Exhibit 10.1

 

 

CONFIDENTIAL TREATMENT REQUESTED – CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE
BEEN REDACTED AND HAVE BEEN SEPARATELY FILED WITH THE COMMISSION. THE OMITTED
PORTIONS HAVE BEEN REPLACED WITH “****.

 

  

EXECUTION VERSION

 

 

 

NOTE PURCHASE AGREEMENT

 

by and among

 

NUMEREX CORP.,

 

as Borrower,

 

various Guarantors from time to time party hereto,

 

various Purchasers from time to time party hereto,

 

and

 

HCP-FVF, LLC,

 

as Collateral Agent

 

Dated as of June 7, 2017

 

 

 

  

 

 

Article 1 DEFINITIONS 1       1.1 Definitions 1       1.2 Accounting Terms 21  
    Article 2 PURCHASE AND SALE OF THE NOTES 22       2.1 Purchase and Sale of
the Notes 22       2.2 Fees Payable 22       2.3 Closing 23       Article 3 THE
NOTES 23       3.1 Interest and Related Fees 23       3.2 Redemption of Notes 24
      3.3 Manner of Payment 28       3.4 [Intentionally Omitted] 28       3.5
Taxes 28       3.6 Purchase Price Allocation 30       Article 4 CONDITIONS TO
THE OBLIGATIONS OF THE PURCHASERS 31       4.1 Representations and Warranties 31
      4.2 Compliance with this Agreement 31       4.3 Certificates 31       4.4
Solvency 32       4.5 Financial Information 32       4.6 Documents 32       4.7
Purchase of Notes Permitted by Applicable Laws 32       4.8 Opinion of Counsel
32       4.9 Consents and Approvals 32       4.10 No Material Judgment or Order
32       4.11 Good Standing Certificates 33       4.12 No Litigation 33      
4.13 Insurance Certificates 33       4.14 Fees, Etc 33       4.15 Collateral 33
      4.16 Lien Searches 33       4.17 No Material Adverse Effect 33       4.18
Structure 34

 

 i 

 

 

4.19 Subordinated Note 34       4.20 Quality of Earnings Report 34       Article
5 CONDITIONS TO THE OBLIGATIONS OF THE BORROWER 34       5.1 Representations and
Warranties 34       5.2 Compliance with this Agreement 34       Article 6
REPRESENTATIONS AND WARRANTIES OF THE BORROWER 34       6.1 Existence and Power
34       6.2 Authorization; No Contravention 35       6.3 Governmental
Authorization; Third Party Consents 35       6.4 Binding Effect 35       6.5 No
Legal Bar 35       6.6 Litigation 36       6.7 Compliance with Laws 36       6.8
No Default or Breach 36       6.9 Title to Properties 36       6.10 Real
Property 36       6.11 Taxes 37       6.12 Financial Condition; SEC Filings 37  
    6.13 Absence of Certain Changes or Events 38       6.14 Environmental
Matters 38       6.15 Investment Company/Government Regulations 39       6.16
Subsidiaries 39       6.17 Capitalization 40       6.18 Private Offering 40    
  6.19 Broker’s, Finder’s or Similar Fees 40       6.20 Labor Relations 40      
6.21 Employee Benefit Plans 41       6.22 Patents, Trademarks, Etc 42       6.23
Potential Conflicts of Interest 43       6.24 Trade Relations 43       6.25
Indebtedness 43       6.26 Material Contracts 43       6.27 Insurance 44

 

 ii 

 

 

6.28 Solvency 44       6.29 Licenses and Approvals 44       6.30 Change of
Control and Similar Payments 44       6.31 OFAC; Anti-Terrorism; Patriot Act 45
      6.32 Disclosure 45       6.33 Customers and Suppliers 45       6.34
Passive Foreign Investment Company 46       6.35 Absence of Certain Practices 46
      6.36 Internal Controls 46       6.37 Accounts and Notes Receivable;
Accounts and Notes Payable 46       Article 7 REPRESENTATIONS AND WARRANTIES OF
THE PURCHASERS 47       7.1 Authorization; No Contravention 47       7.2 Binding
Effect 47       7.3 No Legal Bar 47       7.4 Securities Laws 47       7.5
Governmental Authorization; Third Party Consent 49       7.6 Broker’s, Finder’s
or Similar Fees 49       Article 8 AFFIRMATIVE COVENANTS 49       8.1 Delivery
of Financial and Other Information 49       8.2 Use of Proceeds 52       8.3
Notice of Default or Material Adverse Effect 53       8.4 Conduct of Business 53
      8.5 Taxes and Claims 53       8.6 Insurance 54       8.7 Compliance with
Laws and Material Agreements 54       8.8 Maintenance of Properties 55       8.9
Audits and Inspection 55       8.10 Issue Taxes 55       8.11 Employee Benefit
Plans 55       8.12 Environmental Covenants 56       8.13 Website Links 56      
8.14 Further Assurances 56       8.15 Board Observation 56

 

 iii 

 

 

8.16 Intellectual Property 57       8.17 Replacement of Notes 58       8.18
Landlord and Bailee Agreements 58       8.19 Foreign Pension Plans and Benefit
Plans 58       8.20 Post-Closing Obligations 58       Article 9 NEGATIVE
COVENANTS 59       9.1 Distributions 59       9.2 Indebtedness 59       9.3
Mergers 60       9.4 Sales of Assets 61       9.5 Investments and Acquisitions
61       9.6 Liens 62       9.7 Capital Expenditures; Operating Leases 64      
9.8 Licenses 64       9.9 Affiliates 64       9.10 Permitted Hedging
Arrangements 64       9.11 Sale and Leaseback Transactions and Other Off-Balance
Sheet Liabilities 65       9.12 Contingent Obligations 65       9.13
Subsidiaries 65       9.14 Real Property 65       9.15 Modifications of Charter
Documents 66       9.16 Fiscal Year 66       9.17 Payments on Subordinated Note
66       9.18 Restrictive Agreements 66       9.19 Use of Purchasers’ Names 66  
    9.20 Financial Covenants 66       9.21 Management Fees; Board Fees 68      
9.22 Deposit Accounts 68       9.23 Modifications of Subordinated Note 68      
9.24 No Negative Pledges 68       9.25 Accounts Payable 69       9.26 Passive
Foreign Investment Company 69

 

 iv 

 

 

Article 10 EVENTS OF DEFAULT 69       10.1 Events of Default 69       10.2
Acceleration 72       10.3 Set-Off 72       10.4 Suits for Enforcement 72      
10.5 License 73       Article 11 INDEMNIFICATION 73       11.1 Indemnification
73       11.2 Procedure; Notification 74       Article 12 MISCELLANEOUS 74      
12.1 Survival of Representations and Warranties 74       12.2 Notices 75      
12.3 Successors and Assigns 76       12.4 Amendment and Waiver 77       12.5
Signatures; Counterparts 77       12.6 Headings 78       12.7 GOVERNING LAW 78  
    12.8 JURISDICTION, JURY TRIAL WAIVER, ETC. 78       12.9 Severability 79    
  12.10 Rules of Construction 79       12.11 Entire Agreement 79       12.12
Certain Expenses 79       12.13 Publicity 79       12.14 Further Assurances 80  
    12.15 No Strict Construction 80       12.16 Non-Public Information 80      
12.17 Confidential Information 80       Article 13 COLLATERAL AGENT 81      
13.1 Appointment of Agent; No Effect on Borrower’s Obligations 81       13.2
Powers and Duties 81       13.3 Collateral Matters 81       13.4 Actions with
Respect to Defaults 83       13.5 Successor Collateral Agent 83

 

 v 

 

 

SCHEDULES:       Schedule 1 Prohibited Transferees Schedule 2.1 Allocations
Schedule 6.1 Jurisdictions of Organization and Qualification Schedule 6.3
Consents and Approvals Schedule 6.6 Litigation Schedule 6.7 Investigations, Etc.
Schedule 6.9 Exceptions to Title, Etc. Schedule 6.10 Real Property Owned and
Leased Schedule 6.11 Taxes Schedule 6.12 Financial Condition and Liabilities;
SEC Documents Schedule 6.16 Subsidiaries Schedule 6.17 Capitalization, Etc.
Schedule 6.19 Broker Fees, Etc. Schedule 6.20 Employment Agreements, Employment
Matters Schedule 6.21 ERISA Plans Schedule 6.22 Licenses, Etc. Related to
Intellectual Property Schedule 6.23 Conflicts of Interest Schedule 6.25 Existing
Indebtedness & Liens Schedule 6.26 Material Contracts Schedule 6.27 Insurance
Schedule 6.33 Customers & Suppliers Schedule 6.35 Absence of Certain Practices
Schedule 6.36 Internal Controls Schedule 6.37(a) Accounts and Notes Receivable
Schedule 6.37(b) Accounts and Notes Payable Schedule 8.6 Minimum Insurance
Schedule 9.2 Existing Indebtedness Schedule 9.5 Investments Schedule 9.20(e)
Minimum Monthly Recurring Revenue Schedule 9.24 Negative Pledges Schedule 9.25
Accounts Payable and Receivable     EXHIBITS:       exhibit A Form of Note
Exhibit B Form of Certificate Regarding Non-Bank Status Exhibit C Form of
Compliance Certificate

 

 vi 

 

  

NOTE PURCHASE AGREEMENT

 

THIS NOTE PURCHASE AGREEMENT, dated as of June 7, 2017 (as amended, restated,
supplemented or otherwise modified from time to time in accordance with the
terms hereof, this “Agreement”), by and among NUMEREX CORP., a Pennsylvania
corporation (the “Borrower”), the Guarantors from time to time party hereto, the
Purchasers from time to time party hereto, and HCP-FVF, LLC, a Delaware limited
liability company (“Hale Capital”), as collateral agent for itself and the
Purchasers party hereto (in such capacity and together with its successors and
assigns, the “Collateral Agent”).

 

STATEMENT OF PURPOSE:

 

WHEREAS, the Borrower wishes to sell to the Purchasers, and the Purchasers wish
to purchase on the terms and conditions set forth herein, senior secured
promissory notes issued by the Borrower on the Closing Date in an aggregate
original principal amount of $13,500,000, each substantially in the form of
Exhibit A hereto (as amended, restated, supplemented or otherwise modified from
time to time in accordance with the terms hereof, each a “Note” and collectively
the “Notes”).

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

Article 1

DEFINITIONS

 

1.1          Definitions. As used in this Agreement, and unless the context
requires a different meaning, the following terms have the meanings indicated:

 

“Account Debtor” has the meaning given to that term in the UCC.

 

“Account or Accounts” has the meaning given to that term in the UCC.

 

“Acquisition” means any transaction or series of related transactions,
consummated on or after the date of this Agreement, by which the Borrower or any
Subsidiary, directly or indirectly, (a) acquires any going concern business or
all (or substantially all) of the assets of any firm, corporation, limited
liability company or other entity, or division thereof, whether through purchase
of assets, merger or otherwise or (b) acquires at least a majority (in number of
votes) of the securities of an entity which have ordinary voting power for the
election of directors or managers or a majority (by percentage or voting power)
of the outstanding Capital Stock of any other Person.

 

“Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by or under common control with such Person. A Person
shall be deemed to control another Person if the controlling Person owns 10% or
more of any class of voting securities (or other ownership interests) of the
controlled Person or possesses, directly or indirectly, the power to direct or
cause the direction of the management or policies of the controlled Person,
whether through ownership of Capital Stock, by contract or otherwise; provided
that in no event shall any Purchaser or the Collateral Agent and the Borrower be
deemed to be “Affiliates” of one another.

 

 1 

 

 

“Agreement” has the meaning given to that term in the introductory paragraph.

 

“Anti-Terrorism Laws” has the meaning given to that term in Section 6.31(b).

 

“Anti-Terrorism Order” has the meaning given to that term in Section 6.31(b).

 

“Applicable Insolvency Laws” means all applicable laws governing bankruptcy,
reorganization, arrangement, adjustment of debts, relief of debtors,
dissolution, insolvency, fraudulent transfers or conveyances or other similar
laws (including, without limitation, 11 U.S.C. Sections 544, 547, 548 and 550
and other “avoidance” provisions of Title 11 of the Code, as amended or
supplemented).

 

“Applicable Law” shall mean all laws, rules and regulations applicable to the
Person, conduct, transaction, covenant, document or contract in question,
including all applicable common law and equitable principles, all provisions of
all applicable state, federal and foreign constitutions, statutes, rules,
regulations, treaties, directives and orders of any Governmental Authority, and
all orders, judgments and decrees of all courts and arbitrators.

 

“Applicable Rate” means the Prime Rate plus seven percent (7%) per annum.

 

“Approved Distributors” means Honeywell International acting through the ADI
distribution business, Security Equipment Supply, Inc. and Tri-ED Distribution.

 

“Approved Fund” means (i) any Person (other than a natural person) engaged in
making, purchasing, holding, or investing in commercial loans and similar
extensions of credit and that is advised, administered, or managed by a
Purchaser, an Affiliate of a Purchaser (or an entity or an Affiliate of an
entity that administers, advises or manages a Purchaser); (ii) with respect to
any Purchaser that is an investment fund, any other investment fund that invests
in loans and that is advised, administered or managed by the same investment
advisor as such Purchaser or by an Affiliate of such investment advisor; and
(iii) any third party which provides “warehouse financing” to a Person described
in the preceding clause (i) or (ii) (and any Person described in said clause (i)
or (ii) shall also be deemed an Approved Fund with respect to such third party
providing such warehouse financing).

 

“Board” has the meaning set forth in Section 8.15.

 

“Borrower” has the meaning given to that term in the introductory paragraph.

 

“Business Combination” has the meaning set forth in the definition of “Change of
Control” below.

 

“Business Day” means any day other than a Saturday, Sunday or other day on which
commercial banks in New York are authorized or required by law or executive
order to close.

 

 2 

 

 

“Capital Expenditure” means any expenditure (whether paid in cash or accrued as
a liability) for any purchase or other acquisition of any asset which would be
classified as a fixed or capital asset on a balance sheet prepared in accordance
with GAAP, including the cost of assets acquired pursuant to Capital Leases and
payments in respect of Capital Lease Obligations, but excluding (a) all
Capitalized Software Costs, (b) expenditures of insurance proceeds to rebuild or
replace any capital or fixed asset after a casualty loss, (c) leasehold
improvement expenditures for which the Person is reimbursed promptly by the
lessor, and (d) expenditures made in connection with any Investment permitted
pursuant to Section 9.5.

 

“Capital Lease” of a Person means any lease of Property by such Person as lessee
which would be classified as a capital lease on a balance sheet of such Person
prepared in accordance with GAAP.

 

“Capital Lease Obligations” of any Person means all obligations (including sales
tax obligations) of such Person under Capital Leases.

 

“Capitalized Software Costs” means all costs for the development of software
that are appropriately capitalized in accordance with GAAP.

 

“Capital Stock” means (a) any capital stock, partnership, membership, limited
liability company, joint venture or other ownership or equity interest or other
equivalent, participation or securities (whether voting or non-voting, whether
preferred, common or otherwise, whether certificated or uncertificated, and
however designated), and (b) any option, warrant, security, appreciation right,
profits interests or other right (including Indebtedness securities or other
evidence of Indebtedness) directly or indirectly convertible into or exercisable
or exchangeable for, or otherwise to acquire directly or indirectly, any capital
stock, partnership, membership, limited liability company, joint venture or
other ownership or equity interest, participation or security described in
clause (a) above.

 

“Cash Equivalent Investments” means (a) short-term obligations of, or fully
guaranteed by, the United States, (b) commercial paper rated A-1 or better by
Standard & Poor’s Rating Services, a division of The McGraw-Hill Companies, Inc.
(or any successor thereto) or P-1 or better by Moody’s Investors Service, Inc.
(or any successor thereto) with a duration of not more than nine (9) months, (c)
demand deposit accounts maintained in the ordinary course of business, and (d)
certificates of deposit issued by, and time deposits with, commercial banks
(whether domestic or foreign) having capital and surplus in excess of
$100,000,000; provided in each case that the same provides for payment of both
principal and interest (and not principal alone or interest alone) and is not
subject to any contingency regarding the payment of principal or interest.

 

“CERCLA” means the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended.

 

“CERCLIS” means the Comprehensive Environmental Response Compensation Liability
Information System List.

 

“Certificate Regarding Non-Bank Status” means a certificate in the form attached
hereto as Exhibit B.

 

 3 

 

 

“Certification” has the meaning set forth in Section 6.12(b).

 

“Change in Law” shall mean the occurrence, after the date of this Agreement, of
any of the following: (a) the adoption or taking effect of any law, rule,
regulation or treaty, (b) any change in any law, rule, regulation or treaty or
in the administration, interpretation, implementation or application thereof by
any Governmental Authority or (c) the making or issuance of any request, rule,
guideline or directive (whether or not having the force of law) by any
Governmental Authority; provided that notwithstanding anything herein to the
contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and
all requests, rules, regulations, guidelines, interpretations or directives
thereunder or issued in connection therewith (whether or not having the force of
Applicable Law) and (y) all requests, rules, regulations, guidelines,
interpretations or directives promulgated by the Bank for International
Settlements, the Basel Committee on Banking Supervision (or any successor or
similar authority) or the United States or foreign regulatory authorities
(whether or not having the force of law) , in each case pursuant to Basel III,
shall in each case be deemed to be a Change in Law regardless of the date
enacted, adopted, issued, promulgated or implemented.

 

“Change of Control” means the occurrence of any of the following:

 

(a)          The acquisition by any Person or any group of Persons of record or
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of (i) the Capital Stock of the Borrower (as
determined on a fully-diluted basis) or (ii) the combined voting power of the
then-outstanding voting securities of the Borrower (the “Outstanding Company
Voting Securities”);

 

(b)          Consummation by the Borrower or any of its Subsidiaries of a
merger, consolidation, combination, reorganization, or sale of Capital Stock,
whether in one or a series of related transactions (a “Business Combination”),
in each case, unless, following such Business Combination, (i) all or
substantially all of the individuals and entities who were the beneficial owners
of the Outstanding Company Voting Securities immediately prior to such Business
Combination beneficially own, directly or indirectly, more than 80% of the then
outstanding shares of voting Capital Stock of the purchasing or surviving entity
in such Business Combination, in substantially the same proportions as its
ownership immediately prior to such Business Combination, of the Outstanding
Company Voting Securities and (ii) at least a majority of the members of the
board of directors (or equivalent governing body) of the purchasing or surviving
entity in such Business Combination were members of the Borrower’s or such
Subsidiary’s board of directors (or equivalent governing body) at the time of
the execution of the initial agreement, or of the action of the Borrower’s or
such Subsidiary’s board of directors (or equivalent governing body), providing
for such Business Combination;

 

(c)          A sale, assignment, lease, conveyance, exchange, transfer,
sale-leaseback or other Disposition of more than 50% of the assets of the
Borrower or any Guarantor, whether in one or a series of related transactions
(excluding normal inventory sales and financing arrangements associated with
inventory or receivables);

 

 4 

 

 

(d)          The Borrower ceases to own and control, directly or indirectly,
free and clear of all Liens (other than in favor of the Purchasers) 100% of the
Capital Stock of each Guarantor (other than directors’ qualifying shares, as may
be required by law, and other than as a result of a Disposition permitted by
Section 9.4);

 

(e)          Approval by the board of directors (or equivalent governing body)
of the Borrower or any Guarantor of:

 

(i)          a liquidation or dissolution of the Borrower or any Guarantor;

 

(ii)          an exchange of the Capital Stock of the Borrower for the Capital
Stock of any other Person or Persons;

 

(iii)          the sale or Disposition of all or substantially all of the assets
of the Borrower or any Guarantor; or

 

(iv)          the merger of consolidation of the Borrower with or into another
Person unless permitted by Section 9.3; or

 

(f)          During any period of twelve (12) consecutive months, a majority of
the members of the Board of the Borrower cease to be composed of individuals (i)
who were members of such Board on the first (1st) day of such period, (ii) whose
election or nomination to such Board was approved by individuals referred to in
clause (i) above constituting at the time of such election or nomination at
least a majority of such Board or (iii) whose election or nomination to such
Board was approved by individuals referred to in clauses (i) and (ii) above
constituting at the time of such election or nomination at least a majority of
such Board (excluding, in the case of both clause (ii) and clause (iii), any
individual whose initial nomination for, or assumption of office as, a member of
such Board occurs as a result of an actual or threatened solicitation of proxies
or consents for the election or removal of one or more directors by any Person
or group other than a solicitation for the election of one or more directors by
or on behalf of such Board).

 

“Charter Documents” means the articles or certificate of incorporation or
formation (as applicable), the bylaws or operating or limited liability company
agreement (as applicable), and other similar organizational and governing
documents of any Person, as amended, restated, supplemented or otherwise
modified from time to time.

 

“Closing” has the meaning given to that term in Section 2.3.

 

“Closing Date” has the meaning given to that term in Section 2.3.

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Collateral Agent” has the meaning given to it in the introductory paragraph of
this Agreement.

 

“Collateral Access Agreement” has the meaning assigned thereto in the Guaranty
and Collateral Agreement.

 

 5 

 

 

“Collateral Documents” means the Guaranty and Collateral Agreement, the
Collateral Access Agreements, the Deposit Account Control Agreements, and each
other agreement or writing pursuant to which the Borrower or any Subsidiary
purports to pledge or grant a security interest in any property or assets
securing the Obligations or any of such Borrower or Subsidiary purports to
guarantee the payment and/or performance of the Obligations, in each case, as
amended, restated, supplemented or otherwise modified from time to time.

 

“Compliance Certificate” means a Compliance Certificate in the form attached
hereto as Exhibit C.

 

“Contingent Obligation” of a Person means any contingent obligation calculated
in conformity with GAAP, and in any event shall include any agreement,
undertaking or arrangement by which such Person assumes, guarantees, endorses,
contingently agrees to purchase or provide funds for the payment of, or
otherwise becomes or is contingently liable upon, the obligation or liability of
any other Person, or agrees to maintain the net worth or working capital or
other financial condition of any other Person, or otherwise assures any creditor
of such other Person against loss, including, without limitation, any comfort
letter, operating agreement, take or pay contract or the obligations of any such
Person as general partner of a partnership with respect to the liabilities of
the partnership.

 

“Contractual Obligations” means as to any Person, any provision of any security
issued by such Person or of any agreement, undertaking, contract, indenture,
mortgage, deed of trust or other instrument or arrangement (whether in writing
or otherwise) to which such Person is a party or by which it or any of such
Person’s property is bound.

 

“CWA” has the meaning set forth in the definition of “Environmental Laws.”

 

“Default” means any event or condition which upon notice, lapse of time or both
would, unless cured or waived, become an Event of Default.

 

“Default Rate” has the meaning given to that term in Section 3.1(b).

 

“Deposit Account Control Agreement” means each Deposit Account Control Agreement
among any Loan Party, the Collateral Agent and the applicable depository bank,
as amended, restated, modified, or supplemented from time to time.

 

“Disposition” has the meaning given to that term in Section 9.4.

 

“Distributions” by a Person means (a) the declaration or payment of dividends or
other distributions (whether in cash, securities or other property or assets) on
any now or hereafter outstanding Capital Stock of such Person; (b) any payment
(whether in cash, securities or other property or assets) on account of the
redemption, repurchase, defeasance, sinking fund or other retirement or
acquisition of such Capital Stock or of warrants, rights or other options to
purchase such Capital Stock made either directly or indirectly; (c) any loans or
advances (other than salaries or advances to, or reimbursement of, directors or
employees for travel, entertainment, relocation or other business expenses in
the ordinary course of business), to any stockholder(s), partner(s) or member(s)
of such Person; (d) any payment or prepayment of principal or premium, if any,
or interest, fees or other charges on or with respect to, and any redemption,
purchase, retirement, defeasance, sinking fund or similar payment and any claim
for rescission with respect to any Indebtedness that is subordinated to the
Obligations; and (e) setting aside funds for any of the foregoing.

 

 6 

 

 

“Disqualified Capital Stock” means any Capital Stock which, by its terms (or by
the terms of any security or other equity interests into which it is convertible
or for which it is exchangeable or exercisable), or upon the happening of any
event or condition (a) matures or is mandatorily redeemable (other than solely
for Capital Stock which are not otherwise Disqualified Capital Stock), pursuant
to a sinking fund obligation or otherwise, (b) is redeemable or subject to
mandatory repurchase, in either case, at the option of the holder thereof (other
than solely for equity interests which are not otherwise Disqualified Capital
Stock), in whole or in part, (c) provides for scheduled payments, dividends or
distributions in cash or (d) is or becomes convertible into or exchangeable or
exercisable for indebtedness or any other equity interests that would constitute
Disqualified Capital Stock, in each case, prior to the date that is ninety one
(91) days after the Maturity Date.

 

“Domestic Subsidiary” means any Subsidiary that is organized under the laws of
any state of the United States or the District of Columbia.

 

“EBITDA” means, for any period in question, the sum of (a) Net Income for such
period plus (b) to the extent deducted in determining such Net Income, the sum,
without duplication, of (i) Interest Expense during such period, (ii) all
federal, state, local and/or foreign income taxes payable by the Borrower and
its Subsidiaries during such period, (iii) depreciation expenses of the Borrower
and its Subsidiaries during such period, (iv) amortization expenses of the
Borrower and its Subsidiaries during such period, (v) non-recurring transaction
fees and expenses arising from the Transactions on or prior to the Closing Date
and paid within sixty (60) days of the Closing Date in an amount not to exceed
$575,000, (vi) prepayment fees in connection with the repayment of the
Borrower’s existing term loan facility in an amount not to exceed $340,000,
(vii) cash severance paid during the second Fiscal Quarter of 2017 in an amount
not to exceed $100,000, (viii) the non-cash write-off of loss and commission
during the second Fiscal Quarter of 2017 relating to the sublease of the
Borrower’s Dallas, Texas leased office space in an amount not to exceed
$135,000; (ix) non-cash equity-based compensation in an aggregate amount not to
exceed $2,750,000; and (x) any extraordinary, non-recurring and/or non-cash
losses and expenses incurred during such period as may be agreed in writing by
the Required Purchasers in their sole discretion, minus (c) any extraordinary,
non-recurring and/or non-cash gains or income during such period as may be
agreed in writing by the Required Purchasers in their sole discretion, all
determined on a consolidated basis and in accordance with GAAP.

 

“Eligible Account” means those Accounts consisting of trade receivables created
by each Loan Party in the ordinary course of its business, that arise out of
such Loan Party’s goods shipped or rendition of services, and that are not
excluded as ineligible by virtue of one or more of the excluding criteria set
forth below. In determining the amount to be included, Eligible Accounts shall
be calculated net of customer deposits, credits and unapplied cash. Eligible
Accounts shall not include the following:

 

(a)          Accounts that the Account Debtor has failed to pay within 90 days
of stated due date and Accounts specifically reserved for by the Loan Parties;

 

 7 

 

 

(b)          Accounts with payment terms greater than 90 days from original
invoice date; provided that the Accounts of Approved Distributors may have
payment terms greater than 90 days from the original invoice date and such
Accounts shall be considered to be Eligible Accounts so long as they otherwise
would be Eligible Accounts;

 

(c)          Accounts owed by an Account Debtor (or its Affiliates) where any
Accounts owed by that Account Debtor (or its Affiliates) are deemed ineligible
under clause (a) above (if past due amounts are greater than 10% of the Account
Debtor’s Account balance) or clauses (h) or (o) below;

 

(d)          Accounts with respect to which the Account Debtor is an Affiliate
of the Borrower or an employee of the Borrower;

 

(e)          Accounts that are not payable in Dollars or Canadian Dollars
(provided that such Accounts that are payable in Canadian Dollars shall not
constitute more than $500,000 of Eligible Accounts);

 

(f)          Accounts with respect to which the Account Debtor (i) does not
maintain its principal place of business in the United States or Canada, (ii) is
not organized in the United States or Canada or (iii) is the government of any
foreign country or sovereign state, or of any state, province, municipality, or
other political subdivision thereof, or of any department, agency, public
corporation, or other instrumentality thereof;

 

(g)          Accounts with respect to which the Account Debtor is either (i) the
United States or any department, agency, or instrumentality of the United States
(exclusive, however, of Accounts with respect to which such Borrower has
complied, to the reasonable satisfaction of the Purchaser, with the Assignment
of Claims Act, 31 USC §3727), or (ii) any state of the United States;

 

(h)          That portion of Accounts with respect to which the Account Debtor
is a creditor of such Borrower, has or has asserted a right of setoff, forensic
investigation, or has disputed its obligation to pay all or any portion of the
Account;

 

(i)          That portion of Accounts which reflect a reasonable reserve for
warranty claims or returns or amounts which are owed to Account Debtors,
including those for rebates, allowances, prepayment discounts or other
deductions;

 

(j)          Accounts (i) owing by a single Account Debtor or group of
Affiliated Account Debtors whose total obligations owing to Borrowers exceed
twenty five (25%) percent of the aggregate amount of all otherwise Eligible
Accounts;

 

(k)          Accounts with respect to which the Account Debtor, to the knowledge
of any Loan Party or the Collateral Agent, is subject to an insolvency or
bankruptcy proceeding or any dissolution or liquidation proceeding, is not
solvent, has gone out of business, or as to which such Borrower has received
notice of an imminent insolvency or bankruptcy proceeding or any dissolution or
liquidation or a material impairment of the financial condition of such Account
Debtor;

 

 8 

 

 

(l)           Accounts representing credit card sales or “C.O.D.” sales;

 

(m)         Accounts that are not subject to a valid and perfected first
priority Lien by the Collateral Agent or that are subject to any other Lien,
unless such other Lien is a Permitted Lien and the holder of such Permitted Lien
has entered into an intercreditor agreement with the Purchasers reasonably
acceptable to the Purchasers;

 

(n)          Accounts that consist of progress billings (such that the
obligation of the Account Debtors with respect to such Accounts is conditioned
upon such Loan Party’s satisfactory completion of any further performance under
the agreement giving rise thereto) or retainage invoices;

 

(o)          that portion of Accounts which represent finance charges, service
charges, sales taxes or excise taxes;

 

(p)          that portion of Accounts which has been restructured, extended,
amended or otherwise modified;

 

(q)          Accounts which have not been invoiced or not invoiced in accordance
with the material terms of the relevant agreement;

 

(r)          Accounts which do not have binding documentary evidence of an
underlying transaction with an end user in the event that the transaction giving
rise to the Account involves a distributor, partner or other reseller;

 

(s)          Accounts the balance of which is less than $500; and

 

(t)          Accounts or that portion of Accounts otherwise deemed ineligible
and not covered by clauses (a) through (s) above by the Collateral Agent in its
reasonable discretion exercising reasonable credit judgment.

 

Any Accounts which are not Eligible Accounts shall nonetheless constitute
Collateral.

 

“Eligible Accounts Adjustment” means the total amount owed to Borrower with
respect to the Accounts of Sentinel Offender Services, LLC (“Sentinel”) solely
to the extent that (i) Sentinel is current on its payment obligations under the
Sentinel Settlement Agreement in an amount not to exceed the lesser of
$1,541,143 and the amount currently outstanding under the Sentinel Settlement
Agreement and (ii) the Sentinel Settlement Agreement has not been amended.

 

“Environmental Laws” means any and all federal, state, local and foreign
statutes, laws, judicial decisions, regulations, ordinances, rules, judgments,
orders, decrees, plans, injunctions, Licenses, concessions, grants, franchises,
agreements and other governmental restrictions relating to (a) the protection of
the environment, (b) the effect of the environment on human health, (c)
emissions, discharges or releases of pollutants, contaminants, hazardous
substances or wastes into surface water, ground water, air or land, or (d) the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, hazardous substances or
wastes or the clean-up or other remediation thereof, including, without
limitation, the Clean Air Act, 42 U.S.C. § 7401 et seq., the Clean Water Act, 33
U.S.C. § 1251 et seq. (“CWA”), the Solid Waste Disposal Act (as amended by the
Resource Conservation and Recovery Act), 42 U.S.C. § 6901 et seq. (“RCRA”), and
CERCLA.

 

 9 

 

 

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
and the rules and regulations promulgated thereunder.

 

“ERISA Affiliate” means a corporation that is or was a member of a controlled
group of corporations with the Borrower within the meaning of Section 4001(a) or
(b) of ERISA or Section 414(b) of the Code, a trade or business (including a
sole proprietorship, partnership, trust, estate or corporation) that is under
common control with the Borrower within the meaning of Section 414(m) of the
Code, or a trade or business which together with the Borrower is treated as a
single employer under Section 414(o) of the Code.

 

“Event of Default” has the meaning given to that term in Section 10.1.

 

“Exchange Act” means the Securities Exchange Act of 1934, as amended, and the
rules and regulations of the SEC thereunder.

 

“Excluded Account” has the meaning assigned thereto in the Guaranty and
Collateral Agreement.

 

“Excluded Taxes” shall mean, with respect to any Purchaser, or any other
recipient of any payment to be made by or on account of any Obligations, (a)
Taxes imposed on or measured by its Net Income (however denominated), and
franchise Taxes imposed on it (in lieu of Net Income taxes), (i) by the
jurisdiction (or any political subdivision thereof) under the laws of which such
recipient is organized or in which its principal office or applicable lending
office is located or (ii) that are Other Connection Taxes, (b) any branch
profits Taxes imposed by the United States or any similar Tax imposed by any
other jurisdiction in which the applicable Purchaser is located, (c) in the case
of a Foreign Purchaser, any withholding Tax that is imposed on amounts payable
to such Foreign Purchaser pursuant to a law in effect at the time such Foreign
Purchaser becomes a party hereto (or designates a new lending office), except to
the extent that such Foreign Purchaser (or its assignor or seller of a
participation, if any) was entitled, at the time of designation of a new lending
office (or assignment or sale of a participation), to receive additional amounts
from Borrower with respect to such withholding Tax pursuant to Section 3.5(a),
(d) Taxes resulting from the failure to comply with Section 3.5(e), or (e) any
U.S. federal withholding Taxes imposed under FATCA.

 

“FATCA” shall mean Sections 1471 through 1474 of the Code, as of the date of
this Agreement (or any amended or successor version that is substantively
comparable and not materially more onerous to comply with), any current or
future regulations promulgated thereunder or official interpretations thereof,
any agreement entered into pursuant to Section 1471(b)(1) of the Code, and any
applicable intergovernmental agreements with respect thereto and any fiscal or
regulatory legislation, rules, practices, or laws adopted pursuant to such
intergovernmental agreements.

 

 10 

 

 

“Fee Letter” means that certain Fee Letter, dated as of June 7, 2017, between
the Collateral Agent and the Borrower, as amended, restated, amended and
restated, supplemented or otherwise modified from time to time.

 

“Financial Statements” has the meaning given to that term in Section 6.12.

 

“Fiscal Quarter” means a fiscal quarter of the Borrower and its Subsidiaries,
ending on March 31, June 30, September 30, and December 31 of each year.

 

“Fiscal Year” means a fiscal year of the Borrower and its Subsidiaries, ending
on December 31 of each year.

 

“Foreign Benefit Plan” means each material plan, fund, program or policy
established under the law of a jurisdiction other than the United States (or a
state or local government thereof), whether formal or informal, funded or
unfunded, insured or uninsured, providing employee benefits, including medical,
hospital care, dental, sickness, accident, disability, life insurance, pension,
retirement or savings benefits, under which one or more of the Loan Parties or
their Subsidiaries have any liability with respect to any employee or former
employee, but excluding any Foreign Pension Plan.

 

“Foreign Pension Plan” means a pension plan required to be registered under the
law of a jurisdiction other than the United States (or a state or local
government thereof), that is maintained or contributed to by one or more of the
Loan Parties or their Subsidiaries for their employees or former employees.

 

“Foreign Purchaser” shall mean any Purchaser that is organized under the laws of
a jurisdiction other than that in which Borrower is resident for tax purposes.
For purposes of this definition, the United States, each State thereof, and the
District of Columbia shall be deemed to constitute a single jurisdiction.

 

“Foreign Subsidiary” means any Subsidiary that is not a Domestic Subsidiary.

 

“GAAP” means generally accepted accounting principles in effect within the
United States from time to time, consistently applied. If there are any changes
to GAAP during the term of this Agreement, the parties shall continue to
determine compliance with the financial covenants, and make all other financial
determinations hereunder, without giving effect to any such changes until such
time that the parties hereto can agree to amend the financial covenants and
other provisions requiring financial determinations hereunder to take into
account the effect of such changes to GAAP in a mutually acceptable manner.

 

“Governmental Authority” means the government of any nation, state, city,
locality or other political subdivision of any thereof, any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government, regulation or compliance, including, without
limitation, any federal, state or local public utility commission, and any
corporation or other entity owned or controlled, through stock or capital
ownership or otherwise, by any of the foregoing.

 

 11 

 

 

“Guarantor” or “Guarantors” means each Person that guarantees all or any portion
of the Obligations. Each of the Domestic Subsidiaries of the Borrower on the
Closing Date and each other Domestic Subsidiary of the Borrower required to
guarantee all or any portion of the Obligations after the Closing Date shall be
a Guarantor.

 

“Guaranty and Collateral Agreement” means that certain Guaranty and Collateral
Agreement, dated as of the Closing Date, made by the Loan Parties in favor of
the Collateral Agent, as amended, restated, modified, or supplemented from time
to time.

 

“Hazardous Materials” means (a) any “hazardous substance”, as defined by CERCLA,
(b) any “hazardous waste”, as defined by RCRA, (c) any petroleum product, (d)
any “pollutant,” as defined by the CWA, or (e) contaminant or hazardous,
dangerous or toxic chemical, material or substance within the meaning of any
other Environmental Law.

 

“Hazardous Materials Activity” means any past, current, proposed or threatened
activity, event or occurrence involving any Hazardous Materials, including the
use, manufacture, possession, storage, holding, presence, existence, location,
Release, threatened Release, discharge, placement, generation, transportation,
processing, construction, treatment, abatement, removal, remediation, disposal,
disposition or handling of any Hazardous Materials, and any corrective action or
response action with respect to any of the foregoing.

