Exhibit 99.2
FIRST AMENDMENT TO OPERATING AGREEMENT
OF
CELLEMETRY LLC
A Delaware Limited Liability Company
This FIRST AMENDMENT TO OPERATING AGREEMENT OF CELLEMETRY LLC (this
"Amendment"), effective as of November 1, 1999, is made, executed and agreed to,
for good and valuable consideration, by Numerex Corp., a Pennsylvania
corporation ("Numerex"), BellSouth Wireless, Inc., a Georgia corporation
("BellSouth") and BellSouth Corporation, a Georgia corporation ("BellSouth
Corporation").
RECITALS
A. BellSouth, Numerex and BellSouth Corporation are parties to the
Operating Agreement of Cellemetry LLC, a Delaware limited liability company (the
"Company") dated as of May 15, 1998 (the "Operating Agreement"), pursuant to
which Numerex and BellSouth own, respectively, sixty percent (60%) and forty
percent (40%) of the Percentage Interests of the Company.
B. Simultaneously with the execution and delivery of this Amendment,
each of Numerex and BellSouth intend to execute and deliver that certain
Preferred Stock Purchase Agreement providing for the issuance by Numerex to
BellSouth of 30,000 shares of Series A Preferred Stock of Numerex.
C. The parties to this Amendment acknowledge and confirm that, as of
the date of this Amendment, each of the Class I Member and the Class II Member
has fully performed all of its respective obligations under the Operating
Agreement and otherwise is in compliance with all terms and conditions of the
Operating Agreement.
D. The parties to the Operating Agreement desire to amend the Operating
Agreement on the terms and conditions set forth in this Amendment.
TERMS AND CONDITIONS
1. Incorporation of Recitals. The foregoing Recitals are hereby
incorporated by this reference as if the same were set forth in full herein.
2. Defined Terms.
a. Terms used in this Amendment with initial capital letters
but not separately defined in this Amendment shall have the meanings ascribed to
them in the Operating Agreement.
b. The following additional defined terms are added to Section
1.1 of the Operating Agreement:
"Numerex Loan" shall mean any loan made to the Company by or
on behalf of Numerex pursuant to Section 4.8, including all interest accrued
thereon.
"Prime Rate" shall mean the Prime Rate reported from time to
time in The Wall Street Journal under "Money Rates" as of the relevant date(s),
such rate to change as and when such reported rates change.
3. Business Plan.
a. The defined term "Initial Business Plan" set forth in
Section 1.1 of the Operating Agreement is hereby deleted in its entirety. All
references in the Operating Agreement to the term "Initial Business Plan" are
hereby deleted. All references in the Operating Agreement to the "Initial or
Modified Business Plan" shall hereafter be references to the Modified Business
Plan.
b. The Members hereby adopt the business plan attached hereto
as Exhibit 1 as the business plan for the Company for the period beginning on
November 1, 1999 and continuing through and including November 1, 2004. The term
"Modified Business Plan" as set forth in Section 1.1 of the Operating Agreement
shall mean the business plan attached hereto as Exhibit 1.
4. Class III Shares. Section 3.1.4 of the Operating Agreement is hereby
deleted in its entirety. Pursuant to the terms of the Company's option plan, the
Company granted to certain of its employees (the "Option Holders") options to
acquire Class III Shares. No Class III shares have been issued. Numerex is in
the process of preparing to offer to exchange such options for options to
acquire shares of the capital stock of Numerex. The parties intend that, upon
receiving the consent of the Option Holders to such exchange, there will be no
outstanding rights to acquire Class III Shares. All references in the Operating
Agreement to "Class III Members" and "Class III Shares" are hereby deleted.
5. Capital Accounts; Capital Contributions; Numerex Loans.
a. The defined term "Additional Capital Contribution" set
forth in Section 1.1 of the Operating Agreement is hereby deleted in its
entirety. The term "additional Capital Contribution" shall be substituted for
the term "Additional Capital Contribution" wherever in the Operating Agreement
the term "Additional Capital Contribution" appears.
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b. Simultaneous with the execution and delivery of this
Agreement, Numerex shall transfer to the Company pursuant to the Contribution
Agreement, attached hereto as Exhibit 3, the assets described therein.
c. Section 4.4 of the Operating Agreement is hereby deleted in
its entirety and the following is inserted in lieu thereof:
"4.4 Negative Capital Accounts. No Member shall be required to
pay to the Company or to any other Member any deficit or
negative balance which may exist from time to time in such
Member's Capital Account."
d. Section 4.5 of the Operating Agreement is hereby deleted in
its entirety and the following is inserted in lieu thereof.
