Document:

exv10w4

 

Exhibit 10.4

THIS WARRANT AND THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS WARRANT AND THE CLASS A COMMON STOCK ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS WARRANT UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION
OF COUNSEL REASONABLY SATISFACTORY TO NUMEREX CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.

	 	 	 
	 

	 	Right to Purchase Up To 241,379 of Class A Common
Stock of Numerex Corp. (subject to adjustment as
provided herein)

COMMON STOCK PURCHASE WARRANT

	 	 	 
	No. ___

	 	Issue Date May 30, 2006

          NUMEREX CORP., a corporation organized under the laws of the Commonwealth of Pennsylvania,
hereby certifies that, for value received, LAURUS MASTER FUND, LTD., or its assigns (the “Holder”),
is entitled, subject to the terms set forth below, to purchase from the Company from and after the
Issue Date of this Warrant and at any time or from time to time before 5:00 p.m., New York time, on
May 30, 2013 (the “Expiration Date”), up to 241,379 fully paid and nonassessable shares of Common
Stock (as hereinafter defined), no par value per share, of the Company, at the Exercise Price (as
hereinafter defined). The number and character of such shares of Common Stock are subject to
adjustment as provided herein.

          As used herein the following terms, unless the context otherwise requires, have the following
respective meanings:

          (a) The term “Company” shall include Numerex Corp. and any corporation which shall succeed or
assume the obligations of Numerex Corp. hereunder.

          (b) The term “Common Stock” includes (a) the Company’s Class A Common Stock, no par value per
share, and (b) any other securities into which or for which any of the securities described in (a)
may be converted or exchanged pursuant to a plan of recapitalization, reorganization, merger, sale
of assets or otherwise.

          (c) The term “Other Securities” refers to any stock (other than Common Stock) and other
securities of the Company or any other person (corporate or otherwise) which the holder of the
Warrant at any time shall be entitled to receive, or shall have received, on the exercise of the
Warrant, in lieu of or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other Securities pursuant to
Section 4 or otherwise.

          (d) The term “Exercise Price” shall be $7.73.

 

 

          (e) The term “Registration Rights Agreement” means the Registration Rights Agreement, dated as
of the date hereof, between the Company and the Holder as the same may be amended, modified and
supplemented from time to time.

          (f) The term “Person” means an individual, a partnership, a corporation, a limited liability
company, an association, a joint stock company, a trust, a joint venture or an unincorporated
organization.

     1. Exercise of Warrant.

          1.1 Number of Shares Issuable upon Exercise. From and after the date hereof through
and including the Expiration Date, the Holder shall be entitled to receive, upon exercise of this
Warrant in whole or in part, by delivery of an original or fax copy of the exercise notice attached
hereto as Exhibit A (the “Exercise Notice”), shares of Common Stock of the Company, subject
to adjustment pursuant to Section 4.

          1.2 Fair Market Value. Fair Market Value of a share of Common Stock as of a
particular date (the “Determination Date”) shall mean:

               (a) If the Company’s Common Stock is traded on the American Stock Exchange or another national
securities exchange or is quoted on the National or SmallCap Market of The Nasdaq Stock Market,
Inc. (“Nasdaq”), then the closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.

               (b) If the Company’s Common Stock is not traded on the American Stock Exchange or another
national stock exchange or on the Nasdaq but is traded on the NASD OTC Bulletin Board or the
National Quotation Bureau’s Pink Sheets, then the mean of the average of the closing bid and asked
prices reported for the last business day immediately preceding the Determination Date.

               (c) Except as provided in clause (d) below, if the Company’s Common Stock is not publicly
traded, then as the Holder and the Company agree or in the absence of agreement by arbitration in
accordance with the rules then in effect of the American Arbitration Association, before a single
arbitrator to be chosen from a panel of persons qualified by education and training to pass on the
matter to be decided.

               (d) If the Determination Date is the date of a liquidation, dissolution or winding up, or any
event deemed to be a liquidation, dissolution or winding up pursuant to the Company’s charter, then
all amounts to be payable per share to holders of the Common Stock pursuant to the charter in the
event of such liquidation, dissolution or winding up, plus all other amounts to be payable per
share in respect of the Common Stock in liquidation under the charter, assuming for the purposes of
this clause (d) that all of the shares of Common Stock then issuable upon exercise of the Warrant
are outstanding at the Determination Date.

          1.3 Trustee for Warrant Holders. In the event that a bank or trust company shall have
been appointed as trustee for the Holder of the Warrant pursuant to Subsection 3.2, such bank or
trust company shall have all the powers and duties of a warrant agent (as hereinafter described)
and shall accept, in its own name for the account of the Company or such

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successor Person as may be entitled thereto, all amounts otherwise payable to the Company or
such successor, as the case may be, on exercise of this Warrant pursuant to this Section 1.

     2. Procedure for Exercise.

          2.1 Delivery of Stock Certificates, etc. on Exercise. The Company agrees that the
shares of Common Stock purchased upon exercise of this Warrant shall be deemed to be issued to the
Holder as the record owner of such shares as of the close of business on the date on which this
Warrant shall have been surrendered and payment made for such shares as aforesaid. As soon as
practicable after the exercise of this Warrant in full or in part, and in any event within three
(3) business days thereafter, the Company at its expense (including the payment by it of any
applicable issue taxes) will cause to be issued in the name of and delivered to the Holder, or as
such Holder (upon payment by such Holder of any applicable transfer taxes) may direct in compliance
with applicable securities laws, a certificate or certificates for the number of duly and validly
issued, fully paid and nonassessable shares of Common Stock (or Other Securities) to which such
Holder shall be entitled on such exercise, plus, in lieu of any fractional share to which such
holder would otherwise be entitled, cash equal to such fraction multiplied by the then Fair Market
Value of one full share, together with any other stock or other securities and property (including
cash, where applicable) to which such Holder is entitled upon such exercise pursuant to Section 1
or otherwise. The certificates for the number of shares of Common Stock (or Other Securities)
shall bear a legend required or advisable under federal and state securities laws. The Holder
agrees that if the Registration Statement (as defined in the Registration Rights Agreement) is then
currently effective or if the shares of Common Stock are eligible for sale pursuant to Rule 144
under the Securities Act of 1933, as amended, the Holder shall (i) sell, transfer or dispose of the
shares of Common Stock it receives as a result of the exercise of this Warrant pursuant to the
Registration Statement in accordance with the plan of distribution described therein (such plan of
distribution shall be substantially in the form attached hereto as Exhibit C) or the
provisions of Rule 144, as applicable, and (ii) fulfill applicable prospectus delivery requirements
imposed by applicable federal securities laws.

          2.2 Exercise.

               (a) Payment may be made either in (i) cash or by certified or official bank check payable to
the order of the Company equal to the applicable aggregate Exercise Price, (ii) by delivery of the
Warrant, Common Stock and/or Common Stock receivable upon exercise of the Warrant in accordance
with Section (b) below, or (iii) by a combination of any of the foregoing methods, for the number
of shares of Common Stock specified in such form (as such exercise number shall be adjusted to
reflect any adjustment in the total number of shares of Common Stock issuable to the holder per the
terms of this Warrant) and the Holder shall thereupon be entitled to receive the number of duly
authorized, validly issued, fully-paid and non-assessable shares of Common Stock (or Other
Securities) determined as provided herein.