 

“Hedging Agreement” means any rate protection agreement, foreign currency
exchange agreement, commodity price protection agreement or other interest or
currency exchange rate or commodity price hedging agreement.

 

“Indebtedness” means, with respect to any Person, without duplication, such
Person’s (a) obligations for borrowed money, (b) obligations representing the
deferred purchase price of Property or services (other than accounts payable
arising in the ordinary course of such Person’s business payable on terms
customary in the trade and not outstanding more than 90 days past the date of
invoice), (c) obligations, whether or not assumed, secured by Liens or payable
out of the proceeds or production from Property now or hereafter owned or
acquired by such Person, (d) obligations which are evidenced by bonds,
debentures, notes, acceptances, or other similar instruments, (e) obligations of
such Person to purchase securities or other Property arising out of or in
connection with the sale of the same or substantially similar securities or
Property, (f) Capital Lease Obligations and obligations created or arising under
any conditional sale or other title retention agreement, (g) Contingent
Obligations, (h) net obligations under or relating to Hedging Agreements, (i)
Off-Balance Sheet Liabilities, (j) attributable indebtedness related to Sale and
Leaseback Transactions, (k) the aggregate undrawn face amount of all letters of
credit issued for the account and/or upon the application of such Person
together with all unreimbursed drawings with respect thereto, (l) any obligation
to repurchase or redeem Disqualified Capital Stock of such Person other than at
the sole option of such Person, (m) “earnouts” and similar payment obligations
of such Person to the extent such obligations become fixed or are considered
liabilities under GAAP, (n) all Indebtedness of others guaranteed by such
Person, and (l) any other obligation for borrowed money or other financial
accommodation which, in accordance with GAAP, would be shown as a liability on
the balance sheet of such Person. The amount of Indebtedness under any Hedging
Agreement on any date shall be deemed to be the swap termination value thereof
as of such date.

 

 12 

 

 

“Indemnified Party” has the meaning given to that term in Section 11.1.

 

“Indemnified Taxes” shall mean (a) any Taxes, other than Excluded Taxes, imposed
on or with respect to any payment made by or on account of any obligation of any
Loan Party under any Note Document and (b) to the extent not otherwise described
in (a), Other Taxes.

 

“Intellectual Property” means all intellectual and similar property of a Person,
including inventions, designs, patents, copyrights, trademarks, service marks,
trade names, trade secrets, confidential or proprietary information, customer
lists, know-how, software and databases.

 

“Intellectual Property License” has the meaning assigned thereto in the Guaranty
and Collateral Agreement.

 

“Intellectual Property Security Agreement” means a collateral assignment or
security agreement pursuant to which the Borrower or any of its Subsidiaries
assigns or grants a security interest in its interests in Intellectual Property
to the Collateral Agent, as security for the Obligations, as the same may be
amended, restated, supplemented or otherwise modified from time to time.

 

“Interest Expense” means, for any period, the net interest expense of the
Borrower and its Subsidiaries for the period in question, determined on a
consolidated basis and in accordance with GAAP (including, without limitation,
all commissions, discounts and/or related amortization and other fees and
charges owed by the Borrower and its Subsidiaries with respect to letters of
credit or bankers’ acceptances, the net costs associated with any Hedging
Agreement of the Borrower and its Subsidiaries, capitalized interest expense,
the interest portion of Capital Lease Obligations and the interest portion of
any deferred payment obligation).

 

“Interest Payment Date” has the meaning given to that term in Section 3.1(c).

 

“Inventory” means all of the “inventory” (as that term is defined in the UCC) of
the Borrower and its Subsidiaries, whether now existing or hereafter acquired or
created.

 

“Investment” means any direct or indirect purchase, acquisition or other
investment (including, without limitation, any loan or advance or capital
contribution) in or to any Person, whether payment therefor is made in cash or
Capital Stock or otherwise, and whether such investment is by acquisition of
Capital Stock or Indebtedness, or by loan, advance, transfer of property out of
the ordinary course of business, capital contribution, equity or profit sharing
interest, extension of credit on terms other than those normal in the ordinary
course of business or otherwise. The amount of any Investment shall be the
original cost of such Investment plus the cost of all additions thereto, without
any adjustments for decreases in value, or write downs or write offs with
respect to such Investment.

 

“IP Rights” has the meaning given to that term in Section 6.22.

 

“IRS” means the United States Internal Revenue Service.

 

 13 

 

 

“Knowledge of the Borrower” or “Knowledge of a Loan Party”, or any similar
phrases, means the actual knowledge of any director or executive officer of the
Borrower or such Loan Party, as applicable, or knowledge that such person would
have reasonably obtained in the performance of such person’s duties as a
director or executive officer of the Borrower or such Loan Party, as applicable.

 

“Liabilities” has the meaning given to that term in Section 11.1.

 

“Licenses” means all licenses, permits, authorizations, determinations, and
registrations issued by any Governmental Authority to the Borrower or any
Subsidiary in connection with the conduct of its business.

 

“Lien” means any lien (statutory or otherwise), security interest, mortgage,
pledge, hypothecation, deed of trust, assignment, deposit arrangement,
encumbrance, or preference, priority or other security agreement or preferential
arrangement of any kind or nature whatsoever (including, without limitation, the
interest of a vendor or lessor under any conditional sale, Capital Lease, or
other title retention agreement (and any lease in the nature thereof)) and any
agreement to give any of the foregoing.

 

“Loan Party” means the Borrower and each Guarantor.

 

“Material Adverse Effect” means individually or in the aggregate (a) a material
adverse effect on the assets, business, properties, results of operations,
financial condition, or prospects of the Borrower and its Subsidiaries (taken as
a whole), (b) a material adverse effect upon (i) the legality, validity, binding
effect or enforceability against the Borrower or any of its Subsidiaries of any
Note Document, (ii) a significant portion of the Collateral or the validity,
perfection or priority of the Collateral Agent’s Liens on a significant portion
of the Collateral or (iii) the rights, remedies and benefits (taken as a whole)
available to, or conferred upon, the Collateral Agent or any Purchaser under any
Note Document, or (c) a material adverse effect on the ability of the Borrower
or any of its Subsidiaries to perform its obligations under any Note Document.

 

“Material Contract” means any contract, agreement, instrument, permit, lease or
License of the Borrower or its Subsidiaries (other than this Agreement and the
Note Documents) (i) as to which the termination thereof could reasonably be
expected to result in a Material Adverse Effect, (ii) as to which the failure to
comply with, or loss of such contract could reasonably be expected to decrease
revenue of the Borrower and its Subsidiaries for the most recently ended twelve
(12) month period as of the date of determination by more than 10%, (iii)
involving a commitment to pay an amount, by any Loan Party or any of its
Subsidiaries in excess of $1,000,000 in any twelve-month period following the
Closing Date (whether or not in the ordinary course of business) or where any
Loan Party or any of its Subsidiaries actually paid in excess of $1,000,000
during the twelve month period preceding the Closing Date; (iv) for a
partnership or a joint venture or for the acquisition, sale or lease of any
assets or Capital Stock of any Loan Party, its Subsidiaries or any other Person
or involving a sharing of profits; (v) that is a mortgage, pledge,
hypothecation, conditional sales contract, security agreement, factoring
agreement or other similar Contractual Obligation with respect to any tangible
and/or intangible personal property of any Loan Party or its Subsidiaries (other
than in connection with trade payables incurred in the ordinary course of
business); (vi) that is a loan agreement, credit agreement, promissory note,
guarantee, subordination agreement, letter of credit or any other similar type
of Contractual Obligation (other than this Agreement and the Note Documents or
in connection with trade payables incurred in the ordinary course of business);
(vii) with any Governmental Authority other than in the ordinary course of
business; (viii) which contains any provision that may terminate such contract
or require payments to be made by any Loan Party or any of its Subsidiaries upon
or following a “change of control”, if such termination or payment under such
Contractual Obligation could individually or in the aggregate have a Material
Adverse Effect; (ix) with respect to Hazardous Materials Activity; or (x) that
is a material binding commitment or agreement to enter into any of the foregoing
types of agreements.

 

 14 

 

 

“Maturity Date” has the meaning given to that term in Section 3.2(a).

 

“Maximum Rate” has the meaning given to that term in Section 3.1(d).

 

“Minimum Liquidity” means unrestricted cash and Cash Equivalents recorded on the
balance sheet of the Loan Parties (in each case, to the extent subject to a
first priority perfected security interest in favor of the Collateral Agent
arising under a control agreement in favor of the Collateral Agent, but
excluding any cash or Cash Equivalents subject to Liens permitted by Section
9.6(m)).

 

“Minimum Total Liquidity” means Minimum Liquidity plus Eligible Accounts plus
the Eligible Accounts Adjustment; provided that the Eligible Accounts Adjustment
shall not be included in the calculation of Minimum Total Liquidity at any time
after March 25, 2018.

 

“Monthly Recurring Revenue” means, with respect to any month, the average amount
of monthly revenue for the trailing three month period derived from subscription
and support revenues, as reflected on the Borrower’s and its Subsidiaries’
financial statements (provided that revenue generated from professional services
cannot be greater than 5% of Monthly Recurring Revenue for purposes of
compliance with Section 9.20(e)).

 

“Multiemployer Plan” means a multiemployer plan within the meaning of Section
3(37) or 4001(a)(3) of ERISA or Section 414(f) of the Code.

 

“Net Cash Proceeds” means, with respect to:

 

(a)          any voluntary or involuntary sale or Disposition (other than a
casualty loss or a sale or Disposition permitted under Section 9.4), the cash
proceeds received (directly or indirectly) from time to time in respect thereof,
including any cash received in respect of any non-cash proceeds (including,
without limitation, the monetization of notes receivables), but only as and when
received;

 

(b)          a casualty loss, insurance proceeds, proceeds of a condemnation
award or other compensation payments, in each case net of all reasonable fees
and out-of-pocket expenses (including appraisals, and brokerage, legal,
advisory, banking, title and recording tax expenses and commissions) paid by any
Loan Party to third parties (other than Affiliates) in connection with such
event; or

 

 15 

 

 

(c)          the issuance of any Capital Stock, the aggregate amount of cash
received (directly or indirectly) from time to time (whether as initial
consideration or through the payment or disposition of deferred consideration)
in connection with such issuance, after deducting therefrom only (i) reasonable
fees, commissions, and expenses related thereto and required to be paid by the
applicable Loan Party in connection with such issuance and (ii) Taxes paid or
payable to any taxing authorities by such Loan Party in connection with such
issuance, in each case to the extent, but only to the extent, that the amounts
so deducted are actually paid or payable to a Person that is not an Affiliate of
such Loan Party, and are properly attributable to such transaction.

 

“Net Income” means the net income (or loss) of the Borrower and its Subsidiaries
for the period in question, determined on a consolidated basis and in accordance
with GAAP.

 

“Note Documents” means this Agreement, the Notes, the Collateral Documents, the
Fee Letter, the Warrant, and each other agreement, document, form or certificate
delivered pursuant to this Agreement or any other Note Document, in each case,
as amended, restated, modified or supplemented from time to time.

 

“Note” or “Notes” has the meaning set forth in the Statement of Purpose and
shall include any Note issued under this Agreement, including, without
limitation, any Note issued pursuant to Section 2.1.

 

“Obligations” means, in each case, whether now in existence or hereafter
arising: (a) the principal of and interest on (including interest accruing after
the filing of any bankruptcy or similar petition) the Notes, and (b) the
Prepayment Fee and all other fees and commissions (including attorneys’ fees),
charges, indebtedness, loans, liabilities, financial accommodations,
obligations, covenants and duties owing by Borrower and each of its Subsidiaries
to the Purchasers or the Collateral Agent under any Note Document of every kind,
nature and description, direct or indirect, absolute or contingent, due or to
become due, contractual or tortious, liquidated or unliquidated, and whether or
not evidenced by any note and including interest and fees that accrue after the
commencement by or against the Borrower or any Subsidiary thereof of any
proceeding under any federal bankruptcy laws (as now or hereafter in effect) or
under any other laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding up or adjustment of debts, naming such Person as the
debtor in such proceeding, regardless of whether such interest and fees are
allowed claims in such proceeding.

 

“Observer” shall have the meaning set forth in Section 8.15.

 

“OFAC” means the U.S. Department of the Treasury’s Office of Foreign Assets
Control.

 

“Off-Balance Sheet Liability” of a Person means (a) any repurchase obligation or
liability of such Person with respect to accounts or notes receivable sold by
such Person, (b) any liability under any Sale and Leaseback Transaction which is
not a Capital Lease, (c) any liability under any so-called “synthetic lease”
transaction entered into by such Person, or (d) any obligation arising with
respect to any other transaction which is the functional equivalent of or takes
the place of borrowing but which does not constitute a liability on the balance
sheets of such Person.

 

 16 

 

 

“Other Connection Taxes” shall mean any Taxes imposed as a result of a former or
present connection between the recipient of a payment hereunder and the
jurisdiction imposing such Taxes (other than a connection arising from
executing, delivering, becoming a party to, the performance of an obligation
under, receiving payments under, perfecting a security interest under, or
engaging in any other transaction pursuant to, or enforcing, this Agreement or
selling or assigning any interest in the Notes).

 

“Other Taxes” shall mean all present or future stamp, court or documentary,
intangible, recording, filing or similar Taxes or any other excise or property
Taxes, charges or similar levies arising from any payment made hereunder or
under any Note Document or from the execution, delivery, performance,
enforcement or registration of, from the receipt or perfection of a security
interest under, or otherwise with respect to, this Agreement or any Note
Document, except any such Taxes that are Other Connection Taxes imposed with
respect to an assignment in accordance with the terms hereof.

 

“Outstanding Company Voting Securities” has the meaning set forth in the
definition of “Change of Control”.

 

“Patriot Act” means the Uniting and Strengthening America by Providing
Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, P.L.
107-56, as amended.

 

“PBGC” means the Pension Benefit Guaranty Corporation or any successor agency.

 

“Pension Plan” has the meaning given to that term in Section 6.21(b).

 

“Permitted Liens” has the meaning given to that term in Section 9.6.

 

“Person” means any individual, firm, corporation, limited liability company,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, Governmental Authority or other entity of any kind, and
shall include any successor (by merger or otherwise) of such entity.

 

“Plans” has the meaning given to that term in Section 6.21(a).

 

“Prepayment Date” has the meaning given to that term in Section 3.2(b).

 

“Prepayment Fee” means an amount determined by multiplying the percentage set
forth below corresponding to the date on which the prepayment is, or is required
to be, made by the amount of such prepayment (including any prepayment of
deferred interest accruing on the Notes):

 

Periods of Prepayment Percentage     Closing Date to June 7, 2019 5%     June 8,
2019 to June 7, 2020 3%     June 8, 2020 to the Maturity Date 1%

  

“Prepayment Fee Trigger Event” means

 

 17 

 

 

(a)          any prepayment, redemption or repurchase by any Loan Party of all,
or any part, of the principal balance of the Notes for any reason whether in
whole or in part, and whether before or after (i) the occurrence of an Event of
Default, or (ii) the commencement of any case or other proceeding by any Loan
Party seeking liquidation, reorganization or other relief with respect to itself
or its debts under any bankruptcy, insolvency or other similar Applicable Law
now or hereafter in effect or seeking the appointment of a trustee, receiver,
liquidator, custodian or other similar official of it or any substantial part of
its property, or such Loan Party shall consent to any such relief or to the
appointment of or taking possession by any such official in an involuntary case
or other proceeding commenced against it, or such Loan Party shall make a
general assignment for the benefit of creditors, or formally admits in writing
its inability or shall fail generally to pay its debts as they become due, or
such Loan Party shall take any corporate action to authorize any of the
foregoing (any of the forgoing items set forth in this clause (ii), an
“Insolvency Proceeding”), and notwithstanding any acceleration (for any reason)
of the Obligations; provided that any payment required to be made pursuant to
Section 3.2(a) shall not constitute a Prepayment Fee Trigger Event;

 

(b)          the acceleration of the Obligations for any reason, including, but
not limited to, acceleration in accordance with Section 10.1(f) or (g),
including without limitation as a result of the commencement of an Insolvency
Proceeding;

 

(c)          the satisfaction, release, payment, restructuring, reorganization,
replacement, reinstatement, defeasance or compromise of any of the Obligations
in any Insolvency Proceeding, foreclosure (whether by power of judicial
proceeding or otherwise) or deed in lieu of foreclosure or the making of a
distribution of any kind in any Insolvency Proceeding to the Collateral Agent,
for the account of the Purchasers in full or partial satisfaction of the
Obligations; or

 

(d)          the termination of this Agreement for any reason.

 

For purposes of the definition of the term Prepayment Fee, if a Prepayment Fee
Trigger Event occurs under clauses (a)(ii), (b), (c) or (d) above, the entire
outstanding principal amount of the Term Loan shall be deemed to have been
prepaid on the date on which such Prepayment Fee Trigger Event occurs.

 

“Prime Rate” means, for any day, the greater of (i) the rate of interest in
effect for such day equal to the prime rate in the United States as reported
from time to time in The Wall Street Journal (or other authoritative source
selected by the Collateral Agent in its sole discretion), or as Prime Rate is
otherwise determined by the Collateral Agent in its sole and absolute discretion
and (ii) 4.00%. The Collateral Agent’s determination of the Prime Rate shall be
conclusive, absent manifest error. Any change in such rate of interest shall
take effect at the opening of business on the day of such change. In the event
The Wall Street Journal (or such other authoritative source) publishes a range
of “prime rates”, the Prime Rate shall be the highest of the “prime rates”.

 

“Prohibited Transferee” shall mean any company that is a direct competitor of
Borrower or any of its Subsidiaries, and any Person listed on Schedule 1
attached to this Agreement.

 

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“Property” of a Person means any and all property, whether real, personal,
tangible, intangible, or mixed, of such Person, or other assets owned, leased,
or operated by such Person.

 

“Public Purchaser” has the meaning given to that term in Section 8.1.

 

“Purchase Price” has the meaning given to that term in Section 2.1.

 

“Purchaser” and “Purchasers” means HCP-FVF, LLC, a Delaware limited liability
company and shall include its successors and assigns hereunder or under the
Notes.

 

“RCRA” has the meaning set forth in the definition of “Environmental Laws.”

 

“Release” means any release, spill, emission, leaking, pumping, pouring,
injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching
or migration of Hazardous Materials into the indoor or outdoor environment
(including the abandonment or disposal of any barrels, containers or other
closed receptacles containing any Hazardous Materials), including the movement
of any Hazardous Materials through the air, soil, surface water or groundwater.

 

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA
and the regulations issued under such section, with respect to a Plan,
excluding, however, such events as to which the PBGC has by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified within 30 days
of the occurrence of such event; provided, however, that a failure to meet the
minimum funding standard of Section 412 of the Code and of Section 302 of ERISA
shall be a Reportable Event regardless of the issuance of any such waiver of the
notice requirement in accordance with either Section 4043(a) of ERISA or Section
412(d) of the Code.

 

“Required Purchasers” means the Purchasers holding more than 50% of the
aggregate outstanding principal balance of the Notes.

 

“Requirements of Law” means as to any Person, provisions of the Charter
Documents of such Person, or any law, treaty, code, rule, regulation, right,
privilege, qualification, License or franchise, or any determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to such Person or any of such Person’s property or to which such Person or any
of such Person’s property is subject or pertaining to any or all of the
Transactions or other transactions contemplated or referred to in the Note
Documents.

 

“Sale and Leaseback Transaction” means any sale or other transfer of Property by
any Person with the intent to lease such Property as lessee.

 

“Sanctioned Entity” means (a) an agency of the government of, (b) an
organization directly or indirectly controlled by, or (c) a person resident in a
country that is subject to a sanctions program identified on the list maintained
by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs,
or as otherwise published from time to time as such program may be applicable to
such agency, organization or person.

 

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“Sanctioned Person” means a person named on the list of Specially Designated
Nationals or Blocked Persons maintained by OFAC available at
http://www.treas.gov/offices/enforcement/ofac/sdn/index.html, or as otherwise
published from time to time.

 

“SEC” means the United States Securities and Exchange Commission or any other
governmental authority then having jurisdiction to enforce the Securities Act
and/or the Exchange Act, as applicable.

 

“SEC Documents” has the meaning set forth in Section 6.12(b).

 

“Securities Act” means the Securities Act of 1933, as amended, or any similar
federal statute, and the rules and regulations thereunder as the same shall be
in effect at the time.

 

“Sentinel Settlement Agreement” means that certain Settlement and Release
Agreement dated as of December 30, 2016, by and between the Borrower and
Sentinel Offender Services, LLC.

 

“Single Employer Plan” means a Plan maintained by the Borrower, its Subsidiaries
or any member of a controlled group of corporations with the Borrower, within
the meaning of Section 4001(a) or (b) of ERISA or Section 414(b) of the Code,
for employees of the Borrower, any of its Subsidiaries or any of its respective
ERISA Affiliates.

 

“Solvent” means, with respect to any Person that (a) the fair value of the
assets and the property of such Person exceeds the fair value of the aggregate
liabilities (including contingent and unliquidated liabilities) of such Person,
(b) after giving effect to the transactions contemplated by this Agreement and
the other Note Documents, such Person will not be left with unreasonably small
capital, and (c) after giving effect to the transactions contemplated by this
Agreement and the other Note Documents, such Person is able to both service and
pay its liabilities as they mature. In computing the amount of contingent or
unliquidated liabilities at any time, such liabilities will be computed as the
amount that, in light of all the facts and circumstances existing at such time,
represents the amount that is likely to become an actual or matured liability.

 

“Subordinated Note” means that certain Amended and Restated Senior Subordinated
Promissory Note dated as of the date hereof in the stated principal amount of
$5,000,000 among Kenneth Rainin Foundation, a California corporation, as Holder
(as defined therein), and the Borrower, as Borrower (as defined therein), as
amended or otherwise modified from time to time in accordance with the terms
thereof.

 

“Subordinated Note Obligations” means all of the indebtedness, obligations and
liabilities evidenced by or related to or arising in connection with the
Subordinated Note.

 

“Subsidiary” means, with respect to any Person, a corporation or other entity of
which more than fifty percent (50%) of the voting power of the voting equity
securities or equity interest is owned, directly or indirectly, by such Person.
Unless otherwise qualified, all references to a “Subsidiary” or to
“Subsidiaries” in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.

 

 20 

 

 

“Tax” means any present or future United States federal, state, local or foreign
income, gross receipts, license, payroll, employment, excise, severance, stamp,
occupation, premium, windfall profits, environmental (including taxes under Code
§59A), customs duties, capital stock, franchise profits, withholding, social
security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or
add-on-minimum, estimated, or other taxes, levies, assessments, fees or other
charges imposed by any Governmental Authority, including any interest, penalty,
or addition thereto, whether disputed or not.

 

“Tax Return” means any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule or
attachment thereto, and including any amendment thereof.

 

“Transactions” means the issuance of the Notes hereunder.

 

“UCC” has the meaning set forth in the Guaranty and Collateral Agreement.

 

“Unfunded Liabilities” means the amount (if any) by which the present value of
all vested and unvested accrued benefits under all Plans exceeds the fair market
value of all such Plan assets allocable to such benefits, all determined as of
the then most recent valuation date for such Plans using actuarial assumptions
used in determining the Plans’ normal cost for purposes of Section 412(b)(2)(A)
of the Code. In each case, the foregoing determination shall be made as of the
most recent date prior to the filing of said annual report as of which such
actuarial present value of accumulated Plan benefits is determined.

 

“Warrant” means that certain Warrant, dated as of the date hereof, by the
Borrower issued to HCP-FVF, LLC, as amended or modified from time to time in
accordance with the terms thereof.

 

“Wholly-owned” means, with respect to a Subsidiary, that all of the Capital
Stock of such Subsidiary is, directly or indirectly, owned or controlled by the
Borrower and/or one or more of its Wholly-owned Subsidiaries.

 

 21 

 

 

1.2          Accounting Terms. All accounting terms used herein and not
expressly defined in this Agreement shall have the respective meanings given to
them in conformance with GAAP. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, this shall be done in accordance with GAAP,
consistently applied, to the extent applicable, except as otherwise expressly
provided in this Agreement. If any changes in accounting principles from those
in effect on the date hereof are hereafter occasioned by promulgation of rules,
regulations, pronouncements or opinions by or are otherwise required by the
Financial Accounting Standards Board or the American Institute of Certified
Public Accountants (or successors thereto or agencies with similar functions),
and any of such changes results in a change in the method of calculation of, or
affects the results of such calculation of, any of the financial covenants,
standards or terms found herein, then the parties hereto agree upon the request
of any Loan Party or Purchaser to enter into and diligently pursue negotiations
in order to amend such financial covenants, standards or terms so as to
equitably reflect such changes, with the desired result that the criteria for
evaluating financial condition and results of operations of the Borrower and its
Subsidiaries shall be the same after such changes as if such changes had not
been made; provided that until any such amendments have been agreed upon by the
Required Purchasers, the provisions in this Agreement shall be calculated as if
no such changes in accounting principles had occurred. Notwithstanding any other
provision contained herein, all terms of an accounting or financial nature used
herein shall be construed, and all computations of amounts and ratios shall be
made, without giving effect to any election under Accounting Standards
Codification 825-10 (or any other Financial Accounting Standard having a similar
result or effect) to value any Indebtedness or other liabilities of any Loan
Party at “fair value.” Notwithstanding any accounting change after the Closing
Date that would require lease obligations that would be treated as operating
leases as of the Closing Date to be classified and accounted for as capital
leases or otherwise reflected on the Borrower’s and its Subsidiaries’
consolidated balance sheet, for the purposes of determining compliance with any
covenant contained herein, such obligations shall be treated in the same manner
as operating leases are treated as of the Closing Date.

 

Article 2

PURCHASE AND SALE OF THE NOTES

 

2.1          Purchase and Sale of the Notes. Subject to the terms and conditions
herein set forth, on the Closing Date, the Borrower will issue and sell to the
Purchasers, and the Purchasers severally and not jointly will acquire from the
Borrower, on the Closing Date, the Notes in an aggregate principal amount (and
for an aggregate purchase price) of $13,500,000 (the “Purchase Price”),
allocated among the Purchasers as set forth on Schedule 2.1.

 

2.2          Fees Payable.

 

(a)          Fee Letter. The Borrower shall pay to the Collateral Agent such
fees as are specified as owing in the Fee Letter at the times and in the manner
and amounts as are set forth therein.

 

(b)          Reimbursement of Expenses. At the Closing, the Borrower shall
reimburse all of the Collateral Agent’s and the Purchasers’ reasonable and
documented out-of-pocket fees and expenses (including, without limitation, fees,
charges and disbursements of outside counsel and other out-of-pocket expenses
such as consultant fees, travel expenses, background checks and other expenses)
incurred in connection with (i) the negotiation and execution and delivery of
this Agreement and the Note Documents, (ii) the Purchasers’ due diligence
investigation, and (iii) the other transactions contemplated by this Agreement
and the Note Documents (including filings or other actions required to perfect
the security interests granted under the Collateral Documents); provided that
the Borrower shall not be obligated to pay, without its prior written approval
(such approval not to be unreasonably withheld or delayed), any out-of-pocket
fees, costs and expenses incurred in excess of (x) $10,000 for due diligence
expenses, and (y) $215,000 for travel expense and the fees, disbursements and
other charges of legal counsel to the Purchasers incurred prior to the Closing
in connection with clause (i) above. The Borrower agrees to promptly pay all
reasonable and documented out-of-pocket fees, costs and expenses (including
external attorneys’ fees and expenses) incurred by the Purchasers in connection
with any action to enforce this Agreement or the Note Documents or to collect
any payments due from the Borrower or any of the Guarantors. All fees, costs,
and expenses for which the Borrower is responsible under this Section 2.2(b)
shall be deemed part of the Obligations when incurred.

 

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2.3          Closing. The purchase and issuance of the Notes shall take place at
the closing (the “Closing”) on the date hereof (the “Closing Date”), subject to
the satisfaction or waiver of the conditions to closing set forth in Article 4.
At the Closing, the Borrower shall deliver the Notes to the Purchasers against
delivery by the Purchasers of the Purchase Price, which is payable by wire
transfer of immediately available funds.

 

Article 3

THE NOTES

 

3.1          Interest and Related Fees.

 

(a)          Interest. Except as provided in Section 3.1(b), interest shall
accrue and shall be calculated daily on the basis of the actual number of days
elapsed and a 360-day year on the unpaid principal amount of the Notes
outstanding from time to time and on all other Obligations at the lesser of (i)
the Applicable Rate and (ii) the Maximum Rate (as defined below).

 

(b)          Default Rate of Interest. At the written election of the Required
Purchasers after the occurrence of an Event of Default (or automatically upon
the occurrence of and during the continuance of any Event of Default pursuant to
Section 10.1(a), 10.1(c) (solely with respect to failure to comply with Section
9.20), 10.1(f) or Section 10.1(g)), and for so long as such Event of Default
continues, the unpaid principal amount of the Notes outstanding from time to
time and the other Obligations shall bear interest at a rate per annum of five
percent (5%) (the “Default Rate”) in excess of the rates otherwise payable under
this Agreement or the Note Documents (but not in any event in excess of the
Maximum Rate). The Default Rate shall apply retroactively to the date of
occurrence of such Event of Default. All Default Rate interest shall be paid in
cash on demand of the Collateral Agent. If, pursuant to the terms of this
Agreement or the Note Documents such other Obligations do not bear interest,
after the occurrence of an Event of Default and for so long as it continues,
such Obligations shall bear interest at the rate per annum from time to time
borne by the Notes.

 

(c)          Payment of Interest and Related Fees. Subject to Section 3.1(e)
below, the Borrower shall pay accrued interest in arrears on the last day of
each calendar month (each such date being an “Interest Payment Date”). In
addition, accrued and unpaid interest shall be payable on the maturity of the
Notes, whether by acceleration or otherwise, and on the date of any prepayment
(with respect to the amount prepaid).

 

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(d)          Excess Interest. It is the intention of the parties to comply
strictly with applicable usury laws. Accordingly, notwithstanding any provision
to the contrary in this Agreement or any other Note Document or any of the
Obligations, in no event shall any Obligations require the payment or permit the
payment, taking, reserving, receiving, collection or charging of any sums
constituting interest under Applicable Law that exceed the maximum amount
permitted by such laws, as the same may be amended or modified from time to time
(the “Maximum Rate”). If any such excess interest is called for, contracted for,
charged, taken, reserved or received in connection herewith or therewith, or in
any communication by any Purchasers or any other Person to the Borrower or any
other Person, or in the event that all or part of the principal or interest
hereof or thereof shall be prepaid or accelerated, so that under any of such
circumstances or under any other circumstance whatsoever the amount of interest
contracted for, charged, taken, reserved or received on the amount of principal
actually outstanding from time to time under any Obligations shall exceed the
Maximum Rate, then in such event it is agreed that: (i) the provisions of this
paragraph shall govern and control; (ii) neither the Borrower nor any other
Person or entity now or hereafter liable for the payment of any Obligations
shall be obligated to pay the amount of such interest to the extent it is in
excess of the Maximum Rate; (iii) any such excess interest which is or has been
received by any Purchasers, notwithstanding this paragraph, shall be credited
against the then unpaid principal balance of the Obligations (or, if the
principal amount of the Obligations shall have been paid in full, refunded by
the Purchasers to the party primarily liable on such Obligation); and (iv) the
provisions of this Agreement and the Obligations, and any other communication to
the Borrower, shall immediately be deemed reformed and such excess interest
reduced, without the necessity of executing any other document, to the Maximum
Rate. The right to accelerate the maturity of the Obligations does not include
the right to accelerate, collect, or charge unearned interest, but only such
interest that has otherwise accrued as of the date of acceleration. Without
limiting the foregoing, all calculations of the rate of interest contracted for,
charged, taken, reserved or received in connection with any of the Obligations
which are made for the purpose of determining whether such rate exceeds the
Maximum Rate shall be made to the extent permitted by Applicable Laws by
amortizing, prorating, allocating and spreading during the period of the full
term of such Obligations, including all prior and subsequent renewals and
extensions hereof or thereof, all interest at any time contracted for, charged,
taken, reserved or received by any Purchaser. The terms of this paragraph shall
be deemed to be incorporated into each of the other Note Documents.

 

(e)          PIK Interest. Notwithstanding any other provision hereof, on any
Interest Payment Date occurring on or prior to June 29, 2018 the Borrower shall
pay accrued interest in kind (rather than in cash). Any such interest shall be
capitalized to the principal amount of the Notes on such Interest Payment Date
and shall be considered principal of the Notes for all purposes, including,
without limitation, for the calculation of interest on subsequent Interest
Payment Dates and of any Prepayment Fee.

 

3.2          Redemption of Notes.

 

(a)          Scheduled Redemptions of Notes. (i) The Borrower shall redeem the
Notes issued by it on March 31, 2021 (the “Maturity Date”) by payment in cash in
full of the entire outstanding principal balance thereof (including all interest
that has been added to the outstanding principal amount of such Notes pursuant
to Section 3.1(e)), plus all unpaid interest accrued thereon through the date of
redemption, plus all outstanding and unpaid Obligations to the Purchasers of the
Notes under the Note Documents through the date of redemption and pay to the
Collateral Agent all other outstanding Obligations payable to the Collateral
Agent under the Note Documents. (ii) The Borrower shall redeem the Notes issued
by it in principal installments of $250,000 payable on the last day of each
month end beginning with the month ending June 30, 2018 and continuing through
the Maturity Date (and on such other date(s) and in such other amounts as may be
required from time to time pursuant to this Agreement).

 

 24 

 

 

(b)          Optional Redemption Initiated by the Borrower. The Borrower shall
have the right, at its sole option and election, at any time or from time to
time prior to the Maturity Date, to redeem the Notes issued by the Borrower, in
whole or in part on not less than five (5) Business Days’ prior written notice
of the date of redemption, which shall be a Business Day (any such date, a
“Prepayment Date”), by payment of an amount equal to the unpaid principal
balance thereof to be redeemed, plus all unpaid interest accrued thereon through
the Prepayment Date, plus all outstanding and unpaid fees and expenses payable
to the Purchasers of each Note under the Note Documents through the Prepayment
Date, plus the Prepayment Fee.

 

 25 

 

 

(c)          Mandatory Redemptions.

 

(i)          Change of Control. Upon the occurrence of a Change of Control, the
Borrower shall purchase all Notes issued by it in full by payment of an amount
equal to (x) the unpaid principal balance thereof plus (y) all other outstanding
Obligations payable to the Purchasers of each Note under the Note Documents
through the Prepayment Date and all other outstanding Obligations payable to the
Collateral Agent under the Note Documents plus (z) the Prepayment Fee. The
provisions of this Section 3.2(c)(i) shall not be deemed to be implied consent
to any such Change of Control otherwise prohibited by the terms of this
Agreement.

 

(ii)          Dispositions; Casualty Losses. Promptly, and in any event within
two (2) Business Days of receipt by the Borrower of the proceeds of any
voluntary or involuntary sale or Disposition by the Borrower or any Subsidiary
of assets (including casualty losses or condemnations but excluding sales or
Dispositions which are permitted under Section 9.4), the Borrower shall be
required to prepay the Notes issued by it in an amount equal to 100% of the Net
Cash Proceeds (including condemnation awards and payments in lieu thereof)
received by such Person in connection with such sales or Dispositions plus the
Prepayment Fee; provided that, so long as (A) no Default or Event of Default
shall have occurred and is continuing or would result therefrom, (B) the
Borrower shall have given the Purchasers prior written notice of the Borrower’s
intention to apply such monies to the costs of replacement of the properties or
assets that are the subject of such sale or Disposition or the cost of purchase
or construction of other assets useful in the business of the Borrower or its
Subsidiaries, (C) the monies are held in a deposit account in which the
Purchasers have a perfected security interest (subject only to Permitted Liens)
and (D) the Borrower or its Subsidiaries, as applicable, complete such
replacement, purchase, or construction within 180 days after the initial receipt
of such monies, then the Borrower whose assets were the subject of such
Disposition shall have the option to apply such monies in an amount not to
exceed $750,000 (with any Net Cash Proceeds in excess of $750,000 to be applied
to prepay the Notes) to the costs of replacement of the assets that are the
subject of such sale or Disposition or the costs of purchase or construction of
other assets useful in the business of the Borrower unless and to the extent
that such applicable period shall have expired without such replacement,
purchase, or construction being made or completed, in which case, any amounts
remaining in the deposit account referred to in clause (C) above shall be
immediately paid to the Purchasers and applied in prepayment of the Notes in
accordance with Section 3.3. Nothing contained in this Section 3.2(c) shall
permit the Borrower or any Subsidiary to sell or otherwise dispose of any assets
other than in accordance with Section 9.4.

 

(iii)          Equity. Promptly, and in any event within two (2) Business Days
of the date of the receipt by the Borrower or any of its Subsidiaries of the
proceeds from the issuance and sale of any Capital Stock of the Borrower (other
than proceeds of Capital Stock of the Borrower used to repurchase or repay the
Subordinated Note pursuant to Section 9.17 at any time in an aggregate amount
not to exceed $2,500,000), the Borrower shall be required to prepay the Notes in
an amount equal to 100% of the Net Cash Proceeds received by such Person in
connection with such issuance plus the Prepayment Fee. The provisions of this
Section 3.2(c)(iii) shall not be deemed to be implied consent to any such
issuance otherwise prohibited by the terms of this Agreement.

