Exhibit 99.1
June 11, 1999
BellSouth Wireless, Inc.
0000 Xxxxxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xx. Xxxx X. X. Xxxxxxxx
Xx. Xxxx X. Xxxxxxx
Gentlemen:
This non-binding memorandum of understanding expresses the intent of
NumereX Corporation ("NMRX") and BellSouth Wireless, Inc. ("BLS") to restructure
certain economic and other provisions of the Operating Agreement (the "Operating
Agreement") of Cellemetry LLC ("Cellemetry"), a Delaware limited liability
company, in order to better position Cellemetry for a mutually beneficial
future. Set forth below are the principal understandings and business terms
between NMRX and BLS which will be embodied in a definitive amendment to the
Operating Agreement and other appropriate documents:
1. NMRX and BLS will adopt a mutually acceptable revised 5 year
business plan for Cellemetry beginning as of May 15, 1999 through May 15, 2004.
All respective rights between the parties under Sections 12.13 and 12.17 of the
Operating Agreement that presently trigger 3 years from May 15, 1998 will be
revised to trigger May 15, 2002 and all financial performance tests will be
amended to reflect the revised business plan. Section 12.17(a) of the Cellemetry
Operating Agreement will be revised to reflect that the price at which BLS may
put its ownership interest to NMRX will be $17 million with no interest
compounding thereon.
2. BLS will be issued $3 million of 8% Series A Convertible, Redeemable
Preferred Stock of NMRX (the "Preferred Stock"). The Preferred Stock will be
convertible into 625,000 shares of NMRX common stock beginning the earlier of
(i) May 15, 2002, if, at any time prior to the conversion date, the average
reported closing sales price for the NMRX common stock over 20 trading days in
any 60 day period equals or exceeds $7.00 or (ii) May 15, 2003.
3. Cellemetry will seek to find either a foreign carrier or strategic
investor ("Third Party Investment") to invest new capital in exchange for up to
15% of Cellemetry. In connection with any such Third Party Investment, NMRX's
ownership interest in Cellemetry will not be diluted below 51% and BLS will not
be diluted below 34%. The provisions contained in Section 7.2.1 of the Operating
Agreement, to the extent applicable to the Third Party Investment, except as to
price, and other provisions to be discussed, will be revised to reflect that
BLS's consent to the actions described therein will not be unreasonably
withheld.
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4. From and including May 15, 1999, NMRX will be under no obligation to
make any additional capital contributions to Cellemetry. To the extent NMRX does
make additional capital contributions to Cellemetry prior to the Third Party
Investment, BLS's interest in profits and losses will not be reduced by such
contributions, but instead such contributions will be credited solely to NMRX's
capital account.
5. BLS and NMRX will both use their respective commercially reasonable
best efforts to negotiate an amendment to the Operating Agreement and to
negotiate documents relating to the Preferred Stock consistent with Exhibit A
attached hereto that include the above understandings and terms; such agreement
and such other documents as deemed necessary by BLS and NMRX to be executed as
soon as practicable.
6. This letter 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 letter to
the laws of another jurisdiction.
Although this letter expresses the intentions of the parties as herein
provided, nothing herein set forth shall be construed as or be deemed to
constitute a legally enforceable or binding right or obligation of any of them,
and no party will be bound, legally or otherwise, until definitive agreements
regarding the matters set forth above are executed by the parties and other
persons who shall be appropriate signatories; provided, however, the covenants
set forth above in paragraphs 5 and 6 shall be binding in consideration of the
efforts of the parties to proceed toward preparation of definitive agreements
respecting the transactions outlined above.
If the foregoing accurately summarizes our mutual understanding, please
sign this letter in the space provided below.
Very truly yours,
NUMEREX CORPORATION
By: /s/ X. Xxxx
-------------------
ACCEPTED AND AGREED:
BELLSOUTH WIRELESS, INC.
By: /s/ Xxxx X. Xxxxxxx
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Exhibit A
NUMEREX CORP.
CONVERTIBLE PREFERRED STOCK
TERM SHEET
The following is a term sheet relating to the placement of up to 30,000
shares at $100 per share Stated Value of Series A Convertible Preferred Stock of
NumereX Corp. The obligations of the Issuer and the Investor to close the
investment described in the Term Sheet are subject in their entirety to
agreement to the terms of the definitive documentation to be executed and
delivered in connection with the placement.