               (b) Notwithstanding any provisions herein to the contrary, if the Fair Market Value of one
share of Common Stock is greater than the Exercise Price (at the date of calculation as set forth
below), in lieu of exercising this Warrant for cash, the Holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being exercised) by
surrender of this Warrant at the principal office of the Company together

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with the properly endorsed Exercise Notice in which event the Company shall issue to the
Holder a number of shares of Common Stock computed using the following formula:

	 	 	 	 	 	 	 
	 

	 	X=Y
	 	(A-B)	 	 
	 

	 	 	 	A	 	 
	 
	 	 	 	 	 	 
	 	 	Where X = the number of shares of Common Stock to be issued to the Holder
	 
	 	 	 	 	 	 
	 	 	Y=	 	the number of shares of Common Stock purchasable under the
Warrant or, if only a portion of the Warrant is being exercised, the portion of
the Warrant being exercised (at the date of such calculation)
	 
	 	 	 	 	 	 
	 	 	A=	 	the Fair Market Value of one share of the Company’s Common
Stock (at the date of such calculation)
	 
	 	 	 	 	 	 
	 	 	B=	 	Exercise Price (as adjusted to the date of such calculation)

     3. Effect of Reorganization, etc.; Continuation of Terms.

          3.1 Reorganization, Consolidation, Merger, etc. In case at any time or from time to
time, the Company shall (a) effect a reorganization, (b) consolidate with or merge into any other
person, or (c) transfer all or substantially all of its properties or assets to any other person
under any plan or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and adequate provision shall
be made by the Company whereby the Holder of this Warrant, on the exercise hereof as provided in
Section 1 at any time after the consummation of such reorganization, consolidation or merger or the
effective date of such dissolution, as the case may be, shall receive, in lieu of the Common Stock
(or Other Securities) issuable on such exercise prior to such consummation or such effective date,
either (x) in the event of the consummation of a reorganization, consolidation or merger, the stock
and other securities and property (including cash) to which such Holder would have been entitled
upon such consummation if such Holder had so exercised this Warrant, immediately prior thereto, all
subject to further adjustment thereafter as provided in Section 4, or (y) in the event of
dissolution, cash equal to the then current value of this Warrant as determined in accordance with
the Black Scholes option pricing formula. Upon the occurrence of any stock split, stock dividend,
combination of shares or reverse stock split pertaining to the Common Stock, the Fixed Conversion
Price shall be proportionately increased or decreased as necessary to reflect the proportionate
change in the shares of Common Stock issued and outstanding as a result of such stock split, stock
dividend, combination of shares or reverse stock split.

          3.2 Continuation of Terms. Upon any reorganization, consolidation, merger or transfer
referred to in this Section 3, this Warrant shall continue in full force and effect and the terms
hereof shall be applicable to the shares of stock and other securities and property receivable on
the exercise of this Warrant after the consummation of such reorganization, consolidation or merger
or the effective date of dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the case of any such
transfer, the person acquiring all or substantially all of the properties or

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assets of the Company, whether or not such person shall have expressly assumed the terms of
this Warrant as provided in Section 4.

     4. Certificate as to Adjustments. In each case of any adjustment or readjustment in the
shares of Common Stock (or Other Securities) issuable on the exercise of the Warrant or following
the exercise in part of this Warrant, the Company at its expense will promptly cause its Chief
Financial Officer or other appropriate designee to compute such adjustment or readjustment in
accordance with the terms of the Warrant and prepare a certificate setting forth such adjustment or
readjustment. The Company will forthwith mail a copy of each such certificate to the holder of the
Warrant and any Warrant agent of the Company (appointed pursuant to Section 11 hereof);
provided, however, that the failure of the Company to mail a copy of such
certificate to the Holder of the Warrant and any Warrant Agent shall not affect the number of
shares of Common Stock (or Other Securities) represented hereby.

     5. Reservation of Stock, etc. Issuable on Exercise of Warrant. The Company will at all times
reserve and keep available, solely for issuance and delivery on the exercise of the Warrant, or
following the exercise in part of this Warrant, shares of Common Stock (or Other Securities) from
time to time issuable on the exercise of the Warrant.

     6. Assignment; Exchange of Warrant. Subject to compliance with applicable federal and state
securities laws and the Securities Purchase Agreement, dated of even date herewith, by and between
the Company and the Holder (the “Purchase Agreement”), this Warrant, and the rights evidenced
hereby, may be transferred by any registered holder hereof (a “Transferor”) with respect to any or
all of the shares of Common Stock available for exercise hereunder. On the surrender for exchange
of this Warrant, with the Transferor’s endorsement in the form of Exhibit B attached hereto
(the “Transferor Endorsement Form”) and together with evidence reasonably satisfactory to the
Company demonstrating compliance with applicable securities laws, which shall include, without
limitation, a legal opinion from the Transferor’s counsel that such transfer is exempt from the
registration requirements of applicable securities laws, the Company at its expense but with
payment by the Transferor of any applicable transfer taxes) will issue and deliver to or on the
order of the Transferor thereof a new Warrant of like tenor, in the name of the Transferor and/or
the transferee(s) specified in such Transferor Endorsement Form (each a “Transferee”), calling in
the aggregate on the face or faces thereof for the number of shares of Common Stock called for on
the face or faces of the Warrant so surrendered by the Transferor. In no event shall a Transferee
be a Competitor (as such term is defined in the Purchase Agreement) of the Company.

     7. Replacement of Warrant. On receipt of evidence reasonably satisfactory to the Company of
the loss, theft, destruction or mutilation of this Warrant and, in the case of any such loss, theft
or destruction of this Warrant, on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any such mutilation, on surrender
and cancellation of this Warrant, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.

     8. Registration Rights. The Holder of this Warrant has been granted certain registration
rights by the Company. These registration rights are set forth in a Registration

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Rights Agreement entered into by the Company and Laurus Master Fund, Ltd., dated as of the
date hereof.