"4.5 Company Capital. No Member shall be paid interest on any
Capital Contribution to the Company or on such Member's
Capital Account, and no Member shall have any right to demand
the return of such Member's Capital Contribution (except upon
dissolution of the Company pursuant to Article XIV), or to
cause a partition of the Company's assets."
e. Schedule A to the Operating Agreement is hereby deleted in
its entirety and Schedule A attached hereto is substituted in lieu thereof.
Schedule 4.6(a) to the Operating Agreement is hereby deleted in its entirety and
Schedule 4.6(a) to this Amendment is inserted in lieu thereof. The reference in
Section 3.1.7 to the license described in Schedule 4.6(a)(v) shall be deemed to
be a reference to the license (or sublicense) owned by Uplink relating to
gateway router and radio module technologies. In Section 12.17(iv), the words
"(or the Agreed Value contributed to the Company pursuant to footnote 4 of
Schedule 4.6(a), if applicable)" are hereby deleted.
f. The parties acknowledge and agree that, as of the date of
this Amendment, they have made the respective capital contributions to the
Company set forth on Schedule B attached hereto.
g. As part of its Capital Contributions to the Company
referenced in Section 5.f. of this Amendment, the Class I Member shall,
simultaneously with its execution of this Amendment, execute and deliver to the
Company a promissory note substantially in the form attached hereto as Exhibit 2
(the "Promissory Note"). The Promissory Note shall evidence the Class I Member's
obligation to contribute cash to the Company on the terms and conditions set
forth therein.
h. Section 4.7(a) of the Operating Agreement is hereby deleted
in its entirety and the following is inserted in lieu thereof:
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"(a) Class I Member. Except as provided in Section
4.7(c), the Class I Member shall not be required to
make any additional contribution to the capital of
the Company after October 31, 1999."
i. Section 4.7(b) of the Operating Agreement is hereby deleted
in its entirety and the following is inserted in lieu thereof:
"(b) Class II Member. Except as provided in Section
4.7(c), the Class II Member shall not be required to
make any additional contribution to the capital of
the Company after October 31, 1999."
j. The first sentence of Section 4.7(c) of the Operating
Agreement is hereby deleted and the following is inserted in lieu thereof:
"(c) After November 1, 2002, and after Numerex has
satisfied its obligations set forth in Section 4.8,
the Company shall make calls for any additional
Capital Contributions pursuant to the approved
Budget."
k. A new Section 4.8 is added to the Operating Agreement as
follows:
"4.8 Numerex Loans. In the event that the Board
reasonably determines from time to time that the
Company requires additional cash for operations,
Numerex shall make one or more loans to the Company
in the aggregate amount of up to $5,500,000. If the
Board reasonably determines that the Company requires
additional cash for operations after such time as
Numerex shall have made Numerex Loans in the
aggregate amount of $5,500,000, Numerex shall
thereafter have the right, but not the obligation, to
make one or more additional loans to the Company.
Each loan made by Numerex to the Company after
November 5, 1999, other than any cash advance made
pursuant to the terms of the Promissory Note, shall
constitute a Numerex Loan. Each Numerex Loan shall
bear interest at the Prime Rate commencing on the
date such Numerex Loan was made. Until such time as
the entire principal amount of all Numerex Loans,
including all interest accrued thereon, is repaid to
Numerex in accordance with Section 6.2(a), the
outstanding principal amount of all such Numerex
Loans shall bear interest cumulatively at the Prime
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Rate, compounded quarterly. In no event shall any
distributions be made pursuant to Article VI, until
such time as all Numerex Loans shall have been repaid
in full."
6. Uplink Loan. Section 5.1.5 of the Operating Agreement is hereby
deleted.
7. Distributions. Section 6.2(a) of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(a) As and when determined by the Board, Net Cash
shall be distributed not later than the thirtieth
(30th) day following the close of each quarter to the
Members in proportion to their respective Percentage
Interests in the Company."
