exv10w3



 







Exhibit 10.3




SECURED NON-CONVERTIBLE TERM NOTE




          FOR VALUE RECEIVED, NUMEREX CORP., a Pennsylvania corporation (the “Company”), promises to pay
to LAURUS MASTER FUND, LTD., c/o M&C Corporate Services Limited, P.O. Box 309 GT, Ugland House,
South Church Street, George Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the “Holder”) or
its registered assigns or successors in interest, the sum of Five Million Dollars ($5,000,000),
together with any accrued and unpaid interest hereon, on May 30, 2010 (the “Maturity Date”) if not
sooner paid.




          Capitalized terms used herein without definition shall have the meanings ascribed to such
terms in that certain Securities Purchase Agreement dated as of the date hereof by and between the
Company and the Holder (as amended, modified and/or supplemented from time to time, the “Purchase
Agreement”).




          The following terms shall apply to this Secured Non-Convertible Term Note (this “Note”):




ARTICLE I

CONTRACT RATE AND REPAYMENT




          1.1 Contract Rate. Subject to Sections 3.8 and 4.9, interest payable on the
outstanding principal amount of this Note (the “Principal Amount”) shall accrue at a rate per annum
equal to nine and three quarters percent (9.75%) (the “Contract Rate”). Interest shall be (i)
calculated on the basis of a 360 day year, and (ii) payable monthly, in arrears, commencing on June
1, 2006 on the first business day of each consecutive calendar month thereafter through and
including the Maturity Date and on the Maturity Date, whether by acceleration or otherwise.




          1.2 Repayment. Any outstanding Principal Amount together with any accrued and unpaid
interest and any and all other unpaid amounts which are then owing by the Company to the Holder
under this Note, the Purchase Agreement and/or any other Related Agreement shall be due and payable
on the Maturity Date.




ARTICLE II

PREPAYMENT




          2.1 Prepayment. The Company will have the right to prepay this Note, either in whole
or in part, at any time upon not less than ten (10) days’ prior written notice to the Holder,
without premium or penalty of any kind or nature. Any amounts received by the Holder in connection
with any such prepayment shall be applied in the following order: (i) first, against any and all
amounts (other than principal and interest) then due and owing under this Note, or under the
Purchase Agreement or any Related Agreement to the extent directly and reasonably related to the
loan that is evidenced by this Note; (ii) next, against all accrued but unpaid interest due under
this Note; and (iii) last, against the outstanding principal balance of this Note.




 









 





ARTICLE III

EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS




     Upon the occurrence and continuance of an Event of Default beyond any applicable grace period,
the Holder, at its sole and absolute discretion, may make all sums of principal, interest and other
fees then remaining unpaid under this Note due and payable within five (5) days after written
notice from Holder to the Company (each occurrence being a “Default Notice Period”),
provided, however, that such Default Notice Period shall not apply to Sections 3.1,
3.4 and 3.6 below. In addition, upon acceleration of this Note because of the occurrence of an
Event of Default described in either Section 3.1, Section 3.4 or Section 3.6 below, the amount due
and owing to the Holder shall be one hundred fifteen percent (115%) of the outstanding principal
amount of this Note (plus accrued and unpaid interest and fees, if any). If, with respect to any
Event of Default other than a payment default described in Section 3.1 below, within the Default
Notice Period the Borrower cures the Event of Default, the Event of Default will be deemed to no
longer exist and any rights and remedies of Holder pertaining to such Event of Default will be of
no further force or effect.



     The occurrence of any of the following events set forth in Sections 3.1 through 3.7,
inclusive, below is an “Event of Default”:



     3.1 Failure to Pay Principal, Interest or other Fees. The Company or any of its
Subsidiaries (i) fails to pay when due any installment of principal, interest or other fees hereon
in accordance herewith, or (ii) fails to pay when due any amount due under any other promissory
note or other indebtedness issued by Company or any of its Subsidiaries that, in the aggregate for
all such notes and indebtedness, has a then-current principal balance of more than Four Hundred
Thousand and 00/100ths Dollars ($400,000.00).



     3.2  Breach of Covenant; Cross Default. (i) The Company or any of its Subsidiaries
breaches any material covenant or other term or condition of this Note, the Purchase Agreement or
any other Related Agreement in any material respect and such breach, if subject to cure, continues
for a period of thirty (30) days after the occurrence thereof, or (ii) an “Event of Default” (as
defined in any Related Agreement) has occurred and is continuing.