     9. Maximum Exercise. Notwithstanding anything herein to the contrary, in no event shall the
Holder be entitled to exercise any portion of this Warrant in excess of that portion of this
Warrant upon exercise of which the sum of (1) the number of shares of Common Stock beneficially
owned by the Holder and its Affiliates (other than shares of Common Stock which may be deemed
beneficially owned through the ownership of the unexercised portion of the Warrant or the
unexercised or unconverted portion of any other security of the Holder subject to a limitation on
conversion analogous to the limitations contained herein) and (2) the number of shares of Common
Stock issuable upon the exercise of the portion of this Warrant with respect to which the
determination of this proviso is being made, would result in beneficial ownership by the Holder and
its Affiliates of any amount greater than 4.99% of the then outstanding shares of Common Stock
(whether or not, at the time of such exercise, the Holder and its Affiliates beneficially own more
than 4.99% of the then outstanding shares of Common Stock). As used herein, the term “Affiliate”
means any person or entity that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with a person or entity, as such terms are
used in and construed under Rule 144 under the Securities Act. For purposes of the proviso to the
second preceding sentence, beneficial ownership shall be determined in accordance with Section
13(d) of the Securities Exchange Act of 1934, as amended, and Regulations 13D-G thereunder, except
as otherwise provided in clause (1) of such proviso. The limitations set forth herein (x) may be
waived by the Holder upon provision of no less than sixty-one (61) days prior notice to the Company
and (y) shall automatically become null and void following notice to the Company upon the
occurrence and during the continuance of an Event of Default (as defined in any Note referred to in
that certain Securities Purchase Agreement dated as of the date hereof by and between the Holder
and the Company (as amended, modified, restated and/or supplemented from time to time, the
“Purchase Agreement”)), except that at no time shall the number of shares of Common Stock
beneficially owned by the Holder exceed 19.99% of the outstanding shares of Common Stock.
Notwithstanding anything contained herein to the contrary, the number of shares of Common Stock
issuable by the Company and acquirable by the Holder at a price below $7.91 per share pursuant to
the terms of this Warrant, the Purchase Agreement, any Related Agreement (as defined in the
Purchase Agreement) or otherwise, shall not exceed an aggregate of 2,460,622 shares of Common Stock
(subject to appropriate adjustment for stock splits, stock dividends, or other similar
recapitalizations affecting the Common Stock) (the “Maximum Common Stock Issuance”), unless the
issuance of Common Shares hereunder in excess of the Maximum Common Stock Issuance shall first be
approved by the Company’s shareholders. If at any point in time and from time to time the number
of shares of Common Stock issued pursuant to the terms of this Warrant, the Purchase Agreement, any
Related Agreement (as defined in the Purchase Agreement) or otherwise, together with the number of
shares of Common Stock that would then be issuable by the Company to the Holder in the event of a
conversion pursuant to the terms of this Warrant, the Purchase Agreement, any Related Agreement (as
defined in the Purchase Agreement) or otherwise, would exceed the Maximum Common Stock Issuance but
for this Section 10, the Company shall promptly call a shareholders meeting to solicit shareholder
approval for the issuance of the shares of Common Stock hereunder in excess of the Maximum Common
Stock Issuance.

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     10. Warrant Agent. The Company may, by written notice to the each holder of the Warrant,
appoint an agent for the purpose of issuing Common Stock (or Other Securities) on the exercise of
this Warrant pursuant to Section 1, exchanging this Warrant pursuant to Section 7, and replacing
this Warrant pursuant to Section 8, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case may be, shall be made at such office by such agent.

     11. Transfer on the Company’s Books. Until this Warrant is transferred on the books of the
Company, the Company may treat the registered holder hereof as the absolute owner hereof for all
purposes, notwithstanding any notice to the contrary.

     12. Notices, etc. All notices and other communications from the Company to the Holder of this
Warrant shall be mailed by first class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company in writing by such holder or, until any such
Holder furnishes to the Company an address, then to, and at the address of, the last Holder of this
Warrant who has so furnished an address to the Company.

     13. No Shorting. Neither the Purchaser nor any of its affiliates or investment partners shall
or shall cause any Person, directly or indirectly, to engage in “short sales” of the Company’s
Common Stock or any other hedging strategies involving the Company’s publicly traded securities.

     14. Miscellaneous.

               (a) THIS WARRANT CANNOT BE CHANGED OR TERMINATED ORALLY, AND SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT 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.
EXCEPT AS PROVIDED IN SECTION 1.2(C) HEREOF, ANY ACTION BROUGHT BY EITHER PARTY AGAINST THE OTHER
CONCERNING THE TRANSACTIONS CONTEMPLATED BY THIS WARRANT SHALL BE BROUGHT ONLY IN ANY STATE OR
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, CITY OF NEW YORK; PROVIDED THAT NOTHING
CONTAINED IN THIS WARRANT SHALL BE DEEMED TO PRECLUDE HOLDER FROM BRINGING SUIT OR TAKING OTHER
LEGAL ACTION IN ANY OTHER COURT OF COMPETENT JURISDICTION AND NOTHING SHALL BE DEEMED TO PRECLUDE
THE COMPANY FROM ASSERTING ANY DEFENSES OR COUNTERCLAIMS IN ANY SUCH ACTIONS. BOTH THE COMPANY AND
THE INDIVIDUAL EXECUTING THIS WARRANT ON BEHALF OF THE COMPANY AGREE TO SUBMIT TO THE JURISDICTION
OF SUCH COURTS AND WAIVE TRIAL BY JURY. THE COMPANY AND THE INDIVIDUAL EXECUTING THIS WARRANT
FURTHER CONSENT THAT ANY SUMMONS, SUBPOENA OR OTHER PROCESS OR PAPERS (INCLUDING, WITHOUT
LIMITATION, ANY NOTICE OR MOTION OR OTHER APPLICATION TO EITHER OF THE AFOREMENTIONED COURTS OR A
JUDGE THEREOF) OR ANY NOTICE IN CONNECTION WITH ANY PROCEEDINGS HEREUNDER, MAY BE SERVED BY
REGISTERED OR CERTIFIED

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MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE PROVIDED A REASONABLE TIME FOR
APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID
COURTS. THE COMPANY AND THE INDIVIDUAL EXECUTING THIS WARRANT WAIVE ANY OBJECTION TO JURISDICTION
AND VENUE OF ANY ACTION INSTITUTED HEREON IN THE SUPREME COURT FOR THE STATE OF NEW YORK, COUNTY OF
NEW YORK, OR THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK AND SHALL NOT
ASSERT ANY DEFENSE BASED ON LACK OF JURISDICTION OR VENUE OR BASED UPON FORUM NON
CONVENIENS FOR ANY ACTION FILED IN EITHER SUCH COURT.

               (b) The prevailing party shall be entitled to recover from the other party its reasonable
attorney’s fees and costs; provided, however, that if the parties hereto agree to settle any claim,
action, proceeding or lawsuit brought by one party hereto against the other party hereto, then each
of the parties shall bear its own costs in connection with such claim, action, proceeding or
lawsuit, unless otherwise directed by a court of competent jurisdiction.

               (c) In the event that any provision of this Warrant 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 Warrant.

               (d) The headings in this Warrant are for purposes of reference only, and shall not limit or
otherwise affect any of the terms hereof.

               (e) The Company acknowledges that legal counsel participated in the preparation of this
Warrant and, therefore, stipulates that the rule of construction that ambiguities are to be
resolved against the drafting party shall not be applied in the interpretation of this Warrant to
favor any party against the other party.

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

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          IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of the date first
written above.

	 	 	 	 	 
	 	 	NUMEREX CORP.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

WITNESS:

                                                                                

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Exhibit A

FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

TO: NUMEREX CORP.

The undersigned, pursuant to the provisions set forth in the attached Warrant (No.        ), hereby
irrevocably elects to purchase (check applicable box):

                                shares of the Common Stock covered by such Warrant; or

           the maximum number of shares of Common Stock covered by such Warrant pursuant to the cashless
exercise procedure set forth in Section 2.