 

 26 

 

 

(iv)          Option to Decline. Any mandatory prepayment required to be made
pursuant to Section 3.2(c) may be declined in whole or in part by any Purchaser
without prejudice to such Purchaser’s rights hereunder to accept or decline any
future payments in respect of any mandatory prepayments, by providing notice to
the Collateral Agent no later than 5:00 p.m. (New York City time) one (1)
Business Day (or such other date acceptable to the Collateral Agent) prior to
the date of such prepayment; provided that the Borrower shall give not less than
two (2) Business Days’ prior written notice of the date of any mandatory
prepayment. If a Purchaser chooses not to accept payment in respect of a
mandatory prepayment in whole or in part the other Purchasers that accept such
mandatory prepayment shall have the option to share such proceeds on a pro rata
basis on or before the date otherwise due hereunder; provided that, to the
extent such mandatory prepayment is declined by all the Purchasers, such
prepayment may be retained by the Borrower.

 

(d)          Acceleration. In addition, the Notes shall be subject to
acceleration as set forth in Section 10.2 below.

 

(e)          Prepayment Fee Trigger Event. Upon the occurrence of a Prepayment
Fee Trigger Event, the Borrower shall pay to the Collateral Agent, for the
account of the Purchasers, the Prepayment Fee. THE BORROWER AND THE OTHER LOAN
PARTIES EXPRESSLY WAIVE (TO THE EXTENT SUCH WAIVER IS PERMISSIBLE UNDER
APPLICABLE LAW) THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE OR LAW THAT
PROHIBITS OR MAY PROHIBIT THE COLLECTION OF THE FOREGOING PREPAYMENT FEE IN
CONNECTION WITH ANY ACCELERATION OF THE OBLIGATIONS. The Borrower and the other
Loan Parties expressly agree that (A) the Prepayment Fee is reasonable and is
the product of an arm’s length transaction between sophisticated business
people, ably represented by counsel, (B) the Prepayment Fee shall be payable
notwithstanding the then prevailing market rates at the time payment is made,
(C) there has been a course of conduct between the Purchasers and the Loan
Parties giving specific consideration in this transaction for such agreement to
pay the Prepayment Fee, (D) the Loan Parties shall be estopped hereafter from
claiming differently than as agreed to in this Section 3.2(e), (E) their
agreement to pay the Prepayment Fee is a material inducement to the Purchasers
to purchase the Notes, and (F) the Prepayment Fee represents a good faith,
reasonable estimate and calculation of the lost profits or damages of the
Purchasers and that it would be impractical and extremely difficult to ascertain
the actual amount of damages to the Purchasers or profits lost by the Purchasers
as a result of such Prepayment Fee Trigger Event.

 

 27 

 

 

3.3          Manner of Payment. All fees, interest, Prepayment Fee, premium,
principal and other amounts payable in respect of any Note Document shall be
paid by wire transfer of immediately available funds to an account at a bank
designated in writing by the applicable Purchaser or the Collateral Agent, as
applicable. All payments made by the Borrower (excluding regular monthly
interest payments made when due under Section 3.1(a)) upon the Obligations
relating to the Notes and all net proceeds from the enforcement of the
Obligations shall be applied (a) first, to that portion of the Obligations
constituting fees, indemnities, and expenses and other amounts (including
attorneys’ fees), payable to the Collateral Agent and the Purchasers, (b)
second, to the payment of that portion of the Obligations constituting accrued
and unpaid interest on the Notes, (c) third, to the payment of that portion of
the Obligations constituting unpaid principal of the Notes, and (d) last, the
balance, if any, after all of the Obligations have been indefeasibly paid in
full, to the Borrower or as otherwise required by any Requirements of Law. All
payments made by the Borrower upon the Notes (including, without limitation,
payments of principal if prepaid or upon earlier acceleration) shall be paid
proportionally among the Purchasers of the Notes based upon the outstanding
principal amounts of such Notes held by each Purchaser.

 

3.4          [Intentionally Omitted].

 

3.5          Taxes.

 

(a)          Any and all payments by or on account of any Obligations hereunder
or under any Note Document shall be made free and clear of and without deduction
or withholding for any Indemnified Taxes; provided that if the Borrower shall be
required by Applicable Law (as determined in the good faith discretion of the
Borrower) to deduct or withhold any Indemnified Taxes from such payments, then
(i) the sum payable shall be increased as necessary so that after making all
such deductions or withholding (including such deductions or withholding
applicable to additional sums payable under this Section 3.5) a Purchaser
receives an amount equal to the sum it would have received had no such
deductions or withholding been made, (ii) the Borrower shall make such
deductions or withholding and (iii) the Borrower shall timely pay the full
amount deducted or withheld to the relevant Governmental Authority in accordance
with Applicable Law.

 

(b)          Without limiting the provisions of Section 3.5(a) above, the
Borrower shall timely pay any Other Taxes to the relevant Governmental Authority
in accordance with Applicable Law.

 

(c)          The Borrower shall indemnify each Purchaser for the full amount of
any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or
attributable to amounts payable under this Section 3.5) payable or paid by any
Purchaser or required to be withheld or deducted from a payment to such
Purchaser and any reasonable expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes were correctly or legally imposed or
asserted by the relevant Governmental Authority. A certificate setting forth in
reasonable detail the basis for determining the amount of such payment or
liability delivered to Borrower by any Purchaser shall be conclusive absent
manifest error. Such payment shall be due within ten (10) days of Borrower’s
receipt of such certificate.

 

(d)          As soon as practicable after any payment of Indemnified Taxes or
Other Taxes by the Borrower to a Governmental Authority pursuant to this Section
3.5, Borrower shall deliver to the applicable Purchasers the original or a
certified copy of a receipt issued by such Governmental Authority evidencing
such payment, a copy of the return reporting such payment or other evidence of
such payment reasonably satisfactory to such Purchasers.

 

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(e)          Status of Purchasers.

 

(i)          Any Purchaser that is entitled to an exemption from or reduction of
withholding Tax with respect to payments made hereunder or under any Note
Document shall deliver to the Borrower at the time or times reasonably requested
by the Borrower such properly completed and executed documentation as reasonably
requested by the Borrower as will permit such payments to be made without
withholding or at a reduced rate of withholding. In addition, any Purchaser, if
requested by the Borrower, shall deliver such other documentation prescribed by
Applicable Law or reasonably requested by the Borrower as will enable the
Borrower to determine whether or not such Purchaser is subject to backup
withholding or information reporting requirements.

 

(ii)          Without limiting the generality of Section 3.5(e)(i), each
Purchaser that is not a United States person (as such term is defined in Section
7701(a)(30) of the Code) for U.S. federal income tax purposes (a “Non-US
Purchaser”) shall deliver promptly to the Borrower, on or prior to the Closing
Date (in the case of each Purchaser listed on the signature pages hereof on the
Closing Date or, if later, on or prior to the date on which such Purchaser
becomes a party to this Agreement), and at such other times as the Borrower
reasonably requests, (i) two original copies of IRS Form W-8BEN, W-8BEN-E,
W-8ECI, W-8EXP and/or W-8IMY (or, in each case, any successor forms), properly
completed and duly executed by such Purchaser, and such other documentation
prescribed by the Code or reasonably requested by the Borrower to establish, if
applicable, that such Purchaser is not subject to (or is subject to a reduced
rate of) deduction or withholding of United States federal tax with respect to
any payments to such Purchaser of principal, interest, fees or other amounts
payable under any of the Note Documents, or (ii) if such Purchaser is not a
“bank” or other Person described in Section 881(c)(3) of the Code, a Certificate
Regarding Non-Bank Status that is substantially in the form of Exhibit B
together with two original copies of IRS Form W-8BEN or W-8BEN-E or W-8IMY (or
any successor form), properly completed and duly executed by such Purchaser, and
such other documentation prescribed by the Code or reasonably requested by the
Borrower to establish, if applicable, that such Purchaser is not subject to (or
is subject to a reduced rate of) deduction or withholding of United States
federal tax with respect to any payments to such Purchaser of interest payable
under any of the Note Documents. Without limiting the generality of Section
3.5(e)(i), each Purchaser that is a United States person (as such term is
defined in Section 7701(a)(30) of the Code) for United States federal income tax
purposes (a “U.S. Purchaser”) shall deliver to the Borrower on or prior to the
Closing Date (or, if later, on or prior to the date on which such Purchaser
becomes a party to this Agreement) and at such other times as the Borrower
reasonably requests two original copies of IRS Form W-9 (or any successor form),
properly completed and duly executed by such Purchaser, certifying that such
U.S. Purchaser is entitled to an exemption from United States backup withholding
tax, or otherwise prove that it is entitled to such an exemption. Each Purchaser
required to deliver any forms, certificates or other evidence with respect to
United States federal tax withholding matters pursuant to this Section 3.5(e)
hereby agrees, from time to time after the initial delivery by such Purchaser of
such forms, certificates or other evidence, whenever a lapse in time or change
in circumstances renders such forms, certificates or other evidence obsolete or
inaccurate in any material respect, that such Purchaser shall promptly deliver
to the Borrower two new original copies of IRS Form W-8BEN, W-8BEN-E, W-8ECI,
W-8EXP, W-8IMY and/or W-9 (or, in each case, any successor form), or a
Certificate Regarding Non-Bank Status and two original copies of IRS Form
W-8BEN, W-8BEN-E or W-8IMY (or, in each case, any successor form), as the case
may be, properly completed and duly executed by such Purchaser, and such other
documentation prescribed by the Code or reasonably requested by the Borrower, if
applicable, to confirm or establish that such Purchaser is not subject to
deduction or withholding of United States federal tax with respect to payments
to such Purchaser under the Note Documents, or promptly notify the Borrower of
its legal inability to deliver any such forms, certificates or other evidence.

 

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(iii)          If a payment made to a Purchaser under any Note Document would be
subject to U.S. federal withholding Tax imposed by FATCA if such Purchaser were
to fail to comply with the applicable reporting requirements of FATCA (including
those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such
Purchaser shall deliver to the Borrower at the time or times prescribed by law
and at such time or times reasonably requested by the Borrower such
documentation prescribed by applicable law (including as prescribed by Section
1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably
requested by the Borrower as may be necessary for the Borrower to comply with
its obligations under FATCA and to determine that such Purchaser has complied
with such Purchaser’s obligations under FATCA or to determine the amount to
deduct and withhold from such payment. Solely for purposes of this clause (iii),
“FATCA” shall include any amendments made to FATCA after the date hereof.

 

(f)          If any party determines, in its sole discretion exercised in good
faith, that it has received a refund of any Taxes as to which it has been
indemnified pursuant to this Section 3.5 (including additional amounts pursuant
to this Section 3.5), it shall pay to the indemnifying party an amount equal to
such refund (but only to the extent of indemnity payments made under this
Section 3.5 with respect to the Taxes giving rise to such refund), net of all
out-of-pocket expenses (including Taxes) of such indemnified party and without
interest (other than any interest paid by the relevant Governmental Authority
with respect to such refund). Such indemnifying party, upon the request of such
indemnified party, shall repay to such indemnified party the amount paid over
pursuant to this Section 3.5(f) (plus any penalties, interest or other charges
imposed by the relevant Governmental Authority) in the event that such
indemnified party is required to repay such refund to such Governmental
Authority. Notwithstanding anything to the contrary in this Section 3.5(f), in
no event will the indemnified party be required to pay any amount to an
indemnifying party pursuant to this Section 3.5(f) the payment of which would
place the indemnified party in a less favorable net after-Tax position than the
indemnified party would have been in if the Tax subject to indemnification and
giving rise to such refund had not been deducted, withheld or otherwise imposed
and the indemnification payments or additional amounts with respect to such Tax
had never been paid. This paragraph shall not be construed to require any
indemnified party to make available its Tax returns (or any other information
relating to its Taxes that it deems confidential) to the indemnifying party or
any other Person.

 

(g)          Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower and any
Purchaser under this Section 3.5 shall survive the termination of the Note
Documents and the payment in full of the Notes or the assignment of rights by a
Purchaser.

 

3.6          Purchase Price Allocation. On the Closing Date, in consideration of
the Purchasers purchasing the Notes, the Issuer will issue to the Purchasers for
no additional consideration, the Warrant. The Purchasers and the Borrower agree
that the Notes and the Warrants constitute an “investment unit” for purposes of
Section 1273(c)(2) of the Code. The Purchasers and the Borrower mutually agree
that for purpose of the allocation of the issue price of such investment unit
among the Notes and the Warrants in accordance with Section 1273(c)(2) of the
Code and U.S. Treasury Regulation Section 1.1273-2(h) $1,760,869.57 shall be
allocated to the Warrants, and neither the Purchasers nor the Company shall take
any position inconsistent with such allocation in any Tax Return unless
otherwise required by a tax authority or court.

 

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Article 4

CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS

 

The obligation of the Purchasers to purchase the Notes, to pay the Purchase
Price at the Closing and to perform any obligations hereunder shall be subject
to the satisfaction as determined by, or waived by, the Purchasers of the
following conditions on or before the Closing Date; provided that any waiver of
a condition shall not be deemed a waiver of any breach of any representation,
warranty, agreement, term or covenant, as specifically set forth elsewhere in
this Agreement, or of any misrepresentation by the Borrower.

 

4.1          Representations and Warranties. The representations and warranties
contained in Article 6 hereof shall be true and correct in all material respects
(except to the extent any such representation or warranty is by its terms
qualified by reference to materiality, in which case such representation or
warranty shall be true and correct in all respects) at and as of the Closing
Date (except to the extent such representations and warranties specifically
relate to an earlier date, in which case they shall be true and correct as of
such earlier date) after giving effect to the Transactions, and the Purchasers
shall have received at the Closing a certificate to the foregoing effect, dated
the Closing Date, and executed by the chief executive officer or chief financial
officer of the Borrower on behalf of the Borrower.

 

4.2          Compliance with this Agreement. The Borrower and the Guarantors
shall have performed and complied in all material respects with all of its
agreements and conditions set forth or contemplated herein that are required to
be performed or complied with by such Loan Party on or before the Closing Date
and the Purchasers shall have received at the Closing a certificate to the
foregoing effect, dated the Closing Date, and executed by the chief executive
officer or chief financial officer on behalf of the Borrower.

 

4.3          Certificates. The Purchasers shall have received certificates from
the Borrower and each Guarantor, dated the Closing Date and signed by a manager
or an officer of such Loan Party, certifying (i) that the attached copies of the
Charter Documents of such Loan Party, and resolutions of the board of directors
or similar governing body of such Loan Party approving the Note Documents to
which it is a party and the Transactions are all true, complete and correct and
remain unamended and in full force and effect, (ii) to the incumbency and
specimen signature of each manager or officer of such Loan Party executing any
Note Document to which it is a party or any other document delivered in
connection herewith and therewith on behalf of such Loan Party, (iii) that the
attached list of executive officers and directors or managers, as applicable, of
such Loan Party are true, complete, and correct, (iv) that, to the Knowledge of
such Loan Party, none of the executive officers and directors or managers, as
applicable, included in such attached list have been charged with, indicted for,
been part of a proceeding for, been investigated for, arrested for, or convicted
of a felony, nor are they engaged in criminal activity, nor have any of them
been an officer of a bankrupt company other than as set forth on a schedule
attached to such certificate, and (v) that, to the Knowledge of such Loan Party,
there are no written or oral side agreements with any individual or business
whereby such Loan Party or its management has agreed to incur any obligations
other than those contained in formal written contracts or agreements executed by
or on behalf of such Loan Party.

 

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4.4          Solvency. The Purchasers shall have received a certificate, signed
by the chief financial officer of the Borrower, certifying that the Borrower and
its Subsidiaries, on a consolidated basis, are Solvent both immediately before
and immediately after giving effect to the Transactions.

 

4.5          Financial Information. The Purchasers shall have received (i) a set
of projections of the Borrower for each Fiscal Year through the Maturity Date,
including projected financial statements and Capital Expenditures, and (ii) a
pro forma balance sheet of the Borrower, prepared giving effect to the
consummation of the transactions contemplated hereby, in each case in form and
substance (including as to scope and underlying assumptions) reasonably
satisfactory to the Purchasers.

 

4.6          Documents. The Purchasers shall have received true, complete and
correct copies of the Note Documents, and such other agreements, schedules,
exhibits, certificates, documents, financial information and filings as the
Purchasers may request in connection with or relating to the Transactions all in
form and substance reasonably satisfactory to the Purchasers, including, without
limitation, each of the Note Documents executed by the Borrower and its
Subsidiaries as and where applicable.

 

4.7          Purchase of Notes Permitted by Applicable Laws. The acquisition of
and payment for the Notes to be acquired by the Purchasers hereunder and the
consummation of the transactions contemplated hereby and by the Note Documents
(i) shall not be prohibited by any Requirements of Law, and (ii) shall not
subject the Purchasers to any penalty or other onerous condition under or
pursuant to any Requirements of Law.

 

4.8          Opinion of Counsel. The Purchasers shall have received opinions of
outside counsel to the Borrower and its Subsidiaries, dated as of the Closing
Date, relating to the Transactions, in form and substance reasonably acceptable
to the Purchasers.

 

4.9          Consents and Approvals. All consents, exemptions, authorizations,
or other actions by, or notices to, or filings with, Governmental Authorities
and other Persons in respect of all Requirements of Law and with respect to
those Contractual Obligations of the Borrower and each other Loan Party
necessary in connection with the execution, delivery or performance by the
Borrower or such other Loan Party, or enforcement against the Borrower, of the
Note Documents to which it is a party shall have been made or obtained and be in
full force and effect, and the Purchasers shall have been furnished with
appropriate evidence thereof.

 

4.10        No Material Judgment or Order. There shall not be on the Closing
Date any judgment, injunction or order of a court of competent jurisdiction or
any ruling of any Governmental Authority which, in the judgment of the
Purchasers, would prohibit the purchase of the Notes hereunder or subject the
Purchasers to any penalty or other onerous condition under or pursuant to any
Requirement of Law if the Notes were to be purchased hereunder.

 

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4.11        Good Standing Certificates. The Borrower shall have delivered to the
Purchasers as of a date not more than fifteen (15) Business Days before the
Closing Date good standing certificates for the Borrower and each Guarantor for
its jurisdiction of incorporation or formation and certificates of foreign
qualification for all other jurisdictions where its ownership, lease or
operation of property or the conduct of its business requires such foreign
qualification, except where the failure to be so qualified could not reasonably
be expected to have, either individually or in the aggregate, a Material Adverse
Effect.

 

4.12        No Litigation. No arbitration, action, claim, suit, litigation or
proceeding before any court or any Governmental Authority shall have been
commenced or threatened against the Borrower or any Subsidiary (including its
directors or officers), and no investigation by any Governmental Authority shall
have been commenced and no action, suit or proceeding by any Governmental
Authority shall have been threatened against any Purchaser, or the Borrower (i)
seeking to restrain, prevent or change the transactions contemplated hereby or
questioning the validity or legality of any of such Transactions, (ii) in which
the amount of damages claimed is $500,000 or more or (iii) which could
reasonably be expected to have a Material Adverse Effect, except as set forth on
Schedule 6.6.

 

4.13        Insurance Certificates. The Collateral Agent shall have received (i)
evidence of insurance complying with the requirements of Section 8.6 and (ii)
separate certificates or policy language naming the Collateral Agent as an
additional insured on all liability policies and lenders’ loss payee on all
property policies for the business and properties of each Loan Party.

 

4.14        Fees, Etc. On the Closing Date, the Borrower shall have paid (i) to
the Collateral Agent, all fees due and payable pursuant to the Fee Letter and
(ii) to the Collateral Agent and the Purchasers all out-of-pocket costs, fees
and expenses (including, without limitation, legal fees and expenses) then due
and payable to the Collateral Agent and the Purchasers, as applicable,
hereunder.

 

4.15        Collateral. The Collateral Agent shall have received correct,
complete fully executed copies of each of the Collateral Documents in a form
acceptable to the Collateral Agent, together with such UCC financing statements,
original stock certificates, if any, and stock powers, original promissory
notes, notices of security interest to be filed in the United States Patent and
Trademark Office, and other instruments and documents required to be delivered
under the Collateral Documents or as the Collateral Agent may otherwise
determine to be necessary or appropriate to perfect the Liens granted
thereunder, all in form and substance acceptable to the Collateral Agent.

 

4.16        Lien Searches. The Collateral Agent shall have received (i) searches
of the Uniform Commercial Code, judgment, bankruptcy and tax lien filings which
may be filed with respect to the Collateral covered by the Collateral Documents
and (ii) Lien searches of intellectual property, in each case confirming that
all such Property given as collateral is subject to no Liens except Permitted
Liens.

 

4.17        No Material Adverse Effect. There shall exist no (a) event,
development, or circumstance occurring on or after December 31, 2016, that has
had or could be expected to have, individually or in the aggregate, a Material
Adverse Effect, or (b) material disruption or material adverse change in the
financial, banking or capital markets generally affecting credit facilities
similar to the facility herein.

 

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4.18        Structure. The legal and corporate structure of the Borrower and its
Subsidiaries, along with the form and terms of the Charter Documents of the
Borrower and its Subsidiaries, shall be satisfactory to the Collateral Agent.

 

4.19        Subordinated Note. The Collateral Agent shall have received a duly
executed copy of the Subordinated Note. The Subordinated Note Obligations
outstanding under the Subordinated Note on the Closing Date shall not exceed
$5,000,000.

 

4.20        Quality of Earnings Report. The Purchasers shall have received the
Borrower’s quality of earnings report for the Borrower and its Subsidiaries, the
results of which shall be satisfactory to the Purchasers in their sole
discretion.

 

Article 5

CONDITIONS TO THE OBLIGATIONS OF THE BORROWER

 

The obligations of the Borrower to issue, or cause to be issued, the Notes and
to perform its other obligations hereunder shall be subject to the satisfaction
as determined by, or waived by, the Borrower of the following conditions on or
before the Closing Date:

 

5.1          Representations and Warranties. The representations and warranties
of the Purchasers contained in Article 7 hereof shall be true and correct in all
material respects at and as of the Closing Date as if made at and as of such
date (except to the extent such representations and warranties specifically
relate to an earlier date, in which case they shall be true and correct in all
material respects as of such earlier date).

 

5.2          Compliance with this Agreement. The Purchasers shall have performed
and complied in all material respects with all of the agreements and conditions
set forth or contemplated herein that are required to be performed or complied
with by them on or before the Closing Date.

 

Article 6

REPRESENTATIONS AND WARRANTIES OF THE BORROWER

 

The Borrower hereby represents and warrants to the Purchasers as follows:

 

6.1          Existence and Power. The Borrower and each of its Subsidiaries: (a)
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or formation, (b) has all requisite corporate
or limited liability company power and authority to own and operate its
property, to lease the property it operates as lessee and to conduct the
business in which it is currently, or is currently proposed to be, engaged; (c)
is duly qualified as a foreign entity, licensed and in good standing under the
laws of each jurisdiction where its ownership, lease or operation of property or
the conduct of its business requires such qualification, except where the
failure to be so qualified could not reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect, and (d) has the
corporate or limited liability company power and authority to execute, deliver
and perform its obligations under each Note Document to which it is or will be a
party and to borrow hereunder. The jurisdictions in which the Borrower and each
of its Subsidiaries are organized and qualified to do business as of the Closing
Date are listed on Schedule 6.1.

 

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6.2          Authorization; No Contravention. The execution, delivery and
performance by the Borrower and each Subsidiary of each Note Document to which
it is or will be a party and the consummation of the Transactions: (a) have been
duly authorized by all necessary corporate or limited liability company action;
(b) do not and will not contravene or violate the terms of the Charter Documents
of the Borrower or any of its Subsidiaries or any amendment thereto or any
material Requirement of Law applicable to the Borrower or such Subsidiary or the
Borrower’s or such Subsidiary’s assets, business or properties; (c) do not and
will not (i) conflict with, contravene, result in any violation or breach of or
default under any material Contractual Obligation of the Borrower or such
Subsidiary (with or without the giving of notice or the lapse of time or both)
other than any right to consent, which consents have been obtained, (ii) create
in any other Person a right or claim of termination or amendment of any material
Contractual Obligation of the Borrower or such Subsidiary, or (iii) require
modification, acceleration or cancellation of any material Contractual
Obligation of the Borrower or such Subsidiary; and (d) do not and will not
result in the creation of any Lien (or obligation to create a Lien) against any
property, asset or business of the Borrower or such Subsidiary (other than those
securing the Notes).

 

6.3          Governmental Authorization; Third Party Consents. Except as set
forth on Schedule 6.3, no approval, consent, compliance, exemption,
authorization, or other action by, or notice to, or filing with, any
Governmental Authority or any other Person in respect of any Requirement of Law
or Material Contract, and no lapse of a waiting period under a Requirement of
Law or Material Contract, is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, the Borrower of
the Note Documents to which it is a party or the consummation of the
Transactions, other than filings to perfect Liens granted under the Collateral
Documents.

 

6.4          Binding Effect. The Borrower and its Subsidiaries have duly
executed and delivered the Note Documents to which it is a party and such Note
Documents constitute the legal, valid and binding obligations of the Borrower
and such Subsidiary enforceable against the Borrower and such Subsidiary in
accordance with its respective terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium and similar laws
of general applicability relating to or affecting creditors’ rights and by
general principles of equity.

 

6.5          No Legal Bar. Neither the Borrower nor any Subsidiary has
previously entered into any agreement which is currently in effect or to which
the Borrower or any of its Subsidiaries is currently bound granting any rights
to any Person which conflict with the rights to be granted by the Borrower in
the Note Documents, other than the right to consent, which consents have been
obtained.

 

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6.6          Litigation. Except as set forth on Schedule 6.6, (a) there are no
legal actions, suits, proceedings, claims or disputes pending or, to the
Knowledge of the Borrower, threatened, at law, in equity, in arbitration or
before any Governmental Authority against or affecting the Borrower or its
Subsidiaries that could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect; (b) there is no injunction, writ,
temporary restraining order, decree or any order or determination of any nature
by any arbitrator, court or other Governmental Authority purporting to enjoin or
restrain the execution, delivery or performance of the Note Documents or which
relates to the assets or the business of the Borrower or its Subsidiaries; and
(c) there is no litigation, claim, audit, dispute, review, proceeding or
investigation currently pending or threatened against the Borrower or its
Subsidiaries for any violation or alleged violation of any Requirements of Law,
and neither the Borrower nor any Subsidiary has received written notice of any
threat of any suit, action, claim, dispute, investigation, review or other
proceeding pursuant to or involving any Requirements of Law.

 

6.7          Compliance with Laws.

 

(a)          The Borrower and its Subsidiaries are in compliance with all
Requirements of Law, except for such noncompliance that could not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
Except as set forth on Schedule 6.7 as of the Closing Date, there are no actual
or, to the Knowledge of the Borrower, pending appeals, adjustments, audits,
inquiries, investigations, proceedings, recoupments or notices of intent to
audit or investigate by any Governmental Authority against the Borrower or its
Subsidiaries.

 

6.8          No Default or Breach. No event has occurred and is continuing or
would result from the incurring of Obligations by the Borrower under the Note
Documents which constitutes or, with the giving of notice or lapse of time or
both would constitute an Event of Default. To the Knowledge of the Borrower,
except as could not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect, neither the Borrower nor any Subsidiary is
in default with respect to any Contractual Obligation in any Material Contract.

 

6.9          Title to Properties. Except as set forth on Schedule 6.9, the
Borrower and its Subsidiaries has good title to, or a valid leasehold interest
in, all Property used by it in its business and none of such Property is subject
to any Lien, except for Permitted Liens.

 

6.10        Real Property. Schedule 6.10 sets forth a correct and complete list
of all real property owned or leased by the Borrower or its Subsidiaries as of
the Closing Date. Each lease relating to such leased real property is in full
force and effect and the Borrower and its Subsidiaries enjoy peaceful and
undisturbed possession thereunder. There is no material default on the part of
the Borrower or its Subsidiaries or any event or condition which (with notice or
lapse of time, or both) would constitute a default on the part of the Borrower
or its Subsidiaries under any such lease. The Borrower and its Subsidiaries have
good and marketable title in fee simple to the real property identified on
Schedule 6.10 as owned by the Borrower or its Subsidiaries, free and clear of
any Liens other than Permitted Liens. There are no actions, suits or proceedings
pending or, to the Knowledge of the Borrower, threatened against the owned real
property or the leased real property used in connection with the business of the
Borrower or its Subsidiaries, at law or in equity, in arbitration or before any
Governmental Authority which would in any way affect title to or the right to
use such owned real property or leased real property.

 

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6.11        Taxes.

 

(a)          The Borrower and each of its Subsidiaries has timely filed all
United States federal and material state income and other material Tax Returns
that it was required to file, in each case with due regard for any extension of
time within which to file such Tax Return. All such Tax Returns were correct and
complete in all material respects. All Taxes shown on such Tax Returns to be due
and payable by the Borrower or its Subsidiaries have been paid, in each case
with due regard for any extension of time within which to file such Tax Return,
other than any Taxes the amount or validity of which is being actively contested
by Borrower or its Subsidiaries in good faith and by appropriate proceedings and
with respect to which adequate reserves or other appropriate provision, if any,
as shall be required in conformity with GAAP shall have been made or provided
therefor. Except as set forth on Schedule 6.11, as of the Closing Date, there
are no Liens, other than Permitted Liens, on any of the assets of the Borrower
or its Subsidiaries that arose in connection with any failure (or alleged
failure) to pay any Tax. No claim has been made by a Governmental Authority in a
jurisdiction where the Borrower and its Subsidiaries do not file Tax Returns
that the Borrower or any of its Subsidiaries is or may be subject to taxation by
that jurisdiction.

 

(b)          Except as set forth on Schedule 6.11, as of the Closing Date, there
is no action, suit, proceeding, investigation, examination, audit, or claim now
pending or threatened in writing by any Governmental Authority regarding any
Taxes relating to the Borrower or its Subsidiaries. Neither the Borrower nor any
Subsidiary has entered into an agreement or waiver or been requested to enter
into an agreement or waiver extending any statute of limitations relating to the
payment or collection of Taxes of such Person and there are no circumstances
that would cause the taxable years of the Borrower or its Subsidiaries not to be
subject to the normally applicable statute of limitations.

 

6.12        Financial Condition; SEC Filings.

 

(a)          The Borrower has furnished the Purchasers with true, correct and
complete copies of (collectively, the “Financial Statements”): (i) the audited
consolidated balance sheets of the Borrower and its Subsidiaries as of December
31, 2016, 2015 and 2014, and the related audited consolidated statements of
operations and comprehensive (loss) income, shareholders’ equity and cash flows
for each of the Fiscal Years in the three-year period ended December 31, 2016,
together with the notes thereto and the reports thereon as of December 31, 2016,
certified by the Borrower’s independent certified public accountants, and (ii)
the unaudited consolidated balance sheet of the Borrower and its Subsidiaries
for the Fiscal Quarter ended as of March 31, 2017 and the related unaudited
consolidated statements of operations and comprehensive (loss) income, changes
in shareholders’ equity and cash flows for such period. The Financial Statements
fairly present, in all material respects, the financial position of the
Borrower, as of the respective dates thereof, and the results of operations and
cash flows thereof, as of the respective dates or for the respective periods set
forth therein, and are in conformity with the past historical practices of the
Borrower, with GAAP consistently applied during the periods involved. Except as
set forth on Schedule 6.12, as of the dates of the Financial Statements, neither
the Borrower nor any Subsidiary had any known obligation, Indebtedness or
liability (whether accrued, absolute, contingent or otherwise, and whether due
or to become due), which was not reflected or reserved against in the balance
sheets which are part of the Financial Statements, except for those incurred in
the ordinary course of business and which are fully reflected on the books of
account of the Borrower or its Subsidiaries, as applicable.

 

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(b)          Except as set forth on Schedule 6.12, all statements, reports,
schedules, forms and other documents (the “SEC Documents”) required to have been
filed or furnished by any Loan Party with or to the SEC from January 1, 2016
through the Closing Date have been so filed or furnished on a timely basis
(other than any immaterial Form 3, 4, 5 or 8-K filings or any filings relating
solely to benefit plans). No Subsidiary of any Loan Party is required to file or
furnish any documents with or to the SEC. As of the time it was filed with or
furnished to the SEC: (i) each of the SEC Documents complied as to form in all
material respects with the applicable requirements of the Securities Act or the
Exchange Act (as the case may be); and (ii) none of the SEC Documents contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except to the extent corrected by the filing or furnishing of the
applicable amending or superseding SEC Document. Each of the certifications and
statements relating to SEC Documents required by: (1) Rule 13a-14 or 15d-14
under the Exchange Act; or (2) 18 U.S.C. §1350 (Section 906 of the
Sarbanes-Oxley Act) (collectively, the “Certifications”) is accurate and
complete, and complied as to form and content with all Applicable Laws in effect
at the time such Certification was filed with or furnished to the SEC.

 

6.13        Absence of Certain Changes or Events. Since December 31, 2016, there
has been no development, event, circumstance, or change which could be expected
to have, either individually or in the aggregate, a Material Adverse Effect.

 

6.14        Environmental Matters.

 

(a)          The Borrower and its Subsidiaries are and have been in compliance
in all material respects with all applicable Environmental Laws relating to
their Property, assets and operations; to the Knowledge of the Borrower, there
are no Hazardous Materials stored or otherwise located in, on or under any of
the Property or assets of the Borrower or its Subsidiaries, including, without
limitation, the groundwater, except in material compliance with applicable
Environmental Laws; and, to the Knowledge of the Borrower, there have been no
releases or, threatened releases of Hazardous Materials in, on or under any
property adjoining any of the Property or assets of (or used by) the Borrower or
its Subsidiaries which have not been remediated to the satisfaction of the
appropriate Governmental Authorities and in material compliance with
Environmental Laws.

 

(b)          To the Knowledge of the Borrower, none of the Property, assets or
operations of (or used by) the Borrower and its Subsidiaries is the subject of
any federal, state or local investigation evaluating whether (i) any remedial
action is needed to respond to a release or threatened release of any Hazardous
Materials into the environment or (ii) any release or threatened release of any
Hazardous Materials into the environment is in contravention of any
Environmental Law.

 

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(c)          Neither the Borrower nor any Subsidiary has received any written
notice or claim, nor, to the Knowledge of the Borrower, are there any pending,
threatened, or anticipated lawsuits or proceedings against them, with respect to
violations of an Environmental Law or in connection with the presence of or
exposure to any Hazardous Materials in the environment or any release or
threatened release of any Hazardous Materials into the environment, and, to the
Knowledge of the Borrower, neither the Borrower nor any Subsidiary is or has
been the owner or operator of any property which (i) pursuant to any
Environmental Law has been placed on any list of Hazardous Materials disposal
sites, including, without limitation, the “National Priorities List” or “CERCLIS
List,” (ii) has, or had, any subsurface storage tanks located thereon, or (iii)
has ever been used as or for a waste disposal facility, a mine, a gasoline
service station or a petroleum products storage facility.

 

(d)          To the Knowledge of the Borrower, neither the Borrower nor any
Subsidiary has present or contingent liability in connection with the presence
either on or off the Property or assets of, or used by, the Borrower or any
Subsidiary of any Hazardous Materials in the environment or any release or
threatened release of any Hazardous Materials into the environment.

 

6.15        Investment Company/Government Regulations. Neither the Borrower nor
any Subsidiary is an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. Neither the Borrower nor any Subsidiary is
subject to regulation under the Public Utility Holding Company Act of 1935, as
amended, the Federal Power Act, the Interstate Commerce Act, or any federal or
state statute or regulation limiting its ability to incur Indebtedness.

 

6.16        Subsidiaries. Except as set forth in Schedule 6.16, the Borrower
does not (a) have any Subsidiaries or (b) own of record or beneficially,
directly or indirectly, any (i) Capital Stock issued by any other Person or (ii)
equity, voting or participating interest in any joint venture or other
enterprise.

 

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6.17        Capitalization. As of the Closing Date, after giving effect to the
transactions contemplated hereby and in the other Note Documents, the
capitalization of the Borrower and its Subsidiaries (including the maximum
amount of diluted shares) is as set forth on Schedule 6.17. All of the issued
and outstanding Capital Stock of the Borrower has been, and Capital Stock of the
Borrower issuable upon the exercise of outstanding securities when issued will
be, duly authorized and validly issued and are fully paid and nonassessable. All
outstanding Capital Stock of the Borrower’s Subsidiaries are 100% owned by the
Borrower or one of its Subsidiaries free and clear of all Liens other than
Permitted Liens. Except as set forth in the Charter Documents (as in effect on
the Closing Date), the issuance of the foregoing Capital Stock is not and has
not been subject to preemptive rights in favor of any Person other than such
rights that have been waived and will not result in the issuance of any
additional Capital Stock of the Borrower or the triggering of any anti-dilution
or similar rights contained in any options warrants, debentures or other
securities or agreements of the Borrower or any of its Subsidiaries. On the
Closing Date, except as set forth on Schedule 6.17, there are no outstanding
securities convertible into or exchangeable for Capital Stock of the Borrower or
any of its Subsidiaries or options, warrants or other rights to purchase or
subscribe for Capital Stock of the Borrower or any of its Subsidiaries, or
contracts, commitments, agreements, understandings or arrangements of any kind
to which the Borrower or any of its Subsidiaries is a party relating to the
issuance of any Capital Stock of the Borrower or any of its Subsidiaries, or any
such convertible or exchangeable securities or any such options, warrants or
rights. On the Closing Date, except as set forth on Schedule 6.17, neither the
Borrower nor any of its Subsidiaries has any obligation, whether mandatory or at
the option of any other Person, at any time to redeem or repurchase any Capital
Stock of the Borrower or any of its Subsidiaries, pursuant to the terms of their
respective Charter Documents or otherwise. On the Closing Date, except as set
forth on Schedule 6.20 and Schedule 6.21, neither the Borrower nor any of its
Subsidiaries maintains nor has any obligations under any stock option plan or
other equity compensation related plans or agreements. No issued and outstanding
shares of the Borrower’s Capital Stock are subject to a right of first refusal
or condition of forfeiture in favor of the Borrower, and no shares of the
Capital Stock of the Borrower are subject to vesting restrictions. Since January
1, 2017, the Borrower has not declared or paid, or become responsible to declare
or pay, and the Borrower is not responsible for or have any obligation to
declare or pay, a dividend or other distribution on its securities or otherwise
combined, split, recapitalized or taken similar actions with respect to its
outstanding Capital Stock. There are no voting trusts, proxies or other
contracts or understandings to which the Borrower is a party or is bound with
respect to the voting of any shares of the Borrower’s Capital Stock, the
acquisition (including rights of co-sale, first refusal, antidilution or
pre-emptive rights), disposition, registration of securities of the Borrower, or
other rights of securityholders, or obligations of the Borrower, with respect to
the securities of the Borrower, other than registration rights under warrants
set forth on Schedule 6.17. All securities of the Borrower and its Subsidiaries
(including all shares of the Borrower’s common stock, securities, options and
warrants to purchase shares of the Borrower’s common stock (both outstanding as
well as those that are no longer outstanding)), have been and were issued and
granted pursuant to an exception from the Securities Act and otherwise in
compliance, in all material respects, with all securities and other Applicable
Laws, in compliance with the fiduciary obligations of the board of directors of
the Borrower, and in compliance with all requirements of applicable contracts
affecting, applicable to or relating to, such issuances.