Issuer: NumereX Corp., a Pennsylvania corporation
(the "Company")
Purchaser: BellSouth Wireless, Inc. (the "Investor")
Type of Security: Series A Preferred Stock ("Series A
Preferred")
Stated Value: $100 per share of Series A Preferred
Amount: 30,000 shares of Series A Preferred
Dividends: A cumulative compound dividend on the
Series A Preferred would accrue as of the
closing date at a rate of 8% per annum,
payable on a quarterly basis. Accrued
dividends would be payable (a) if, as and
when determined by the Company's Board of
Directors, (b) upon the liquidation or
winding up of the Company, or (c) upon
redemption of the Series A Preferred. No
dividends may be declared and/or paid on
the Common Stock until all dividends have
been paid in full on the Series A
Preferred. Dividends will cease to accrue
in the event that the Investor converts its
holdings to Common Stock. In the event the
Company fails to pay dividends for two
consecutive quarters, the Investor would be
entitled to designate one Director to serve
on the Company's Board of Directors.
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Liquidation Preference: In the event any liquidation, dissolution
or winding up of the Company, whether
voluntary or involuntary, the Investor
would be entitled to receive, prior and in
preference to any distribution of the
assets or surplus funds of the Company to
the holders of the Common Stock, the amount
of $100 per share of Series A Preferred (as
adjusted for any combinations,
consolidations, stock distributions or
stock dividends with respect to such
shares) plus all unpaid dividends on such
shares for each share of Series A Preferred
then held by the Investor. After the
payment of such liquidation preference, the
Investor would share on a prorata basis
with the holders of all other Capital Stock
of the Company in any available
distributions.
A consolidation or merger of the Company or
sale of all or substantially all of its
assets (as defined in the definitive
agreements) would be deemed, at the
Investor's option, to be a liquidation or
winding up for purposes of the liquidation
preference.
Conversion: Optional Conversion: The Series A
Preferred would be convertible at any time
after May 14, 2003 at the option of the
holder thereof into 625,000 shares of
Common Stock subject to adjustment for
certain events.
Early Conversion: (A) the Series A
Preferred would be convertible at any time
at the option of the Investor into 625,000
shares of Common Stock upon announcement of
a transaction or event resulting in a
Change in Control; (B) For a one year
period beginning May 15, 2002 and ending
May 14, 2003, the Series A Preferred would
be convertible at the option of the
Investor into 625,000 shares of Common
Stock, if at any time from the closing date
to the conversion date, the closing price
of the Company's Common Stock equals or
exceeds an average of $7.00 per share for
20 trading days in any 60 day period.
Change of Control: A "Change in Control" shall be deemed to
occur if:
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1. Any person, excluding employee benefit
plans of the Company, is or becomes the
"beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Securities
Exchange Act), directly or indirectly,
or securities of the Company
representing twenty-five percent (25%)
or more of the combined voting power of
the Company's then outstanding
securities, provided, however, that such
an acquisition of beneficial ownership
representing between twenty-five percent
(25%) and fifty percent (50%),
inclusive, of such voting power shall
not be considered a Change in Control if
the Board approves such acquisition
either prior to or immediately after its
occurrence;
2. The Company consummates a merger,
consolidation, share exchange, or other
reorganization or transaction of the
Company (a "Fundamental Transaction")
with any other corporation, other than a
Fundamental Transaction that results in
the voting securities of the Company
outstanding immediately prior thereto
continuing to represent (either by
remaining outstanding or by being
converted into voting securities of the
surviving entity) at least fifty-one
percent (51%) of the combined voting
power immediately after such Fundamental
Transaction of (x) the Company's
outstanding securities or (y) the
surviving entity's outstanding
securities;
3. The stockholders of the Company approve
a plan of complete liquidation or
winding-up of the Company or an
agreement for the sale or disposition
(in one transaction or a series of
transactions) of all or substantially
all of the Company's assets; or
4. Any event or series of events results in
the Directors on the Board of Directors
who were Directors prior to the event or
series of events (or Directors nominated
by such Directors) cease to constitute a
majority of the Board of Directors or of
any parent of or successor to the
Company.