The undersigned herewith makes payment of the full Exercise Price for such shares at the price per
share provided for in such Warrant, which is $                    . Such payment takes the form of (check
applicable box or boxes):

           $                     in lawful money of the United States; and/or

           the cancellation of such portion of the attached Warrant as is exercisable for a total of                      shares of Common Stock (using a Fair Market Value of $                     per share for purposes of
this calculation); and/or

           the cancellation of such number of shares of Common Stock as is necessary, in accordance with
the formula set forth in Section 2, to exercise this Warrant with respect to the maximum number of
shares of Common Stock purchaseable pursuant to the cashless exercise procedure set forth in
Section 2.

The undersigned requests that the certificates for such shares be issued in the name of, and
delivered to                                          whose address is               
                                                                  .

The undersigned represents and warrants that all offers and sales by the undersigned of the
securities issuable upon exercise of the within Warrant shall be made pursuant to registration of
the Common Stock and prospectus delivery requirements under the Securities Act of 1933, as amended
(the “Securities Act”) or pursuant to an exemption from registration under the Securities Act.

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	(Signature must conform to name of holder as
specified on the face of the Warrant)
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	 	 	(Address)

 

 

Exhibit B

FORM OF TRANSFEROR ENDORSEMENT

(To be signed only on transfer of Warrant)

     For value received, the undersigned hereby sells, assigns, and transfers unto the person(s)
named below under the heading “Transferees” the right represented by the within Warrant to purchase
the percentage and number of shares of Common Stock of Numerex Corp. to which the within Warrant
relates specified under the headings “Percentage Transferred” and “Number Transferred,”
respectively, opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of Numerex Corp. with full power of substitution in the
premises.

	 	 	 	 	 
	Transferees	 	Percentage Transferred	 	Number Transferrred
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	 

	 	 
	 	 
	 
	 	 	 	 
	 

	 	 
	 	 

	 	 	 	 	 	 	 
	Dated:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	(Signature must conform to name of holder as
specified on the face of the Warrant)
	 
	 	 	 	 	 	 
	Signed in the presence of:	 	 	 	 
	 
	 	 	 	 	 	 
	 	 	 	 	 
	(Name)
	 	 	 	(address)
	 
	 	 	 	 	 	 
	ACCEPTED AND AGREED:	 	 	 	 
	 

	 	 	 	 	 	 
	[TRANSFEREE]	 	 	 	(address)
	 
	 	 	 	 	 	 
	 	 	 	 	 
	(Name)
	 	 	 	 

 

 

Exhibit C

PLAN OF DISTRIBUTION

The Company shall include a “Plan of Distribution” section in the Registration Statement (as
defined in the Registration Rights Agreement), which shall substantially state as follows:

Plan of Distribution

     The shares of our common stock covered hereby may be offered and sold from time to time by the
selling stockholder. The selling stockholder will act independently of us in making decisions with
respect to the timing, manner and size of each sale of shares of common stock currently held by
selling stockholder. Following conversion of the secured convertible note or exercise of warrants
by the selling stockholder holding a secured promissory note or warrants, the selling stockholder
will act independently of us in making decisions with respect to the timing, manner, and sale of
shares of our common stock held by the selling stockholder who converts or exercises. The selling
stockholder may use any one or more of the following methods when selling shares:

	 	•	 	ordinary brokerage transactions and transactions in which the broker-dealer solicits
purchasers;
	 
	 	•	 	block trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;
	 
	 	•	 	purchases by a broker-dealer as principal and resale by the broker-dealer for its
account;
	 
	 	•	 	an exchange distribution in accordance with the rules of the applicable exchange;
	 
	 	•	 	privately negotiated transactions;
	 
	 	•	 	broker-dealers may agree with the selling stockholder to sell a specified number of
such shares at a stipulated price per share;
	 
	 	•	 	a combination of any such methods of sale; and
	 
	 	•	 	any other method permitted pursuant to applicable law.

     The selling stockholder may also sell shares under Rule 144 under the Securities Act of 1933,
as amended (the “Securities Act”), if available, rather than under this prospectus.

     Broker-dealers engaged by the selling stockholder may arrange for other broker-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from the selling
stockholder (or, if any broker-dealer acts as agent for the purchaser of shares, from the
purchaser) in amounts to be negotiated. Discounts, concessions, commissions and similar selling
expenses, if any, attributable to the sale of shares will be borne by the selling stockholder. The
selling stockholder does not expect these commissions and discounts to exceed what is customary in
the types of transactions involved.

     The selling stockholder may from time to time pledge or grant a security interest in some or
all of the shares of common stock owned by it and, if it defaults in the performance of its secured
obligations, the pledgees or secured parties may offer and sell the shares of common stock from
time to time under this prospectus, or under an amendment to this prospectus under

 

Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of
selling stockholders to include the pledgee, transferee or other successors in interest as selling
stockholder under this prospectus.

     The selling stockholder also may transfer the shares of common stock in other circumstances,
in which case the transferees, pledgees or other successors in interest will be the selling
beneficial owners for purposes of this prospectus and may sell the shares of common stock from time
to time under this prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest as selling
stockholders under this prospectus.

     The selling stockholder and any broker-dealers or agents that are involved in selling the
shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection
with such sales. In such event, any commissions received by such broker-dealers or agents and any
profit on the resale of the shares purchased by them may be deemed to be underwriting commissions
or discounts under the Securities Act. The selling stockholder have informed the Company that it
does not have any agreement or understanding, directly or indirectly, with any person to distribute
the Common Stock.

     The Company is required to pay certain fees and expenses incurred by the Company incident to
the registration of the shares. The Company has agreed to indemnify the selling stockholder
against certain losses, claims, damages and liabilities, including liabilities under the Securities
Act.

     The anti-manipulation rules of Regulation M under the Securities Exchange Act of 1934, as
amended, may apply to sales of our common stock and activities of the selling stockholder.exv10w5

 

Exhibit 10.5

NUMEREX CORP. AND CERTAIN OF ITS SUBSIDIARIES

MASTER SECURITY AGREEMENT (this “Agreement”)

	 	 	 
	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

Gentlemen:

     1. To secure the payment of all Obligations (as hereafter defined), Numerex Corp., a
Pennsylvania corporation (the “Company”), and each of the other undersigned parties other than
Laurus Master Fund, Ltd. and each other entity that is required to enter into this Master Security
Agreement (each, an “Assignor” and, collectively, the “Assignors”, “we” and/or “us”) hereby assigns
and grants to Laurus Master Fund, Ltd. (“Laurus” and/or “you”) a continuing security interest in
all of the following property now owned or at any time hereafter acquired by such Assignor, or in
which such Assignor now has or at any time in the future may acquire any right, title or interest
(the “Collateral”): all cash, cash equivalents, accounts, accounts receivable, deposit accounts,
inventory, equipment, goods, fixtures, documents, instruments (including, without limitation,
promissory notes), contract rights, commercial tort claims set forth on Schedule A to this
Agreement, general intangibles (including, without limitation, payment intangibles), chattel paper,
supporting obligations, investment property (including, without limitation, all partnership
interests, limited liability company membership interests and all other equity interests owned by
any Assignor), letter-of-credit rights, trademarks, trademark applications, tradestyles, patents,
patent applications, copyrights, copyright applications and other intellectual property in which
such Assignor now has or hereafter may acquire any right, title or interest, all proceeds and
products thereof (including, without limitation, proceeds of insurance) and all additions,
accessions and substitutions thereto or therefore. Except as otherwise defined herein, all
capitalized terms used herein shall have the meanings provided such terms in the Securities
Purchase Agreement referred to below. All items of Collateral which are defined in the UCC shall
have the meanings set forth in the UCC. For purposes hereof, the term “UCC” means the Uniform
Commercial Code as the same may, from time to time, be in effect in the State of New York;
provided, that in the event that, by reason of mandatory provisions of law, any or all of the
attachment, perfection or priority of, or remedies with respect to, Laurus’ security interest in
any Collateral is governed by the Uniform Commercial Code as in effect in a jurisdiction other than
the State of New York, the term “UCC” shall mean the Uniform Commercial Code as in effect in such
other jurisdiction for purposes of the provisions of this Agreement relating to such attachment,
perfection, priority or remedies and for purposes of definitions related to such provisions;
provided further, that to the extent that the UCC is used to define any term herein and such term
is defined differently in different Articles or Divisions of the UCC, the definition of such term
contained in Article or Division 9 shall govern.

 

 

     2. The term “Obligations” as used herein shall mean and include any and all debts, liabilities
and obligations owing by each Assignor to Laurus arising under, out of, or in connection with: (i)
that certain Securities Purchase Agreement dated as of the date hereof by and between the Company
and Laurus (the “Securities Purchase Agreement”) and (ii) the Related Agreements referred to in the
Securities Purchase Agreement (the Securities Purchase Agreement and each Related Agreement, as
each may be amended, modified, restated or supplemented from time to time, collectively, the
“Documents”), and in connection with any documents, instruments or agreements relating to or
executed in connection with the Documents, whether now existing or hereafter arising, direct or
indirect, liquidated or unliquidated, absolute or contingent, due or not due and whether under,
pursuant to or evidenced by a note, agreement, guaranty, instrument or otherwise, including,
without limitation, obligations and liabilities of each Assignor for post-petition interest, fees,
costs and charges that accrue after the commencement of any case by or against such Assignor under
any bankruptcy, insolvency, reorganization or like proceeding (collectively, the “Debtor Relief
Laws”) in each case, irrespective of the genuineness, validity, regularity or enforceability of
such Obligations, or of any instrument evidencing any of the Obligations or of any collateral
therefore or of the existence or extent of such collateral, and irrespective of the allowability,
allowance or disallowance of any or all of the Obligations in any case commenced by or against any
Assignor under any Debtor Relief Law.

     3. We hereby represent, warrant and covenant to you that: (a) each of us is a legal entity
validly existing, in good standing and formed under the laws of the jurisdictions set forth below
our names on the signature pages hereto with an organization identification number set forth below
our names on the signature pages hereto and we will provide you thirty (30) days’ prior written
notice of any change in our state of formation; (b) our legal names are as set forth on the
signature pages hereto and are identical to that which is set forth in our certificates or articles
of incorporation or other constitutive documents, as amended through the date hereof and we will
provide you thirty (30) days’ prior written notice of any change in any of our legal names; (c) we
are the lawful owner of the Collateral and have the sole right to grant a security interest therein
and will defend the Collateral against all claims and demands of all persons and entities; (d) we
will keep the Collateral free and clear of all attachments, levies, taxes, liens, security
interests and encumbrances of every kind and nature (“Encumbrances”), except (i) to the extent said
Encumbrance does not secure indebtedness in excess of $150,000 on a combined basis for each of us
at any one time and such Encumbrance is removed or otherwise released within 10 business days of
the creation thereof or (ii) for those Encumbrances arising from the Documents; (e) we will at our
own cost and expense use commercially reasonable efforts to keep the Collateral in good state of
repair (ordinary wear and tear excepted) and will use commercially reasonable efforts not to waste
or destroy the same or any part thereof other than ordinary course discarding of items no longer
used or useful in our business; (f) we will not without your prior written consent, sell, exchange,
lease or otherwise dispose of the Collateral or any of our rights therein, whether by sale, lease
or otherwise, except for (I) the sale of inventory in the ordinary course of business and (II) the
disposition or transfer in the ordinary course of business during any fiscal year of obsolete and
worn-out equipment having an aggregate fair market value of not more than $37,500 and only to the
extent that (i) the proceeds of any such equipment disposition are used to acquire replacement
equipment which is subject to your first

2

 

priority security interest or are used to repay Obligations or to pay general corporate
expenses, (ii) following the occurrence of an Event of Default which continues to exist the
proceeds of which are remitted to you to be held as cash collateral for the Obligations, or (iii)
the grant of nonexclusive licenses by the Company of any intellectual property right that is deemed
to be an item of Collateral, including trademarks, trademark applications, tradestyles, patents,
patent applications, copyrights, copyright applications and other intellectual property rights, to
customers, suppliers or contract manufactures in the ordinary course of the Company’s business; (g)
we will name you as an additional insured and lender’s loss payee under all of our policies of
insurance which shall insure, without limitation, the Collateral against such losses, damages and
hazards as you shall reasonably require and in amounts and under policies issued by insurers
reasonably acceptable to you. If we fail to do so, you may procure such insurance and the cost
thereof shall constitute Obligations; (h) we will at all reasonable times and upon reasonable
advance notice (except that such notice shall not be required in the event you reasonably believe
such access is necessary to preserve or protect the Collateral and/or during the continuance of an
Event of Default) allow you or your representatives free access to and the right of inspection of
the Collateral provided that you do not unreasonably interfere with our normal business operations;
(i) we hereby indemnify and save you harmless from all loss, costs, damage, liability and/or
expense, including reasonable attorneys’ fees, that you may sustain or incur to enforce payment,
performance or fulfillment of any of the Obligations and/or in the enforcement of this Agreement or
in the prosecution or defense of any action or proceeding either against you or us concerning any
matter growing out of or in connection with this Agreement, and/or any of the Obligations and/or
any of the Collateral, except to the extent caused by your own gross negligence or willful
misconduct; (j) with respect to all accounts arising out of contracts between us and the United
States of America, or any state, or any department, agency or instrumentality of any of them (each,
a “Government Contract”), we will, upon your request, comply with any governmental notice or
approval requirements, including, without limitation, compliance with the Federal Assignment of
Claims Act, (k) each account shall conform to the following criteria: (i) shipment of the
merchandise or rendition of services has been completed, (ii) merchandise or services shall not
have been rejected or disputed by the account debtor and there shall not have been asserted any
offset, defense or counterclaim (other than any such rejections, disputes, offsets, defenses or
counterclaims which are asserted in the ordinary course of business), and (iii) each such account
shall be a good and valid account representing an undisputed bona fide indebtedness (other than in
connection with any such dispute arising in the ordinary course of business) incurred by the
account debtor liable therefor, for a fixed sum as set forth in the invoice relating thereto with
respect to an unconditional sale and delivery upon the stated terms of goods sold by us, or work,
labor and/or services rendered by us, as applicable, (l) all commercial tort claims (as defined in
the Uniform Commercial Code as in effect in the State of New York) held by any Assignor are set
forth on Schedule A to this Agreement, and (m) each Assignor hereby agrees that it shall
promptly, and in any event within five (5) Business Days after the same is acquired by it, notify
Laurus of any commercial tort claim acquired by it and unless otherwise consented to in writing by
Laurus, it shall enter into a supplement to this Agreement granting to Laurus a security interest
in such commercial tort claim, securing the Obligations.