 

6.18        Private Offering. No form of general solicitation or general
advertising was used by the Borrower or its Subsidiaries or their respective
representatives in connection with the offer or sale of the Notes to the
Purchasers pursuant to this Agreement.

 

6.19        Broker’s, Finder’s or Similar Fees. Except as set forth on Schedule
6.19, there are no brokerage commissions, finder’s fees or similar fees or
commissions payable by the Borrower or its Subsidiaries in connection with the
Transactions based on any agreement, arrangement or understanding with the
Borrower or its Subsidiaries or any action taken by the Borrower or its
Subsidiaries.

 

6.20        Labor Relations. Neither the Borrower nor any Subsidiary has
committed or is engaged in any unfair labor practice (as defined in the National
Labor Relations Act of 1947 and the regulations thereunder, in each case, as
amended). There is (a) no unfair labor practice complaint pending or, to the
Knowledge of the Borrower, threatened against the Borrower or any of its
Subsidiaries before the National Labor Relations Board and no grievance or
arbitration proceeding arising out of or under collective bargaining agreements
is so pending or, to the Knowledge of the Borrower, threatened, (b) no strike,
labor dispute, slowdown or stoppage pending or, to the Knowledge of the
Borrower, threatened against the Borrower or any Subsidiary, (c) no union
representation question existing with respect to the employees of the Borrower
or any Subsidiary, and to the Knowledge of the Borrower, no union organizing
activities are taking place, and (d) as of the Closing Date, no employment
contract with any employee of the Borrower or any of its Subsidiaries except as
set forth on Schedule 6.20 and the employment of all employees of the Borrower
and its Subsidiaries are terminable at will without penalty or severance of any
kind, except as set forth on Schedule 6.20. Except as set forth on
Schedule 6.20, the Borrower and each Subsidiary is in compliance in all material
respects with all federal, state or other Applicable Laws respecting employment
and employment practices, terms and conditions of employment and wages and
hours. Neither the Borrower nor any Subsidiary is a party to any collective
bargaining agreement.

 

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6.21        Employee Benefit Plans.

 

(a)          Employee Benefit Plans and Liabilities. Within the
six-consecutive-year period immediately preceding the first day of the year in
which the Closing Date occurs neither the Borrower nor any ERISA Affiliate
thereof has contributed to, or has any actual or contingent, direct or indirect,
liability in respect of, any employee benefit plan (as defined in Section 3(3)
of ERISA) or other employee benefit arrangement (collectively, the “Plans”),
other than liabilities with respect to such Plans specifically listed on
Schedule 6.21. Schedule 6.21 sets forth all Plans. The Borrower has delivered to
the Purchasers materially accurate and complete copies of all of such Plans in
effect as of the date hereof. At no time during such six year period has the
Borrower or any ERISA Affiliate thereof participated in or contributed to any
Multiemployer Plan, nor during such period has the Borrower or any ERISA
Affiliate thereof had an obligation to participate in or contribute to any such
Multiemployer Plan. No agreement subject to Section 4204 of ERISA has been
entered into in connection with Transactions. There are no outstanding
liabilities of the Borrower or any ERISA Affiliate thereof to any employee
benefit plans previously maintained by the Borrower or any ERISA Affiliate
thereof, and, the Borrower has no Knowledge of any potential liabilities in
connection therewith. There are no actions, suits or claims, other than for
benefits in the ordinary course, pending or, to the Knowledge of the Borrower,
threatened against the Borrower, any ERISA Affiliate thereof or the Plans which
might subject the Borrower or any ERISA Affiliate thereof to any material
liability.

 

(b)          Plan Compliance. The Borrower and its Subsidiaries, individually
and collectively, are in compliance in all material respects with all reporting,
disclosure and registration requirements applicable to it under the Code, ERISA
and all federal and state securities laws, and Department of Labor, IRS and SEC
rules and regulations promulgated thereunder, with respect to all of the Plans,
and are not subject to any material liability, whether asserted or not, for any
penalties to any Governmental Authority for late filing of any return, report or
other governmental filing. No civil or criminal action brought pursuant to the
provisions of Title I, Subtitle B, Part 5 of ERISA or any other federal or state
law is pending or, to the Knowledge of the Borrower, threatened against any
fiduciary of the Plans with respect to the Plans. Except as set forth on
Schedule 6.7, no Plan, or, to the Knowledge of the Borrower, any fiduciary
thereof, has been, or is currently, the direct or indirect subject of an audit,
investigation, or examination by any Governmental Authority with respect to the
Plans. All of the Plans comply currently, and have complied at all times (and
all former Plans have complied at all times in the past), both as to form and
operation, in all material respects, with its terms and with all Requirements of
Law applicable thereto. Each of the Plans maintained by the Borrower or any
ERISA Affiliate thereof that is an “employee benefit pension plan” (within the
meaning of Section 3(2)(a) of ERISA) (each a “Pension Plan”) either (i) has
obtained a favorable determination (covering all changes or amendments
applicable under Requirements of Law) from the IRS as to its qualification under
Sections 401(a) and 501(a) of the Code or, if the Pension Plan is maintained
pursuant to a prototype or standardized plan, is entitled to rely on an opinion
letter from the IRS, or (ii) is within the remedial amendment period (as
provided in Section 401(b) of the Code) for making any required changes or
amendments, and nothing has occurred before or after the date of each such
determination letter as would reasonably be expected to adversely affect such
qualification. All amounts that are currently owing to Plan participants
(including, without limitation, former Plan participants), or contributions
required to be made to the Plans have been timely paid in all material respects,
contributed or accrued in accordance with past historical practices with respect
to all periods prior to the Closing Date.

 

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(c)          Prohibited Transactions. No Plan, nor any related trust, nor the
Borrower or Subsidiary, nor any trustee, administrator or other “party in
interest” or “disqualified person” (within the meaning of Section 3(14) of ERISA
or Section 4975(e)(2) of the Code, respectively) with respect to the Plans, has
engaged in any nonexempt “prohibited transaction” (within the meaning of Section
406 of ERISA or Section 4975(c) of the Code, respectively) with respect to the
participation of the Borrower or any Subsidiary therein, which could subject any
of the Plans or related trusts, or any trustee, administrator or other fiduciary
of any such Plan, or the Borrower or Subsidiary or any Purchaser, or any other
party dealing with the Plans, to the penalties or excise tax imposed on
prohibited transactions by Section 502 of ERISA or Section 4975 of the Code.

 

(d)          Miscellaneous. Neither the Borrower nor any Subsidiary nor any Plan
provides for or promises retiree, medical, disability, or life insurance
benefits to any current or former employee, officer, or director of the Borrower
or any Subsidiary other than continuation coverage required by Section 4980B of
the Code. Neither the Borrower nor any Subsidiary is a party to, or obligated,
under any agreement, plan, contract or other arrangements that will result,
separately or in the aggregate, in the payment of any “excess parachute payment”
within the meaning of Section 280G of the Code as a result of the consummation
of the Transactions.

 

6.22        Patents, Trademarks, Etc.

 

(a)          The Borrower and each Subsidiary owns and/or has the right to use
all Intellectual Property material to the conduct of its business (collectively,
“IP Rights”) without any conflict with or infringement of the IP Rights of
others. Schedule 6.22 sets forth a complete list of Licenses or other
Contractual Obligations relating to the Borrower’s and its Subsidiaries’ IP
Rights (other than off the shelf computer software and programs and Licenses and
Contractual Obligations entered in the ordinary course of business) and of
registrations of patents, trademarks, service marks and copyrights including any
applications therefor constituting such IP Rights as of the Closing Date.
Neither the Borrower nor any Subsidiary has any obligation to pay any royalty
with respect to the IP Rights.

 

(b)          Except as set forth in Schedule 6.22, as of the Closing Date no
claims have been asserted by any Person with respect to the use by the Borrower
or any Subsidiary of any such IP Rights or challenging or questioning the
validity or effectiveness of any License or agreement held by the Borrower or
its Subsidiaries or to which it is a party relating to any such IP Rights which
claims could reasonably be expected to have a Material Adverse Effect. To the
Knowledge of the Borrower, the conduct of the business of the Borrower and its
Subsidiaries as conducted and as proposed to be conducted does not and will not,
in any material respect, conflict with or infringe upon the IP Rights of others,
and neither the Borrower nor any Subsidiary has received any communication
alleging any such violation. To the Knowledge of the Borrower, no third party is
infringing or violating any of the IP Rights of the Borrower or its
Subsidiaries. To the Knowledge of the Borrower, no person employed by or
affiliated with the Borrower or its Subsidiaries has violated any confidential
relationship that such person may have had with any third party, in connection
with the development or sale of any product or service or proposed product or
service of the Borrower or its Subsidiaries.

 

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6.23        Potential Conflicts of Interest. Except as set forth on Schedule
6.23, no executive officer, director or manager (or equivalent Person) or member
of the Borrower or any Subsidiary: (a) is an officer, director, manager,
employee or consultant of, any Person that is, or is engaged in business as, a
competitor, lessor, lessee, supplier, distributor, sales agent or customer of,
or lender to or borrower from, the Borrower or its Subsidiaries; (b) has been a
party to any material transaction with the Borrower or any Subsidiary; (c) owns,
directly or indirectly, in whole or in part, any material tangible or intangible
property that the Borrower or its Subsidiaries use or contemplate using in the
conduct of business; or (d) has any material cause of action or other material
claim whatsoever against, or owes or has advanced any amount to the Borrower or
any Subsidiary, except for advances in the ordinary course of business such as
for accrued vacation pay, accrued benefits under employee benefit plans,
customary expense reimbursements existing on the date hereof, and similar
matters and agreements.

 

6.24        Trade Relations. To the Knowledge of the Borrower, there exists no
present condition or state of facts or circumstances that could reasonably be
expected to have a Material Adverse Effect or prevent the Borrower or any of its
Subsidiaries from conducting its business after the consummation of the
Transactions, in substantially the same manner in which such business has
heretofore been conducted.

 

6.25        Indebtedness. Schedule 6.25 lists (a) the amount of all Indebtedness
of the Borrower and its Subsidiaries (other than Indebtedness under this
Agreement) that will remain outstanding after the Closing Date, (b) the Liens
that relate to such Indebtedness and that encumber the assets of the Borrower
and its Subsidiaries, (c) the name of each lender thereof, and (d) the amount of
any unfunded commitments, if any, available to the Borrower and its Subsidiaries
in connection with any such Indebtedness facilities.

 

6.26        Material Contracts. Schedule 6.26 lists all Material Contracts as of
the Closing Date. Each of the Material Contracts is in full force and effect.
The Borrower and its Subsidiaries has satisfied in full or provided for all of
its liabilities and obligations under each Material Contract requiring
performance prior to the date hereof in all material respects, and is not in
default under any of such Material Contracts, nor does, to the Knowledge of the
Borrower, any condition exist that with notice or lapse of time or both would
constitute such a default. To the Knowledge of the Borrower, no other party to
any Material Contract is in default thereunder, nor, to the Knowledge of the
Borrower, does any condition exist that with notice or lapse of time or both
would constitute such a default. No approval or consent of any Person is needed
for the Material Contracts to continue to be in full force and effect after
giving effect to the Transactions.

 

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6.27        Insurance. Schedule 6.27 accurately summarizes all of the insurance
policies or programs of the Borrower and its Subsidiaries as of the date hereof.
All such policies are in full force and effect, are underwritten by reputable
insurers, are sufficient for all applicable Requirements of Law and otherwise
are in compliance with the criteria set forth in Section 8.6 hereof. All such
policies will remain in full force and effect and will not terminate or lapse by
reason of any of the Transactions.

 

6.28        Solvency. Borrower and its Subsidiaries, on a consolidated basis,
are Solvent, both before and after taking into account the Transactions.

 

6.29        Licenses and Approvals. The Borrower and each of its Subsidiaries
holds all material Licenses that are required by any Governmental Authority to
permit it to conduct and operate the Borrower’s or its Subsidiaries’ business as
now conducted, and all such Licenses are valid and in full force and effect and
will remain in full force and effect upon consummation of the transactions
contemplated by this Agreement and the other Note Documents. The Borrower and
its Subsidiaries are in compliance in all material respects with all Licenses.
Neither the Borrower nor any Subsidiary is a party to and, to the Knowledge of
the Borrower, there is not, any investigation, notice of apparent liability,
violation, forfeiture or other order or complaint issued by or before any
Governmental Authority or any other proceedings which could in any manner
threaten or adversely affect the validity or continued effectiveness of such
material Licenses of the Borrower or its Subsidiaries, or give rise to any order
of forfeiture. There is no pending threat of cancellation, loss, termination,
modification, or nonrenewal of any such Licenses of the Borrower or its
Subsidiaries, nor any basis for such cancellation, loss, termination,
modification, or nonrenewal. The Borrower has no reason to believe that such
Licenses will not be renewed in the ordinary course. The Borrower and its
Subsidiaries have filed in a timely manner all material reports, applications,
documents, instruments, and information required to be filed pursuant to
applicable rules and regulations or requests of every regulatory body having
jurisdiction over any of its Licenses.

 

6.30        Change of Control and Similar Payments. Neither the execution,
delivery and performance by the Borrower and the Guarantors of this Agreement,
nor the execution, delivery and performance by the Borrower and the Guarantors
of any of the other Note Documents, nor the consummation of the transactions
contemplated hereby shall require any payment by the Borrower or any Subsidiary,
in cash or kind, under any other agreement, plan, policy, commitment or other
arrangement, other than pursuant to the terms of the Indebtedness that is being
repaid on the Closing Date in accordance with Section 8.2(a). There are no
agreements, plans, policies, commitments or other arrangements with respect to
any compensation, benefits or consideration which will be materially increased,
or the vesting of benefits of which will be materially accelerated, as a result
of this Agreement or the other Note Documents or the occurrence of any of the
transactions contemplated hereby or thereby. There are no payments or other
benefits payable by the Borrower or its Subsidiaries, the value of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement or the other Note Documents.

 

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6.31        OFAC; Anti-Terrorism; Patriot Act.

 

(a)          Neither the Borrower nor any Subsidiary nor, to the knowledge of
the Borrower, any Affiliate of the foregoing: (a) is a Sanctioned Person, (b)
has any assets in Sanctioned Entities, or (c) derives any operating income from
Investments in, or transactions with Sanctioned Persons or Sanctioned Entities.
The proceeds of the Notes will not be used and have not been used to fund any
operations in, finance any Investments or activities in, or make any payments
to, a Sanctioned Person or a Sanctioned Entity.

 

(b)          The Borrower and its Subsidiaries are in compliance, in all
material respects, with any United States Requirements of Law relating to
terrorism, sanctions or money laundering (the “Anti-Terrorism Laws”), including
the United States Executive Order No. 13224 on Terrorist Financing (the
“Anti-Terrorism Order”) and the Patriot Act. No part of the proceeds of any Note
will be used, directly or indirectly, for any payments to any governmental
official or employee, political party, official of a political party, candidate
for political office, or anyone else acting in an official capacity, in order to
obtain, retain or direct business or obtain any improper advantage, in violation
of the United States Foreign Corrupt Practices Act of 1977, as amended, or any
other Anti-Terrorism Law.

 

(c)          No Loan Party and no Subsidiary of any Loan Party (and, to the
knowledge of each Loan Party, no joint venture or Affiliate thereof) (i) is
listed in the annex to, or is otherwise subject to the provisions of, the
Anti-Terrorism Order, (ii) is owned or controlled by, or acting for or on behalf
of, any person listed in the annex to, or is otherwise subject to the provisions
of, the Anti-Terrorism Order or (iii) commits, threatens or conspires to commit
or supports “terrorism” as defined in the Anti-Terrorism Order.

 

6.32        Disclosure.

 

(a)          Agreement and Other Documents. This Agreement, together with all
exhibits and schedules hereto, the Note Documents, and the agreements,
certificates and other documents furnished to the Purchasers by the Borrower at
the Closing, do not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements contained herein
or therein, in the light of the circumstances under which they were made, not
misleading provided that to the extent any such exhibit, schedule, agreement,
certificate or other document was based solely upon or constitutes a forecast or
projection, the Borrower represents only that it acted in good faith and
utilized reasonable assumptions in the preparation of such exhibit, schedule,
agreement, certificate or other document, it being understood that actual
results may vary from such forecasts and that such variations may be material.

 

(b)          Material Adverse Effect. To the Knowledge of the Borrower, there is
no fact which the Borrower has not disclosed to the Purchasers in writing which
could reasonably be expected to have a Material Adverse Effect.

 

6.33        Customers and Suppliers. Schedule 6.33 sets forth a complete and
accurate list of (a) the 10 largest customers of the Loan Parties (measured by
aggregate billing) during (i) the Fiscal Year ended December 31, 2016 and (ii)
the Fiscal Quarter ended March 31, 2017, noting the relevant Loan Party, and (b)
the 10 largest suppliers of materials, products or services to the Loan Parties
(measured by the aggregate amount purchased by the Loan Parties during (i) the
Fiscal Year ended December 31, 2016 and (ii) the Fiscal Quarter ended March 31,
2017, noting the relevant Loan Party.

 

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6.34        Passive Foreign Investment Company. To the Knowledge of the Borrower
or any Loan Party (but without consultation with any of the Borrower’s
independent accountants), no Loan Party is, or has been, a “passive foreign
investment company,” as defined in Section 1297 of the Code, during any tax year
beginning after May 31, 2012.

 

6.35        Absence of Certain Practices. Except as set forth on Schedule 6.35,
no Loan Party or any of its Subsidiaries, or, to the Knowledge of the Borrower
or any Loan Party, any director, officer, agent, employee or other Person acting
on their behalf, has given or agreed to give any gift or similar benefit of more
than nominal value to any customer, supplier, governmental employee or official
or any other Person who is or may be in a position to help or hinder any Loan
Party or its Subsidiaries or assist any Loan Party or its Subsidiaries in
connection with any proposed transaction involving such Loan Party or its
Subsidiaries, which gift or similar benefit, induced any party to do business
with such Loan Party. No Loan Party or any of its Subsidiaries, or, to the
Knowledge of the Borrower or any Loan Party, any director, officer, agent,
employee or other Person acting on their behalf has (i) used any corporate or
other funds for unlawful contributions, payments, gifts, or entertainment, or
made any unlawful expenditures relating to political activity to, or on behalf
of, government officials or others; or (ii) accepted or received any unlawful
contributions, payments, gifts or expenditures.

 

6.36        Internal Controls. Each Loan Party and its Subsidiaries maintain a
system of internal control over financial reporting. Such internal controls over
financial reporting (a) provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements for external
purposes in accordance with GAAP and (b) as to Borrower are designed to ensure
that all material information concerning Borrower and its Subsidiaries required
to be disclosed by Borrower in the reports that it is required to file, submit
or furnish under the Exchange Act is recorded, processed, summarized and
reported on a timely basis to the individuals responsible for the preparation of
such reports. There are no significant deficiencies or material weaknesses in
the design or operation of any Loan Party’s or its Subsidiaries’ ability to
record, process, summarize and report financial data other than set forth on
Schedule 6.36. There is and has been no fraud, whether or not material, that
involves management or other employees who have a significant role in any Loan
Party’s and/or its Subsidiaries’ internal controls.

 

6.37        Accounts and Notes Receivable; Accounts and Notes Payable.

 

(a)          All the accounts receivable and notes receivable owing to any Loan
Party or any of its Subsidiaries as of the date hereof constitute valid and
enforceable (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors’ rights and by general principles of equity)
claims (without any previously exercised rights of set off or compromise)
arising from bona fide transactions in the ordinary course of business,
consistent with past practice, and, to the Knowledge of the Borrower or any Loan
Party, there are no known or, to the Knowledge of the Borrower or any Loan
Party, asserted claims, refusals to pay or other rights of set-off against any
thereof. Except as provided on Schedule 6.37(a), (i) as of April 30, 2017, no
account debtor or note debtor is delinquent by more than thirty (30) days in any
payment due that exceeds $5,000; (ii) as of the Closing Date, no account debtor
or note debtor has refused (or, to the Knowledge of the Borrower or any Loan
Party, threatened to refuse) to pay its obligations for any reasons; (iii) to
the Knowledge of the Borrower or any Loan Party, as of the Closing Date no
account debtor or note debtor is insolvent or bankrupt and (iv) no account
receivable or note receivable is hypothecated or pledged to any person (except
in connection with the Notes) by any Loan Party or any of its Subsidiaries.

 

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(b)          All accounts payable and notes payable by any Loan Party or any of
its Subsidiaries to third parties as of the date hereof arise from bona fide
transactions in the ordinary course of business, consistent with past practice
and, except as set forth on Schedule 6.37(b), as of April 30, 2017, there is no
such account payable or note payable more than thirty (30) days delinquent in
its payment, except those contested in good faith.

 

Article 7

REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS

 

Each Purchaser hereby severally and not jointly represents and warrants as
follows:

 

7.1          Authorization; No Contravention. The execution, delivery and
performance by such Purchaser of this Agreement: (a) is within its power and
authority and has been duly authorized by all necessary action; (b) does not
contravene the terms of its Charter Documents or any amendment thereof, and (c)
will not, in any material respect, violate, conflict with or result in any
breach or contravention of any of its Contractual Obligations, or any order or
decree directly relating to it.

 

7.2          Binding Effect. This Agreement has been duly executed and delivered
by such Purchaser and this Agreement constitutes its legal, valid and binding
obligation, enforceable against it in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency, or similar
laws affecting the enforcement of creditors’ rights generally or by equitable
principles relating to enforceability.

 

7.3          No Legal Bar. The execution, delivery, and performance of this
Agreement by such Purchaser will not violate in any material respect any
Requirement of Law applicable to it, assuming the accuracy and correctness of
the representations and warranties made by the Borrower to the Purchasers in the
Note Documents.

 

7.4          Securities Laws.

 

(a)          The Notes are being or will be acquired by such Purchaser hereunder
for its own account, not as a nominee or agent, and not with the view to, or for
resale in connection with, any distribution thereof in any transaction which
would be in violation of state or federal securities laws.

 

(b)          Such Purchaser is a sophisticated purchaser with respect to the
purchase of the Notes and is an “accredited investor” as defined in Rule 501(a)
of Regulation D promulgated under the Securities Act.

 

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(c)          Such Purchaser understands that (i) the Notes constitute
“restricted securities” under the Securities Act, (ii) the offer and sale of the
Notes hereunder is not registered under the Securities Act or under any “blue
sky” laws in reliance upon certain exemptions from such registration and that
the Borrower is relying on the representations made herein by such Purchaser in
its determination of whether such specific exemptions are available, and (iii)
the Notes may not be transferred except pursuant to an effective registration
statement under the Securities Act, or under an exemption from such registration
available under the Securities Act and under applicable “blue sky” laws or in a
transaction exempt from such registration. Such Purchaser acknowledges that: (1)
it has no right to require registration thereof under the Securities Act or any
“blue sky” laws, and (2) there is not now and is not contemplated to be any
public market therefor. As a result, such Purchaser is prepared and is able to
bear the economic risk of an investment in the Notes for an indefinite period of
time. Such Purchaser understands that any certificate representing the Notes
that are issued to the Purchaser may bear, in the Borrower’s discretion, the
following restrictive legend and will be restricted from transfer in accordance
with such legend:

 

“This Note has not been and will not be registered under the United States
Securities Act 1933 (the “Securities Act”) or with any securities regulatory
authority of any state or other jurisdiction of the United States. The holder
hereof, by purchasing or otherwise acquiring this security, acknowledges that
this security has not been registered under the Securities Act. The holder
agrees that this security may be offered, resold, pledged or otherwise
transferred only in compliance with the Securities Act and any applicable state
securities laws and only (1) pursuant to Rule 144 under the Securities Act or
(2) pursuant to an exemption from registration under the Securities Act, and in
each case in accordance with any applicable securities laws of the states of the
United States and other jurisdictions. The holder acknowledges that the purpose
of the foregoing limitation is, in part, to ensure that Company is not required
to register under the Securities Act.”

 

(d)          Such Purchaser (i) has been furnished with or has had access to all
material books and records of the Borrower and each Subsidiary and all of their
respective material contracts, agreements and documents and (ii) has had an
opportunity to ask questions of, and receive answers from, management and
representatives of the Borrower and its Subsidiaries and which representatives
have made available to them such information regarding the Borrower and its
Subsidiaries and their current respective businesses, operations, assets,
finances, financial results, financial condition and prospects in order to make
a fully informed decision to purchase and acquire the Notes. Such Purchaser has
generally such knowledge and experience in business and financial matters, and
with respect to investments in securities of privately held companies, as to
enable it to understand and evaluate the risks of an investment in the Notes and
form an investment decision with respect thereto. Such Purchaser acknowledges
that none of the Borrower or its Subsidiaries has given such Purchaser any
investment advice, credit information or opinion as to whether the purchase of
the Notes is prudent.

 

(e)          The foregoing, however, does not limit or modify the
representations and warranties set forth in Article 6 of this Agreement or in
any other Note Document or the right of such Purchaser to rely thereon.

 

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7.5          Governmental Authorization; Third Party Consent. No approval,
consent, compliance, exemption or authorization of any Governmental Authority or
any other Person in respect of any Requirement of Law, and no lapse of a waiting
period under a Requirement of Law, is necessary or required in connection with
the execution, delivery or performance by it or enforcement against such
Purchaser of this Agreement or the transactions contemplated hereby.

 

7.6          Broker’s, Finder’s or Similar Fees. There are no brokerage
commissions, finder’s fees or similar fees or commissions payable in connection
with the transactions contemplated by the Note Documents based on any agreement,
arrangement or understanding with such Purchaser or any action taken by it.

 

Article 8

AFFIRMATIVE COVENANTS

 

Until the indefeasible payment in full in cash of all Obligations under the
Notes (other than contingent indemnification or expense reimbursement
obligations for which no claim has been made) or such later date as set forth
below, the Borrower hereby covenants and agrees with the Purchasers as follows:

 

8.1          Delivery of Financial and Other Information. The Borrower will, and
will cause each other Loan Party to, maintain a system of accounting established
and administered in accordance with GAAP (including reflecting in its financial
statements adequate accruals and appropriations to reserves). In addition, the
Borrower shall deliver or cause to be delivered to the Purchasers the following:

 

(a)          Within ninety (90) days after the close of each Fiscal Year, an
unqualified audit report certified by BDO USA, LLP or such other independent
certified public accountants selected by the Borrower and reasonably acceptable
to Collateral Agent, prepared in accordance with GAAP, including consolidated
balance sheets of the Borrower and its Subsidiaries as of the end of such Fiscal
Year and the related consolidated statements of operations, changes in
shareholders’ equity and cash flows for such Fiscal Year, all such financial
statements to be prepared in accordance with GAAP and accompanied by (i) any
management letter prepared by said accountants and (ii) a management summary,
discussion, and analysis prepared by an authorized officer of the Borrower
setting forth in narrative form all significant operational and financial events
and activities affecting the Borrower and its Subsidiaries during such Fiscal
Year.

 

(b)          Within forty-five (45) days after the close of each Fiscal Quarter
beginning with June 30, 2017, an unaudited consolidated balance sheet of the
Borrower and its Subsidiaries and as of the end of such Fiscal Quarter and the
related consolidated statements of operations, changes in shareholders’ equity
and cash flows for such Fiscal Quarter and for the portion of the Fiscal Year
ended at the end of such Fiscal Quarter, prepared in accordance with GAAP and
setting forth in each case in comparative form, the figures for (i) the
corresponding Fiscal Quarter and the corresponding portion of the previous
Fiscal Year (as applicable), (ii) the immediately preceding Fiscal Quarter and
(iii) the annual budget described in Section 8.1(g) for the corresponding Fiscal
Quarter and the corresponding portion of the previous Fiscal Year, all of which
shall be prepared in an actual-to-budget comparative format in relation to the
applicable annual budget described in Section 8.1(g) hereof and shall be
certified by an authorized officer of the Borrower as fairly presenting, in all
material respects, the financial position of the Borrower and its Subsidiaries,
as of the respective dates thereof, and the results of operations and cash flows
thereof, as of the respective dates or for the respective periods set forth
therein and accompanied by a management summary, discussion, and analysis
prepared by an authorized officer of the Borrower setting forth in narrative
form all significant operational and financial events and activities affecting
the Borrower and its Subsidiaries during such Fiscal Quarter.

 

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(c)          Within thirty (30) days after the close of each calendar month
beginning with June 30, 2017, (i) an unaudited consolidated balance sheet of the
Borrower and its Subsidiaries and the related consolidated statements of
operations, changes in shareholders’ equity and cash flows for such month and
for the portion of the Fiscal Year ended at the end of such month, prepared in
accordance with GAAP and setting forth in each case in comparative form, the
figures for (A) the corresponding month and the corresponding portion of the
previous Fiscal Year (as applicable) (B) the immediately preceding month, and
(C) the annual budget described in Section 8.1(g) for the corresponding month
and the corresponding portion of the previous fiscal year, all of which shall be
prepared in an actual-to-budget comparative format in relation to the applicable
annual budget described in Section 8.1(g) hereof and shall be certified by an
authorized officer of the Borrower as fairly presenting, in all material
respects, the financial position of the Borrower and its Subsidiaries, as of the
respective dates thereof, and the results of operations and cash flows thereof,
as of the respective dates or for the respective periods set forth therein, (ii)
an accounts payable aging report and an accounts receivable aging report, each
in form and substance reasonably satisfactory to the Required Purchasers, (iii)
a revenue report in form and substance reasonably satisfactory to the Required
Purchasers and with no less detail than such report contained in the Borrower’s
financial model delivered to the Purchasers prior to the Closing Date, which
report shall include by business segment: (s) revenue, (t) number of
subscribers, (u) number of new subscribers added, (v) number of subscribers
dropped, (w) churn (net and gross), (x) number of new customers, (y) number of
customers dropped and (z) the average selling price of hardware and software,
and (iv) a product line profit and loss report.

 

(d)          Together with the financial statements required under Sections
8.1(a), Section 8.1(b), and Section 8.1(c), a Compliance Certificate signed by
an authorized officer of the Borrower (i) evidencing the Loan Parties’
compliance with the financial covenants contained in Section 9.20 hereof and
(ii) stating whether there exists on the date of such certificate any Default or
Event of Default and, if any Default or Event of Default then exists, setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto.

 

(e)          Promptly upon receipt thereof, any reports (including, without
limitation, any management letters and/or reports) submitted to the Borrower or
any Subsidiary (other than reports previously delivered pursuant to Sections
8.1(a), 8.1(b) and 8.1(c) above) by independent accountants in connection with
any annual, interim or special audit made by them of the books of the Borrower
or any Subsidiary.

 

(f)          Promptly upon receipt or transmission thereof, and in any event no
later than two (2) Business Days after the date of such receipt or transmission,
provided that the delivery thereof is not prohibited by any Requirement of Law,
copies of all communications to and from Governmental Authorities regarding
notice of material enforcement proceedings, complaints, inspections, and related
matters addressed to the Borrower or any Subsidiary.

 

 50 

 

 

(g)          As soon as available, but in any event no later than thirty (30)
days after the end of the Fiscal Year, consolidated capital and operating
expense budgets, projections of sources and applications of funds, balance
sheets and profit and loss projections, all for each month of the applicable
Fiscal Year, all itemized in detail (including itemization of provisions for
officers’ compensation), together with any material revisions thereto.

 

(h)          Upon the request of any Purchaser, copies of the annual federal and
state income Tax Returns of the Borrower and each Subsidiary for the immediately
preceding year, any filings with the SEC and, if requested by any Purchaser,
copies of all reports filed with any federal, state or local Governmental
Authority.

 

(i)          Promptly upon receipt by the Borrower or any Subsidiary, written
notice of any material default which has not been waived or cured, given to any
such Loan Party by the holder of the Subordinated Note or any other creditor or
lessor to whom the Borrower or any Subsidiary has material debt or other
obligations.

 

(j)          Promptly upon obtaining knowledge thereof, written notice of any
litigation claiming in excess of $200,000 from the Borrower or any Subsidiary,
or which could be expected to otherwise have a Material Adverse Effect and
copies of any pleadings associated therewith.

 

(k)          As soon as available, copies of all statements, reports, press
releases, and other documents relating to the financial condition of the
Borrower, each Subsidiary and their respective business operations as required
to be furnished to any lender of the Borrower or any Subsidiary.

 

(l)          Promptly, and in any event within five (5) Business Days after
receipt thereof by the Borrower or any Subsidiary, provided that the delivery
thereof is not prohibited by any Requirement of Law, copies of each notice or
other correspondence received from the SEC (or comparable agency in any
applicable non-U.S. jurisdiction) concerning any investigation or possible
investigation or other inquiry by such agency regarding financial or other
operational results of the Borrower or any Subsidiary.

 

(m)          Together with the financial statements required under Section
8.1(c), copies of any (i) board materials provided to the Board of the Borrower
or any Subsidiary and (ii) a copy of the internal management FP&A package;
provided that the Purchasers may be denied access to any such materials, if and
to the extent the Borrower reasonably and in good faith determines (x) such
denial is reasonably necessary based on the reasonable advice of counsel to
preserve attorney-client privilege, (y) there exists an actual or potential
conflict of interest between the Purchasers, and the Borrower or its
Subsidiaries, as applicable, or (z) based on the reasonable advice of counsel,
such denial is required by Applicable Laws;

 

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(n)          Promptly upon the filing or sending thereof, and in any event
within three (3) Business Days after filing thereof, copies of all regular,
periodic or special reports of any Loan Party filed with the SEC; copies of all
registration statements of any Loan Party filed with the SEC (other than on Form
S-8); and copies of all proxy statements or other communications made to
security holders generally; provided that filing or furnishing of such report,
registration statement, proxy statement or other communication with the SEC via
the EDGAR system shall be deemed to be furnishing of the same to Purchasers; or

 

(o)          Such other information (including non-financial information) as any
Purchaser may from time to time reasonably request.

 

Documents required to be delivered pursuant to Section 8.1(a),(b) or (g) (to the
extent any such documents are included in materials otherwise filed with the
SEC) may be delivered electronically and if so delivered, shall be deemed to
have been delivered on the date (i) on which the Borrower posts such documents,
or provides a link thereto on the Borrower’s website on the Internet at the
website address; or (ii) on which such documents are posted on the Borrower’s
behalf on an Internet or intranet website, if any, to which each Purchaser has
access; provided that: (i) the Borrower shall deliver paper copies of such
documents to any Purchaser upon its request to the Borrower to deliver such
paper copies until a written request to cease delivering paper copies is given
by such Purchaser and (ii) the Borrower shall notify each Purchaser (by
telecopier or electronic mail) of the posting of any such documents and provide
electronic mail electronic versions (i.e., soft copies) of such documents.

 

The Borrower hereby acknowledges that certain of the Purchasers (each, a “Public
Purchaser”) may have personnel who do not wish to receive material non-public
information with respect to the Borrower or its Affiliates, or the respective
securities of any of the foregoing, and who may be engaged in investment and
other market-related activities with respect to such Persons’ securities. The
Borrower hereby agrees that so long as the Borrower is the issuer of any
outstanding debt or equity securities that are registered or issued pursuant to
a private offering or is actively contemplating issuing any such securities it
will use commercially reasonable efforts to identify that portion of the
materials and/or information provided by or on behalf of the Borrower hereunder
(collectively, “Borrower Materials”) that may be distributed to the Public
Purchasers and that (w) all such Borrower Materials shall be clearly and
conspicuously marked “PUBLIC” which, at a minimum, shall mean that the word
“PUBLIC” shall appear prominently on the first page thereof; by marking Borrower
Materials “PUBLIC,” the Borrower shall be deemed to have authorized the
Purchasers to treat such Borrower Materials as not containing any material
non-public information (although it may be sensitive and proprietary) with
respect to the Borrower or its securities for purposes of United States federal
and state securities laws.

 

8.2          Use of Proceeds.

 

(a)          The Borrower shall use the proceeds of the sale of the Notes
hereunder only as follows: (i) to repay that certain Term Loan Agreement, dated
as of March 9, 2016, between the Numerex Corp., as lead borrower, the other
borrowers party thereto from time to time, Crystal Financial LLC, as term agent,
and the term lenders party thereto from time to time, (ii) for general corporate
purposes and working capital requirements of the Borrower and its Subsidiaries,
and (iii) to pay the closing fee and all other fees and expenses in connection
with this Agreement.

 

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(b)          The Borrower shall not use any proceeds of the sale of the Notes
hereunder to, directly or indirectly, purchase or carry any “margin stock” (as
defined in Regulation U) or to extend credit to others for the purpose of
purchasing or carrying any “margin stock” in violation of the provisions of
Regulation T, U or X of the Board of Governors of the Federal Reserve System.