Notwithstanding anything to the contrary
herein, a divestiture or spin-off of a
subsidiary of the Company other than
Cellemetry LLC shall not by itself
constitute a "Change in Control."
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Antidilution Provisions: In the event of stock splits, stock
dividends, reorganizations, mergers,
consolidations or sale of assets, there
would be a proportional adjustment in the
conversion price and in the number of
shares of Common Stock to be received upon
conversion.
In the event that the Company issues or
sells any Common Stock (at any time after
the original issue date for the Series A
Preferred) or warrants, options,
convertible securities or other rights to
purchase Common Stock ("Common Stock
equivalents") at a price per share less
than the then fair market value of the
Common Stock, the Series A Preferred shares
would be provided anti-dilution protection
in accordance with a formula to be set
forth in the Series A Preferred financing
documentation, provided, however, that such
anti-dilution protection would not apply to
future issuances of shares of Common Stock
pursuant to employee benefit plans adopted
by the Board of Directors.
Board Observer Rights: The Investor would be entitled to designate
a person reasonably acceptable to the
Company to attend Board meetings as an
invitee, who shall have all of the
privileges and benefits of a Director of
the Company except voting rights.
Restrictions and Limitations: Consent of the Series A Preferred, voting
as a separate voting group, would be
required for any actions which:
(i) alter or change the rights,
preferences or privileges of the
Series A Preferred;
(ii) increase the authorized number of
shares of Series A Preferred;
(iii) create any new class or series of
stock which has preference over or is
on parity with the Series A
Preferred; or
(iv) involve a repurchase or other
acquisition of shares of the
Company's stock other than
repurchases of common stock with a
value not in excess of $1.5 million
on an annual basis as long as the
Company is current in its dividends
on the Series A Preferred, and other
than pursuant to redemption
provisions described below under
"Redemption."
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Redemption: At the option of the Company, the Company
may redeem all, but not less than all, of
the Series A Preferred on the dates and the
amounts that follow, plus accrued but
unpaid dividends:
Amount Payable
Date Upon Redemption
---- ---------------
May 15, 2000 $4,225,000
May 15, 2001 $6,350,000
May 15, 2002 $8,980,000
Conditions precedent to Investor's (i) Execution of amendment to the
obligation to invest: Cellemetry LLC Operating Agreement.
(ii) Legal documentation reasonably
satisfactory to Investor and
Investor's counsel.
(iii) Satisfactory completion of due
diligence.
Registration Rights: The Investor would have the following
registration rights with respect to shares
of Company Common Stock to be issued on
conversion at the Company's expense:
(i) Three (3) piggyback rights, except
that the underwriter would have the
right to limit what is sold, so
market price is not adversely
affected.
(ii) One (1) S-3 demand registration (or
short-form registration), if the
Company qualifies for the use of such
short-form registration statements.
(iii) The Company would not grant future
piggyback rights more favorable than
those granted to the Investor without
granting the Investor such more
favorable rights.
(iv) The Company would comply with all
necessary requirements to enable the
Investor and any transferees to sell
shares under Rule 144.
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Purchase Agreement: The purchase of the Company's Series A
Preferred would be made pursuant to a
Series A Convertible Preferred Purchase
Agreement drafted by counsel to the Company
which would be mutually agreeable to the
Company and the Investor. This agreement
would contain, among other things, usual
and customary representations and
warranties of the Company and the Investor,
covenants of the Company and the Investor
reflecting the provisions set forth herein
and other usual and customary covenants,
and appropriate conditions of closing,
including among other things, qualification
of the shares under applicable Blue Sky
laws and the filing of a certificate of
designation to authorize the Series A
Preferred, (such certificate to be drafted
by counsel to the Investor) and an opinion
of counsel. Until the Purchase Agreement is
signed, there would not exist any binding
obligation on the part of either party to
consummate the transaction. This Term Sheet
does not constitute a contractual
commitment of the Company or the Investor
or an obligation of either party to
negotiate with the other.
Intent of Parties: The parties agree to proceed in good faith
to execute and deliver definitive
agreements incorporating the terms outlined
above and such additional terms as are
customary for transactions of the type
described herein. This Term Sheet expresses
the intent of the parties and is not
legally binding on any of them unless and
until such mutually satisfactory definitive
agreements are executed and delivered by
the undersigned.
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