     We hereby further covenant that (i) on or prior to the thirtieth (30th) day
following the Closing Date (or such later date as may be agreed by Laurus in writing), each
Assignor will (x)

3

 

irrevocably direct all of its then present Account Debtors (as defined below) and other
persons or entities obligated to make payments constituting Collateral to make such payments
directly to the lockboxes maintained by such Assignor (the “Lockboxes”) with SunTrust Bank or such
other financial institution accepted by Laurus in writing as may be selected by the Company (the
“Lockbox Bank”) (each such direction pursuant to this clause (x), a “Direction Notice”) and (y)
provide Laurus with copies of each Direction Notice, each of which shall be agreed to and
acknowledged by the respective Account Debtor, and (ii) thereafter send a Direction Notice to each
subsequent Account Debtor or other person or entity who or which is obligated to make payments
constituting Collateral, and provide Laurus with copies of each such Direction Notice, each of
which shall be agreed to and acknowledged by such future Account Debtor. The Lockbox Bank shall
agree to deposit the proceeds of such payments immediately upon receipt thereof in that certain
deposit account maintained at the Lockbox Bank, or such other deposit account accepted by Laurus in
writing (the “Lockbox Deposit Account”). On or prior to the thirtieth (30th) day
following the Closing Date (or such later date as may be agreed by Laurus in writing), each
Assignor shall and shall cause the Lockbox Bank to enter into documentation reasonably acceptable
to Laurus pursuant to which the Lockbox Bank agrees to, following not less than five (5) nor more
than ten (10) days notification by Laurus to the Lockbox Bank and each Assignor (which notification
shall contain a sworn statement signed by a principal officer of Laurus, stating either that (i) an
Event of Default has occurred under Section 3.1, Section 3.4 or Section 3.6 of the Non-Convertible
Note, and that because of such Event of Default, the Non-Convertible Note has been accelerated, or
(ii) an Event of Default has occurred under Section 4.1, Section 4.4 or Section 4.6 of the
Convertible Note, and that because of such Event of Default, the Convertible Note has been
accelerated), to comply only with the instructions or other directions of Laurus concerning the
Lockbox and the Lockbox Deposit Account. Laurus shall only have the right to give such
notification, and such notification shall only be effective, if an Event of Default has occurred
under Section 3.1, Section 3.4 or Section 3.6 of the Non-Convertible Note or under Section 4.1,
Section 4.4 or Section 4.6 of the Convertible Note. All of each Assignor’s invoices, account
statements and other written or oral communications directing, instructing, demanding or requesting
payment of any Account (as hereinafter defined) of any such Assignor or any other amount
constituting Collateral shall conspicuously direct that all payments be made to the Lockbox or such
other address as Laurus may direct in writing. If, notwithstanding the instructions to Account
Debtors, any Assignor receives any payments at any time during any period in which an Event of
Default exists under Section 3.1, Section 3.4 or Section 3.6 of the Non-Convertible Note or under
Section 4.1, Section 4.4 or Section 4.6 of the Convertible Note, such Assignor shall immediately
remit such payments to the Lockbox Deposit Account in their original form with all necessary
endorsements. Until so remitted, the Assignors shall hold all such payments received by it during
any period in which an Event of Default exists under Section 3.1, Section 3.4 or Section 3.6 of the
Non-Convertible Note or under Section 4.1, Section 4.4 or Section 4.6 of the Convertible Note in
trust for and as the property of Laurus and shall not commingle such payments with any of its other
funds or property. For the purpose of this Master Security Agreement, (1) “Accounts” shall mean
all “accounts”, as such term is defined in the UCC as in effect in the State of New York on the
date hereof, now owned or hereafter acquired by any Assignor and (2) “Account Debtor” shall mean
any person or entity who is or may be obligated with respect to, or on account of, an Account.

4

 

     4. Following the occurrence and during the continuance of an Event of Default, you shall have
the right to instruct all of our account debtors to remit payments on all accounts in accordance
with your express written instructions. If, despite such instructions, we shall receive any
payments with respect to accounts, we shall receive such payments in trust for your benefit, shall
segregate such payments from our other funds and shall deliver or cause to be delivered to you, in
the same form as so received with all necessary endorsements, all such payments as soon as
practicable, but in no event later than five (5) business days after our receipt thereof.
Following the occurrence and during the continuation of an Event of Default, you shall have full
power and authority to collect each account, through legal action or otherwise, and may settle,
compromise, or assign (in whole or in part) the claim for any account, or otherwise exercise any
other right now existing or hereafter arising with respect to any account if such action is
commercially reasonable and will expedite collection.

     5. We shall be in default under this Agreement upon the happening of any of the following
events or conditions, each such event or condition being an “Event of Default” (a) the occurrence
of any Event of Default under and as defined in any Document which is not cured within any
applicable notice, cure, grace or similar period; (b) any warranty, representation or statement
made or furnished to you by any of us or on our behalf was false in any material respect when made
or furnished; (c) any of us shall breach in any material respect any provision of this Agreement,
as the same may be amended, modified and supplemented from time to time, and such breach shall not
have been cured during any applicable notice, cure, grace or similar period; (d) except to the
extent otherwise expressly permitted hereunder, the loss, theft, damage, destruction, sale or
encumbrance to or of any of the Collateral or the making of any levy, seizure or attachment thereof
or thereon except to the extent (i) said levy, seizure or attachment does not secure indebtedness
in excess of $100,000 and such levy, seizure or attachment has not been removed or otherwise
released within 10 business days of the creation or the assertion thereof or (ii) (I) with respect
to any loss, theft, destruction or damage to or of any of the Collateral (collectively, a “Loss”)
in an aggregate amount equal to $1,000,000 or more on a combined basis for all Collateral, you
shall have received within ninety (90) days of the occurrence of such Loss insurance proceeds in an
amount not less than ninety percent (90%) of the fair market value of the Collateral subject to
such Loss and (II) with respect to any Loss in an aggregate amount less than $1,000,000 on a
combined basis for all Collateral, you shall have repaired, replaced or otherwise restored the
Collateral subject to such Loss within ninety (90) days of the occurrence of such Loss; (e) any of
us shall become insolvent, cease operations, dissolve, terminate our business existence, make an
assignment for the benefit of creditors, or suffer the appointment of a receiver, trustee,
liquidator or custodian of all or any part of our property (provided, however, that as to the
Subsidiaries and only in connection with any cessation of operations, dissolution, termination of
our business existence or liquidation that, in each case, is not related to any bankruptcy or
similar proceeding, in regard to such Subsidiary, any such cessation of operations, dissolution,
termination of our business existence or liquidation shall neither be nor constitute an Event of
Default hereunder if such Subsidiary shall transfer all of its assets and liabilities either to the
Company or to another Subsidiary that is a party to this Master Security Agreement, the Stock
Pledge Agreement and the Subsidiary Guaranty; provided further that, notwithstanding the foregoing,
a Core Company shall not be permitted to transfer any of its assets to a Non-Core Company without
the consent of the Purchaser); (f) any proceedings under any bankruptcy or