 

8.3          Notice of Default or Material Adverse Effect. The Borrower will
give prompt notice in writing to the Purchasers upon becoming aware of the
following: (a) the occurrence of any Default or Event of Default under this
Agreement (such notice to specify the nature and period of existence thereof and
what action the Borrower is taking (and proposes to take) with respect thereto),
(b) the occurrence of any event which constitutes or which with the passage of
time or giving of notice or both would constitute an event of default under any
Material Contract, (c) the occurrence of any event which constitutes or which
with the passage of time or giving of notice or both would constitute a default
under any other Contractual Obligation which could reasonably be expected to
have a Material Adverse Effect and (d) any development or other information
outside the ordinary course of business of the Borrower or any Subsidiary which
could reasonably be expected to have a Material Adverse Effect.

 

8.4          Conduct of Business. The Borrower will, and will cause each other
Loan Party to, carry on and conduct its business in substantially the same
manner and in substantially the same fields of enterprise as it is presently
conducted or those reasonably related or ancillary thereto and do all things
necessary to remain duly incorporated or organized, validly existing and in good
standing as a domestic corporation or limited liability company in its
jurisdiction of incorporation or organization, as the case may be, and maintain
all requisite authority to conduct its business in each jurisdiction in which
its business is conducted except to the extent the failure to be so qualified
could not reasonably be expected to have a Material Adverse Effect.

 

8.5          Taxes and Claims. The Borrower will, and will cause each of its
Subsidiaries to:

 

(a)          Timely file complete and correct United States federal and material
state income and applicable foreign and material state and local Tax Returns
required by law, in each case with due regard for any extension of time within
which to file such Tax Return, and pay when due all material Taxes, except those
which are being contested in good faith by appropriate proceedings and with
respect to which adequate reserves have been set aside in accordance with GAAP,
which deferment of payment is permissible so long as no Lien, other than a
Permitted Lien has been entered and the Borrower’s and its Subsidiaries’ title
to, and its/their right to use, its/their Properties are not materially
adversely affected thereby; and

 

(b)          Pay and perform (i) all Obligations under this Agreement and the
other Note Documents and (ii) except where failure to do so could not reasonably
be expected to have a Material Adverse Effect, all other Indebtedness,
obligations and liabilities in accordance with customary trade practices;
provided that the Borrower or such Subsidiary may contest any item described in
clause (ii) above in good faith so long as adequate reserves are maintained with
respect thereto in accordance with GAAP.

 

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8.6          Insurance.

 

(a)          The Borrower will, and will cause each of its Subsidiaries to,
maintain with reputable insurance companies insurance in such amounts and
covering such risks as set forth on Schedule 8.6 and is otherwise consistent
with sound business practice, including, without limitation, property and
casualty insurance on all of its Property, general liability insurance, workers
compensation insurance, business interruption insurance, and directors and
officers liability insurance and maintain such insurance as is required by the
terms of any Collateral Document. All such insurance policies shall contain the
provision that the Purchasers be given 30 days written notice of intent to
terminate by either the Borrower or any of its Subsidiaries or insuring company,
and shall name Collateral Agent as lenders loss payee or additional insured, as
applicable, thereunder. The Borrower will, and will cause each of its
Subsidiaries to, furnish to the Purchasers upon request full information as to
the insurance carried by it.

 

(b)          The Borrower will, and will cause each of its Subsidiaries to, at
all times keep its Property which is subject to the Lien of any Collateral
Document insured in favor of the Purchasers, and all policies or certificates
(or certified copies thereof) with respect to such insurance. At or prior to the
Closing Date, the Borrower shall furnish certificates of insurance issued on
applicable ACORD Forms with respect to property and liability insurance for the
Borrower. The Borrower will, and will cause each of its Subsidiaries to, notify
the Purchasers, promptly, upon receipt of a notice of termination, cancellation,
or non-renewal from its insurance company of any such policy.

 

(c)          If the Borrower shall fail to maintain all insurance in accordance
with this Section 8.6 or to timely pay or cause to be paid the premium(s) on any
such insurance, or if the Borrower shall fail to deliver all certificates with
respect thereto, the Purchasers shall have the right (but shall be under no
obligation) to procure such insurance or pay such premiums, and the Borrower
agrees to reimburse the Purchasers, on demand, for all costs and expenses
relating thereto.

 

8.7          Compliance with Laws and Material Agreements.

 

(a)          The Borrower will, and will cause each of its Subsidiaries to,
comply with any and all Requirements of Law to which it may be subject
including, without limitation, all Environmental Laws, and obtain any and all
Licenses necessary to the ownership of its Property or to the conduct of its
businesses, except, in each case, where failure to do so could not reasonably be
expected to have a Material Adverse Effect. The Borrower will, and will cause
each of its Subsidiaries to, timely satisfy all material assessments, fines,
costs and penalties imposed by any Governmental Authority against such Person or
any Property of such Person except to the extent such assessments, fines, costs,
or penalties are being contested in good faith by appropriate proceedings and
for which the Borrower or such Subsidiary has set aside on its books adequate
reserves in accordance with GAAP. The Borrower will, and will cause each of its
Subsidiaries to, comply with any and all agreements or instruments evidencing
Indebtedness and any other material agreement to which it is a party or by which
it is bound, where such default would result in a Material Adverse Effect.

 

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(b)          The Borrower will file or furnish, on a timely basis in accordance
with the applicable requirements of the Securities Act or the Exchange Act (as
the case may be) or in the timeframe set forth in any extension granted by the
SEC, all statements, reports, schedules, forms and other documents (other than
any immaterial Form 3, 4, 5 or 8-K filings or any filings relating solely to
benefit plans), required to be filed or furnished with or to the SEC.

 

8.8          Maintenance of Properties. The Borrower will, and will cause each
of its Subsidiaries to, do all things necessary to maintain, preserve, protect
and keep its Property (other than Property that is obsolete, surplus, or no
longer used or useful in the ordinary conduct of its business) in good repair,
working order and condition (ordinary wear and tear and casualty and
condemnation excepted), make all necessary and proper repairs, renewals and
replacements such that its business can be carried on in connection therewith
and be properly conducted at all times and pay and discharge when due the cost
of repairs and maintenance to its Property, and pay all rentals when due for all
real estate leased by such Person.

 

8.9          Audits and Inspection. The Borrower will, and will cause each of
its Subsidiaries to, permit the Collateral Agent, and any of its representatives
or designees, to visit and inspect any of its Property, books of account,
records and reports to examine, audit and make copies thereof, and to discuss
its affairs, finances and accounts with, and to be advised as to the same by,
its officers, managers, employees and independent certified public accountants
at such times and intervals as the Collateral Agent may designate upon advance
notice to the Borrower (except following the occurrence and during the
continuance of an Event of Default in which case no advance notice shall be
required). The reasonable and documented out-of-pocket costs and expenses
associated with such activities shall be paid by the Borrower.

 

8.10        Issue Taxes. The Borrower shall pay all Taxes, if any, in connection
with the issuance of the Notes. The obligations of the Borrower hereunder shall
survive the payment of the Obligations and the termination of the Note
Documents.

 

8.11        Employee Benefit Plans. The Borrower will, and will cause each of
its Subsidiaries to, (a) keep in full force and effect any and all Plans which
are presently in existence or may, from time to time, come into existence under
ERISA and not withdraw from any such Plans, unless such withdrawal can be
effected or such Plans can be terminated without material liability to the
Borrower or its Subsidiaries, (b) make contributions to all such Plans in a
timely manner and in a sufficient amount to comply in all material respects with
the standards of ERISA, including, without limitation, the minimum funding
standards of ERISA, (c) comply in all material respects with all requirements of
ERISA, (d) notify the Purchasers promptly upon receipt by the Borrower or any
Subsidiary of any notice concerning the imposition of any withdrawal liability
or of the institution of any proceeding or other action which may result in the
termination of any such Plans by the PBGC or the appointment of a trustee to
administer such Plans, (e) promptly advise the Purchasers of the occurrence of
any Reportable Event or non-exempt prohibited transaction (as defined in ERISA)
with respect to any such Plans of which Borrower becomes aware, and (f) amend
any Plan that is intended to be qualified within the meaning of Section 401 of
the Code to the extent necessary to keep the Plan qualified and to cause the
Plan to be administered and operated in a manner that does not cause the Plan to
lose its qualified status.

 

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8.12        Environmental Covenants. The Borrower will, and will cause each of
its Subsidiaries to:

 

(a)          use and operate all of its facilities and Properties in material
compliance with all Environmental Laws, keep all necessary Licenses in effect
and remain in material compliance therewith, and handle all Hazardous Materials
in material compliance with all applicable Environmental Laws;

 

(b)          promptly notify the Purchasers and provide copies upon receipt of
all written claims or complaints relating to compliance of the Properties with
Environmental Laws, and shall promptly seek to cure and diligently pursue and
have dismissed with prejudice any such actions and proceedings to the
satisfaction of the Purchasers; and

 

(c)          provide such information and certifications which any Purchaser may
reasonably request from time to time to ensure compliance with this Section
8.12.

 

8.13        Website Links. The Borrower will, and will cause each of its
Subsidiaries to, permit each Purchaser to place on its website a link to the
Borrower’s and each of its Subsidiaries’ websites.

 

8.14        Further Assurances. The Borrower will, and will cause each of its
Subsidiaries to, take any action reasonably requested by any Purchaser in order
to effectuate the purposes and terms contained in this Agreement or any of the
Note Documents.

 

8.15        Board Observation. For so long as the Obligations are outstanding,
the Purchasers shall have the right to appoint Martin Hale Jr. (or another Hale
Capital representative acceptable to the Purchasers), by written notice to the
Borrower from time to time, as an observer (the “Observer”) to the board of
directors or similar governing body of the Borrower and each of its Subsidiaries
(the “Board”). The Observer shall have the right to attend (which attendance may
occur telephonically at the election of the Observer) and participate in all
meetings of the Board and any committees thereof. The Observer shall have no
right to vote on any matter presented to the Board or any committee thereof. The
Borrower shall give the Observer written notice of each meeting thereof at the
same time and in the same manner as the other members of the Board or such
committee receive notice of such meetings. The Borrower shall permit the
Observer to attend and participate in all meetings thereof. The Observer shall
be entitled to receive all written materials and other information given to
other members of the Board and such committees in connection with such meeting
or otherwise, at the same time such materials and information are given to the
other members of the Board and such committees, and the Observer shall keep such
materials and information confidential, and shall abide by the Borrower’s
insider trading policy. If the Borrower or any Subsidiary proposes to take any
action by written consent in lieu of a meeting of the Board, then the Borrower
shall give written notice thereof to the Observer describing the nature and
substance of such action and including the text of such written consents. The
Borrower shall pay and reimburse the reasonable and documented out-of-pocket
costs and expenses of the Observer incurred in connection with traveling to and
attending such meetings of the Board and committees. Notwithstanding anything
contained in this Section 8.15 to the contrary, the Observer designated
hereunder may be excluded from any meeting (or portion thereof), or denied
access to any materials, if and to the extent the Board reasonably and in good
faith determines (i) such recusal is reasonably necessary based on the advice of
counsel to preserve attorney-client privilege, (ii) there exists, with respect
to any deliberation or board or committee materials, an actual or potential
conflict of interest between the Observer, and the Borrower or its Subsidiaries,
as applicable, or (iii) based on the advice of counsel, such recusal is required
by Applicable Laws.

 

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8.16        Intellectual Property.

 

(a)          At the request of the Collateral Agent, in order to facilitate
filings with the United States Patent and Trademark Office and the United States
Copyright Office, the Borrower will, and will cause each Guarantor to, execute
and deliver to the Collateral Agent one or more Intellectual Property Security
Agreements to further evidence the Purchasers’ Lien on such Person’s
Intellectual Property. The Borrower will, and will cause each Guarantor to, take
the steps described in this Section 8.16 with respect to all new or acquired
Intellectual Property to which the Borrower or any Guarantor is now or later
becomes entitled that is necessary in the conduct of such Person’s business. The
Borrower acknowledges and agrees that the Purchasers shall have no duties with
respect to any Intellectual Property or Licenses of the Borrower or its
Subsidiaries.

 

(b)          The Borrower and the Guarantors shall have the duty, with respect
to Intellectual Property that is necessary in the conduct of such Person’s
business (i) to prosecute diligently any trademark application or service mark
application that is part of the trademarks pending as of the date hereof or
hereafter, (ii) to prosecute diligently any patent application that is part of
the patents pending as of the date hereof or hereafter, and (iii) to take all
reasonable and necessary action to preserve and maintain all of the Borrower’s
and the Guarantors’ trademarks, patents, copyrights, Licenses, and its rights
therein, including paying all maintenance fees and filing of applications for
renewal, affidavits of use, and affidavits of noncontestability, except in cases
of (i) and (ii), where Borrower, in its reasonable opinion, determines that the
costs for engaging in such prosecution activities exceeds the likely benefit of
continued prosecution and except in case (iii) where Borrower, in its reasonable
opinion, determines that the costs of preserving and maintaining exceeds the
value Borrower obtains from such preservation and maintenance. Borrower and each
Guarantor shall require all employees, consultants, and contractors of the
Borrower and the Guarantors who were involved in the creation or development of
such Intellectual Property to sign agreements containing assignment to the
Borrower or such Guarantor of Intellectual Property rights created or developed
and obligations of confidentiality. Neither the Borrower nor any Guarantor shall
abandon any Intellectual Property or License that is necessary in the conduct of
the Borrower’s or such Guarantor’s business.

 

(c)          The Borrower will, and will cause each of the Guarantors to,
promptly file an application with the United States Copyright Office for any
copyright that has not been registered with the United States Copyright Office
if such copyright registration is necessary in connection with the conduct of
such Person’s business. Any expenses incurred in connection with the foregoing
shall be borne by the Borrower or the Guarantors.

 

(d)          Neither the Borrower nor any Guarantor shall enter into any
Intellectual Property License to receive any license or rights in any
Intellectual Property of any other Person unless the Borrower or Guarantors have
used commercially reasonable efforts to permit the assignment of or grant of a
Lien in such Intellectual Property License (and all rights of the Borrower or
Guarantors thereunder) to the Purchasers.

 

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8.17        Replacement of Notes. Upon receipt of evidence reasonably
satisfactory to the Borrower of the loss, theft, destruction or mutilation of
any Note, and, in the case of any such loss, theft or destruction, upon delivery
of a bond of indemnity reasonably satisfactory to the Borrower (provided that an
institutional Purchaser of a Note may instead deliver to the Borrower an
indemnity agreement in form and substance reasonably satisfactory to the
Borrower), or, in the case of any such mutilation, upon surrender and
cancellation of the Note, as the case may be, the Borrower will issue a new Note
of like tenor, in lieu of such lost, stolen, destroyed or mutilated Note.

 

8.18        Landlord and Bailee Agreements. Each Loan Party shall (i) obtain a
landlord agreement or bailee or mortgagee waivers, as applicable, from the
lessor of each property leased from an Affiliate of a Loan Party and (ii) use
commercially reasonable efforts to obtain a landlord agreement or bailee or
mortgagee waivers, as applicable, from the lessor (other than Affiliates) of
each leased property, bailee in possession of any Collateral or mortgagee of any
owned property, in each case, with respect to the Borrower’s headquarters and
each other location where any Collateral having a value in excess of $250,000 is
stored or located, which agreement shall be reasonably satisfactory in form and
substance to the Collateral Agent.

 

8.19        Foreign Pension Plans and Benefit Plans. None of the Loan Parties or
any of their Subsidiaries maintain or contribute to, or are required to maintain
or contribute to, or have any liability or contingent liability with respect to,
any Foreign Benefit Plans and Foreign Pension Plans.

 

8.20        Post-Closing Obligations.

 

(a)          Collateral Access Agreements. The Loan Parties shall use
commercially reasonable efforts to obtain and deliver to Collateral Agent,
within thirty (30) days after the Closing Date (or any longer period Collateral
Agent agrees to in its sole discretion), an executed Collateral Access Agreement
(in form and substance reasonably satisfactory to Collateral Agent) with respect
to each location that the Loan Parties are required to obtain Collateral Access
Agreements for pursuant to Section 8.18 of this Agreement; provided that such
thirty (30) day period shall be extended for an additional thirty (30) days if
the Loan Parties are diligently pursuing such agreements but have not obtained
them within the initial thirty (30) day period provided above.

 

(b)          Control Agreements.  The Loan Parties shall deliver to Collateral
Agent, within thirty (30) days after the Closing Date (or any longer period
Collateral Agent agrees to in its sole discretion), executed Deposit Account
Control Agreements (in form and substance reasonably satisfactory to Collateral
Agent)  with respect to each of the Loan Parties’ deposit accounts (other than
Excluded Accounts) existing on the Closing Date.

 

(c)          Insurance.  The Loan Parties shall deliver to Collateral Agent,
within thirty (30) days after the Closing Date (or any longer period Collateral
Agent agrees to in its sole discretion), insurance endorsements (in form and
substance reasonably satisfactory to Collateral Agent) naming Collateral Agent
as lenders loss payee or additional insured, as applicable, and containing the
provision that the Purchasers be given thirty (30) days written notice of intent
to terminate such insurance policy by the Borrower, any of its Subsidiaries, or
the insuring company.

 

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(d)          Lien Release. The Loan Parties shall deliver to Collateral Agent,
within sixty (60) days after the Closing Date (or any longer period Collateral
Agent agrees to in its sole discretion), evidence that each of the state tax
liens listed below have been released:

 

(i)State Tax Lien (GA) (File No. 3576 / 671)

(ii)State Tax Lien (GA) (File No. 3596 / 373)

(iii)State Tax Lien (GA) (File No. 3685 / 467)

(iv)State Tax Lien (GA) (File No. 3726 / 681)

(v)State Tax Lien (GA) (File No. 3769 / 558)

(vi)State Tax Lien (GA) (File No. 3909 / 652)

 

(e)          Numerex Solutions, LLC. The Loan Parties shall deliver to
Collateral Agent, within five (5) Business Days of the Closing Date (or such
longer period Collateral Agent agrees to in its sole discretion), (i) evidence
of filing of an amended and restated or amended certificate of formation for
Numerex Solutions, LLC (in form and substance reasonably satisfactory to
Collateral Agent) and (ii) executed resolutions of Numerex Solutions, LLC (in
form and substance reasonably satisfactory to Collateral Agent) related to such
certificate of formation and organizational documents of Numerex Solutions, LLC.

 

Article 9

NEGATIVE COVENANTS

 

Until the indefeasible payment in full in cash of all Obligations under the
Notes (other than contingent indemnification or expense reimbursement
obligations for which no claim has been made) or such later date as set forth
below, the Borrower hereby covenants and agrees with the Purchasers as follows:

 

9.1          Distributions. The Borrower will not, and will not cause or permit
any of its Subsidiaries to, make or declare or incur any liability to make any
Distributions in respect of the Capital Stock of the Borrower, except that (i) a
Subsidiary of the Borrower may declare and pay dividends on its outstanding
Capital Stock to the Borrower or to a Wholly-owned Subsidiary of the Borrower
that is a Loan Party; and (ii) the Borrower may declare and pay dividends with
respect to its Capital Stock payable solely in additional shares of its Capital
Stock.

 

9.2          Indebtedness. The Borrower will not, and will not cause or permit
any of its Subsidiaries to, create, incur or suffer to exist any Indebtedness
(directly or indirectly), except:

 

(a)          the Obligations;

 

(b)          Indebtedness existing on the date hereof and described in Schedule
9.2;

 

(c)          Capital Lease Obligations and purchase money Indebtedness in an
aggregate amount not to exceed $2,500,000 at any time outstanding;

 

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(d)          endorsement of items for deposit or collection of commercial paper
received in the ordinary course of business;

 

(e)          Indebtedness with respect to surety and appeal bonds, performance
bonds, bid bonds, completion guarantees and similar obligations incurred in the
ordinary course of business;

 

(f)          Indebtedness owed to any Person providing property, casualty,
liability, or other insurance to the Borrower or any of its Subsidiaries, so
long as the amount of such Indebtedness is not in excess of the amount of the
unpaid cost of, and shall be incurred only to defer the cost of, such insurance
for the year in which such Indebtedness is incurred and such Indebtedness is
outstanding only during such year, and which, in all cases, does not exceed
$550,000 outstanding at any time;

 

(g)          accrual of interest, accretion or amortization of original issue
discount, in each case, on Indebtedness permitted hereunder;

 

(h)          Indebtedness in respect of bid, performance or surety bonds,
workers’ compensation claims, self-insurance obligations and bankers acceptances
issued for the account of the Borrower or any Subsidiary in the ordinary course
of business, including guarantees or obligations of the Borrower or any
Subsidiary with respect to letters of credit supporting such bid, performance or
surety bonds, workers’ compensation claims, self-insurance obligations and
bankers acceptances (in each case other than for an obligation for money
borrowed); provided that neither the Borrower nor any Domestic Subsidiary shall
incur such Indebtedness for the account of, for the benefit of, or in support of
any Foreign Subsidiary;

 

(i)          Indebtedness in respect of netting services, overdraft protections
and otherwise in connection with deposit accounts that are promptly repaid
incurred in the ordinary course of business;

 

(j)          unsecured Indebtedness in the ordinary course of business in
respect of the following bank products or services extended to any Loan Party in
an aggregate amount not to exceed $300,000 at any time: (i) cash management
services and (ii) commercial credit card and merchant card services; and

 

(k)          the Subordinated Note Obligations in an aggregate principal amount
not to exceed $5,000,000 (which aggregate principal amount permitted under this
Section 9.2(k) shall be reduced by the amount of any payments of principal made
pursuant to Section 9.17).

 

9.3          Mergers. The Borrower will not merge or consolidate with or into
any other Person other than with another Loan Party in a transaction in which
the Borrower is the surviving entity. The Borrower will not cause or permit any
of its Subsidiaries to, merge or consolidate with or into any other Person that
is not a Loan Party, and no Domestic Subsidiary will merge or consolidate with
any Foreign Subsidiary unless the surviving entity is a Loan Party that is a
Domestic Subsidiary.

 

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9.4          Sales of Assets. The Borrower will not, and will not cause or
permit any of its Subsidiaries to, sell, assign, License, lease, convey,
exchange, transfer or otherwise dispose of its Property (each, a “Disposition”)
(including, without limitation, any Capital Stock of any Subsidiary owned by the
Borrower or another Subsidiary) to any other Person, except:

 

(a)          Dispositions of Inventory in the ordinary course of business;

 

(b)          Dispositions of obsolete, worn-out or surplus assets no longer used
or usable in the business of the Borrower or any of its Subsidiaries in the
ordinary course of business;

 

(c)          leases, licenses or sublicenses of real or personal property in the
ordinary course of business, in each case subject to the Liens granted under the
Note Documents;

 

(d)          Investments in compliance with Section 9.5(b);

 

(e)          Dispositions, settlements and writeoffs of accounts receivable in
connection with the collection or compromise thereof in the ordinary course of
business and in an aggregate amount not to exceed $450,000 in any fiscal year;

 

(f)          Dispositions of Property to the extent that (i) such Property is
exchanged for credit against the purchase price of similar replacement property
or (ii) the proceeds of such Disposition are reasonably promptly applied to the
purchase price of such replacement property and, in each case, so long as
Collateral Agent has a Lien with respect to such replacement property with the
same priority as the Lien of Collateral Agent with respect to the Property
disposed of;

 

(g)          subject to Section 3.2(c)(ii), Dispositions which constitute, or
which are subject to, a casualty event;

 

(h)          Dispositions by any Loan Party to any other Loan Party; and

 

(i)          (i) any lapse of Intellectual Property by any Loan Party that is
not economically desirable in the conduct of the Loan Parties’ business or (ii)
any abandonment of Intellectual Property rights in the ordinary course of
business so long as (in each case under clauses (i) and (ii)), such lapse is not
materially adverse to the interests of the Purchasers and such Intellectual
Property is not then being used by the Loan Parties in the ordinary course of
business.

 

9.5          Investments and Acquisitions. The Borrower will not, and will not
cause or permit any of its Subsidiaries to, make or suffer to exist any
Investments (including without limitation, loans and advances to, and other
Investments in, Subsidiaries), or commitments therefor, or to become or remain a
partner in any partnership or joint venture, or to make any Acquisition of any
Person, except for:

 

(a)          Cash Equivalent Investments, subject to Deposit Account Control
Agreements in favor of the Collateral Agent on behalf of the Purchasers or
otherwise subject to a perfected security interest in favor of the Collateral
Agent on behalf of the Purchasers, and purchases of assets in the ordinary
course of business;

 

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(b)          Investments (including intercompany loans) in Wholly-owned Domestic
Subsidiaries that are Loan Parties so long as the Collateral Agent has a first
priority, perfected Lien in any intercompany loans and has received an
intercompany note evidencing such intercompany loans, together with transfer
powers executed in blank in connection therewith;

 

(c)          Investments comprised of (i) accounts receivables or notes payable
owing to the Borrower or Subsidiary if created or acquired in the ordinary
course of business, (ii) endorsements of negotiable instruments held for
collection in the ordinary course of business or (iii) lease, utility and other
similar deposits made in the ordinary course of business;

 

(d)          Investments in securities of trade creditors, customers, suppliers
or account debtors received in satisfaction or partial satisfaction of
obligations owing to it or upon foreclosure or pursuant to any plan of
reorganization or liquidation or similar arrangement upon the bankruptcy or
insolvency of such trade creditors, customers, suppliers or account debtors;

 

(e)          deposits of cash made in the ordinary course of business to secure
performance of operating leases permitted hereunder;

 

(f)          Investments existing on the Closing Date and set forth on Schedule
9.5; and

 

(g)          extensions of payment terms made to customers in the ordinary
course of business.

 

9.6          Liens. The Borrower will not, and will not cause or permit any of
its Subsidiaries to, create, incur or suffer to exist, any Lien in, of or on its
or their Property (whether now owned or hereafter acquired, or upon any income,
profits or proceeds therefrom), except the following (“Permitted Liens”):

 

(a)          Subject to Section 8.5 hereof, Liens for taxes, assessments or
governmental charges or levies on its Property if the same shall not at the time
be delinquent or thereafter can be paid without penalty, or are being contested
in good faith and by appropriate proceedings and for which adequate reserves in
accordance with GAAP shall have been set aside on its books, so long as the
Borrower’s or Subsidiary’s title to, and its right to use, its Properties are
not materially adversely affected thereby;

 

(b)          Subject to Section 8.5 hereof, Liens imposed by law, such as
carriers’, warehousemen’s and mechanics’ liens and other similar Liens arising
in the ordinary course of business which secure payment of obligations not more
than 60 days past due or which are being contested in good faith by appropriate
proceedings and for which adequate reserves in accordance with GAAP shall have
been set aside on its books, so long as the Borrower’s or Subsidiary’s title to,
and its right to use, its Properties are not materially adversely affected
thereby;

 

(c)          Liens arising out of pledges or deposits under worker’s
compensation laws, unemployment insurance, old age pensions, or other social
security or retirement benefits, or similar legislation;

 

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(d)          (i) Utility easements, building restrictions and such other
encumbrances or charges against real property as are of a nature generally
existing with respect to properties of a similar character, as arise in the
ordinary course of business and that do not secure any monetary obligations and
do not materially detract from the value of the affected property or interfere
with the ordinary course of business of the Borrower or any Subsidiary and (ii)
minor defects in title, in each case, which do not materially interfere with the
conduct of the Borrower’s and its Subsidiaries’ business or the utilization
thereof in the business of the Borrower or its Subsidiaries;

 

(e)          Liens existing on the date hereof and described in Schedule 9.6;

 

(f)          Liens securing the Obligations;

 

(g)          Liens securing Indebtedness permitted under Section 9.2(c);
provided that (i) such Liens shall be created substantially simultaneously with
the acquisition or lease of the related asset, (ii) such Liens do not at any
time encumber any property other than the property financed by such
Indebtedness, (iii) the amount of Indebtedness secured thereby is not increased
and (iv) the principal amount of Indebtedness secured by any such Lien shall at
no time exceed one hundred percent (100%) of the original purchase price of such
property at the time it was acquired;

 

(h)          Liens arising out of judgments, attachments or awards not resulting
in an Event of Default under Section 10.1(i) or securing appeal or other surety
bonds relating to such judgments;

 

(i)          Liens (i) incurred in the ordinary course of business to secure the
performance of tenders, statutory obligations (other than excise taxes), surety,
stay, customs and appeal bonds, statutory bonds, bids, leases, government
contracts, trade contracts, performance and return of money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed money)
or (ii) arising by virtue of deposits made in the ordinary course of business to
secure liability for premiums to insurance carriers;

 

(j)          leases, licenses or sublicenses of the properties of the Borrower
or its Subsidiaries, in each case as otherwise permitted under Section 9.4
hereof and entered into in the ordinary course of the Borrower’s or its
Subsidiaries’ business so long as such leases, licenses or sublicenses do not,
individually or in the aggregate, (i) interfere in any material respect with the
ordinary conduct of the business of the Borrower or its Subsidiaries, or (ii)
materially impair the use (for its intended purposes) or the value of the
property subject thereto;

 

(k)          (i) bankers’ Liens, rights of setoff and other similar Liens
existing solely with respect to cash and Cash Equivalent Investments on deposit
in one or more accounts maintained by the Borrower or its Subsidiaries, in each
case granted in the ordinary course of business in favor of the bank or banks
with which such accounts are maintained, securing amounts owing to such bank
with respect to cash management and operating account arrangements and (ii)
Liens of a collection bank arising under Section 4-210 of the UCC on items in
the course of collection;

 

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(l)          the filing of UCC financing statements solely as a precautionary
measure in connection with operating leases otherwise permitted hereunder;

 

(m)          Liens on cash and Cash Equivalent Investments held in an Excluded
Account securing reimbursement obligations in respect of letters of credit and
related Indebtedness permitted to be incurred hereunder, and in any event, not
securing more than $300,000 of Indebtedness in the aggregate at any time;

 

(n)          statutory Liens of landlords and lessors in respect of rent not in
default;

 

(o)          the title and interest of a lessor or sublessor in and to personal
property leased or subleased, in each case extending only to such personal
property; and

 

(p)          non-exclusive licenses of Intellectual Property rights in the
ordinary course of business.

 

9.7          Capital Expenditures; Operating Leases.

 

(a)          The Borrower will not, and will not cause or permit any of its
Subsidiaries to, make any Capital Expenditure if the sum of the aggregate amount
of all Capital Expenditures of the Borrower and its Subsidiaries on a pro forma
basis (calculated as if the Capital Expenditure in question was on made on the
last day of the most recently ended month) in the trailing twelve month period
most recently ended on a combined basis would exceed $1,300,000.

 

(b)          The Borrower will not, and will not cause or permit any of its
Subsidiaries to, enter into any operating lease if the sum of the aggregate
amount of all expenditures under operating leases (excluding the operating lease
with respect to the property located at 3330 Cumberland Boulevard, Atlanta, GA
30339) made or required to be made by the Loan Parties on a combined basis
during such Fiscal Year would exceed $1,000,000.

 

9.8          Licenses. The Borrower will not, and will not cause or permit any
of its Subsidiaries to, grant any rights or Licenses to any IP Rights of the
Borrower or its Subsidiaries other than non-exclusive rights or Licenses granted
in the ordinary course of business.

 

9.9          Affiliates. Except as otherwise permitted by Section 9.21 and the
Subordinated Note, the Borrower will not, and will not cause or permit any of
its Subsidiaries to, enter into any transaction or arrangement (including,
without limitation, the purchase or sale of any Property or service) with, or
make any payment or transfer to, any Affiliate, except for transactions
permitted by this Agreement and transactions in the ordinary course of business
and pursuant to the reasonable requirements of the Borrower’s or such
Subsidiary’s operating business and upon fair and reasonable terms that are
fully disclosed to the Purchasers and that are no less favorable to the Borrower
or such Subsidiary than would be obtained in a comparable arm’s-length
transaction with a Person not an Affiliate.

 

9.10        Permitted Hedging Arrangements. The Borrower will not, and will not
cause or permit any of its Subsidiaries to, enter into Hedging Agreements or
become liable for liabilities arising from Hedging Agreements.

 

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9.11        Sale and Leaseback Transactions and Other Off-Balance Sheet
Liabilities. The Borrower will not, and will not cause or permit any of its
Subsidiaries to, enter into or suffer to exist any (a) Sale and Leaseback
Transaction which is not a Capital Lease or (b) any other transaction pursuant
to which the Borrower or any Subsidiary incurs or has incurred Off-Balance Sheet
Liabilities.

 

9.12        Contingent Obligations. The Borrower will not, and will not cause or
permit any of its Subsidiaries to, make or suffer to exist any Contingent
Obligation (other than indemnities to officers and directors to the extent
permitted by applicable law), except Contingent Obligations arising from the
Collateral Documents, or existing on the Closing Date as permitted Indebtedness
or permitted by Section 9.2.

 

9.13        Subsidiaries.

 

(a)          If the Borrower or any Subsidiary creates, forms or acquires any
Domestic Subsidiary on or after the date of this Agreement, the Borrower will,
and will cause such Subsidiaries to, contemporaneously with the creation,
formation or acquisition of such new Domestic Subsidiary (or at such later time
as the Collateral Agent may agree in writing), (i) grant to Collateral Agent a
perfected security interest in and Lien on all of the issued and outstanding
Capital Stock of such Domestic Subsidiary, in order to secure the Obligations
and (ii) cause such Domestic Subsidiary to join the Guaranty and Collateral
Agreement and secure said Obligations as a “Grantor” under the Guaranty and
Collateral Agreement with a perfected security interest in and Lien on all of
the accounts, Inventory, documents, instruments, chattel paper, general
intangibles, goods, machinery, equipment, investment property, other tangible
and intangible personal property, real property and other assets and the books
and records of such Subsidiary and the thereof (except that, with respect to
property of such Domestic Subsidiary that constitutes Capital Stock in a Foreign
Subsidiary, any such pledge, security interest or Lien shall be limited to
sixty-five percent (65%) of the voting Capital Stock of such Foreign
Subsidiary), all pursuant to the Guaranty and Collateral Agreement.

 

(b)          Neither the Borrower nor any Subsidiary shall create, form, or
acquire any Foreign Subsidiary without the express written consent of the
Collateral Agent.

 

(c)          No Subsidiary shall at any time acquire any material assets or
operations unless such Subsidiary shall have complied with the requirements of
this Section 9.13 applicable to newly created, formed or acquired Subsidiaries.

 

9.14        Real Property. As soon as practicable after any permitted
acquisition of real property or lease (as lessee), the Borrower will, and will
cause each of its Subsidiaries to, deliver a perfected mortgage Lien in favor of
the Collateral Agent on any acquired real property of the Borrower or
Subsidiary, collateral assignment of lease and Collateral Access Agreement on
any real property leased by the Borrower or Subsidiary, and such insurance
policies, opinions of counsel and related documents as the Collateral Agent may
reasonably request (all in form and substance acceptable to the Collateral
Agent).

 

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9.15        Modifications of Charter Documents. The Borrower will not permit,
and will cause each of its Subsidiaries not to permit, such Person’s Charter
Documents to be amended or modified in any way that could reasonably be expected
to materially or adversely affect the interests of the Purchasers.

 

9.16        Fiscal Year. The Borrower will not, and will not cause or permit any
of its Subsidiaries to, change its Fiscal Year so that it ends on other than the
last day of December.

 

9.17        Payments on Subordinated Note. The Borrower will not, and will not
cause or permit any of its Subsidiaries to, make any payment or repurchase or
declare or set aside any amount for payment or repurchase of principal, interest
or other amount on or with respect to the Subordinated Note except as permitted
by the subordination terms thereof; provided that from the Closing Date until
July 1, 2018 the Borrower (or any of its Subsidiaries) may make payments or
repurchases of the Subordinated Note in accordance with the terms thereof in an
aggregate amount not to exceed $5,000,000 so long as no Default or Event of
Default shall have occurred and be continuing at the time of such repurchase or
prepayment or would result therefrom.

 

9.18        Restrictive Agreements. The Borrower will not, and will not cause or
permit any of its Subsidiaries to, become or be a party to any contract or
agreement which materially impairs such Person’s ability to perform under this
Agreement, or under any other Note Document.

 

9.19        Use of Purchasers’ Names. Neither the Borrower nor any Subsidiary
shall use any Purchaser’s name in connection with any of its business
operations. Nothing herein contained is intended to permit or authorize the
Borrower or its Subsidiaries to make any contract on behalf of any Purchaser.

 

9.20        Financial Covenants. The Borrower and its Subsidiaries, on a
consolidated basis, shall not:

 

(a)          Minimum EBITDA. As of the last day of any Fiscal Quarter on or
after June 30, 2017, permit (i) EBITDA less (ii) consolidated Capitalized
Software Costs of the Borrower and its Subsidiaries, in each case, for each
Fiscal Quarter period then ended to be less than the amount set forth across
from such Fiscal Quarter in the table below:

 

Fiscal Quarter Ending Minimum Amount June 30, 2017 $580,000 September 30, 2017
$1,000,000 December 31, 2017 $1,500,000 March 31, 2018 and each Fiscal Quarter
thereafter $1,750,000

  

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(b)          [Reserved].

 

(c)          Minimum Total Liquidity. As of the last day of any calendar month
ending on or after the Closing Date, permit Minimum Total Liquidity to be less
than the amount set forth across from such fiscal month in the table below:

 

Month Ending Minimum Amount Each calendar month end ending after the Closing
Date through and including the calendar month ending September 30, 2017
$10,500,000 Each calendar month end ending after September 30, 2017 through and
including the calendar month ending June 30, 2018 $11,000,000 Each calendar
month end ending after June 30, 2018through and including the calendar month
ending December 31, 2018 $12,500,000 Each calendar month end ending after
December 31, 2018 and each calendar month end thereafter $14,000,000

 

(d)          Minimum Liquidity. (i) At any time after the Closing Date through
and including July 1, 2018, permit Minimum Liquidity to be less than $5,000,000
and (ii) at any time after July 1, 2018 through and including the Maturity Date,
permit Minimum Liquidity to be less than $6,000,000.

