referenced in Section 4(a) above following
such transaction.
(k) Reorganization and Reclassification. In case of any
capital reorganization or any reclassification of the capital stock of the
Corporation, the holders of Series A Preferred Stock shall thereafter be
entitled to obtain (in lieu of the number of shares of Class A Common Stock
which such holders would have been entitled to receive upon conversion
immediately prior to such reorganization or reclassification) the shares of
stock of any class or series or other securities or property to which such
number of shares of Class A Common Stock would have been entitled at the time of
such reorganization or reclassification had such conversion occurred immediately
prior thereto. In case of any such capital reorganization or reclassification,
appropriate provision (as determined by resolution of the Board of Directors of
the Corporation) shall be made with respect to the rights and interests
thereafter of the holders of Series A Preferred Stock, to the end that all of
the provisions hereof (including adjustment provisions)
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shall thereafter be applicable, as nearly as reasonably practicable, in relation
to such stock or other securities or property.
(l) Determination by the Board of Directors. All
determinations by the Board of Directors of the Corporation under the provisions
of this Section 5 shall be made in good faith with due regard to the interests
of the holders of Series A Preferred Stock and the other holders of securities
of the Corporation and in accordance with good financial practice, and all
valuations made by the Board of Directors of the Corporation under the terms of
this Section 5 must be made with due regard to any market quotations of
securities involved in, or related to, the subject of such valuation and in
accordance with Section 4.
(m) Certain Events. If the Corporation issues any securities
and the provisions of this Section 5 are not strictly applicable to such
issuance or if strictly applicable would not fairly protect the rights of the
holders of Series A Preferred Stock in accordance with the essential intent and
principals of such provisions, then the Board of Directors of the Corporation in
good faith shall determine the adjustment, if any, of the Conversion Price in
the application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid. In no event shall any
such adjustment have the effect of increasing the Conversion Price as otherwise
determined pursuant to any of the provisions of this Section 5 except in the
case of a combination of shares of a type contemplated in Section 5(f) above and
then in no event to an amount larger than the Conversion Price as adjusted
pursuant to Section 5(f) above.
(n) No Dilution or Impairment. The Corporation will not, by
amendment of its Articles of Incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of Section 5 and in taking of all such action as may be
necessary or appropriate in order to protect the conversion privilege of the
holders of Series A Preferred Stock. Without limiting the generality of the
foregoing, the Corporation (a) will take all such action as may be necessary or
appropriate in order that the Corporation may validly and legally issue fully
paid and non-assessable shares of Class A Common Stock upon the conversion of
Series A Preferred Stock, (b) will not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Class A
Common Stock issuable after the action upon conversion of the Series A Preferred
Stock would exceed the total number of shares of Class A Common Stock then
authorized by the Corporation's Articles of Incorporation and available for the
purpose of issue upon such exercise, and (c) shall not at any time authorize or
issue any security which under the definition given in Section 5(s) below
constitutes "Common Stock" and which grants to its registered holders rights to
share in dividends or any other distributions of any kind at any time made by
the Corporation (including but not limited to liquidating distributions) which
have the right to the distribution of a greater amount per share than the amount
per share distributable on the Corporation's Common Stock on the date hereof or
which are in any respect more favorable than the corresponding rights
attributable to Common Stock on the date hereof.
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(o) Listing on Securities Exchanges, etc. The Corporation will
list on each principal national securities exchange (or Nasdaq National Market)
on which any Common Stock may at any time be listed, subject to official notice
of issuance upon the conversion of the Series A Preferred Stock, all shares of
Common Stock from time to time issuable upon the conversion of the Series A
Preferred Stock pursuant to this Section 5 and will maintain such listing as
long as any Common Stock is listed.
(p) Stock to be Reserved. The Corporation will at all times
reserve and keep available out of its authorized Class A Common Stock or its
treasury shares, solely for the purpose of issuance upon the conversion of the
Series A Preferred Stock as herein provided, such number of shares of Class A
Common Stock as shall then be issuable upon the conversion of all outstanding
Series A Preferred Stock. The Corporation covenants that all shares of Class A
Common Stock which shall be so issued shall be duly and validly issued and fully
paid and non-assessable and free from all taxes, liens and charges with respect
to the issue thereof, and, without limiting the generality of the foregoing, the
Corporation covenants that it will from time to time take all such action as may
be requisite to assure that the par value per share, if any, of the Class A
Common Stock is at all times equal to or less than the then applicable
Conversion Price. The Corporation will take all such action as may be necessary
to assure that all such shares of Class A Common Stock may be so issued without
violation of any applicable law or regulation, or of any requirements of any
national securities exchange upon which the Class A Common Stock of the
Corporation may be listed.
(q) Issue Tax. The issuance of certificates for shares of
Class A Common Stock upon conversion of Series A Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Corporation shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and deliver of any
certificate in a name other than that of the holder of Series A Preferred Stock
which is being converted.
(r) Closing of Books. The Corporation will at no time close
its transfer books against the transfer of any shares of Series A Preferred
Stock or of any shares of Class A Common Stock issued or issuable upon the
conversion of any shares of Series A Preferred Stock in any manner which
interferes with the timely conversion of such shares of Series A Preferred
Stock.