5

 

insolvency law shall be commenced by or against any of us and if commenced against us shall
not be dismissed within 60 days; (g) any of us shall repudiate or purport to revoke any of our
obligations under any Document made by any of us in favor of you after expiration of applicable
cure, notice, grace or similar period; or (h) if any Core Company shall at any time transfer in any
manner whatsoever, including by way of merger, consolidation or otherwise, any of its assets to a
Non-Core Company. For purposes of this Section 5, the following terms shall have the following
meanings: (1) “Core Company” shall mean any one or more of the following companies: Numerex Corp.
(a Pennsylvania corporation), CellemetryXG Customer Services, LLC (a Georgia limited liability
company), Numerex Solutions, LLC (a Delaware limited liability company), Cellemetry LLC (a Delaware
limited liability company), Numerex Investment Corp. (a Delaware corporation), Mobileguardian LLC
(a Delaware limited liability company), Uplink Security, Inc. (a Georgia corporation), and Airdesk
LLC (a Georgia limited liability company); and (2) “Non-Core Company” shall mean any one or more of
the following companies: Digilog Inc. (a Pennsylvania corporation), DCX Systems Inc. (a
Pennsylvania corporation), Broadband Networks, Inc. (a Delaware corporation), and BNI Solutions LLC
(a Delaware limited liability company). You hereby acknowledge that you will not unreasonably
withhold your consent to any non-bankruptcy internal corporate reorganization or restructuring (a)
by and among Core Company on the one hand and another Core Company on the other hand and (b) by and
among a Non-Core Company on the one hand and another Non-Core Company on the other hand.

     6. Upon the occurrence of any Event of Default and for so long as such Event of Default is
continuing, you may declare all Obligations immediately due and payable and you shall have the
remedies of a secured party provided in the Uniform Commercial Code as in effect in the State of
New York, this Agreement and other applicable law. Upon the occurrence of any Event of Default and
for so long as such Event of Default is continuing, you will have the right to take possession of
the Collateral and to maintain such possession on our premises or to remove the Collateral or any
part thereof to such other premises as you may desire. Upon your request (following the occurrence
of an Event of Default for so long as such Event of Default is continuing), we shall assemble the
Collateral and make it available to you at a place designated by you. If any notification of
intended disposition of any Collateral is required by law, such notification, if mailed, shall be
deemed properly and reasonably given if mailed at least ten (10) days before such disposition,
postage prepaid, addressed to us either at our address shown herein or at any other address for
such notice as we may provide you from time to time in writing pursuant to Section 11 hereof. Any
proceeds of any disposition of any of the Collateral shall be applied by you in the following order
to the extent of any such proceeds: first, to the payment of all reasonable expenses in connection
with the sale of the Collateral, including reasonable attorneys’ fees and other legal expenses and
disbursements and the reasonable expense of retaking, holding, preparing for sale, selling, and the
like, second, toward the payment of the Obligations in such order of application as you may elect
subject to the terms of the Documents, and third, to us or as otherwise required by the Uniform
Commercial Code or as a court of competent jurisdiction may direct.

     7. If we default in the performance or fulfillment of any of the terms, conditions, promises,
covenants, provisions or warranties on our part to be performed or fulfilled under or

6

 

pursuant to this Agreement, you may, at your option without waiving your right to enforce this
Agreement according to its terms, at any time after five (5) days’ written notice to Numerex Corp.,
as our agent (provided that no such notice shall be required in the event prompt action is
necessary to preserve or protect the Collateral), perform or fulfill the same or cause the
performance or fulfillment of the same for our account and at our sole cost and expense, and the
reasonable out-of-pocket cost and expense thereof (including reasonable attorneys’ fees) shall be
added to the Obligations and shall be payable on demand with interest thereon at the highest
interest rate under the Documents.

     8. a. Notwithstanding anything to the contrary contained in this Master Security Agreement,
any other Related Agreement or the Securities Purchase Agreement, and subject to the following
provisions of this Section 8.a, any Non-Core Company may sell all or any part of its assets with
the prior written consent of Laurus. So long as such Non-Core Company agrees to use all of such
net sales proceeds received by it in connection with such sale to pay down the Obligations, then
Laurus shall not, and shall not have the right to, unreasonably withhold, delay or condition its
consent. In the event that a Non-Core Company that seeks to sell all or any part of its assets has
delivered written request to Laurus seeking Laurus’ consent (and such notice contains a covenant
that all of such net sales proceeds received by such Non-Core Company in connection with such sale
shall be applied as described in the immediately preceding sentence of this Section 8.a), and
Laurus has failed to respond to such written request within five (5) business days after receipt
thereof, then Laurus’ consent shall be deemed to have been given. Such Non-Core Company shall
deliver to Laurus the net sales proceeds received by such Non-Core Company in connection with such
sale no later than three (3) business days after receipt thereof.

     b. Notwithstanding anything to the contrary contained in this Master Security Agreement, any
other Related Agreement or the Securities Purchase Agreement, and subject to the following
provisions of this Section 8.b, any Core Company may sell all or any part of its assets with the
prior written consent of Laurus. So long as (a) such Core Company agrees to use all of such net
sales proceeds received by it in connection with such sale to pay down the Obligations and (b) the
net sales proceeds to be received by such Core Company in connection with such sale are sufficient
to satisfy the Obligations in full, then Laurus shall not, and shall not have the right to,
unreasonably withhold, delay or condition its consent. In the event that a Core Company that seeks
to sell all or any part of its assets has delivered written request to Laurus seeking Laurus’
consent (and such notice contains a representation that the net sales proceeds to be received by
such Core Company in connection with such sale are sufficient to satisfy the Obligations in full,
and a covenant that all of such net sales proceeds shall be applied as described in the immediately
preceding sentence of this Section 8.b), and Laurus has failed to respond to such written request
within five (5) business days after receipt thereof, then Laurus’ consent shall be deemed to have
been given and payments must still be made in such case. Such Core Company shall deliver to Laurus
the net sales proceeds received by such Core Company in connection with such sale no later than
three (3) business days after receipt thereof.