 

(e)          Minimum Monthly Recurring Revenue.

 

(i)          As of the last day of any calendar month ending on or after the
Closing Date, permit the actual minimum Monthly Recurring Revenue, averaged on a
trailing three (3) month basis, to be less than the projected total minimum
Monthly Recurring Revenue as set forth in Schedule 9.20(e) and calculated in the
manner described in Schedule 9.20(e).

 

(ii)          As of the last day of any calendar month ending on or after the
Closing Date, permit the sum of the trailing 6 month actual Monthly Recurring
Revenue for the Uplink line of business (which shall be consistent with the
breakout for such line of business provided in that certain model dated as of
June 1, 2017 and delivered to the Purchasers prior to the Closing Date), to be
less than $8,000,000. For purposes of testing the trailing Monthly Recurring
Revenue, the six-month actual results will be calculated as the sum of the test
month plus the five previous months’ actual results for the Uplink line of
business.

 

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9.21        Management Fees; Board Fees. The Borrower will not, and will not
cause or permit any of its Subsidiaries to, pay any management, advisory or
other similar fee to any Person, except with respect to (a) payment of
reasonable compensation to officers, employees, and Affiliates for actual
services rendered to the Loan Parties and their Subsidiaries and reimbursement
of actual out-of-pocket expenses, in all cases, in the ordinary course of
business, (b) payment of reasonable directors’ fees in an aggregate amount of
cash compensation not to exceed $60,000 per director, per calendar year, and
reimbursement of actual out-of-pocket expenses incurred in connection with
attending board of director and committee meetings and (c) payment of non-cash
equity-based compensation to directors.

 

9.22        Deposit Accounts. Unless consented to in advance in writing by the
Purchasers, the Borrower and its Subsidiaries shall not: (i) establish or
maintain any deposit account or securities account that is not subject to an
account control agreement in favor of the Collateral Agent, (ii) deposit any
payment items or the proceeds of any Note into a deposit account or securities
account that is not subject to an account control agreement in favor of
Collateral Agent or (iii) close or modify the terms governing any existing
deposit account in a manner adverse to the Purchasers; provided, however, that
the foregoing shall not apply to any Excluded Account.

 

9.23         Modifications of Subordinated Note. The Borrower shall not directly
or indirectly amend, terminate or otherwise modify (or permit any amendment,
termination or modification of), including waivers of material rights or
remedies thereunder, the Subordinated Note which in any case (i) is contrary to
the terms of this Agreement or any other Note Document, (ii) is in contravention
of the amendment restrictions set forth in the Subordinated Note as in effect on
the Closing Date or (iii) could reasonably be expected to be materially adverse
to the rights, interests or privileges of the Collateral Agent or the Purchasers
or their ability to enforce the same.

 

9.24        No Negative Pledges. No Loan Party shall, and no Loan Party shall
permit any of its Subsidiaries to, directly or indirectly, (a) create or
otherwise cause or suffer to exist or become effective any consensual
restriction or encumbrance of any kind on the ability of any Loan Party or
Subsidiary to pay dividends or make any other distribution on any of such Loan
Party’s or Subsidiary’s Capital Stock or to pay fees, including management fees,
or make other payments and distributions to the Borrower or any other Loan
Party, or to make loans or advances to the Borrower, or to transfer any of the
properties or assets of such Subsidiary to the Borrower, or (b) enter into,
assume or become subject to any Contractual Obligation prohibiting or otherwise
restricting the existence of any Lien upon any of its assets in favor of the
Collateral Agent, whether now owned or hereafter acquired; provided that the
foregoing in this Section 9.24 shall not apply to restrictions and conditions
(i) imposed by Requirements of Law, (ii) imposed by the Note Documents, (iii)
existing on the date hereof and identified on Schedule 9.24 (but shall apply to
any extension or renewal of, or any amendment or modification expanding the
scope of, any such restriction or condition), (iv) to customary restrictions and
conditions contained in agreements relating to the sale of a Subsidiary pending
such sale, provided such restrictions and conditions apply only to the
Subsidiary that is to be sold and such sale is permitted by the terms of this
Agreement, (v) clause (b) shall not apply to restrictions or conditions imposed
by any agreement relating to secured Indebtedness (including Capital Lease
Obligations) permitted by this Agreement if such restrictions or conditions
apply only to the property or assets securing such Indebtedness and (vi) clause
(b) of the foregoing shall not apply to customary provisions in leases
restricting the assignment thereof.

 

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9.25        Accounts Payable. No Loan Party shall, and no Loan Party shall
permit any of its Subsidiaries to, directly or indirectly, allow the accounts or
notes payable to (i) the suppliers set forth on Schedule 9.25, (ii) any
successors of such suppliers set forth on Schedule 9.25 and (iii) any network
provider that is providing network services for 20% or more of the Loan Parties’
subscribers to be overdue for more than thirty (30) days past the invoice date
for such accounts payable.

 

9.26        Passive Foreign Investment Company. No Loan Party shall become
“passive foreign investment company,” as defined in Section 1297 of the Code.

 

Article 10

EVENTS OF DEFAULT

 

10.1        Events of Default. An “Event of Default” shall occur hereunder upon:

 

(a)          Failure of the Borrower to pay the principal of any Note (or any
installment thereof) as and when due (whether at scheduled maturity, upon
acceleration or otherwise), or failure of the Borrower to pay within one (1)
Business Day after the same shall become due (i) any interest upon any Note,
(ii) any fees or any other Indebtedness or Obligations to the Purchasers or
(iii) any other obligations under any of the Note Documents.

 

(b)          Any representation or warranty made or deemed made by or on behalf
of the Borrower or any of its Subsidiaries to any Purchaser under or in
connection with this Agreement, the Notes or any other Note Document or any
certificate or information delivered in connection with any of the foregoing
shall be materially false when made.

 

(c)          Failure of the Borrower or any of its Subsidiaries to comply with
any term, covenant, or provision contained in Sections 8.1(a), 8.1(b), 8.1(c),
8.1(d), 8.1(g), 8.2, 8.3 (other than (d)), 8.6, 8.15, 8.20 or Article 9 of this
Agreement.

 

(d)          Failure of the Borrower or any of its Subsidiaries to perform or
observe any other term, covenant or provision contained in this Agreement (other
than those specified elsewhere in this Section 10.1) or any other Note Document
and any such failure shall remain unremedied for thirty (30) days after
occurrence.

 

(e)          (i) Failure of the Borrower or any of its Subsidiaries to pay when
due or within any applicable grace period therefor any payments under any
Indebtedness (other than the Obligations) in excess of $150,000 (which, for
purposes of clarity, shall include the Subordinated Note) or (ii) the default by
the Borrower or any of its Subsidiaries in the performance (beyond the
applicable grace period with respect thereto, if any) of any other term,
provision or condition contained in any agreement, contract or instrument under
which any such Indebtedness was created or is governed, the effect of which
default is to cause, or to permit the holder or holders of such other
Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity, or (iii) any other event shall occur or condition exist, the effect of
which event or condition is to cause, or to permit the holder or holders of such
other Indebtedness to cause, such Indebtedness to become due prior to its stated
maturity; or (iv) any such Indebtedness of the Borrower or any of its
Subsidiaries shall be declared to be due and payable or required to be prepaid
or repurchased (other than by a regularly scheduled payment) prior to the stated
maturity thereof; or (v) the Borrower or any of its Subsidiaries shall admit in
writing its inability to pay its debts generally as they become due.

 

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(f)          The Borrower or any Subsidiary shall (i) file or consent to the
entry of an order for relief with respect to it under any federal, state or
foreign bankruptcy, insolvency, receivership, liquidation or similar law as now
or hereafter in effect, (ii) make an assignment for the benefit of creditors,
(iii) apply for, seek, consent to, or acquiesce in, the appointment of a
receiver, custodian, trustee, examiner, liquidator or similar official for it or
any substantial part of its Property, (iv) institute any proceeding seeking an
order for relief under any federal, state or foreign bankruptcy, insolvency,
receivership, liquidation or similar law as now or hereafter in effect seeking
to adjudicate it a bankrupt or insolvent, or seeking dissolution, winding up,
liquidation, reorganization, arrangement, adjustment or composition of it or its
debts under any such law relating to bankruptcy, insolvency or reorganization or
relief of debtors, fail to file an answer or other pleading denying the material
allegations of any such proceeding filed against it or file an answer admitting
the material allegations of a petition filed against itself in any such
proceeding, (v) dissolve, wind up or liquidate, (vi) take any corporate,
organizational or similar action to authorize or effect any of the foregoing
actions set forth in this Section 10.1(f), or (vii) fail to contest in good
faith any appointment or proceeding described in Section 10.1(g).

 

(g)         Without the application, approval or consent of the Borrower or any
Subsidiary, as applicable, a receiver, trustee, examiner, liquidator or similar
official shall be appointed for such Loan Party or any substantial part of its
Property, or a proceeding described in Section 10.1(f) shall be instituted
against such Loan Party and such appointment continues undischarged or such
proceeding continues undismissed or unstayed for a period of 45 consecutive
days.

 

(h)         Any court, government, or Governmental Authority shall condemn,
seize or otherwise appropriate, or take custody or control of, all or any
material portion of the Property of the Borrower or any Subsidiary.

 

(i)          The Borrower or any Subsidiary shall fail within 30 days to pay,
bond or otherwise discharge one or more (i) judgments or orders for the payment
of money aggregating in excess of $250,000 (or the equivalent thereof in
currencies other than U.S. Dollars) in the aggregate, or (ii) nonmonetary
judgments or orders which, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, which judgment(s), in any such case,
is/are not stayed on appeal or otherwise being appropriately contested in good
faith.

 

(j)          The occurrence of a Reportable Event with respect to any Plan; the
filing of a notice of intent to terminate a Plan by the Borrower, any ERISA
Affiliate or any Subsidiary, the institution of proceedings to terminate a Plan
by the PBGC or any other Person; the withdrawal in a “complete withdrawal” or a
“partial withdrawal” as defined in Sections 4203 and 4205, respectively, of
ERISA by the Borrower, any ERISA Affiliate or any Subsidiary of the Borrower
from any Multiemployer Plan; the incurrence of any material increase in the
contingent liability of the Borrower or any of its Subsidiaries with respect to
any “employee welfare benefit plan” as defined in Section 3(1) of ERISA which
covers retired employees and its beneficiaries; or the Unfunded Liabilities of
all Single Employer Plans shall exceed (in the aggregate) $250,000, in each such
case which, either individually or in the aggregate, would be reasonably
expected to result in liability to any Loan Party in excess of $250,000.

 

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(k)          The institution by the Borrower, any ERISA Affiliate or any
Subsidiary of steps to terminate any Plan if, in order to effectuate such
termination, the Borrower, such ERISA Affiliate or such Subsidiary, as the case
may be, would be required to make a contribution to such Plan, or would incur a
liability or obligation to such Plan, in excess of $250,000, or the institution
by the PBGC of steps to terminate any Plan, which would reasonably be expected
to result in material liability to any Loan Party.

 

(l)           The Borrower or any Subsidiary shall (i) be the subject of any
proceeding pertaining to the release by the Borrower, any such Subsidiary or any
other Person of any Hazardous Material into the environment, or (ii) violate any
Environmental Law, which, in either case could reasonably be expected to have a
Material Adverse Effect.

 

(m)         Any breach by the Borrower or the holders of the Subordinated Note
of the subordination provisions set forth therein.

 

(n)         Any Collateral Document shall for any reason fail to create a valid
and perfected first priority (subject to any Permitted Liens) security interest
in any collateral purported to be covered thereby, except as permitted by the
terms of any Collateral Document, or any Collateral Document shall fail to
remain in full force or effect or any action shall be taken to discontinue or to
assert the invalidity or unenforceability of any Collateral Document.

 

(o)          The occurrence of a Change of Control.

 

(p)          The occurrence of a Material Adverse Effect.

 

(q)          The subordination provisions set forth in Section 5 of the
Subordinated Note or any subordination or intercreditor agreement relating to
any other Indebtedness of any Loan Party subordinated to the Obligations, or any
subordination provisions of any note or other document running to the benefit of
the Collateral Agent or Purchasers in respect of such Indebtedness, shall cease
for any reason to be in full force and effect or any Loan Party or any of their
Subsidiaries shall so assert in writing.

 

(r)          Borrower’s SEC reporting obligations under the Securities Exchange
Act of 1934, as amended, are terminated or Borrower’s Capital Stock are delisted
from The Nasdaq Stock Market and not listed on any other national stock exchange
(for the avoidance of doubt a “national stock exchange” shall not include OTC
Bulletin Board or any other similar over the counter exchange).

 

(s)          Any Loan Party or any material Subsidiary shall be enjoined,
restrained, or in any way prevented by court order from continuing to conduct
all or any material part of its business.

 

(t)          Any Loan Party or any of its Subsidiaries shall be convicted under
any criminal law that could lead to a forfeiture of any property of such Person
where either (i) the property subject to forfeiture has a fair market value of
$500,000 or more, or (ii) the forfeiture of such property could reasonably be
expected to have a Material Adverse Effect.

 

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10.2        Acceleration. If an Event of Default occurs and is continuing under
Section 10.1(f), or (g) or clause (v)(B) of Section 10.1(e), then the
outstanding principal of and interest on the Notes shall automatically become
immediately due and payable along with the Prepayment Fee, without presentment,
demand, protest or notice of any kind, all of which are expressly waived. If any
other Event of Default occurs and is continuing, the Required Purchasers, by
written notice to the Borrower, may declare the principal of and interest on the
Notes to be due and payable immediately along with the Prepayment Fee. Upon any
such declaration of acceleration, such principal and interest shall become
immediately due and payable, without presentment, demand, protest or notice of
any kind, all of which are expressly waived, and the Collateral Agent (acting at
the direction of the Required Purchasers) shall be entitled to exercise all of
its rights and remedies hereunder and under such Note or any other Note Document
whether at law or in equity.

 

10.3        Set-Off. Upon the occurrence and during the continuation of an Event
of Default, in addition to all other rights and remedies that may then be
available to any Purchaser of any Note, each Purchaser of any Note and the
Collateral Agent is hereby authorized at any time and from time to time, without
notice to the Borrower (any such notice being expressly waived by the Borrower)
to set off and apply any and all Indebtedness at any time owing by such
Purchaser or the Collateral Agent to or for the credit or the account of the
Borrower or any of its Subsidiaries against all amounts which may be owed to
such Purchaser or the Collateral Agent by the Borrower or any of its
Subsidiaries in connection with this Agreement or any other Note Document. If
any Purchaser of the Notes shall obtain from the Borrower payment of any
principal of or interest on any Note held by it or payment of any other amount
under this Agreement or such Note held by it or any other Note Document through
the exercise of any right of set-off, and, as a result of such payment, such
Purchaser shall have received a greater percentage of the principal, interest or
other amounts then due to such Purchaser under the Note Documents than the
percentage received by any other Purchaser, it shall promptly make such
adjustments (including without limitation purchasing risk participations) with
such other Purchaser from time to time as shall be equitable, to the end that
all the Purchasers of the Notes shall share the benefit of such excess payment
(net of any expenses which may be incurred by such Purchaser in obtaining or
preserving such excess payment) pro rata in accordance with the unpaid principal
and/or interest on the Notes or other amounts (as the case may be) owing to each
of the Purchasers of the Notes. To such end, all Purchasers of the Notes shall
make appropriate adjustments among themselves if such payment is rescinded or
must otherwise be restored. Any Purchaser of the Notes taking action under this
Section 10.3 shall promptly provide notice to the Borrower of any such action
taken; provided that the failure of such Purchaser to provide such notice shall
not prejudice its rights hereunder.

 

10.4        Suits for Enforcement. In case any one or more Events of Default
described in Section 10.1 shall have occurred and be continuing, unless such
Events of Default shall have been waived, the Purchaser of each Note with
respect to which any such Event of Default has occurred may proceed to protect
and enforce its rights under this Article 10 by suit in equity or action at law.
It is agreed that in the event of any such action, or any action between the
Purchasers of the Notes and the Borrower (including its officers and agents) in
connection with a breach or enforcement of this Agreement, the Purchasers of the
Notes shall be entitled to receive all reasonable and documented out-of-pocket
fees, costs and expenses incurred, including without limitation such fees and
expenses of outside counsel (whether or not litigation is commenced) and fees,
costs and expenses of appeals.

 

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10.5        License. The Borrower and its Subsidiaries hereby grant to the
Collateral Agent a non-exclusive, worldwide and royalty-free license to use or
otherwise exploit all Intellectual Property rights of the Borrower or Subsidiary
for the purpose of: (a) completing the manufacture of any in-process materials
following any Event of Default so that such materials become saleable inventory,
all in accordance with the same quality standards previously adopted by the
Borrower or Subsidiary for its own manufacturing; and (b) selling, leasing or
otherwise disposing of any or all collateral following any Event of Default.

 

Article 11

INDEMNIFICATION

 

11.1        Indemnification. In addition to all other sums due hereunder or
provided for in this Agreement, the Borrower shall indemnify and hold harmless
each Purchaser, the Collateral Agent, its respective Affiliates and each of its
respective managers, officers, directors, agents, employees, Subsidiaries,
partners, members, attorneys, accountants and controlling persons (each, an
“Indemnified Party”) to the fullest extent permitted by law from and against any
and all reasonable and documented out-of-pocket losses, claims, damages,
expenses (including, without limitation, fees, disbursements and other charges
of outside counsel and costs of investigation incurred by an Indemnified Party
in any action or proceeding between the Borrower (or any of its Subsidiaries)
and such Indemnified Party (or Indemnified Parties) or between an Indemnified
Party (or Indemnified Parties) and any third party or otherwise) or other
liabilities or losses (collectively, “Liabilities”), in each case resulting from
or arising out of any breach of any representation or warranty, covenant or
agreement of the Borrower or any of its Subsidiaries in this Agreement or any
other Note Document, including without limitation, the failure to make payment
when due of amounts owing pursuant to this Agreement or any other Note Document,
on the due date thereof (whether at the scheduled maturity, by acceleration or
otherwise) or any legal, administrative or other actions (including, without
limitation, actions brought by any holders of equity or Indebtedness of the
Borrower or any of its Subsidiaries or derivative actions brought by any Person
claiming through or in the Borrower’s or any such Subsidiary’s name),
proceedings or investigations (whether formal or informal), or written threats
thereof, based upon, relating to or arising out of the Note Documents, the
transactions contemplated thereby, or any Indemnified Party’s role therein or in
the transactions contemplated thereby, or the gross negligence or willful
misconduct of the Borrower or any of its Affiliates and its respective
directors, officers, and employees; provided, however, that the Borrower shall
not be liable under this Section 11.1 to an Indemnified Party to the extent that
it is finally judicially determined that such Liabilities resulted primarily
from the willful misconduct or gross negligence of an Indemnified Party;
provided, further, that if and to the extent that such indemnification is
unenforceable for any reason, the Borrower shall make the maximum contribution
to the payment and satisfaction of such Liabilities which shall be permissible
under Applicable Laws. In connection with the obligation of the Borrower to
indemnify for expenses as set forth above, the Borrower further agrees, upon
presentation of appropriate invoices, to reimburse each Indemnified Party for
all such reasonable and documented out-of-pocket expenses (including, without
limitation, fees, disbursements and other charges of outside counsel and costs
of investigation incurred by an Indemnified Party in connection with any
Liabilities) as they are incurred by such Indemnified Party. The obligations of
the Borrower under this Section 11.1 shall survive the payment in full of the
other Obligations and the termination of this Agreement.

 

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11.2        Procedure; Notification. Each Indemnified Party under this Article
11 will, promptly after the receipt of notice of the commencement of any action,
investigation, claim or other proceeding against such Indemnified Party in
respect of which indemnity may be sought from the Borrower under this Article
11, notify the Borrower in writing of the commencement thereof. The omission of
any Indemnified Party to so notify the Borrower of any such action shall not
relieve the Borrower from any liability which it may have to such Indemnified
Party, except to the extent that such omission impairs the Borrower’s ability to
defend the action, claim or other proceeding. In case any such action, claim or
other proceeding shall be brought against any Indemnified Party and it shall
notify the Borrower of the commencement thereof, the Borrower shall be entitled
to assume the defense thereof at its own expense, with counsel satisfactory to
such Indemnified Party in its judgment; provided that any Indemnified Party may,
at its own expense, retain separate counsel to participate in such defense.
Notwithstanding the foregoing, in any action, claim or proceeding in which the
Borrower, on the one hand, and an Indemnified Party, on the other hand, is, or
may become, a party, such Indemnified Party shall have the right to employ
separate counsel at the Borrower’s expense and to control its own defense of
such action, claim or proceeding if, in the opinion of counsel to such
Indemnified Party, a conflict or potential conflict exists between the Borrower,
on the one hand, and such Indemnified Party, on the other hand, that would make
such separate representation advisable. The Borrower agrees that it will not,
without the prior written consent of the Required Purchasers, settle, compromise
or consent to the entry of any judgment in any pending or threatened claim,
action or proceeding relating to the matters contemplated hereby (if any
Indemnified Party is a party thereto or has been actually threatened to be made
a party thereto) unless such settlement, compromise or consent includes an
unconditional release of the Purchaser and each other Indemnified Party from all
liability arising or that may arise out of such claim, action or proceeding. The
rights accorded to Indemnified Parties hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise.

 

Article 12

MISCELLANEOUS

 

12.1        Survival of Representations and Warranties. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement, any investigation by or on behalf of any Purchaser,
acceptance of the Notes and payment therefor, or termination of this Agreement.
Except as otherwise expressly provided by its terms, this Agreement and each
other Note Document shall terminate and be of no further force and effect on the
earlier of (a) the date on which the Obligations (other than contingent
indemnification obligations for which no claim has been made) have been
satisfied in full in cash, as set forth in writing by the Purchasers, and (b)
such time as the parties hereto mutually agree to the termination thereof.

 

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12.2        Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and shall be by registered or
certified first-class mail, return receipt requested, facsimile, or email (with
receipt confirmed), courier service or personal delivery:

 

(a)          if to Collateral Agent:

 

HCP-FVF, LLC

c/o Hale Capital Partners, LP

17 State Street, Suite 3230

New York, NY 10004

Email: martin@halefunds.com

Telephone: (212) 751-8807

Fax: (212) 751-1201

Attention: Martin M. Hale, Jr.

 

With a copy (which shall not constitute notice) to:

 

Proskauer Rose LLP

One International Place

Boston, MA 02110

Email: SBoyko@proskauer.com

Telephone: (617) 526-9770

Fax: (617) 526-9899

Attention: Stephen A. Boyko

 

(b)          if to the Purchasers:

 

HCP-FVF, LLC

c/o Hale Capital Partners, LP

17 State Street, Suite 3230

New York, NY 10004

Email: martin@halefunds.com

Telephone: (212) 751-8807

Fax: (212) 751-1201

Attention: Martin M. Hale, Jr.

 

With a copy (which shall not constitute notice) to:

 

Proskauer Rose LLP

One International Place

Boston, MA 02110

Email: SBoyko@proskauer.com

Telephone: (617) 526-9770

Fax: (617) 526-9899

Attention: Stephen A. Boyko

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(c)          if to the Borrower or any Subsidiary:

 

Numerex Corp.

400 Interstate North Parkway, 13th Floor

Atlanta, GA 30339

Email: kgayron@numerex.com

ehyun@numerex.com

Telephone:    (770) 615-1410

(770) 615-1431

Attention: Kenneth Gayron

 Eugene Hyun

 

With a copy (which shall not constitute notice) to:

 

Andrew J. Ryan

The Ryan Law Group LLP

14 E. 4th St., Suite 406

New York, NY 10012

Email: ar@trlg-llp.com

Telephone: 212-944-7300

 

All such notices and communications shall be deemed to have been duly given: if
personally delivered, when delivered by hand; if mailed, five (5) Business Days
after being deposited in the mail, postage prepaid; if delivered by courier, one
(1) Business Day after being deposited with a reputable overnight courier, with
charges prepaid; if faxed, upon confirmation as successfully sent by the
sender's fax machine; or if emailed, when receipt is acknowledged.

 

12.3        Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of the parties hereto.
Subject to applicable securities laws, each Purchaser may, with the consent of
the Collateral Agent and upon notice to, but without the consent of the
Borrower, transfer the Notes held by it in whole or in part and may assign its
rights under the Note Documents to one or more assignees; provided that any such
transfer or assignment by a Purchaser to one or more of its Affiliates or
Approved Funds may be made at any time without requiring the consent of the
Required Purchasers or any other Person; provided further that, so long as no
Event of Default has occurred and is continuing, any such assignee is not a
Prohibited Transferee. In addition, each Purchaser may at any time, without the
consent of, or notice to, the Borrower sell participations to any Person in all
or a portion of such Purchaser’s rights and/or obligations under this Agreement
and the other Note Documents; provided that such Purchaser’s obligations under
this Agreement and the other Note Documents shall remain unchanged, and the
Borrower shall continue to deal solely and directly with such Purchaser, as the
case may be, in connection with the provisions of this Agreement and the other
Note Documents. Notwithstanding anything herein to the contrary, no assignments
may be made to, and no participations may be sold to, a Loan Party or any of its
Affiliates, except pursuant to the purchase option set forth in the Subordinated
Note. Notwithstanding anything herein to the contrary, any Purchaser may, at any
time, create a security interest in, pledge or assign, all or any portion of its
rights under and interest in the Note Documents and the Notes in favor of any
secured creditor of such Purchaser, and such secured creditor may enforce such
pledge or security interest in any manner permitted under Applicable Law.
Neither the Borrower nor any Subsidiary may assign any of its rights, or
delegate any of its obligations, under this Agreement, the Notes without the
prior written consent of the Required Purchasers, and any such purported
assignment by the Borrower or any such Subsidiary without the written consent of
the Required Purchasers shall be void and of no effect. Except as provided in
Article 11, no Person other than the parties hereto and its successors and
permitted assigns is intended to be a beneficiary of any of the Note Documents.

 

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12.4        Amendment and Waiver.

 

(a)          No failure or delay on the part of any of the parties hereto in
exercising any right, power, or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power, or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power, or remedy. The remedies provided for in this Agreement are
cumulative and are not exclusive of any remedies that may be available to the
parties hereto at law, in equity or otherwise.

 

(b)          Any amendment, waiver, supplement or modification of or to any
provision of this Agreement or the Notes and any consent to any departure by any
party from the terms of any provision of this Agreement or the Notes, shall be
effective (i) only if it is made or given in writing and signed by the Borrower
and the Required Purchasers and (ii) only in the specific instance and for the
specific purpose for which made or given; provided that, notwithstanding the
foregoing, without the prior written consent of the Purchaser affected thereby,
an amendment, waiver, supplement or modification of this Agreement, the Notes or
any consent to departure from a term or provision hereof or thereof may not: (A)
reduce the rate of or extend the time for payment of principal or interest on
the Notes; (B) reduce the principal amount of the Notes; (C) make the Notes
payable in money other than that stated in the Notes; (D) reduce the amount or
extend the time of payment of fees or other compensation payable to the
Purchasers hereunder; or (E) change any provision of this Section 12.4(b) or the
definition of “Required Purchasers” or any other provision specifying the number
or percentage of Purchasers required to amend, waive or otherwise modify any
rights hereunder or make any determination or grant any consent hereunder.

 

(c)          Except where notice is specifically required by this Agreement, no
notice to or demand on the Borrower or any of its Subsidiaries in any case shall
entitle the Borrower or any of its Subsidiaries to any other or further notice
or demand in similar or other circumstances.

 

12.5        Signatures; Counterparts. Facsimile and electronic transmissions of
any executed original document and/or retransmission of any executed facsimile
or electronic transmission shall be deemed to be the same as the delivery of an
executed original. At the request of any party hereto, the other parties hereto
shall confirm facsimile transmissions by executing duplicate original documents
and delivering the same to the requesting party or parties. This Agreement may
be executed in any number of counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

 

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12.6        Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.

 

12.7        GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN
ACCORDANCE WITH, AND ENFORCED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE THAT WOULD REQUIRE
THE APPLICATION OF THE LAW OF ANOTHER JURISDICTION.

 

12.8       JURISDICTION, JURY TRIAL WAIVER, ETC.

 

(a)          EACH PARTY TO THIS AGREEMENT HEREBY IRREVOCABLY AGREES THAT ANY
LEGAL ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE
NOTES OR ANY AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY MAY BE
BROUGHT IN THE SUPREME COURT OF THE STATE OF NEW YORK SITTING IN NEW YORK COUNTY
OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, OR
ANY APPELLATE COURT FROM ANY THEREOF, AND HEREBY EXPRESSLY SUBMITS TO THE
PERSONAL JURISDICTION AND VENUE OF SUCH COURTS FOR THE PURPOSES THEREOF AND
EXPRESSLY WAIVES ANY CLAIM OF IMPROPER VENUE AND ANY CLAIM THAT ANY SUCH COURT
IS AN INCONVENIENT FORUM. EACH PARTY HEREBY IRREVOCABLY CONSENTS TO THE SERVICE
OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO ITS ADDRESS SET FORTH IN SECTION 12.2, SUCH SERVICE TO
BECOME EFFECTIVE 10 DAYS AFTER SUCH MAILING.

 

(b)          TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY TO THIS
AGREEMENT HEREBY WAIVES ITS RIGHT TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR
CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, THE NOTES OR
ANY OF THE OTHER NOTE DOCUMENTS, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THEREUNDER OR THE PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS. EACH OF THE LOAN
PARTIES (i) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY HOLDER
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT THE PURCHASERS WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (ii) ACKNOWLEDGES
THAT THE PURCHASERS HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, AND THE
OTHER NOTE DOCUMENTS TO WHICH IT IS PARTY BY, AMONG OTHER THINGS, THE WAIVERS
AND CERTIFICATIONS CONTAINED HEREIN.

 

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12.9        Severability. If any one or more of the provisions contained in this
Agreement, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair the
benefits of the remaining provisions of this Agreement. The parties hereto
further agree to replace such invalid, illegal, or unenforceable provision of
this Agreement with a valid, legal, and enforceable provision that will achieve,
to the extent possible, the economic, business and other purposes of such
invalid, illegal, or unenforceable provision.

 

12.10     Rules of Construction. Unless the context otherwise requires, “or” is
not exclusive, and references to sections or subsections refer to sections or
subsections of this Agreement.

 

12.11      Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and the other Note Documents, is intended by the parties as a
final expression of its agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein or therein. This Agreement, together with the exhibits and schedules
hereto, and the other Note Documents supersede all prior agreements and
understandings between the parties with respect to such subject matter.

 

12.12     Certain Expenses. The Borrower will pay all expenses of the Purchasers
and the Collateral Agent (including, without limitation, fees, charges and
disbursements of outside counsel and travel expenses) in connection with (a) any
administration, enforcement, amendment, supplement, modification or waiver of or
to any provision of this Agreement or any of the other Note Documents or any
documents relating thereto (including, without limitation, a response to a
request by the Borrower or any of its Subsidiaries for the consent of such
Purchaser or Collateral Agent to any action otherwise prohibited hereunder or
thereunder), (b) consent to any departure from the terms of any provision of
this Agreement or such other documents and (c) any redemption of the Notes. The
obligations of the Borrower under this Section 12.12 shall survive the payment
in full of the other Obligations and the termination of this Agreement.

 

12.13      Publicity. Except as may be required by Applicable Law or otherwise
expressly provided herein, none of the parties hereto shall issue a publicity
release or announcement or otherwise make any public disclosure concerning this
Agreement or the transactions contemplated hereby, without prior approval by the
other parties hereto, provided, however, that the Purchasers may, without the
approval of the Borrower, issue a press release and may publish and distribute
one or more tombstone or other announcements of the closing of the transactions
contemplated hereby using the Borrower’s name, product photographs, logo or
trademark. In addition to the foregoing, each Purchaser is hereby authorized to
deliver a copy of any financial statement or other information made available by
the Borrower or its Subsidiaries in connection herewith to any regulatory
authority having jurisdiction over such Purchaser, pursuant to any request
therefore and may further divulge to any assignee or purchaser of any portion of
the Notes (or any participation therein) or any prospective assignee or
purchaser of any portion of the Notes (or any participation therein), all
information, and furnish to such Person copies of any reports, financial
statements, certificates, and documents obtained under any provision of this
Agreement, or related agreements and documents.

 

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12.14      Further Assurances. Each of the parties shall execute such documents
and perform such further acts (including, without limitation, obtaining any
consents, exemptions, authorizations, or other actions by, or giving any notices
to, or making any filings with, any Governmental Authority or any other Person)
as may be required or desirable to carry out or to perform the provisions of
this Agreement, including without limitation, any post-closing assignment(s) by
any Purchaser of a portion of the Notes to a Person not currently a party
hereto, subject to the limitations set forth herein.

 

12.15      No Strict Construction. The parties hereto have participated jointly
in the negotiation and drafting of this Agreement and the other Note Documents.
In the event an ambiguity or question of intent or interpretation arises under
any provision of this Agreement or any Note Document, this Agreement or such
other Note Document shall be construed as if drafted jointly by the parties
thereto, and no presumption or burden of proof shall arise favoring or
disfavoring any party by virtue of the authorship of any of the provisions of
this Agreement or any other Note Document. No knowledge of, or investigation,
including without limitation, due diligence investigation, conducted by, or on
behalf of, the Purchaser or any other Purchaser shall limit, modify or affect
the representations set forth in Article 6 of this Agreement or the right of any
Purchaser to rely thereon.

 

12.16     Non-Public Information. Each Purchaser acknowledges and agrees that it
may receive material non-public information (“MNPI”) hereunder concerning the
Loan Parties and their Affiliates and agrees to use such information in
compliance with all relevant policies, procedures and applicable Requirements of
Laws.

 

12.17      Confidential Information. Each Purchaser agrees to use commercially
reasonable efforts to maintain, in accordance with its customary practices, the
confidentiality of information obtained by it pursuant to any Note Document,
except that such information may be disclosed (i) with the Borrower’s consent,
(ii) to any investment committee of such Purchaser that is advised of the
confidential nature of such information and is instructed to keep such
information confidential in accordance with the terms hereof, (iii) to Persons
employed or engaged by Collateral Agent or such Purchaser or such Purchaser’s
Affiliates or Approved Funds in evaluating, approving, structuring or
administering the Notes, (iv) to the extent such information presently is or
hereafter becomes (A) publicly available other than as a result of a breach of
this Section 12.17 or (B) available to such Purchaser from a source (other than
any Loan Party) not known by such Purchaser to be subject to disclosure
restrictions, (v) to the extent disclosure is required by applicable
Requirements of Law or other legal process or requested or demanded by any
Governmental Authority, (vi) to any other party hereto, (vii) to any assignee or
participant or potential assignee or participant that has agreed to comply with
the covenant contained in this Section 12.17 (and any such assignee or
participant or potential assignee or participant may disclose such information
to Persons employed or engaged by them as described in clause (iii) above),
(viii) in connection with the exercise or enforcement of any right or remedy
under any Note Document or in connection with any litigation or other proceeding
to which Purchaser is a party or bound, (ix) to any nationally recognized rating
agency that requires access to information about a Purchaser’s investment
portfolio in connection with ratings issued with respect to such Purchaser, (x)
to any Purchaser’s independent auditors and other professional advisors as to
which such information has been identified as confidential. In the event of any
conflict between the terms of this Section 12.17 and those of any other
Contractual Obligation entered into with any Loan Party (whether or not a Note
Document), the terms of this Section 12.17 shall govern.

 

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Article 13

COLLATERAL AGENT

 

13.1        Appointment of Agent; No Effect on Borrower’s Obligations. Hale
Capital is hereby appointed by each Purchaser and its successors and assigns as
Collateral Agent hereunder and under the other Note Documents and each Purchaser
hereby authorizes Hale Capital to act as Collateral Agent in accordance with the
terms hereof and the other Note Documents. Collateral Agent hereby agrees to act
in its capacity as such upon the express conditions contained herein and the
other Note Documents, as applicable. The provisions of this Article 13 are
solely for the benefit of Collateral Agent and each Purchaser, and no Loan Party
shall have any rights as a third party beneficiary of any of the provisions
thereof. Each Purchaser shall ratably, in accordance with the aggregate
outstanding principal amount of the Notes held by it, indemnify the Collateral
Agent (to the extent not reimbursed by the Loan Parties) against any cost,
expense (including outside counsel fees and disbursements), claim, demand,
action, loss or liability (except such as result from the Collateral Agent’s
gross negligence or willful misconduct) that the Collateral Agent may suffer or
incur in connection with the Note Documents or any action taken or omitted by
the Collateral Agent hereunder or thereunder. The obligations of the Purchasers
under this Section 13.1 shall survive the payment in full of the Obligations and
the termination of this Agreement. This Article 13 sets forth the rights and
obligations solely as between the Collateral Agent and the Purchasers, and
nothing in this Article 13 creates any rights for any Loan Party or releases the
Borrower from its obligations under this Agreement, including without limitation
the obligation of any Loan Party to reimburse any Purchaser for any payment made
by such Purchaser to Collateral Agent under this Section 13.1 on any Loan
Party’s behalf.

 

13.2        Powers and Duties. Each Purchaser irrevocably authorizes Collateral
Agent to take such action on such Purchaser’s behalf and to exercise such
powers, rights, and remedies hereunder and under the other Note Documents as are
specifically delegated or granted to Collateral Agent by the terms hereof and
thereof, together with such powers, rights, and remedies as are incidental
thereto. Each Purchaser hereby further irrevocably authorizes Collateral Agent
to act as the secured party under each of the Collateral Documents. Collateral
Agent may exercise such powers, rights and remedies and perform such duties by
or through its agents or employees and may consult with legal counsel,
independent public accountants and other experts selected by it and shall not be
liable for any action taken or omitted to be taken by it in good faith in
accordance with the advice of such counsel, accountants or expert. Collateral
Agent may accept payments of principal, interest, fees and expenses due under
the Note Documents from the deposits from any Loan Party on the account or
benefit for any Purchaser.