(s) Definition of Common Stock. As used in this Section 5, the
term "Common Stock" if not limited to a specific class thereof shall mean and
include either or both the Corporation's authorized Class A and Class B Common
Stock, any capital stock deemed common stock under the Pennsylvania Business
Corporation Law, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed sum or
percentage of such fixed sum in respect of the rights of the holders thereof to
participate in dividends or in the distribution of assets upon the voluntary or
involuntary liquidation, dissolution or winding up of the Corporation; provided
that the shares of Class A Common Stock issuable upon conversion of Series A
Preferred Stock or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets
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provided for in Section 5(k), shall include only shares designated as Class A
Common Stock on the day immediately following the filing of this instrument.
6. Redemption.
(a) The Corporation, at its option, may redeem all, but not
less than all, shares of Series A Preferred Stock at any time on or after
November 1, 2000, at the redemption prices per share set forth below, plus an
amount equal to accrued and unpaid dividends thereon (the "Redemption Price"):
Twelve month period Redemption Price
beginning November 1, per share
--------------------- ---------
2000......................................$140.834
2001.......................................211.667
2002.......................................299.334
(b) Notice of any redemption shall be given by reputable
overnight courier, postage prepaid, mailed not less than 15 nor more than 30
days prior to the date fixed for redemption to the holders of record of the
shares of Series A Preferred Stock to be redeemed, at their respective addresses
appearing on the books of the Corporation. Notice so mailed shall be
conclusively presumed to have been duly given whether or not actually received.
Such notice shall state: (i) the date fixed for redemption; (ii) the Redemption
Price; (iii) that the holder has the right to convert such shares into Common
Stock until the close of business on the redemption date; (iv) the
then-effective conversion price and the place where certificates for such shares
may be surrendered for conversion; (v) the place where certificates for such
shares are to be surrendered for payment of the Redemption Price; and (vi) that
after such date fixed for redemption the shares to be redeemed shall not accrue
dividends.
(c) At the option of the Corporation, if notice of redemption
is mailed as aforesaid, and if prior to the date fixed for redemption funds
sufficient to pay in full the Redemption Price are deposited in trust, for the
account of the holders of the shares to be redeemed, with a bank or trust
company named in such notice doing business in the City of Atlanta, State of
Georgia and having capital surplus and undivided profits of at least $50 million
(which bank or trust company also may be the transfer agent and/or paying agent
for the Series A Preferred Stock) notwithstanding the fact that any
certificates(s) for shares called for redemption shall not have been surrendered
for cancellation, on and after such date of deposit the shares represented
thereby so called for redemption shall be deemed to be no longer outstanding,
and all rights of the holders of such shares as shareholders of the Corporation
shall cease, except the right of the holders thereof to convert such shares in
accordance with the provisions of Section 5 at any time prior to the close of
business on the redemption date and the right of the holders thereof to receive
out of the funds so deposited in trust the Redemption Price, without interest,
upon such surrender of the certificate(s) representing such shares. Any funds so
deposited with such bank or trust company in respect of shares of Series A
Preferred Stock converted before the close of business on the redemption date
shall be returned to the Corporation upon such
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conversion. Any funds so deposited with such bank or trust company which shall
remain unclaimed by the holders of shares called for redemption at the end of
two years after the redemption date shall be repaid to the Corporation, on
demand, and thereafter the holder of any such shares shall look only to the
Corporation for the payment without interest, of the Redemption Price.
7. Board Observer Rights. The holders of Series A Preferred Stock shall
have the right, as a respective class, at all times to designate a person
reasonably acceptable to the Corporation to attend Board of Directors' meetings
as an invitee, who shall have all of the privileges and benefits of a director
of the Corporation except voting rights.
This Section 7 shall terminate upon the transfer by BellSouth Wireless,
Inc. of the Series A Preferred Stock to a person other than a Permitted
Transferee.
8. Transfer of Shares.
(a) Restriction on Transfers.
BellSouth shall not Transfer (as defined below) or attempt to
Transfer, or solicit any offer for the Transfer of, any Series A Preferred Stock
now owned by BellSouth or which BellSouth may at any time hereafter own, acquire
or be entitled to, except (i) in strict accordance with the provisions hereof
and (ii) after May 15, 2001 (unless the transferee is a Permitted Transferee, in
which case a Transfer may be made prior to such date). For purposes of this
Section 8, "Transfer" means a sale, assignment, transfer, gift, or other
disposition, or contract to do or permit any of the foregoing, whether
accomplished or entered into voluntarily or by operation of law.
(b) Permitted Transferees.
Notwithstanding Section 8(a) hereof, with the prior written
approval of the Corporation, BellSouth shall have the right to Transfer all of
the Series A Preferred Stock owned by BellSouth to any affiliate of BellSouth,
provided that as a condition to receiving such Series A Preferred Stock, such
affiliate agrees in writing to be bound by the terms and conditions hereof (the
"Permitted Transferees"). For purposes of this Section 8(b), "affiliate" shall
be defined as any entity that is controlled by BellSouth, of which BellSouth
holds more than fifty percent (50%) controlling interest, directly or through
wholly-owned subsidiaries.