     9. We appoint you, any of your officers, employees or any other person or entity whom you may
designate as our attorney, with power to execute such documents in our behalf

7

 

and to supply any omitted information and correct patent errors in any documents executed by
us or on our behalf; to file financing statements against us covering the Collateral; to sign our
name on public records only if and to the extent necessary to evidence, perfect and/or preserve the
security interest created pursuant to this Agreement; and to take all such other reasonable actions
that are necessary to carry out this Agreement. We hereby ratify and approve all acts of the
attorney and neither you nor the attorney will be liable for any acts of commission or omission,
nor for any error of judgment or mistake of fact or law other than gross negligence or willful
misconduct. This power being coupled with an interest, is irrevocable so long as any Obligations
remains unpaid.

     10. No delay or failure on your part in exercising any right, privilege or option hereunder
shall operate as a waiver of such or of any other right, privilege, remedy or option, and no waiver
whatever shall be valid unless in writing, signed by you and then only to the extent therein set
forth, and no waiver by you of any default shall operate as a waiver of any other default or of the
same default on a future occasion. You shall have the right to enforce any one or more of the
remedies available to you, successively, alternately or concurrently. We agree to join with you in
executing financing statements or other instruments to the extent required by the Uniform
Commercial Code in form satisfactory to you and in executing such other documents or instruments as
may be reasonably required or deemed necessary by you for purposes of effecting or continuing your
security interest in the Collateral.

     11. This Agreement cannot be changed or terminated orally, and shall be governed by and
construed in accordance with the laws of the State of New York without 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. Any action brought by either party against the other concerning the transactions
contemplated by this Agreement shall be brought only in any state or federal court sitting in the
Borough of Manhattan, City of New York; provided that nothing contained in this Agreement shall be
deemed to preclude you from bringing suit or taking other legal action in any other court of
competent jurisdiction and nothing shall be deemed to preclude us from asserting any defenses or
counterclaims in any such actions. You, we and the individuals executing this Agreement agree to
submit to the jurisdiction of such courts and waive trial by jury. You, we and the individuals
executing this Agreement further consent that any summons, subpoena or other process or papers
(including, without limitation, any notice or motion or other application to either of the
aforementioned courts or a judge thereof) or any notice in connection with any proceedings
hereunder, may be served by registered or certified mail, return receipt requested, or by personal
service provided a reasonable time for appearance is permitted, or in such other manner as may be
permissible under the rules of said courts. You, we and the individuals executing this Agreement
waive any objection to jurisdiction and venue of any action instituted hereon in the Supreme Court
for the State of New York, County of New York or the United States District Court for the Southern
District of New York and shall not assert any defense based on lack of jurisdiction or venue or
based upon forum non conveniens in any action brought in either such court.

8

 

     12. All notices from you to us shall be sufficiently given if mailed or delivered to us at our
address set forth below unless you shall have received from us in writing another address for
notices. Copies of all notices to us shall also be sent to: Legal Counsel, Numerex Corp., 1600
Parkwood Circle SE, Suite 200, Atlanta, Georgia 30339, facsimile: (770) 693-5951, and Richard
Baltz, Esq., Arnold & Porter LLP, 555 12th Street, N.W., Washington, D.C. 20004,
facsimile: (202) 942-5999.

[SIGNATURE LINES ON FOLLOWING PAGE]

9

 

[SIGNATURE PAGE NO. 1 TO SECURITY AGREEMENT]

	 	 	 	 	 	 	 
	 	 	Very truly yours,	 	 
	 
	 	 	 	 	 	 
	 	 	NUMEREX CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 1600 Parkwood Circle SE, Suite 500	 	 
	 

	 	 	 	       Atlanta, GA 30339	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Pennsylvania	 	 
	 	 	Org. ID#: PA2569500	 	 
	 
	 	 	 	 	 	 
	 	 	NUMEREX SOLUTIONS LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 1600 Parkwood Circle SE, Suite 500	 	 
	 

	 	 	 	       Atlanta, GA 30339	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Delaware	 	 
	 	 	Org. ID#: DE3361359	 	 
	 
	 	 	 	 	 	 
	 	 	CELLEMETRY LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 1600 Parkwood Circle SE, Suite 500	 	 
	 

	 	 	 	       Atlanta, GA 30339	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Delaware	 	 
	 	 	Org. ID#: DE2896495	 	 

[SIGNATURE LINES CONTINUED ON FOLLOWING PAGE]

10

 

[SIGNATURE PAGE NO. 2 TO SECURITY AGREEMENT]

	 	 	 	 	 	 	 
	 	 	NUMEREX INVESTMENT CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 1600 Parkwood Circle SE, Suite 500	 	 
	 

	 	 	 	       Atlanta, GA 30339	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Delaware	 	 
	 	 	Org. ID#: DE2429448	 	 
	 
	 	 	 	 	 	 
	 	 	BROADBAND NETWORKS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 2820 E. College Ave. Suite B	 	 
	 

	 	 	 	       State College, PA 16801-7548	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Delaware	 	 
	 	 	Org. ID#: DE2280048	 	 
	 
	 	 	 	 	 	 
	 	 	BNI SOLUTIONS LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 2820 E. College Ave. Suite B	 	 
	 

	 	 	 	       State College, PA 16801-7548	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Delaware	 	 
	 	 	Org. ID#: DE3410681	 	 

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[SIGNATURE PAGE NO. 3 TO SECURITY AGREEMENT]

	 	 	 	 	 	 	 
	 	 	DIGILOG INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	Address: 2360 Maryland Road	 	 
	 

	 	 	 	       Willow Grove, PA 19090	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Pennsylvania	 	 
	 	 	Org. ID#: PA2587972	 	 
	 
	 	 	 	 	 	 
	 	 	DCX SYSTEMS INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 2360 Maryland Road	 	 
	 

	 	 	 	       Willow Grove, PA 19090	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Pennsylvania	 	 
	 	 	Org. ID#: PA2608798	 	 

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[SIGNATURE PAGE NO. 4 TO SECURITY AGREEMENT]

	 	 	 	 	 	 	 
	 	 	MOBILEGUARDIAN LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 1600 Parkwood Circle SE, Suite 500	 	 
	 

	 	 	 	       Atlanta, GA 30339	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Delaware	 	 
	 	 	Org. ID#: DE3597074	 	 
	 
	 	 	 	 	 	 
	 	 	UPLINK SECURITY, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address: 1600 Parkwood Circle SE, Suite 500	 	 
	 

	 	 	 	       Atlanta, GA 30339	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Georgia	 	 
	 	 	Org. ID#: GAK823623	 	 
	 
	 	 	 	 	 	 
	 	 	CELLEMETRYXG CUSTOMER SERVICES, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation:	 	 
	 	 	Org. ID#:	 	 

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[SIGNATURE PAGE NO. 5 TO SECURITY AGREEMENT]

	 	 	 	 	 	 	 
	 	 	AIRDESK, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Its:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 	 	Address:	 	 
	 	 	Telephone No.:	 	 
	 	 	Facsimile No.:	 	 
	 
	 	 	 	 	 	 
	 	 	State of Formation: Georgia	 	 

ACKNOWLEDGED:

LAURUS MASTER FUND, LTD.

	 	 	 	 	 
	By:
	 	 	 	 
	Its:

	 	 

	 	 
	 

	 	 

	 	 

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SCHEDULE A

COMMERCIAL TORT CLAIMS

None.

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