 

13.3        Collateral Matters.

 

(a)          Each Purchaser authorizes and directs the Collateral Agent to enter
into the Collateral Documents for the benefit of the Purchasers. Each Purchaser
hereby agrees, and each holder of any Note by the acceptance thereof will be
deemed to agree, that, except as otherwise set forth herein, any action taken by
the Required Purchasers or all of the Purchasers or the Collateral Agent at the
discretion of the Required Purchasers or all of the Purchasers, as applicable,
in accordance with the provisions of this Agreement or the other Note Documents,
and the exercise by the Required Purchasers, all of the Purchasers, or the
Collateral Agent, as applicable, of the powers set forth herein or therein,
together with such other powers as are incidental thereto, shall be authorized
and binding upon all of the Purchasers. The Collateral Agent is hereby
authorized on behalf of all of the Purchasers, without the necessity of any
notice to or further consent from any Purchaser, from time to time, to take any
action with respect to any Collateral or Note Document which may be necessary or
appropriate to perfect and maintain perfected the Liens granted pursuant to the
Collateral Documents.

 

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(b)          The Purchasers hereby authorize the Collateral Agent, at the
election and on the instruction of the Required Purchasers (i) to, in accordance
with the terms of (and at the times specified in) the Collateral Documents,
release (x) any Lien granted to or held by the Collateral Agent upon any
collateral in accordance with the terms of the Collateral Documents, and (y) any
Guarantor from its obligations under the Guaranty and Collateral Agreement; and
(ii) to subordinate or release any Lien on any collateral granted to or held by
the Collateral Agent under any Collateral Document to the holder of any
Permitted Lien described in Sections 9.6(g). Upon request by the Collateral
Agent at any time, the Purchasers will confirm in writing the Collateral Agent’s
authority to release or subordinate its interest in particular types or items of
collateral, or to release any Guarantor from any guaranty, in each case, as
permitted pursuant to this Section 13.3(b).

 

(c)          The Collateral Agent shall have no obligation whatsoever to the
Purchasers or to any other Person to assure that any collateral exists or is
owned by the Borrower or any Subsidiary thereof or is cared for, protected or
insured or that the Liens granted to the Collateral Agent herein or pursuant to
the Note Documents have been properly or sufficiently or lawfully created,
perfected, protected or enforced or are entitled to any particular priority, or
to exercise or to continue exercising at all or in any manner or under any duty
of care, disclosure or fidelity any of the rights, authorities and powers
granted or available to the Collateral Agent in this Section 13.3 or in any of
the Note Documents, it being understood and agreed that in respect of the
Collateral, or any act, omission or event related thereto, the Collateral Agent
may act in any manner it may deem appropriate, in its sole discretion, given the
Collateral Agent’s own interest in any collateral as one of the Purchasers and
that the Collateral Agent shall have no duty or liability whatsoever to the
Purchasers, except for its gross negligence or willful misconduct. Neither the
Collateral Agent nor any of its directors, officers, partners, managers, agents
or employees shall be responsible for or have any duty to ascertain, inquire
into or verify (i) any statement, warranty or representation made in connection
with any Note Document or any borrowing hereunder; (ii) the performance or
observance of any of the covenants or agreements specified in any Note Document;
(iii) the satisfaction of any condition specified in any Note Document, except
receipt of items required to be delivered to the Collateral Agent; (iv) the
validity, effectiveness, sufficiency or genuineness of any Note Document or any
other instrument or writing furnished in connection therewith; (v) the existence
or non-existence of any Default or Event of Default; or (vi) the financial
condition of any Loan Party. Each Purchaser acknowledges that it has,
independently and without reliance upon the Collateral Agent or any other
Purchaser, and based on such documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Purchaser also acknowledges that it will, independently and
without reliance upon the Collateral Agent or any other Purchaser, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking any action
under the Note Documents.

 

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13.4        Actions with Respect to Defaults. The Collateral Agent shall not be
deemed to have knowledge or notice of the occurrence of any Default or Event of
Default except with respect to Defaults in the payment of principal, interest
and fees required to be paid to the Collateral Agent for the account of
Purchasers, unless the Collateral Agent shall have received written notice from
a Purchaser or a Loan Party referring to this Agreement, describing such Default
or Event of Default and stating that such notice is a “notice of default”. The
Collateral Agent will notify each Purchaser of its receipt of any such notice.
In addition to the Collateral Agent’s right to take actions on its own accord as
permitted under this Agreement, the Collateral Agent shall take such action with
respect to a Default or Event of Default as shall be directed by the Required
Purchasers or all of the Purchasers, as the case may be, provided that the
Collateral Agent shall not be required to take any action which in the
Collateral Agent’s opinion would expose the Collateral Agent or its Affiliates
to liability, and provided, further, that until the Collateral Agent shall have
received such directions, the Collateral Agent may (but shall not be obligated
to) take such ministerial action, or refrain from taking such ministerial
action, with respect to such Default or Event of Default as it shall deem
advisable and in the best interests of the Purchasers. The Collateral Agent may
at any time request instructions from the Purchasers with respect to any actions
or approvals which by the terms of this Agreement or of any of the Note
Documents the Collateral Agent is permitted or desires to take or to grant, and
if such instructions are promptly requested, the Collateral Agent shall be
absolutely entitled to refrain from taking any action or to withhold any
approval and shall not be under any liability whatsoever to any Person for
refraining from any action or withholding any approval under any of the Note
Documents until it shall have received such instructions from the Required
Purchasers. Without limiting the foregoing, no Purchaser shall have any right of
action whatsoever against the Collateral Agent solely as a result of the
Collateral Agent acting or refraining from acting under this Agreement, except
with respect to its gross negligence or willful misconduct.

 

13.5        Successor Collateral Agent. The Collateral Agent may at any time
give notice of its resignation to the Purchasers and the Borrower. Upon receipt
of any such notice of resignation, the Required Purchasers shall have the right
to appoint a successor Collateral Agent. If no such successor shall have been so
appointed by the Required Purchasers and shall have accepted such appointment
within thirty (30) days after the retiring Collateral Agent gives notice of its
resignation, then (a) the resignation of the Collateral Agent shall become
effective on such 30th day, (b) the Required Purchasers shall perform the duties
of the Collateral Agent under the Note Documents until the Required Purchasers
appoint a successor Collateral Agent, (c) the retiring Collateral Agent shall be
discharged from its duties and obligations hereunder and under the other Note
Documents and (d) all payments, communications and determinations provided to be
made by, to or through the Collateral Agent shall instead be made by or to each
Purchaser directly, until such time as the Required Purchasers appoint a
successor the Collateral Agent as provided for in this Section 13.5. Upon the
acceptance of a successor’s appointment as the Collateral Agent hereunder, such
successor shall succeed to and become vested with all of the rights, powers,
privileges and duties of the retiring (or retired) Collateral Agent, and the
retiring Collateral Agent shall be discharged from all of its duties and
obligations hereunder and under the other Note Documents (if not already
discharged therefrom as provided herein). After the retiring Collateral Agent’s
resignation hereunder and under the other Note Documents, the provisions of this
Article 13 shall continue in effect for the benefit of such retiring Collateral
Agent and its sub-agents in respect of any actions taken or omitted to be taken
by any of them while the retiring Collateral Agent was acting or was continuing
to act as the Collateral Agent.

 

[Signature Page Follows]

 

 83 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
and delivered by its respective officers hereunto duly authorized as of the date
first written.

 

  BORROWER:       NUMEREX CORP.         By: /s/ Kenneth L. Gayron     Name:    
Its:         GUARANTORS:       CELLEMETRY LLC         By: /s/ Kenneth L. Gayron
    Name:     Its:         CELLEMETRY SERVICES, LLC         By: /s/ Kenneth L.
Gayron     Name:     Its:         NUMEREX GOVERNMENT SERVICES LLC         By:
/s/ Kenneth L. Gayron     Name:     Its:

 

[Signature Page to Note Purchase Agreement]

 

   

 

 

  NUMEREX SOLUTIONS, LLC         By: /s/ Kenneth L. Gayron     Name:     Its:  
      ORBIT ONE COMMUNICATIONS, LLC         By: /s/ Kenneth L. Gayron     Name:
    Its:         UBLIP, INC.         By: /s/ Kenneth L. Gayron     Name:    
Its:         UPLINK SECURITY, LLC         By: /s/ Kenneth L. Gayron     Name:  
  Its:         OMNILINK SYSTEMS, INC.         By: /s/ Kenneth L. Gayron    
Name:     Its:

 

[Signature Page to Note Purchase Agreement]

 

   

 

 

  NEXTALARM, LLC         By: /s/ Kenneth L. Gayron     Name:     Its:        
TELEMETRY SERVICES CORPORATION         By: /s/ Kenneth L. Gayron     Name:    
Its:

 

[Signature Page to Note Purchase Agreement]

 

   

 

 

  HCP-FVF, LLC, in its capacity as Collateral Agent and as a Purchaser        
By: /s/ Kenneth L. Gayron   Name: Martin Hale Jr.   Title: Authorized Signatory

 

[Signature Page to Note Purchase Agreement]

 

   

 

  

SCHEDULE 1

 

PROHIBITED TRANSFEREES

 

1.Cerberus Capital Management

2.Black Diamond Capital Management

 

 

 

SCHEDULE 2.1

 

ALLOCATION

 

Purchaser Allocation HCP-FVF, LLC $13,500,000

 

 

 

 

SCHEDULE 6.1

 

EXISTENCE AND POWER

 

Name of Company Type of Organization Jurisdiction of
Organization Foreign
Jurisdictions Numerex Corp. for-profit corporation PA GA, UT, OK Cellemetry LLC
limited liability company DE GA CELLEMETRY SERVICES, LLC limited liability
company GA N/A NextAlarm, LLC limited liability company GA N/A Numerex
Government Services LLC limited liability company GA N/A NUMEREX SOLUTIONS, LLC
limited liability company DE TX, GA Orbit One Communications, LLC limited
liability company GA N/A uBlip, Inc. for-profit corporation GA N/A Uplink
Security, LLC limited liability company GA N/A Omnilink Systems Inc. for-profit
corporation DE GA, CA, VA, NC Telemetry Services Corporation for-profit
corporation DE GA Omnilink Systems India Private Limited Indian private limited
company entity India N/A DCX Systems Australia PTY LTD Australian proprietary
limited company Australia N/A

 

 

 

 

SCHEDULE 6.3

 

GOVERNMENT AUTHORIZATION; THIRD PARTY CONSENTS

 

None.

 

 

 

 

SCHEDULE 6.6

 

LITIGATION

 

(a):

 

In re Easterling v. Aretz, et al., 16 CV 1617 (Montgomery Ct., TN)

 

Date Filed: August 8, 2016

Status: Discovery on Omnilink’s motion to dismiss 

Insurance Coverage: Agreed to defend

 

Products liability claim against Omnilink Systems Inc. based on the death of
Liperial Easterling by an individual assigned to wear an ankle monitoring
bracelet supplied by Omnilink Systems Inc.

 

Cen-Com, Inc. v. Numerex Corp., et al., 16-2-311077-0 (King Ct., Wash) (the
“Cen-Com Matter”)

 

Date Filed: December 30, 2016 

Status: Answer and Counterclaim filed

Insurance Coverage: No

 

Misappropriation of customer information and breach of contract claims against
Numerex Corp. and NextAlarm, LLC by Cen-Com, Inc.

 

Marc Zionts

 

Date Filed: Not Applicable 

Status: Under negotiation 

Insurance Coverage: No

 

Possible disparagement, breach of employment contract, and wrongful termination
claims based on the termination of Marc Zionts as Chief Executive Officer of
Numerex.

 

 

 

 

SCHEDULE 6.7

 

INVESTIGATIONS, ETC.

 

SEC Investigation. On April 27, 2016, Borrower received a document preservation
notice from the Atlanta regional Office of the Securities & Exchange Commission
in connection with an investigation by the staff. The SEC inquired about the
departure of executive officers of Borrower, Grant Thorton’s decision not to
stand for reappointment after completion of audit services for fiscal year 2015,
and the material weakness reported in Borrower’s annual report for the year
ended December 31, 2015. The chair of Borrower’s audit committee responded to
questions from the SEC staff and since that time, there have been no additional
contact or requests for more information.

 

OFCCP. On May 10, 2016, Numerex entered into a Conciliation Agreement with the
U.S. Department of Labor Office of Federal Contract Compliance Program in
connection with its investigation of Numerex’s Affirmative Action Program.

 

 

 

 

SCHEDULE 6.9

 

TITLE TO PROPERTY

 

None.

 

 

 

 

SCHEDULE 6.10

 

REAL PROPERTY

 

The following properties are leased by Borrower or its Subsidiaries:

 

1210 Roosevelt St. Suite 200
Edmund, OK 73034
Lessee: Numerex Corp. 400 Interstate North Parkway SE
Suite 1350
Atlanta, GA 30339
Lessee: Numerex Corp. 8144 Walnut Hill Lane
Suite 310
Dallas, TX 75231
Lessee: Numerex Corp. 1095 Windward Ridge
Building 300, Ste. 160
Alpharetta, GA 30005
Lessee: Numerex Corp. 5900 Windward Parkway #200
Alpharetta, GA 30005
Lessee: Omnilink Systems Inc. 275 S. Main Street, Suite 2CC
Doylestown, PA 18902
Lessee: Numerex Corp. 3330 Cumberland Boulevard, Suite 700
Atlanta, GA 30339
Lessee: Numerex Corp. 12720 Hillcrest Road
Dallas, TX 75230
Lessee: Numerex Solutions, LLC

 

The following properties are owned by Borrower or its Subsidiaries:

 

None.

 

 

 

 

SCHEDULE 6.11

 

TAXES

 

1.State Tax Lien, Fulton County GA (File No. 3576 / 671) $1,221.00, entered
against Omnilink Systems Inc.

 

2.State Tax Lien, Fulton County GA (File No. 3596 / 373) $1,221.00, entered
against Omnilink Systems Inc.

 

3.State Tax Lien, Fulton County GA (File No. 3685 / 467) $1,221.00, entered
against Omnilink Systems Inc.

 

4.State Tax Lien, Fulton County GA (File No. 3726 / 681) $2,596.65, entered
against Omnilink Systems Inc.

 

5.State Tax Lien, Fulton County GA (File No. 3769 / 558) $2,596.65, entered
against Omnilink Systems Inc.

 

6.State Tax Lien, Fulton County GA (File No. 3909 / 652) $2,596.65, entered
against Omnilink Systems Inc.

 

 

 

 

SCHEDULE 6.12

 

FINANCIAL CONDITION

 

(a)None.

 

(b)On January 20, 2017, the Company filed with the SEC a Current Report on Form
8-K for which the deadline was January 20, 2017. However, due to an error by the
employee making the filing, the report was inadvertently not filed until after
5:30 pm on January 20, 2017, resulting in a filing date of January 23, 2017.

 

 

 

 

SCHEDULE 6.16

 

SUBSIDIARIES

 

The following are wholly owned subsidiaries of Numerex Corp.:

 

Cellemetry LLC

 

CELLEMETRY SERVICES, LLC

 

NextAlarm, LLC

 

Numerex Government Services LLC

 

NUMEREX SOLUTIONS, LLC

 

Orbit One Communications, LLC

 

uBlip, Inc.

 

Omnilink Systems Inc.

 

DCX Systems Australia PTY LTD

 

The following are wholly owned subsidiaries of Omnilink Systems Inc.:

 

Telemetry Services Corporation

 

Omnilink Systems India Private Limited

 

The following is a wholly owned subsidiary of Cellemetry LLC:

 

Uplink Security, LLC

 

 

 

 

SCHEDULE 6.17

 

CAPITALIZATION

 

Issuer # of Shares Owned Total Shares Outstanding Owner Certificate No.
(if uncertificated,
please indicate so) Par Value
(if any) Numerex Corp. N/A 19,578,470 million shares of Class A Common Stock
outstanding Publicly Traded N/A No par value uBlip, Inc. 1,000 1,000 Numerex
Corp. 1 None Omnilink Systems Inc. 10 10 Numerex Corp. 1 $0.01 Telemetry
Services Corporation 100,000 100,000 Omnilink Systems Inc. 1 $0.0001 Cellemetry
LLC 100% N/A Numerex Corp. Uncertificated N/A CELLEMETRY SERVICES, LLC 100% N/A
Numerex Corp. Uncertificated N/A Numerex Government Services LLC 100% N/A
Numerex Corp. Uncertificated N/A NUMEREX SOLUTIONS, LLC 100% N/A Numerex Corp.
Uncertificated N/A Orbit One Communications, LLC 100% N/A Numerex Corp.
Uncertificated N/A Uplink Security, LLC 100% N/A Cellemetry LLC Uncertificated
N/A NextAlarm, LLC 100% N/A Numerex Corp. Uncertificated N/A

 

Numerex Corp. also owns 100% of DCX Systems Australia PTY LTD, an Australian
proprietary limited company. Numerex Corp.’s ownership interest in this
subsidiary is uncertificated. Omnilink Systems Inc. also owns 100% of Omnilink
Systems India Private Limited, an Indian private limited company. Omnilink
Systems Inc.’s ownership interest in this subsidiary is uncertificated.

 

 

 

 

Options Granted to Employees and Directors

 

Issuer Grant Number Grant Date Expiry Date Exercise Price Outstanding Vested
NonVested Numerex Corp. 2006 20070305 ISO 03/05/2007 03/04/2017 $9.3400 250.00
250.00 0.00 Numerex Corp. 2006 20071026 ISO 10/26/2007 10/25/2017 $7.8400
5,250.00 5,250.00 0.00 Numerex Corp. 2006 20071026 NQ 10/26/2007 10/25/2017
$7.8400 3,000.00 3,000.00 0.00 Numerex Corp. 1999 20061026 ISO MK 10/26/2006
10/25/2016 $9.4600 50,000.00 50,000.00 0.00 Numerex Corp. 2006 20061026 ISO EE
10/26/2006 10/25/2016 $9.4600 2,000.00 2,000.00 0.00 Numerex Corp. 2006 20061026
ISO EE A 10/26/2006 10/25/2016 $9.4600 6,500.00 6,500.00 0.00 Numerex Corp. 2006
20100521 SAR 05/21/2010 05/21/2020 $4.5100 55,932.00 55,932.00 0.00 Numerex
Corp. 2006 20100730 SAR 07/30/2010 07/30/2020 $5.1700 7,500.00 7,500.00 0.00
Numerex Corp. 2006 20101028 SAR 10/28/2010 10/28/2020 $7.2500 2,000.00 2,000.00
0.00 Numerex Corp. 2006 20110114 SAR 01/14/2011 01/14/2021 $10.2500 11,125.00
11,125.00 0.00 Numerex Corp. 2006 20110519 SAR 05/19/2011 05/19/2021 $9.9300
11,500.00 11,500.00 0.00 Numerex Corp. 2006 20110916 SAR 09/16/2011 09/16/2021
$6.0300 10,875.00 10,875.00 0.00 Numerex Corp. 2006 20130611 NQ/SAR MK
06/11/2013 06/11/2023 $10.9700 50,000.00 50,000.00 0.00 Numerex Corp. 2006
20130628 NQ/SAR 06/28/2013 06/28/2023 $11.1600 20,000.00 20,000.00 0.00 Numerex
Corp. 2006 20131024 NQ 10/24/2013 10/24/2023 $12.0100 10,000.00 7,500.00
2,500.00 Numerex Corp. 2006 20140220 NQ/SAR 02/20/2014 02/20/2024 $14.5700
21,500.00 16,125.00 5,375.00 Numerex Corp. 2006 20140424 NQ/SAR 04/24/2014
04/24/2024 $10.6700 10,000.00 7,500.00 2,500.00 Numerex Corp. 2014 20140516 NQ
EE 05/16/2014 05/16/2024 $10.9500 39,500.00 29,625.00 9,875.00 Numerex Corp.
2014 20140516 NQ SVP 05/16/2014 05/16/2024 $10.9500 56,550.00 44,350.00
12,200.00 Numerex Corp. 2014 20141023 NQ 10/23/2014 10/23/2024 $11.6500 4,500.00
2,250.00 2,250.00 Numerex Corp. 2014 20150520 NQ RB 05/20/2015 05/21/2025
$8.5900 15,000.00 11,250.00 3,750.00 Numerex Corp. 2014 20150729 NQ SVP
07/29/2015 07/29/2025 $8.2800 44,400.00 11,100.00 33,300.00 Numerex Corp. 2014
20150729 NQ EE 07/29/2015 07/29/2025 $8.2800 60,200.00 15,050.00 45,150.00
Numerex Corp. 2014 20150911 NQ 09/11/2015 09/11/2025 $8.9600 5,800.00 1,450.00
4,350.00 Numerex Corp. 2014 20151028NQ EE 10/28/2015 10/28/2025 $8.1300
10,000.00 2,500.00 7,500.00 Numerex Corp. 2014 20151028NQ SVP 10/28/2015
10/28/2025 $8.1300 51,000.00 12,750.00 38,250.00 Numerex Corp. 2006 20061026 ISO
LF 11/13/2015 07/29/2016 $9.4600 15,000.00 15,000.00 0.00 Numerex Corp. 2006
20070305 ISO LF 11/13/2015 07/29/2016 $9.3400 15,000.00 15,000.00 0.00 Numerex
Corp. 2006 20090730 NQ LF 11/13/2015 07/29/2016 $5.5000 4,375.00 4,375.00 0.00
Numerex Corp. 2006 20110916 SAR LF 11/13/2015 07/29/2016 $6.0300 7,500.00
7,500.00 0.00 Numerex Corp. 2006 20130628 NQSAR LF 11/13/2015 07/29/2016
$11.1600 10,000.00 10,000.00 0.00 Numerex Corp. 2014 20140516 NQ LF 11/13/2015
07/29/2016 $10.9500 3,225.00 3,225.00 0.00 Numerex Corp. 2014 20160302 NQ
03/02/2016 03/02/2026 $5.8800 10,000.00 2,500.00 7,500.00 Numerex Corp. 2014
20160126 NQ 01/26/2016 01/26/2026 $6.1700 68,000.00 17,000.00 51,000.00 Numerex
Corp. 2014 20160126 NQ SVP 01/26/2016 01/26/2026 $6.1700 63,500.00 15,875.00
47,625.00 Numerex Corp. 2014 20160519 NQ Exec 05/19/2016 05/19/2026 $7.2600
139,510.00 34,877.00 104,633.00 Numerex Corp. 2014 20160519 NQ 05/19/2016
05/19/2026 $7.2600 226,460.00 56,606.00 169,854.00 Numerex Corp. 2014 20160531
NQ EE 05/31/2016 05/31/2026 $7.5000 13,000.00 3,250.00 9,750.00 Numerex Corp.
2014 20160908 RM 09/08/2016 09/08/2026 $7.6100 5,609.00 0.00 5,609.00 Numerex
Corp. 2014 20160523 OPT AV 05/23/2016 05/23/2026 $7.5600 10,000.00 2,500.00
7,500.00 Numerex Corp. 2014 20160531 OPT CS 05/31/2016 05/31/2026 $7.5000
10,000.00 2,500.00 7,500.00 Numerex Corp. 2014 20160613 OPT JM 06/13/2016
06/13/2026 $7.4900 5,000.00 0.00 5,000.00 Numerex Corp. 2014 20160613 OPT MS
06/13/2016 06/13/2026 $7.4900 15,000.00 0.00 15,000.00 Numerex Corp. 2014
20160615 OPT MB 06/15/2016 06/15/2026 $7.5500 5,000.00 0.00 5,000.00 Numerex
Corp. 2014 20160627 OPT JS 06/27/2016 06/27/2026 $7.1200 10,000.00 0.00
10,000.00 Numerex Corp. 2014 20160712 OPT KB 07/12/2016 07/12/2026 $7.9400
12,000.00 0.00 12,000.00 Numerex Corp. 2014 20160718 OPT DG 07/18/2016
07/18/2026 $7.7900 22,000.00 0.00 22,000.00 Numerex Corp. 2014 20161031 NQ EE
New Hire 10/31/2016 10/31/2026 $7.1100 126,500.00 0.00 126,500.00 Numerex Corp.
2014 20170111 Exec OPT 01/11/2017 01/11/2027 $7.1800 50,000.00 0.00 50,000.00
Numerex Corp. 2014 20170221 New Hire Option 02/21/2017 02/21/2027 $5.3300
26,500.00 0.00 26,500.00           1,437,561.00 587,590.00 849,971.00          
                   

 

 

 

Unvested Restricted Stock Units Granted to Employees and Directors

 

Issuer Grant Number Grant Date Issued Forfeited Remaining Numerex Corp. 2014
20140516 RSU EE 05/16/2014 104,950.00 44,650.00 11,238.00 Numerex Corp. 2014
20140516 RSU SVP 05/16/2014 221,700.00 130,925.00 10,150.00 Numerex Corp. 2014
20141023 RSU 10/23/2014 7,900.00 3,000.00 1,700.00 Numerex Corp. 2014 20150729
RSU EE 07/29/2015 34,500.00 15,150.00 13,575.00 Numerex Corp. 2014 20150729 RSU
SVP 07/29/2015 50,100.00 27,900.00 16,650.00 Numerex Corp. 2014 20151028 RSU SVP
10/28/2015 44,000.00 17,250.00 15,750.00 Numerex Corp. 2014 20160101 RSU
01/01/2016 39,789.00 17,811.00 8,352.00 Numerex Corp. 2014 20160101 RSU SVP
01/01/2016 43,479.00 17,996.00 7,228.00 Numerex Corp. 2014 20160519 RSU Exec
05/19/2016 101,540.00 45,250.00 42,218.00 Numerex Corp. 2014 20160519 RSU EE
05/19/2016 80,240.00 19,920.00 45,249.00 Numerex Corp. 2014 20160101 RSU
LG  TERM 01/01/2016 1,726.00 0.00 863.00 Numerex Corp. 2014 20160908 RW RSU
09/08/2016 2,300.00 0.00 2,300.00 Numerex Corp. 2014 20160727 RSU BOD 07/27/2016
96,000.00 0.00 96,000.00 Numerex Corp. 2014 20160727 YR 07/27/2016 10,000.00
0.00 10,000.00 Numerex Corp. 2014 20170111 RSU Exec 01/11/2017 50,000.00 0.00
50,000.00       888,224.00 339,852.00 331,273.00

 

 

 

 

Shares of Common Stock Reserved for Issuance Pursuant to Options and RSUs

 

1,156,398

 

Warrants

 

On March 31, 2017, the Borrower issued to Kenneth Rainin Foundation a warrant to
purchase 125,000 shares of the Borrower’s common stock at a warrant price of 
$0.01 per share.

 

In connection with the Transaction, the Borrower will issue to HCP-FVF, LLC a
warrant to purchase 895,944 shares of the Borrower’s common stock at an exercise
price of $4.14 per share.

 

Total Capitalization

 

Total Numer of Shares Outstanding 19,578,470 Total Number of Outstanding Options
1,437,561 Total Number of Unvested RSUs 331,273 Total Number of Warrants
1,020,944 Fully diluted share count as of June 7, 2017 22,368,248

 

 

 

SCHEDULE 6.19

 

BROKER’S, FINDER’S OR SIMILAR FEES

 

None.

 

 

 

 

SCHEDULE 6.20

 

LABOR RELATIONS

 

Change in Control Severance Agreement with Stratton Nicolaides dated July 31,
2014

 

Change in Control Severance Agreement with Eugene Hyun dated October 5, 2016

 

Change in Control Severance Agreement with Wayne Stargardt dated July 31, 2014

 

Change in Control Severance Agreement with Anubha Jayaswal dated October 5, 2016

 

Severance and Change-In-Control Agreement with Shu Gan dated March 2, 2016

 

Severance and Change-In-Control Agreement with Ken Gayron dated March 7, 2016

 

Employment Agreement with Yoganand Rajala dated May 5, 2014

 

Employment Agreement with Stratton Nicolaides dated November 4, 2015

 

Severance Agreement with Rizwan Munir dated September 8, 2016

 

Severance and Change-In-Control Agreement with Kelly Gay dated March 6, 2017

 

 

 

 

SCHEDULE 6.21

 

EMPLOYEE BENEFITS PLANS

 

The Numerex Corp. Savings and Profit Sharing Plan

 

Medical Plan

 

Dental Plan

 

Vision Plan

 

Life insurance,

 

Long term disability

 

Short term disability

 

Flexible spending account

 

Health Care Flexible Spending Account

 

Dependent Care Flexible Spending Account

 

Health savings account

 

LegalShield Legal Plan

 

Employee Assistance Plan

 

Team Member Share Purchase Incentive Plan

 

Numerex Corporation 2006 Long Term Incentive Plan

 

Numerex Corporation 2014 Incentive Plan

 

 

 

 

SCHEDULE 6.22

 

PATENTS, TRADEMARKS, ETC.

 

(a)Licenses and Intellectual Property

 

Licenses

 

Settlement Agreement between Satellite Tracking of People, LLC and Michelle
Enterprises on the one hand, and Omnilink Systems Inc. on the other, dated July
16, 2010.

 

Supplemental Settlement Agreement between Satellite Tracking of People, LLC and
Omnilink Systems Inc., effective May 19, 2014.

 

GPS and Limited Data Bus Patent License Agreement between Omega Patents LLC and
Numerex Corp., dated February 1, 2011.

 

Software License Agreement between Verizon Corporate Services Group Inc. and
Omnilink Systems Inc., effective September 2, 2015.

 

Software License Agreement between Jazz Wireless Data, Inc. and Numerex Corp.,
effective September 30, 2010.

 

Wireless Network Patent Portfolio License between MPEG LA, LLC and Numerex
Corp., effective November 11, 2006.

 

Patents

 

Country Serial No Filing
Date Patent No Issue Date Title Status Assignee US 09/666,042 9/20/2000
6,718,177 4/6/2004 System for Communicating Messages Via a Forward Overhead
Control Channel for a Programmable Logic Control Device Issued Numerex Corp. US
10/038,089 1/2/2002 6,882,843 4/19/2005 Multiple Wireless Data Transport
Transceiver System Issued Numerex Corp. US 09/083,079 5/21/1998 6,311,060
10/30/2001 Method and System for Registering the Location of a Mobile Cellular
Communications Device Issued Numerex Corp. US 10/008,100 11/13/2001 7,225,459
5/29/2007 Methods and Systems for Dynamically Adjusting Video Bit Rates Issued
Numerex Corp. US 08/769,142 12/18/1996 5,873,043 2/16/1999 System for
Communicating Messages Via a Forward Overhead Control Channel Expired Numerex
Corp.

 

 

 

 

US 09/699,312 10/27/2000 6,856,808 2/15/2005 Interconnect System and Method for
Multiple Protocol Short Message Services Issued Numerex Corp. US 10/262,372
9/30/2002 6,718,237 4/6/2004 Communications Device for Conveying Geographic
Location Information Over Capacity Constrained Wireless Systems Issued Numerex
Corp. US 09/549,761 4/14/2000 6,738,647 5/18/2004 Method and System for
Expanding the Data Payload of Data Messages Transported Via a Cellular Network
Control Channel Issued Numerex Corp. US 09/082,694 5/21/1998 6,311,056
10/30/2001 Method and System for Expanding the Data Capacity of a Cellular
Network Control Channel Issued Numerex Corp. US 10/773,692 2/6/2004 7,272,494
9/18/2007 Communication Device for Conveying Geographic Location Information
Over Capacity Constrained Wireless Systems Issued Numerex Corp. US 10/770,326
2/2/2004 7,151,943 12/19/2006 System for Communicating Messages Via a Forward
Overhead Control Channel for a Programmable Logic Control Device Issued Numerex
Corp. US 10/885,445 7/6/2004 7,245,928 7/17/2007 Method and System for Improved
Short Message Services Issued Numerex Corp. US 10/952,710 9/29/2004 7,233,802
6/19/2007 Interconnect System and Method for Multiple Protocol Short Message
Services Issued Numerex Corp. US 11/811,855 6/12/2007 7,680,505 3/16/2010
Telemetry Gateway Issued Numerex Corp. US 12/704,290 2/11/2010 8,060,067
11/15/2011 Method and System for Efficiently Routing Messages Issued Numerex
Corp. US 13/247,316 9/28/2011 8,543,146 9/24/2013 Method and System for
Efficiently Routing Messages Issued Numerex Corp. US 13/848,804 3/22/2013
8,903,437 12/2/2014 Method and System for Efficiently Routing Messages Issued
Numerex Corp. US 10/959,809 10/6/2004 7,783,508 8/24/2010 Method and System for
Refining Vending Operations Based on Wireless Data Issued Numerex Corp. US
10/877,354 6/25/2004 7,650,285 1/19/2010 Method and System for Adjusting Digital
Audio Playback Sampling Rate Issued Numerex Corp. US 12/012,848 2/6/2008
8,265,605 9/11/2012 Service escrowed transportable wireless event reporting
system Issued Numerex Corp. US 13/568,559 8/7/2012 8,543,097 9/24/2013 Service
escrowed transportable wireless event reporting system Issued Numerex Corp. US
13/971,935 8/21/2013 8,855,716 10/7/2014 Service escrowed transportable wireless
event reporting system Issued Numerex Corp. US 12/002,215 12/14/2007 7,880,599
2/1/2011 Method and System for Remotely Monitoring the Operations of a Vehicle
Issued Numerex Corp. US 12/002,091 12/14/2007 7,936,256 5/3/2011 Method and
System for Interacting with a Vehicle over a Mobile Radiotelephone Network
Issued Numerex Corp. US 12/290,048 10/27/2008 8,738,046 5/27/2014 Intelligent
Short Message Delivery System and Method Issued Numerex Corp.

 

 

 

 

US 12/713,916 2/26/2010 8,041,383 10/18/2011 Digital Upgrade System and Method
Issued Numerex Corp. US 13/234,712 9/16/2011 8,483,748 7/9/2013 Digital Upgrade
System and Method Issued Numerex Corp. US 13/911,554 6/6/2013 8,868,059
10/21/2014 Digital Upgrade System and Method Issued Numerex Corp. US 12/640,688
12/17/2009 8,112,285 2/7/2012 Method and System for Improving Real-Time Data
Communications Issued Numerex Corp. US 12/985,989 1/6/2011 8,126,764 2/28/2012
Communication of Managing Vending Operations Based on Wireless Data Issued
Numerex Corp. US 12/860,231 8/20/2010 8,214,247 7/3/2012 Method and System for
Refining Vending Operations Based on Wireless Data Issued Numerex Corp. US
13/491,079 6/7/2012 8,484,070 7/9/2013 Method and System for Managing Vending
Operations Based on Wireless Data Issued Numerex Corp. US 12/985,975 1/6/2011
8,269,618 9/18/2012 Method and System for Remotely Monitoring the Location of a
Vehicle Issued Numerex Corp. US 13/040,563 3/4/2011 8,253,549 8/28/2012 Method
and System for Interacting with a Vehicle over a Mobile Radiotelephone Network
Issued Numerex Corp. US 13/561,313 7/30/2012 8,547,212 10/1/2013 Method and
System for Interacting with a Vehicle over a Mobile Radiotelephone Network
Issued Numerex Corp. US 14/043,363 10/1/2013 9,084,197 7/14/2015 Method and
System for Interacting with a Vehicle over a Mobile Radiotelephone Network
Issued Numerex Corp. US 13/345,018 1/6/2012 8,412,186 4/2/2013 Method and system
for managing subscriber identity modules on wireless networks for machine
to-machine applications Issued Numerex Corp. US 13/681,460 11/20/2012 8,611,891
12/17/2013 Method and system for managing subscriber identity modules on
wireless networks for machine to-machine applications Issued Numerex Corp. US
14/079,936 11/14/2013 9,414,240 8/9/2016 Method and system for managing
subscriber identity modules on wireless networks for machine to-machine
applications Issued Numerex Corp. US 13/456,662 4/26/2012 8,705,716 4/22/2014
Interactive Control of Alarm Systems by Telephone Interface Using an
Intermediate Gateway Issued Numerex Corp. US 13/413,333 3/6/2012 8,705,704
4/22/2014 Delivery of Alarm System Event Data and Audio Over Hybrid Network
Issued Numerex Corp. US 13/438,941 4/4/2012 8,798,260 8/5/2014 Delivery of Alarm
System Event Data and Audio Issued Numerex Corp. US 14/450,787 8/4/2014
9,462,135 10/4/2016 Delivery of Alarm System Event Data and Audio Issued Numerex
Corp. US 14/013,637 8/29/2013 9,153,124 10/6/2015 Alarm Sensor Supporting
Long-Range Wireless Communication Issued Numerex Corp.