     3.3 Breach of Representations and Warranties. Any material representation or warranty
of the Company or any of its Subsidiaries made herein, in the Purchase Agreement, or in any Related
Agreement shall have been materially false or misleading when made.



     3.4 Receiver or Trustee. The Company or any of its Subsidiaries shall make a general
assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver
or trustee for it or for a substantial part of its property or business; or such a receiver or
trustee shall otherwise be appointed by a person other than the Company or a Subsidiary, and such
appointment by a person other than the Company or a Subsidiary shall not have been dismissed or
withdrawn within 60 days of such appointment.



     3.5 Judgments. Any money judgment, writ or similar final process shall be entered or
filed against the Company, any of its Subsidiaries or any of their respective property or other



2









 







assets for more than $400,000, and shall remain unvacated, unbonded or unstayed for a period
of ninety (90) days.



     3.6 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or
other proceedings or relief under any bankruptcy law or any law for the relief of debtors shall be
instituted by or against the Company or any of its Subsidiaries and, in the case of an involuntary
case or proceeding, such case or proceeding is not dismissed within sixty (60) days following the
commencement thereof.



     3.7 Stop Trade. An SEC stop trade order or Principal Market trading suspension of the
Common Stock shall be in effect for five (5) consecutive days or five (5) days during a period of
ten (10) consecutive days, excluding in all cases a suspension of all trading on a Principal
Market, provided that the Company shall not have been able to cure such trading suspension within
30 days of the notice thereof or list the Common Stock on another Principal Market within 60 days
of such notice. The “Principal Market” for the Common Stock shall include the NASD OTC Bulletin
Board, NASDAQ SmallCap Market, NASDAQ National Market System, American Stock Exchange, or New York
Stock Exchange, whichever of the foregoing is at the time the principal trading exchange or market
for the Common Stock, or any securities exchange or other securities market on which the Common
Stock is then being listed or traded.



     3.8 Payment Grace Period; Default Interest. The Company shall have a three (3)
business day grace period to pay any monetary amounts due under this Note (which such three (3)
business day grace period must expire before an Event of Default related thereto will exist or be
deemed to exist hereunder), the Purchase Agreement or any Related Agreement, after which grace
period a default interest rate of five percent (5%) per annum above the then applicable interest
rate hereunder shall apply to the monetary amounts due.



ARTICLE IV

MISCELLANEOUS




          4.1 Cumulative Remedies. The remedies under this Note shall be cumulative.




          4.2 Failure or Indulgence Not Waiver. No failure or delay on the part of the Holder
hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such power, right or privilege preclude
other or further exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.




          4.3 Notices. Any notice herein required or permitted to be given shall be in writing
and shall be deemed effectively given: (a) upon personal delivery to the party notified, (b) when
sent by confirmed telex or facsimile if sent during normal business hours of the recipient, if not,
then on the next business day, (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally
recognized overnight courier, specifying next day delivery, with written verification of receipt.
All communications shall be sent to the Company, at the address provided in the




3









 




Purchase Agreement executed in connection herewith, with a copy to Arnold & Porter LLP, 555
12th Street, N.W., Washington, D.C. 20004-1206 Attn: William Carmody, and to the Holder
at the address provided in the Purchase Agreement for such Holder, with a copy to John E. Tucker,
Esq., 825 Third Avenue, 14th Floor, New York, New York 10022, facsimile number (212)
541-4434, or at such other address as the Company or the Holder may designate by ten days advance
written notice to the other parties hereto.




          4.4 Amendment Provision. The term “Note” and all references thereto, as used
throughout this instrument, shall mean this instrument as originally executed, or if later amended
or supplemented, then as so amended or supplemented, and any successor instrument as such successor
instrument may be amended or supplemented.




          4.5 Assignability. This Note shall be binding upon the Company and its successors and
assigns, and shall inure to the benefit of the Holder and its successors and assigns, and may be
assigned by the Holder in accordance with the requirements of the Purchase Agreement. The Company
may not assign any of its obligations under this Note without the prior written consent of the
Holder, any such purported assignment without such consent being null and void.




          4.6 Cost of Collection. In case of any Event of Default under this Note, the Company
shall pay the Holder reasonable costs of collection, including reasonable attorneys’ fees.