8. Actions by Board; Committees; Delegation of Authority and Duties.
a. The last sentence of Section 7.2.1 is deleted, and the
following is inserted in lieu thereof:
"Notwithstanding anything in this Agreement to the
contrary, the following actions shall require the
prior approval of at least one Class II Manager,
provided, that, in the case of Sections 7.2.1(c),
(d), (f) and (q) below, the consent of the Class II
Manager shall not be unreasonably withheld,
conditioned or delayed."
b. Section 7.2.1(k) is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"(k) adopting a new business plan or making any
material change to the Modified Business Plan."
c. Section 7.2.1(n) is hereby deleted.
d. Section 7.2.1(q) is hereby deleted in its entirety and the
following is inserted in lieu thereof:
"(q) appointment of the independent public
accountants, which, shall be a nationally recognized
accounting firm, or such other accounting firm as is
mutually acceptable to the members."
9. Schedule 12.3 to the Operating Agreement is hereby deleted in its
entirety and Schedule 12.3 attached hereto is inserted in lieu thereof.
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10. Put Rights. Section 12.13 of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"At any time after November 1, 2002, and until
November 1, 2004, the Class II Member may request
(the "Initial Request"), on one occasion, that the
Company undertake an initial public offering ("IPO").
In addition, after November 1, 2004, the Class II
Member may request (the "Second Request"), on one
occasion, that the Company undertake an IPO. Such
request(s) shall be presented to the Company and be
in the form of a letter of intent or similar proposal
from an investment banking firm (and approved by that
firm's commitment committee(s) for IPO selection)
with a national reputation which expresses a
willingness to conduct an IPO on the Company's behalf
as a firm commitment underwriting, which would
include shares to be issued by the Company and sold
by Class I and Class II Members as selling
shareholders. In the event that the Class I Member
elects not to proceed with the IPO pursuant to the
First Request or the Second Request, for a period of
six months commencing on the date of such request,
the Class II Member shall have the right to require
that the Class I Member purchase all or a portion of
its Outstanding Shares by delivering notice to the
Class I Member of the exercise of such right ("Put
Notice"). In the event that the Class II Member
timely delivers the Put Notice, the Class I Member
shall purchase for cash the Class II Member's
Outstanding Shares specified in the Put Notice, for a
price equal to (a) the Fair Market Value multiplied
by (b) a fraction, the numerator of which is the
number of Class II Shares subject to the Put Notice
and the denominator of which is the total number of
Outstanding Shares, provided, that, in no event shall
the aggregate purchase price paid by the Class I
Member for all of the outstanding Class II Shares
exceed $17.00 million. If the Class I Member
purchases some or all of the Class II Shares pursuant
to this Section 12.13 and the Company subsequently
completes an IPO within one year of such purchase,
then the Class I Member shall pay to the Class II
Member an amount equal to the difference, if any,
between the net price per share realized by the
Company in the IPO and the price
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per share paid by the Class I Member to the Class II
Member, multiplied by the number of shares purchased
by the Class I Member from the Class II Member
pursuant to this Section 12.13.
11. Failure to Achieve Goals. The first paragraph of Section 12.17 is
hereby deleted and the following is inserted in lieu thereof:
"If the Company either (A) has not achieved
$9,780,500 of "service revenue cumulative" (as set
forth on Table 8 of the Modified Business Plan) by
November 1, 2002, (B) has losses in excess of
$13,648,750 of "income before taxation cumulative"
(as set forth on Table 8 of the Modified Business
Plan) by November 1, 2002, or (C) becomes insolvent
or bankrupt at any time during the first three years
after the date hereof, then, at Numerex's election,
BellSouth may, as its sole remedy, either (a) put all
of the outstanding Class II Shares to the Class I
Member for $17.00 million, or (b) take the actions
set forth below."
12. Third Party Investment. A new Section 12.21 is hereby added to the
Operating Agreement as follows:
"12.21 Third Party Investment. The Board may after
the date of this Amendment seek to identify one or
more third parties expressing an interest in making a
strategic investment (the "Third Party Investment")
of new capital in the Company in exchange for Shares
representing up to fifteen percent (15%) of the
Percentage Interests, and to negotiate with such
party or parties the terms of such Third Party
Investment. Notwithstanding anything to the contrary
set forth in Section 7.2.1 of the Operating
Agreement, BellSouth shall not unreasonably withhold,
condition or delay its consent to any Third Party
Investment proposed by the Board (whether or not the
proposed investor is a Prohibited Transferee) unless
BellSouth's Percentage Interest would be less than
thirty-four percent (34%) after giving effect to such
Third Party Investment."