(c) Non-Compliance.
In the event BellSouth shall Transfer or attempt to Transfer
any Series A Preferred Stock otherwise than in strict accordance with the
provisions hereof, such action shall be void and of no effect, and no dividends
or distributions of any kind whatsoever shall be paid by the Corporation in
respect of such Series A Preferred Stock (all such dividends and distributions
being deemed waived by BellSouth), and the voting rights of such Series A
Preferred Stock shall be suspended during the period commencing with BellSouth's
initial failure to comply with the provisions hereof and ending when (i)
BellSouth complies with the provisions of this Section 8,
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or (ii) the Corporation, based on the unanimous approval of the Board and its
sole discretion, agrees in writing to terminate such suspension and to permit
such Transfer.
(d) Triggering Event.
The receipt by BellSouth (sometimes referred to as a "Selling
Party") of a bona fide written offer ("Offer") subsequent to May 15, 2001, which
BellSouth desires to accept, to acquire all, but not less than all, of
BellSouth's Series A Preferred Stock ("Offered Shares") is a "Triggering Event"
with respect to BellSouth and the Permitted Transferees (BellSouth and all
Permitted Transferees collectively referred to as an "Affected Party").
(e) Notice of Occurrence of Triggering Event.
Within 15 days after the occurrence of a Triggering Event, the
Affected Party shall give notice of the occurrence ("Notice of Occurrence") to
the Corporation. Failure to give Notice of Occurrence shall neither prevent nor
relieve any of the parties from exercising their rights or satisfying their
obligations under this Section 8. If the Affected Party is a Selling Party, the
Notice of Occurrence shall include a copy of the Offer, stating the name of the
offeror ("Offeror") and the price ("Offer Price") and other terms ("Offer
Terms") of the Offer.
(f) Purchase.
Upon the occurrence of a Triggering Event, the Offered Shares
shall be sold in accordance with this Section 8(f).
(i) Option to the Corporation. The Corporation shall
have the option to redeem the Offered Shares at the Redemption Price set forth
in Section 6 or purchase all of the Offered Shares of the Affected Party for the
Purchase Price (as defined in Section 8(g)), by giving written notice, within
forty-five (45) days after the date of Notice of Occurrence, to the Affected
Party of the exercise of its option. The Corporation may only purchase, pursuant
to this Section 8(f)(i), that number of shares to the extent the Corporation has
sufficient capital surplus or retained earnings to permit it to lawfully
purchase and pay for any such shares. The exercise of the option by the
Corporation shall be effective only if the notice given by the Corporation
indicates that the Corporation intends to purchase all such Offered Shares.
(ii) Purchase of All Shares. Unless otherwise agreed
to by the Affected Party, all and not less than all of the Offered Shares must
be purchased pursuant to Section 8(f)(i) hereof, in order that there shall be a
purchase of such Offered Shares within the intent, scope and terms hereof.
(iii) Closing on Optional Purchase. If the
Corporation shall have exercised its options to redeem or purchase the Offered
Shares pursuant to Section 8(f)(i) hereof, the closing of the redemption or
purchase and sale contemplated by this Section 8(f)(iii) shall be held at 10:00
a.m., on the earlier of the 90th day following the date Notice of Occurrence is
given
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or the 30th day after the exercise of the option that results in options to
purchase all (but not less than all) of the Offered Shares being exercised, at
the then principal office of the Corporation, or at such other time and place as
the parties shall mutually agree. At the closing, the Affected Party shall
deliver to the purchasers certificates for the Offered Shares, duly endorsed for
transfer, and the purchasers shall pay the Purchase Price to the Selling Party.
(v) Right to Transfer. If all of the Offered Shares
are not redeemed or purchased pursuant to Section 8(f)(i) hereof, the Affected
Party may, for a period of ninety (90) days following the final date for
acceptance under Section 8(f)(i) hereof, sell all such Offered Shares to the
Offeror; provided, however, that no such Offered Shares shall be sold to the
Offeror upon any terms or conditions more favorable to Offeror than the Offer
Terms as such Offer Terms were described in the Notice of Occurrence; and
provided further that counsel to the Affected Party shall deliver to the
Corporation an opinion to the effect that transfer of the Offered Shares does
not require registration under the Securities Act of 1933. If the Affected Party
wishes to sell such Offered Shares on terms and conditions more favorable to the
Offeror than the Offer Terms or has not sold such Offered Shares on the Offer
Terms within such ninety (90) day period, the Affected Party shall be obligated
to make a new offer to the Corporation in accordance with this Section 8(f)
before the Affected Party shall be permitted to Transfer any Series A Preferred
Stock.
(g) Purchase Price.
The Purchase Price shall be the Offer Price in writing to the Affected
Party by such third party.
(h) Legal Opinion.
Prior to any Transfer by sale to a third party, a Selling Party shall
furnish to the Corporation an opinion of counsel, in form and substance
reasonably satisfactory to the Corporation, stating that registration of such
sale is not required under federal securities laws.
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