          4.7 Governing Law, Jurisdiction and Waiver of Jury Trial.




               (a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR CONFLICT OF LAW PROVISION OR RULE
(WHETHER OF THE STATE OF NEW YORK OR ANY OTHER JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF
THE LAWS OF ANY JURISDICTION OTHER THAN THE STATE OF NEW YORK.



               (b) THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR FEDERAL COURTS LOCATED IN THE
COUNTY OF NEW YORK, STATE OF NEW YORK SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY
CLAIMS OR DISPUTES BETWEEN THE COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE OR ANY OF THE OTHER RELATED AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR
RELATED TO THIS NOTE OR ANY OF THE RELATED AGREEMENTS; PROVIDED, THAT THE COMPANY
ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF
THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER PROVIDED, THAT NOTHING IN
THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE HOLDER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER JURISDICTION TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR
ANY OTHER SECURITY FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
THE HOLDER. THE



4









 




COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH JURISDICTION IN ANY ACTION OR SUIT
COMMENCED IN ANY SUCH COURT, AND THE COMPANY HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED
UPON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. THE COMPANY
HEREBY WAIVES PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER PROCESS MAY BE MADE BY
REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT THE ADDRESS SET FORTH IN THE PURCHASE
AGREEMENT AND THAT SERVICE SO MADE SHALL BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY’S
ACTUAL RECEIPT THEREOF OR THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.




               (c) THE COMPANY DESIRES THAT ITS DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE
LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF
ARBITRATION, THE COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
THE HOLDER AND THE COMPANY ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THE
RELATIONSHIP ESTABLISHED BETWEEN THEM IN CONNECTION WITH THIS NOTE, ANY OTHER RELATED AGREEMENT OR
THE TRANSACTIONS RELATED HERETO OR THERETO.



          4.8 Severability. In the event that any provision of this Note is invalid or
unenforceable under any applicable statute or rule of law, then such provision shall be deemed
inoperative to the extent that it may conflict therewith and shall be deemed modified to conform
with such statute or rule of law. Any such provision which may prove invalid or unenforceable
under any law shall not affect the validity or enforceability of any other provision of this Note.




          4.9 Maximum Payments. Nothing contained herein shall be deemed to establish or
require the payment of a rate of interest or other charges in excess of the maximum permitted by
applicable law. In the event that the rate of interest required to be paid or other charges
hereunder exceed the maximum rate permitted by such law, any payments in excess of such maximum
rate shall be credited against amounts owed by the Company to the Holder and thus refunded to the
Company.




          4.10 Security Interest and Guarantee. The Holder has been granted a security interest
(i) in certain assets of the Company and its Subsidiaries as more fully described in the Master
Security Agreement dated as of the date hereof and (ii) in the equity interests of the Companies’
Subsidiaries pursuant to the Pledge Agreement dated as of the date hereof. The obligations of the
Company under this Note are guaranteed by certain Subsidiaries of the Company pursuant to the
Subsidiary Guaranty dated as of the date hereof.




          4.11 Construction. Each party acknowledges that its legal counsel participated in the
preparation of this Note and, therefore, stipulates that the rule of construction that




5









 




ambiguities are to be resolved against the drafting party shall not be applied in the
interpretation of this Note to favor any party against the other.




          4.12 Registered Obligation. This Note is intended to be a registered obligation within
the meaning of Treasury Regulation Section 1.871-14(c)(1)(i) and the Company (or its agent) shall
register this Note (and thereafter shall maintain such registration) as to both principal and any
stated interest. Notwithstanding any document, instrument or agreement relating to this Note to
the contrary, transfer of this Note (or the right to any payments of principal or stated interest
thereunder) may only be effected by (i) surrender of this Note and either the reissuance by the
Company of this Note to the new holder or the issuance by the Company of a new instrument to the
new holder, or (ii) transfer through a book entry system maintained by the Company (or its agent),
within the meaning of Treasury Regulation Section 1.871-14(c)(1)(i)(B).




[Balance of page intentionally left blank; signature page follows]




6









 





          IN WITNESS WHEREOF, the Company has caused this Secured Non-Convertible Term Note to be signed
in its name effective as of this 30th day of May, 2006.




	 	 	 	 	 
	 	NUMEREX CORP.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 


WITNESS:



                                                            





7