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13. Liquidation and Termination.
a. Section 14.2(c) of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(c) the liquidator shall pay, satisfy or discharge
from Company funds all of the debts, liabilities and
obligations of the Company (including, without
limitation, all Numerex Loans and all expenses
incurred in liquidation) or otherwise make adequate
provision for payment and discharge thereof
(including, without limitation, the establishment of
a cash escrow fund for contingent liabilities in such
amount and for such term as the liquidator may
reasonably determine."
b. Section 14.2(e)(iii) of the Operating Agreement is hereby
deleted in its entirety and the following is inserted in lieu thereof:
"(iii) after allocations of Profits and Losses have
been made pursuant to Article VI to pay to the
Members the amounts of the remaining positive
balances in their Capital Accounts (determined as of
the date of such distribution);"
14. Deficit Capital Accounts. Section 14.3 of the Operating Agreement
is hereby deleted in its entirety and the following is inserted in lieu thereof:
"14.3 Deficit Capital Accounts. No Member shall have
any obligation to restore a deficit balance, if any,
in its Capital Account in the event of the occurrence
of an event of dissolution pursuant to Section 14.1."
15. Notices. The reference to Blank Rome Xxxxxxx & XxXxxxxx LLP and the
accompanying address is hereby deleted and the following is inserted in lieu
thereof:
"Xxxxxx & Xxxxxx
000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attn: Xxxxxxx X. Xxxxx, Esq."
The address for notices for BellSouth Wireless, Inc. set forth in the
Operating Agreement is hereby deleted and the following is inserted in lieu
thereof:
BellSouth Wireless, Inc.
Suite 7H
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxx X. Xxxxxxx
Fax: 000-000-0000
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16. Binding Effect. Subject to the restrictions set forth in this
Amendment, this Amendment is binding on and inures to the benefit of the parties
and their respective heirs, legal representatives, successors, and permitted
assigns.
17. Governing Law; Severability. THIS AMENDMENT IS GOVERNED BY AND
SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE,
EXCLUDING ANY CONFLICT-OF-LAWS RULE OR PRINCIPLE THAT MIGHT REFER THE GOVERNANCE
OR THE CONSTRUCTION OF THIS AMENDMENT TO THE LAWS OF ANOTHER JURISDICTION. In
the event of a direct conflict between the provisions of this Amendment and any
provision of the Certificate or any mandatory provision of the Act or (to the
extent such statute is incorporated into the Act, the Corporation Act), the
applicable provision of the Certificate, the Act or the Corporation Act shall
control. If any provision of this Amendment or the application thereof to any
Person or circumstance is held invalid or unenforceable to any extent, the
remainder of this Amendment and the application of that provision to other
Persons or circumstances is not affected thereby and that provision shall be
enforced to the greatest extent permitted by law.
18. Further Assurances. In connection with this Amendment and the
transactions contemplated hereby, each party hereto shall execute and deliver
any additional documents and instruments and perform any additional acts that
may be necessary or appropriate to effectuate and perform the provisions of this
Amendment and those transactions.
19. Neutral Construction. The parties have negotiated this Amendment
and all of the terms and conditions contained in this Amendment in good faith
and at arms' length, and each party has been represented by counsel during such
negotiations. No term, condition, or provision contained in this Amendment shall
be construed against any party or in favor of any party (i) because such party
or such party's counsel drafted, revised, commented upon, or did not comment
upon, such term, condition, or provision; or (ii) because of any presumption as
to any inequality of bargaining power between or among the parties. Furthermore,
all terms, conditions, and provisions contained in this Amendment shall be
construed and interpreted in a manner which is consistent with all other terms,
conditions, and provisions contained in this Amendment.