 

 

 

 

US 14/039,573 9/27/2013 9,177,464 11/3/2015 Method and system for untethered
two-way voice communication for an alarm system Issued Numerex Corp. US
10/462,708 6/17/2003 7,245,703 7/17/2007 Alarm Signal Interceptor, Middleware
Processor, and Re-Transmitter Using Caller ID Issued Numerex Corp. US 10/861,790
6/7/2004 7,440,554 10/21/2008 Alarm Signal Interceptor, Middleware Processor,
and Re-Transmitter Issued Numerex Corp. US 11/226,857 9/14/2005 7,593,512
9/22/2009 Private VOIP network for Security System Monitoring Issued Numerex
Corp. US 11/348,291 2/6/2006 7,734,020 6/8/2010 Two-way Voice and Voice over IP
receivers for Alarm Systems Issued Numerex Corp. US 11/517,025 9/7/2006
7,613,278 11/3/2009 Alarm System Activation Platform Issued Numerex Corp. US
12/018,724 1/23/2008 8,369,487 2/5/2013 Enhanced 911 notification for Internet
Enabled Alarm Systems Issued Numerex Corp. US 12/504,709 7/17/2009 9,131,040
9/8/2015 Alarm System for use over Satellite Broadband Issued Numerex Corp. US
13/004,917 1/12/2011 8,509,391 8/13/2013 Wireless VoIP Network for Security
System Monitoring Issued Numerex Corp. US 13/939,460 7/11/2013 9,094,410
7/28/2015 Wireless VoIP Network for Security System Monitoring Issued Numerex
Corp. US 13/194,912 7/30/2011 9,054,893 6/9/2015 Alarm System IP Network with
PSTN Output Issued Numerex Corp. US 14/598,737 1/16/2015 9,356,798 5/31/2016
Alarm System IP Network with PSTN Output Issued Numerex Corp. US 14/075,467
11/8/2013 9,235,855 1/12/2016 Delivery of Security Solutions Based on Demand
Issued Numerex Corp. US 14/272,709 5/8/2014 9,510,180 11/29/2016 Mobile
Management Message Distribution and Active On-Network Determination Issued
Numerex Corp. US 14/862,701 9/23/2015     Mobile Management Message Distribution
and Active On-Network Determination Pending Numerex Corp US 14/185,209 2/20/2014
9,350,871 5/24/2016 Delivery of Alarm System Event Data and Audio Over Hybrid
Network Issued Numerex Corp US 14/332,794 7/16/2014 9,183,730 11/10/2015 Method
and System for Mitigating Invasion Risk Associated with Stranger Interactions in
a Security System Environment Issued Numerex Corp US 14/559,190 12/3/2014    
Method and System for Managing a Location Detector Pending Numerex Corp US
14/525,808 10/28/2014     Method and System for Generating Geofences for
Managing Offender Movement Pending Numerex Corp US 14/534,746 11/6/2014
 9,582,982  2/28/2017 Method and System for Energy Managed of an Offender
Monitor Issued Numerex Corp US 14/524,232 10/27/2014     Offender Monitor with
Managed Rate of Location Reading Pending Numerex Corp

 

 

 

 

US 14/525,786 10/28/2014 9,401,082 7/26/2016 Offender Monitor with Orientation
Based Monitoring Issued Numerex Corp US 14/522,965 10/24/2014 9,449,497
9/20/2016 Method and System for Detecting Alarm System Tampering Issued Numerex
Corp US 11/040,636 1/21/2005 7,323,970 1/29/2008 Method and System for Remote
Interaction with a Vehicle via Wireless Communication Issued Numerex Corp US
14/789,085 7/1/2015     Method and System for Locating a Wireless Tracking
Device Pending Numerex Corp US 14/789,089 7/1/2015 9,503,848 11/22/2016 Method
and System for Locating a Wireless Tracking Device Associated with a Network of
Alarm Panels Issued Numerex Corp US 13/081,954 4/7/2011 9,119,013 8/25/2015
Satellite Based Tracking and Data Device with Multi-Function Radio Frequency
Interface Issued Numerex Corp US 13/092,652 4/22/2011     Analytical Scoring
Engine for Remote Device Data Pending Numerex Corp US 13/209,536 8/15/2011
8,769,111 7/1/2014 IP Network Service Redirector Device and Method Issued
Numerex Corp US 13/435,231 3/30/2012 8,990,915 3/24/2015 Local Data Appliance
for Collecting and Storing Remote Sensor Data Issued Numerex Corp US 13/484,973
5/31/2012 9,214,082 12/15/2015 System and Method for Alarm System Tamper
Detection and Reporting Issued Numerex Corp US 13/485,030 5/31/2012 9,325,814
8/9/2016 Wireless SNMP Agent Gateway Issued Numerex Corp US 13/607,955 9/10/2012
8,761,795 6/24/2014 Dynamic Reverse Geofencing Issued Numerex Corp US 14/312,037
6/23/2014     Dynamic Reverse Geofencing Pending Numerex Corp US 13/644,001
10/3/2012 8,970,364 3/3/2015 Method and System for Remote Coupling Security
System Control Issued Numerex Corp US 13/734,352 1/4/2013 9,207,331 12/8/2015
Using Statistical Analysis to Infer an Accurate GPS Location for Use in Tracking
Devices Issued Numerex Corp US 13/865,601 4/18/2013 9,041,527 5/26/2015 System
and Method for Using Alarm System Zones for Remote or Mobile Objects Issued
Numerex Corp US 14/721,472 5/26/2015     System and Method for Using Alarm
System Zones for Remote or Mobile Objects Pending Numerex Corp US 14/538,569
11/11/2014     System and Method for Employing Base Stations to Track Mobile
Devices Pending Numerex Corp US 14/552,768 11/25/2014     System and Method for
Interfacing 2G Applications with a 3G/4G Cellular Radio Network Pending Numerex
Corp US 14/794,586 7/8/2015     Depletion Mode MOSFET Power Supply Pending
Numerex Corp US 14/794,602 7/8/2015     System and Method for Camera
Registration Pending Numerex Corp US 14/830,574 8/19/2015     Motor Fault
Detection System and Method Pending Numerex Corp

 

 

 

 

US 14/872,780 10/1/2015     Coordination of Gas Pump with Tank Level Sensors for
Fraud Detection Pending Numerex Corp US 14/872,997 10/1/2015     Closed Tank
Fill Level Sensor Pending Numerex Corp US 11/804,199 5/17/2007 7,680,471
3/16/2010 System and method for prolonging wireless data product’s life Issued
Numerex Corp US 13/750,205 1/25/2013 9,215,578 12/15/2015 Monitoring Systems and
Methods Issued Omnilink Systems Inc. US 12/112,695 4/30/2008 8,115,621 2/14/2012
Device for Tracking the Movement of Individuals or Objects Issued Omnilink
Systems Inc. US 11/935,858 11/6/2007 8,547,222 10/1/2013 System and Method of
Tracking the Movement of Individuals and Assets Issued Omnilink Systems Inc. US
11/935,833 11/6/2007 7,518,500 4/14/2009 System and Method for Monitoring Alarms
and Responding to the Movement of Individuals and Assets Issued Omnilink Systems
Inc. US 12/350,678 1/8/2009 7,864,047 1/4/2011 System and Method for Monitoring
Alarms and Responding to the Movement of Individuals and Assets Issued Omnilink
Systems Inc. US 13/937,941 7/9/2013 9,373,241 6/21/2016 System and Method of
Tracking the Movement of Individuals and Assets Issued Omnilink Systems Inc. US
12/794,500 6/4/2010 8,489,113 7/16/2013 Method and System for Tracking,
Monitoring and/or Changing Tracking Devices including Wireless Energy Transfer
Features Issued Omnilink Systems Inc. US 12/639,524 12/16/2009 8,831,627
9/9/2014 System and Method for Tracking Monitoring, Collecting, Reporting and
Communicating with the Movement of Individuals Issued Omnilink Systems Inc. US
29/279,448 5/1/2007 D578,918 10/21/2008 Offender Monitor Issued Omnilink Systems
Inc. US 08/969,146 11/12/1997 6,154,648 11/28/2000 METHODS AND APPARATUS FOR
COMMUNICATING DATA VIA A CELLULAR MOBILE RADIOTELEPHONE SYSTEM Issued Numerex
Corp. US 09/160,512 9/24/1998 6,108,537 8/22/2000 METHOD AND SYSTEM FOR
PERFORMING A PREDETERMINED OPERATION RELATED TO A PREDETERMINED CLASS OF
CELLULAR SOURCES Issued Numerex Corp. US 15/222,164 7/28/2016     Offender
Monitor Messaging System Pending Numerex Corp. US 15/158,088 5/18/2016    
System and Method of Using Pick-up, Drop-off Geofence for Mobile Devices Pending
Numerex Corp. US 14/991,031 1/8/2016 9,536,417   1/2/2017 Method and System for
Hierarchical Management of Personal Emergency Response System (PERS) Devices
Issued Numerex Corp. US 14/991,028 1/8/2016     Method and System for Locating a
Personal Emergency Response System (PERS) Device Based on Real Estate Lockbox
Interaction Pending Numerex Corp. US 15/331,364 10/21/2016     Method and System
for Locating a Wireless Tracking Device Associated with a Network of Alarm
Panels Pending Numerex Corp.

 

 

 

 

 

Trademarks

 

MARK SERIAL NO. REG. NO. FILING DATE REG. DATE Registrant

Country

 [t1700472_logo.jpg]

77894440 3906542 12/16/2009 1/18/2011 Numerex Corp. US AVIDWIRELESS 85721098
4378893 9/5/2012 8/6/2013 Numerex Corp. US FASTRACK 78047504 2858718 2/9/2001
6/29/2004 Numerex Corp. US FOCALPOINT 78873454 3545293 5/1/2006 12/9/2008
Omnilink Systems Inc. US MYSHIELD 86740980 5087883 8/28/2015  11/22/2016 Numerex
Corp. US NEXTALARM 86187648 4784209 2/7/2014 8/4/2015 Numerex Corp. US
NEXTALARM.COM 78885124 3249281 5/16/2006 6/5/2007 Numerex Corp. US NEXTALARM.COM
THE BROADBAND ALARM COMPANY 78929909 3244717 7/14/2006 5/22/2007 Numerex Corp.
US NUMEREX 77710898 3736251 4/9/2009 1/12/2010 Numerex Corp. US NUMEREX
SATELLITE FLEX 85385958 4488845 8/1/2011 2/25/2014 Numerex Corp. US OMNILINK
78626004 3156898 5/9/2005 10/17/2006 Omnilink Systems Inc. US

 

 

 

 

SMART DATA DELIVERED 86112013 4680617 11/6/2013 2/3/2015 Numerex Corp. US THE
BROADBAND ALARM COMPANY 78785181 3175728 1/4/2006 11/21/2006 Numerex Corp. US
UPLINK 78691601 3279435 8/12/2005 8/14/2007 Uplink Security, LLC US UPLINK
78106931 4013326 2/5/2002 8/16/2011 Uplink Security, LLC US UPLINK 86190829
4683816 2/11/2014 2/10/2015 Uplink Security, LLC US ACCELAVIEW 85040167 3932829
5/17/2010 3/15/2011 Numerex Corp. US MACHINES TRUST US 77592395 3675590
10/14/2008 9/1/009 Numerex Corp. US NUMEREX FAST 77920341 3906634 1/26/2010
1/18/2011 Numerex Corp. US NUMEREX DNA DEVICE NETWORK APPLICATION 77917829
3840747 1/22/2010 8/31/2010 Numerex Corp. US V-NOTIFY 77084419 3333730 1/17/2007
11/13/2007 Numerex Corp. US E-NOTIFY 77084414 3403769 1/17/2007 3/25/2008
Numerex Corp. US ORBITRAX 77004275 3264104 9/21/2006 7/17/2007 Numerex Corp. US
CELLEMETRY 74493789 2004693 2/23/1994 10/1/1996 Numerex Corp. US DCX 74437904
1941980 9/20/1993 12/19/1995 Numerex Corp. US DERIVED CHANNEL MULTIPLEX 74437859
1937727 9/20/1993 11/28/1995 Numerex Corp. US UPLINK REMOTE 86187670 4677682
2/7/2014 1/27/2015 Uplink Security, LLC US UPLINK GPS 85818059 4546091 1/8/2013
6/10/2014 Uplink Security, LLC US

 

Registered Copyrights

 

None.

 

 

 

 

Domain Name

 

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GoDaddy NEXTALARM.ORG 6/12/2017

 

 

 

 

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5/11/2020 GoDaddy REMOTEARM.ME 12/22/2017 GoDaddy SATELLITEFLEX.COM 7/12/2017

 

 

 

 

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UPLINKTRACKING.NET 4/23/2018 GoDaddy UTRAQAUTO.COM 6/3/2018

 

 

 

 

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1/26/2018 GoDaddy FELIXLIVE.NET 1/26/2018 GoDaddy FELIXLOGISTICS.COM 1/26/2018
GoDaddy FELIXMANAGER.COM 1/26/2018 GoDaddy FELIXMAPPING.COM 1/26/2018 GoDaddy
FELIXMOBILE.COM 1/26/2018 GoDaddy FELIXMOBILE.NET 1/26/2018 GoDaddy FELIXTAV.COM
1/26/2018 GoDaddy FELIXTPM.COM 4/4/2018 GoDaddy FELIXTRACKING.COM 1/26/2018
GoDaddy FELIXVIEW.COM 1/26/2018 GoDaddy G-RFID.COM 1/23/2018 GoDaddy G-RFID.INFO
1/24/2018 GoDaddy G-RFID.NET 1/23/2018

 

 

 

 

GoDaddy G-RFID.ORG 1/24/2018 GoDaddy G-RFID.US 1/23/2018 GoDaddy I-FELIX.COM
1/26/2018 GoDaddy MYACCUTRAX.COM 3/1/2019 GoDaddy MYACCUTRAX.NET 3/1/2019
GoDaddy comcastconnectionpro.com 1/13/2022 GoDaddy comcastwirelessbackup.com
1/25/2026 GoDaddy comcastconnectionprotection.com 9/30/2018

 

(b)Claims Asserted

 

The Cen-Com Matter. See Schedule 6.6 for more information.

 

 

 

 

SCHEDULE 6.23

 

POTENTIAL CONFLICTS OF INTEREST

 

(a) and (b):

 

Andrew Ryan, a board member of Numerex Corp., provides legal services to Numerex
Corp. through his firm, The Ryan Law Group. In the fiscal year ending December
31, 2016, The Ryan Law Group billed Numerex approximately $140,000 in legal fees
and costs.

 

Brian Igoe is the Chief Investment Officer of the Rainin Group, Inc., a family
office responsible for the investments of the Kenneth Rainin Foundation. As
noted in Schedules 6.17 and 6.25, the Kenneth Rainin Foundation is the holder of
the Subordinated Note and holds a warrant to purchase 125,000 shares of the
Company’s common stock at a warrant price of  $0.01 per share.

 

(d):

 

As noted in Schedule 6.25, the Kenneth Rainin Foundation is the holder of the
Subordinated Note.

 

 

 

 

SCHEDULE 6.25

 

EXISTING INDEBTEDNESS & LIENS

 

(a)Indebtedness of the Borrower and its Subsidiaries

 

1.Indebtedness in the amount of approximately $981,000 pursuant to the Master
Lease and Financing Agreement No. 12568, dated as of March 23, 2016, between
Cisco Systems Capital Corporation and Numerex Corp. (the “Cisco Lease”), under
which the obligations of the Company are secured by a lien on the equipment
purchased under the Cisco Lease.

 

2.Standby Letter of Credit SVBSF006532 issued by Silicon Valley Bank in the
amount of $200,000.00 in favor of Sprint Spectrum L.P. with Omnilink Systems
Inc. as the beneficiary thereunder (the “Sprint LOC”), which is secured by a
lien on the money market accounts with Silicon Valley Bank with account numbers
ending in -8509 and -8513.

 

3.Indebtedness in the amount of $5,000,000 outstanding under the Subordinated
Note, which is unsecured.

 

(b)Liens related to the Indebtedness of the Borrower and its Subsidiaries

 

See response to (a) above.

 

(c)Lenders

 

See response to (a) above.

 

(d)Unfunded Commitments

 

None.

 

 

 

 

SCHEDULE 6.26

 

MATERIAL CONTRACTS

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

****

 

The Subordinated Note

 

 

 

 

SCHEDULE 6.27

 

INSURANCE

 

Coverage Description Carrier
Policy Number
Effective Dates Deductible/Retention Limits       Property  Berkley Tech
TCP7009453
10/31/2016-10/31/2017 AOP Deductible - $5,000
BI Waiting Period - 24 Hours
Earthquake - $50,000/72 Hours
Flood - $50,000/ 72 Hours Blanket Business Personal Property - $12,725,412
BI & Extra Expense - $25,250,000
Earthquake - $5,000,000
Flood - $5,000,000

Havana, FL Scheduled BPP - $250,000
Havana, FL Scheduled BI - $732,236   General Liability General Liability - $0
Employee Benefits Each Employee - $1,000 Each Occurrence - $1,000,000
Personal & Advertising Injury - $1,000,000
Medical Expense (Any one person) - $10,000
Damage to Premises Rented to You - $1,000,000
Products/Completed Ops - $3,000,000
General Aggregate - $3,000,000

Employee Benefits Liability
Each Employee - $1,000,000
All Claims Aggregate - $3,000,000   International Contingent Auto/Employers
Liability Hired Car PD Deductible - $1,000 Contingent Auto Liability -
$1,000,000
Hired Car PD - $50,000

Contingent Employers Liability
Bodily Injury by Accident - $1,000,000
Bodily Injury by Disease (Policy Limit) - $1,000,000
Bodily Injury by Disease (each employee) - $1,000,000   Umbrella Retention - $0
Each Occurrence/Aggregate - $15,000,000  

 

 

 

 

Auto  Berkley Tech
TCA7009454
10/31/2016-10/31/2017 Comprehensive/Collision Deductible - $1,000 Liability -
$1,000,000 CSL - Symbols 8,9
Physical Damage- Actual Cash Value - Symbol 8   Workers Comp/ Employers
Liability  Berkley Tech
TWC7009455
10/31/2016-10/31/2017 $0 WC Limits Statutory by State
Employers Liability Limits
Bodily Injury by Accident - $1,000,000
Bodily Injury by Disease (Policy Limit) - $1,000,000
Bodily Injury by Disease (each employee) - $1,000,000   1st XS Liability  CNA
6043546133
10/31/16-17 N/A Each Occurrence/Aggregate - $25M xs $15M   Cargo Policy  Zurich
OC 5844395
10/31/16-17 Per Occurrence - $1,000 Any One Vessel - $1,000,000
Any One Vessel (On Deck) - $100,000
Any One Aircraft - $1,000,000
Any One Package Shipped by Registered Mail/Parcel - $5,000

Domestic Transit - Any One Conveyance or at Any One Place/Time  $1,5000,000  
E&O/Cyber  CNA
596738041
10/31/16-17 Retention $100,000
BI Waiting Period - 10 Hours Liability Coverages
Tech E&O Liability - $10,000,000
Media  Liability - $10,000,000
Network Security Liability - $10,000,000
Privacy Liability - $10,000,000
Privacy Regulation Proceeding - $10,000,000
Privacy Regulation Fines - $10,000,000

Reimbursement Coverages
Privacy Event Expense - $10,000,000
Extortion Demand - $10,000,000
Privacy Regulation Investigation - $10,000,000
1st Party BI & Extra Expense - $10,000,000   Primary D&O AIG
02-199-31-95
10/30/16-10/30/17 Securities Retention - $500,000
Employment Practices Retention - $150,000
All Other Loss - $250,000 Limit of Liability - $10,000,000  

 

 

 

 

1st XS D&O Travelers
105518089
10/30/16-10/30/17 N/A D&O - $10MM xs $10MM   2nd XS D&O Side A AIG
02-245-84-16
10/30/16-10/30/17 N/A D&O-Side A  $5MM xs 20MM   Employment Practices Liability
AIG
02-250-50-64
10/30/16-10/30/17 Class Action Retention - $50,000
3rd Party Retention - $50,000
All Other Loss - $50,000 Limit of Liability - $3,000,000   Fiduciary Liability
AIG
02-250-50-62
10/30/16-10/30/17 $0 Limit of Liability - $1,000,000   Crime Travelers
106619918
10/30/16-10/30/17 Employee Theft - $25,000
ERISA Fidelity - $0
Employee Theft of Client Property - $25,000
Forgery or Alteration - $25,000
On Premises - $25,000
In Transit - $25,000
Money Orders or Counterfeit Money - $5,000
Computer Fraud - $25,000
Computer Program & Data Restoration Expense - $25,000
Funds Transfer Fraud - $25,000
Personal Accounts Forgery or Alteration - $25,000
Identity Fraud Expense - $0
Claim Expense - $0 Employee Theft - $5,000,000
ERISA Fidelity - $5,000,000
Employee Theft of Client Property - $5,000,000
Forgery or Alteration - $5,000,000
On Premises - $5,000,000
In Transit - $5,000,000
Money Orders or Counterfeit Money - $5,000,000
Computer Fraud - $5,000,000
Computer Program & Data Restoration Expense - $1,000,000
Funds Transfer Fraud - $5,000,000
Personal Accounts Forgery or Alteration - $1,000,000
Identity Fraud Expense - $25,000
Claim Expense - $15,000  

 

 

 

 

SCHEDULE 6.33

 

CUSTOMERS AND SUPPLIERS

 

(a)        10 largest customers

 

(i)During the Fiscal Year ended December 31, 2016

 

Customer 2016 Sales Entity **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** ****

 

(ii)During the Fiscal Quarter ended March 31, 2017

 

Customer Q1 2017 Sales Entity **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** ****

 

 

 

 

(b)        10 largest suppliers

 

(i)During the Fiscal Year ended December 31, 2016

 

Supplier  Purchases **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** ****

 

(ii)During the Fiscal Quarter ended March 31, 2017

 

Supplier Purchases **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** ****

 

 

 

SCHEDULE 6.35

 

ABSENCE OF CERTAIN PRACTICES

 

None.

 

 

 

 

SCHEDULE 6.36

 

INTERNAL CONTROLS

 

Significant Deficiencies as set forth in March 31, 2017 Audit Committee Report:

 

(a)       IT General Controls

 

(b)       Internal Controls over Income Tax Accounting

 

(c)       Review of Significant Balance Sheet Reconciliation

 

 

 

 

SCHEDULE 6.37(a)

 

ACCOUNTS AND NOTES RECEIVABLE

 

(i) As of April 30, 2017

 

**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** ****

 

 

 

 

SCHEDULE 6.37(b)

 

ACCOUNTS AND NOTES PAYABLE

 

As of April 30, 2017

 

**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****

 

 

 

 

**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** **** **** **** **** **** **** **** **** **** **** **** **** ****
**** **** **** ****

 

 

 

 

SCHEDULE 8.6

 

MINIMUM INSURANCE

 

Coverage
Description Limits       Property Blanket Business Personal Property -
$12,725,412
BI & Extra Expense - $25,250,000
Earthquake - $5,000,000
Flood - $5,000,000

Havana, FL Scheduled BPP - $250,000
Havana, FL Scheduled BI - $732,236   General Liability

Each Occurrence - $1,000,000
Personal & Advertising Injury - $1,000,000
Medical Expense (Any one person) - $10,000
Damage to Premises Rented to You - $1,000,000
Products/Completed Ops - $3,000,000
General Aggregate - $3,000,000

Employee Benefits Liability
Each Employee - $1,000,000
All Claims Aggregate - $3,000,000

 

  International Contingent Auto/Employers Liability Contingent Auto Liability -
$1,000,000
Hired Car PD - $50,000

Contingent Employers Liability
Bodily Injury by Accident - $1,000,000
Bodily Injury by Disease (Policy Limit) - $1,000,000
Bodily Injury by Disease (each employee) - $1,000,000   Umbrella

Each Occurrence/Aggregate - $15,000,000

 

 

 

 

 

 

Auto Liability - $1,000,000 CSL - Symbols 8,9
Physical Damage- Actual Cash Value - Symbol 8   Workers Comp/ Employers
Liability WC Limits Statutory by State
Employers Liability Limits
Bodily Injury by Accident - $1,000,000
Bodily Injury by Disease (Policy Limit) - $1,000,000
Bodily Injury by Disease (each employee) - $1,000,000   1st XS Liability Each
Occurrence/Aggregate - $25M xs $15M   Cargo Policy Any One Vessel - $1,000,000
Any One Vessel (On Deck) - $100,000
Any One Aircraft - $1,000,000
Any One Package Shipped by Registered Mail/Parcel - $5,000

Domestic Transit - Any One Conveyance or at Any One Place/Time  $1,5000,000  
E&O/Cyber Liability Coverages
Tech E&O Liability - $10,000,000
Media  Liability - $10,000,000
Network Security Liability - $10,000,000
Privacy Liability - $10,000,000
Privacy Regulation Proceeding - $10,000,000
Privacy Regulation Fines - $10,000,000

Reimbursement Coverages
Privacy Event Expense - $10,000,000
Extortion Demand - $10,000,000
Privacy Regulation Investigation - $10,000,000
1st Party BI & Extra Expense - $10,000,000   Primary D&O Limit of Liability -
$10,000,000   1st XS D&O D&O - $10MM xs $10MM  

 

 

 

 

2nd XS D&O Side A D&O-Side A  $5MM xs 20MM   Employment Practices Liability
Limit of Liability - $3,000,000   Fiduciary Liability Limit of Liability -
$1,000,000   Crime Employee Theft - $5,000,000
ERISA Fidelity - $5,000,000
Employee Theft of Client Property - $5,000,000
Forgery or Alteration - $5,000,000
On Premises - $5,000,000
In Transit - $5,000,000
Money Orders or Counterfeit Money - $5,000,000
Computer Fraud - $5,000,000
Computer Program & Data Restoration Expense - $1,000,000
Funds Transfer Fraud - $5,000,000
Personal Accounts Forgery or Alteration - $1,000,000
Identity Fraud Expense - $25,000
Claim Expense - $15,000  

 

 

 

 

SCHEDULE 9.2

 

EXISTING INDEBTEDNESS

 

The Cisco Lease

 

The Subordinated Note

 

The Sprint LOC

 

 

 

 

SCHEDULE 9.5

 

EXISTING INVESTMENTS

 

The investments in the direct and indirect Subsidiaries of the Company described
on Schedule 6.17.

 

 

 

 

SCHEDULE 9.6

 

EXISTING LIENS

 

Under the terms of the Cisco Lease, Cisco Systems Capital Corporation has a
first priority security interest in certain equipment purchased under the Cisco
Lease.

 

Liens on the money market accounts with Silicon Valley Bank with account numbers
ending in -8509 and -8513 which have been pledged as cash collateral to Silicon
Valley Bank to secure the Sprint LOC.

 

The liens listed on Schedule 6.11, of which the Company is diligently pursuing
the release by the applicable taxing authorities.

 

 

 

 

 

Schedule 9.20(e)

 

MINIMUM MONTHLY RECURRING REVENUE

 

For the purposes of testing the trailing three-month Monthly Recurring Revenue,
the three-month actual results will be calculated as the average of the test
month plus the two previous months’ actual results. For example, for the test
period ending June 30, 2017, actual Monthly Recurring Revenue shall be
calculated as the average of the actual results of the months ending June 30,
2017, May 31, 2017 and April 30, 2017. To be in compliance with the minimum
Monthly Recurring Revenue covenant set forth in Section 9.20(e)(i), the
three-month trailing actual Monthly Recurring Revenue shall be greater than the
amount set forth in the table below.

 

Month Ending Monthly Recurring
Revenue, 3 month
trailing average no
less than June 30, 2017 $3,660,000   July 31, 2017 $3,666,000   August 31, 2017
$3,687,000   September 30, 2017 $3,760,000   October 31, 2017 $3,793,000  
November 30, 2017 $3,820,000   December 31, 2017 $3,785,000   January 31, 2018
$3,808,000   February 28, 2018 $3,830,000   March 31, 2018 $3,814,000   April
30, 2018 $3,832,000   May 31, 2018 $3,849,000   June 30, 2018 $3,867,000   July
31, 2018 $3,884,000   August 31, 2018 $3,901,000   September 30, 2018
$3,919,000   October 31, 2018 $3,936,000   November 30, 2018 $3,954,000  
December 31, 2018 $3,971,000   January 31, 2019 $3,988,000   February 28, 2019
$4,003,000   March 31, 2019 $4,016,000   April 30, 2019 $4,029,000   May 31,
2019 $4,042,000   June 30, 2019 $4,055,000   July 31, 2019 $4,068,000   August
31, 2019 $4,081,000   September 30, 2019 $4,094,000   October 31, 2019
$4,106,000   November 30, 2019 $4,119,000   December 31, 2019 $4,132,000  
January 31, 2020 $4,117,000   February 29, 2020 $4,104,000   March 31, 2020
$4,079,000   April 30, 2020 $4,098,000   May 31, 2020 $4,116,000   June 30, 2020
$4,135,000   July 31, 2020 $4,153,000   August 31, 2020 $4,171,000   September
30, 2020 $4,189,000   October 31, 2020 $4,207,000   November 30, 2020
$4,225,000   December 31, 2020 $4,243,000   January 31, 2021 $4,261,000  
February 28, 2021 $4,278,000   March 31, 2021 $4,296,000  

 

   

 

 

SCHEDULE 9.24

 

NEGATIVE PLEDGES

 

See Schedule 9.6

 

 

 

 

SCHEDULE 9.25

 

ACCOUNTS PAYABLE

 

****

 

****

 

****

 

****

 

 

 

EXHIBIT A

 

FORM OF NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

 

[THIS NOTE HAS BEEN ISSUED WITH ORIGINAL ISSUE DISCOUNT (AS DEFINED IN § 1273(a)
OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, AND U.S. TREASURY REGULATION §
1.1273-1 PROMULGATED THEREUNDER). THE HOLDER HEREOF CAN OBTAIN THE INFORMATION
DESCRIBED IN U.S. TREASURY REGULATION § 1.1275-3 BY WRITING TO: NUMEREX CORP.,
ATTENTION: CHIEF EXECUTIVE OFFICER.]

 

NUMEREX CORP.

 

SENIOR SECURED NOTE

 

DUE March 31, 2021

 

$[____________] June [__], 2017

 

FOR VALUE RECEIVED, the undersigned, NUMEREX CORP., a Pennsylvania corporation
(the “Borrower”), hereby promises to pay to [_____________], a [______________]
(together with its registered assigns, the “Holder”), the principal sum of
[___________] AND NO/100 DOLLARS ($[__________]) on the Maturity Date, except as
otherwise set forth herein or in the Note Purchase Agreement (as defined below),
and with interest thereon from time to time as provided herein.

 

1.          Note Purchase Agreement. This Note (this “Note”) is issued by the
Borrower, on the date hereof, pursuant to the Note Purchase Agreement dated as
of the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the “Note Purchase Agreement”), by and among the Borrower,
the Holder, the Collateral Agent, and the other Purchasers now and from time to
time party thereto, and is subject to the terms thereof. The Holder is entitled
to the benefits of this Note and the Note Purchase Agreement, as the Note
Purchase Agreement relates to this Note, and may enforce the agreements of the
Borrower contained herein and therein and exercise the remedies provided for
hereby and thereby or otherwise available in respect hereto and thereto. This
Note is secured by, among other things, one or more Collateral Documents
described in the Note Purchase Agreement. Capitalized terms used herein and not
defined herein have the meanings ascribed to such terms in the Note Purchase
Agreement.

 

   

 

 

2.          Interest. The Borrower promises to pay interest on the sum of the
principal amount of this Note (including any default interest added thereto
pursuant to Section 3.1(b) of the Note Purchase Agreement) at the aggregate rate
and in the manner and times set forth in the Note Purchase Agreement.

 

3.          Repayment; Prepayment. The Borrower shall repay the outstanding
principal amount of this Note as set forth in the Note Purchase Agreement.

 

4.          Amendment. Amendments and modifications of this Note may be made
only in the manner provided in the Note Purchase Agreement.

 

5.          Enforcement. The Borrower shall pay all costs of enforcement of this
Note to the extent and in the manner set forth in the Note Purchase Agreement.

 

6.          Remedies Cumulative. No remedy conferred upon the Holder herein or
in the Note Purchase Agreement or any other Note Document is intended to be
exclusive of any other remedy and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given hereunder, under the Note
Purchase Agreement or under any other Note Document or now or hereafter existing
at law or in equity or by statute or otherwise.

 

7.          Transfer. This Note may be transferred or assigned, in whole or in
part, by the Holder at any time subject to the limitations set forth in the Note
Purchase Agreement and herein. The term “Holder” as used herein shall also
include any permitted transferee of this Note. Each transferee of this Note
acknowledges that this Note has not been registered under the Securities Act,
and may be transferred only pursuant to an effective registration under the
Securities Act or pursuant to an applicable exemption from the registration
requirements of the Securities Act.

 

8.          Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises, and agreements in this Note by or on behalf of the
Borrower shall bind its successors and assigns, whether so expressed or not.

 

9.          Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and in the manner set forth in
Section 12.2 of the Note Purchase Agreement.

 

10.        GOVERNING LAW. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND
ENFORCED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION
OF THE LAW OF ANOTHER JURISDICTION.

 

 2 

 

 

11.        Severability. In case any provision in or obligation under this Note
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdictions, shall not in any way be
affected or impaired thereby.

 

12.        Waivers. All Persons bound by this obligation, whether primarily or
secondarily liable as principals, sureties, guarantors, endorsers or otherwise,
hereby waive the benefits of all provisions of law for stay or delay or
execution or sale of property or other satisfaction of judgment against any of
them on account of liability hereon until judgment is obtained, executed and
issued against any of them and in turn satisfied, and its right, if any, to
require the Holder to hold as security for this Note any collateral deposited by
any of said persons as security. Demand, presentment, protest, notice of
protest, and notice of dishonor are hereby waived by all parties bound hereon.

 

13.        Headings. The headings in this Note are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

 

[Signature Pages Follow]

 

 3 

 

 

IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as of the
date first written above.

 

  NUMEREX CORP.         By:       Name:       Its:  

 

Signature Page to Senior Secured Note – [_______]

 

   

 

 

Exhibit C

 

Form of Compliance Certificate

 

See attached.

 

   

 

 

NOTE

 

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED, OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.

 

NUMEREX CORP.

 

SENIOR SECURED NOTE

 

DUE March 31, 2021

 

$13,500,000.00 June 7, 2017

 

FOR VALUE RECEIVED, the undersigned, NUMEREX CORP., a Pennsylvania corporation
(the “Borrower”), hereby promises to pay to HCP-FVF, LLC, a Delaware limited
liability company (together with its registered assigns, the “Holder”), the
principal sum of thirteen million five hundred thousand AND NO/100 DOLLARS
($13,500,000.00) on the Maturity Date, except as otherwise set forth herein or
in the Note Purchase Agreement (as defined below), and with interest thereon
from time to time as provided herein.

 

1.          Note Purchase Agreement. This Note (this “Note”) is issued by the
Borrower, on the date hereof, pursuant to the Note Purchase Agreement dated as
of the date hereof (as amended, restated, supplemented or otherwise modified
from time to time, the “Note Purchase Agreement”), by and among the Borrower,
the Holder, the Collateral Agent, and the other Purchasers now and from time to
time party thereto, and is subject to the terms thereof. The Holder is entitled
to the benefits of this Note and the Note Purchase Agreement, as the Note
Purchase Agreement relates to this Note, and may enforce the agreements of the
Borrower contained herein and therein and exercise the remedies provided for
hereby and thereby or otherwise available in respect hereto and thereto. This
Note is secured by, among other things, one or more Collateral Documents
described in the Note Purchase Agreement. Capitalized terms used herein and not
defined herein have the meanings ascribed to such terms in the Note Purchase
Agreement.

 

2.          Interest. The Borrower promises to pay interest on the sum of the
principal amount of this Note (including any default interest added thereto
pursuant to Section 3.1(b) of the Note Purchase Agreement) at the aggregate rate
and in the manner and times set forth in the Note Purchase Agreement.

 

3.          Repayment; Prepayment. The Borrower shall repay the outstanding
principal amount of this Note as set forth in the Note Purchase Agreement.

 

 

 

 

4.          Amendment. Amendments and modifications of this Note may be made
only in the manner provided in the Note Purchase Agreement.

 

5.          Enforcement. The Borrower shall pay all costs of enforcement of this
Note to the extent and in the manner set forth in the Note Purchase Agreement.

 

6.          Remedies Cumulative. No remedy conferred upon the Holder herein or
in the Note Purchase Agreement or any other Note Document is intended to be
exclusive of any other remedy and each and every such remedy shall be cumulative
and shall be in addition to every other remedy given hereunder, under the Note
Purchase Agreement or under any other Note Document or now or hereafter existing
at law or in equity or by statute or otherwise.

 

7.          Transfer. This Note may be transferred or assigned, in whole or in
part, by the Holder at any time subject to the limitations set forth in the Note
Purchase Agreement and herein. The term “Holder” as used herein shall also
include any permitted transferee of this Note. Each transferee of this Note
acknowledges that this Note has not been registered under the Securities Act,
and may be transferred only pursuant to an effective registration under the
Securities Act or pursuant to an applicable exemption from the registration
requirements of the Securities Act.

 

8.          Covenants Bind Successors and Assigns. All the covenants,
stipulations, promises, and agreements in this Note by or on behalf of the
Borrower shall bind its successors and assigns, whether so expressed or not.

 

9.          Notices. All notices, demands and other communications provided for
or permitted hereunder shall be made in writing and in the manner set forth in
Section 12.2 of the Note Purchase Agreement.

 

10.        GOVERNING LAW. THIS NOTE AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE WITH, AND
ENFORCED UNDER, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
PRINCIPLES OF CONFLICTS OF LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION
OF THE LAW OF ANOTHER JURISDICTION.

 

11.        Severability. In case any provision in or obligation under this Note
shall be invalid, illegal or unenforceable in any jurisdiction, the validity,
legality and enforceability of the remaining provisions or obligations, or of
such provision or obligation in any other jurisdictions, shall not in any way be
affected or impaired thereby.

 

12.        Waivers. All Persons bound by this obligation, whether primarily or
secondarily liable as principals, sureties, guarantors, endorsers or otherwise,
hereby waive the benefits of all provisions of law for stay or delay or
execution or sale of property or other satisfaction of judgment against any of
them on account of liability hereon until judgment is obtained, executed and
issued against any of them and in turn satisfied, and its right, if any, to
require the Holder to hold as security for this Note any collateral deposited by
any of said persons as security. Demand, presentment, protest, notice of
protest, and notice of dishonor are hereby waived by all parties bound hereon.

 

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13.        Headings. The headings in this Note are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

 

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, the Borrower has caused this Note to be executed as of the
date first written above.

 

  NUMEREX CORP.       By: /s/ Kenneth L. Gayron     Name:  Kenneth Gayron    
Its:  Interim Chief Executive Officer and Chief Financial Officer

 

[Signature Page to Note]