20. Arbitration. All claims, demands, disputes, controversies,
differences, or misunderstandings between the parties arising out of, or by
virtue of, this Amendment shall be submitted to and determined by arbitration in
accordance with this Section. In the event of such a claim, demand, dispute,
controversy, difference, or misunderstanding, Numerex on the one hand, and
BellSouth and BellSouth Corporation on the other hand, shall each select one
arbitrator and shall together select a third arbitrator who is neutral and
unbiased, and who shall serve as the chairman of the panel. If the parties are
unable to agree upon the third arbitrator, or if one of the parties is unable to
or fails to select an arbitrator in accordance with this Section, the American
Arbitration Association ("AAA") shall be designated by either party to appoint
such arbitrator(s) to arbitrate the
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matter in accordance with this Section. The matter shall be arbitrated under the
rules of the AAA applicable to commercial arbitrations then obtaining, such
arbitration to be held in Washington, D.C. At any time before a decision of the
arbitration panel has been rendered, the parties may resolve the dispute by
settlement. The decision of a majority of arbitrator(s) shall be the award of
the panel of arbitrators and shall be made in writing setting forth the award,
the reasons for the decision and such award shall be binding and conclusive on
all parties, shall not be appealable and may include a finding for payment of
the costs of such arbitration. Judgment of a court of competent jurisdiction may
be entered upon the award and may be enforced as such in accordance with the
provisions of the award. This Amendment to arbitrate is specifically enforceable
by the parties to this Amendment.
21. Counterparts and Effectiveness. This Amendment may be executed in
several counterparts, each of which shall be treated as originals for all
purposes, and all so executed shall constitute one agreement, binding on all of
the parties hereto, notwithstanding that all the parties are not signatory to
the original or the same counterpart. The execution of this Amendment by
facsimile signature shall be sufficient for all purposes and shall be binding on
any party who so executes.
22. Ratification. Except as modified hereby, the Operating Agreement,
and its terms and provisions, are hereby ratified and affirmed, and shall remain
in full force and effect.
23. Administrative Matters. The parties hereby acknowledge and confirm
the following, which shall constitute a separate agreement and not an amendment
to the Operating Agreement:
a. Xxxxxx Xxx and Xxxxx XxXxx have resigned as Class I
Managers and officers of the Company. The Class I Member has designated Xxxxxx
X. Xxxx and Xxxxxxx Xxxxxxx as the successor Class I Managers.
b. The Chief Operating Officer of the Company is Xxxxxxx
Xxxxxxx. The Company has agreed to pay Xx. Xxxxxxx an annual salary of $150,000.
c. The Vice President - Finance of the Company is Xxxxx Xxxxx.
The Company has agreed to pay Xx. Xxxxx an annual salary of $120,000.
d. The Company's independent accountant is Xxxxx Xxxxxxxx,
LLP.
IN WITNESS WHEREOF, following adoption of this Amendment by the Board,
the Members and the other parties have executed this Amendment as of the date
first set forth above.
BellSouth Wireless, Inc. (the Class II Member)
By: \s\ Xxxx X. Xxxxxxx
----------------------------
Name: Xxxx X. Xxxxxxx
Title: Vice President
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Numerex Corp. (the Class I Member)
By: \s\ Xxxxxxxx X. Xxxxxxxxxx
----------------------------
Name: Xxxxxxxx X. Xxxxxxxxxx
Title: Chief Operating Officer
Cellemetry LLC (the Company)
By: \s\ Xxxxx Xxxxx
-----------------------------
Name: Xxxxx Xxxxx
Title: Vice President, Finance
Schedule A
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Additional
Capital Capital Class I Class II Percentage
Members' Names and Addresses Contributions Contributions Shares Shares Interest
-------------------------------------------------------------------------------------------------------
Numerex Corp. $23,000,000 $0 540,000 60.00%
000 Xxxx Xxxxx Xxxxxxxxx Xxxxxx,
Xxxxx 000,
Xxxxx 23 and Xxxxxxxx Xxxx,
Xxxx Xxxxxxxxxxxx, XX 00000-0000
-------------------------------------------------------------------------------------------------------
BellSouth Wireless, Inc., $15,333,333 $0 360,000 40.00%
Xxxxx 000
0000 Xxxxxxxxx Xxxxxx
Xxxxxxx, XX 00000
-------------------------------------------------------------------------------------------------------
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Schedule B
Capital Contributions of Class I Member
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Agreed Value of Capital
Capital Contribution Contribution
-------------------------------------------------------------------------------------------------------
1. Previous contributions by the Class I Member to the Capital of $20,189,000
the Company, including contribution of Uplink shares pursuant
to the Contribution Agreement
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2. Termination of all outstanding options to acquire Class III $1,533,320
Shares in exchange for issuance of options to acquire shares of
the capital stock of Numerex
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3. Obligations of the Class I Member under the Promissory Note $1,228,157
-------------------------------------------------------------------------------------------------------
4. Cash contributed by Numerex pursuant to the terms of the $49,523
Contribution Agreement
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Total $23,000,000
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