Exhibit 10.1
SECURITIES PURCHASE AGREEMENT
     This Securities Purchase Agreement (this “Agreement”) is made and entered
into as of May 30, 2006, by and between NUMEREX CORP., a Pennsylvania
corporation (the “Company”), and LAURUS MASTER FUND, LTD., a Cayman Islands
company (the “Purchaser”).
Recitals
     Whereas, the Company has authorized the sale to the Purchaser of (i) a
Secured Convertible Term Note in the aggregate principal amount of Five Million
Dollars ($5,000,000) (as amended, restated, modified or supplemented from time
to time, the “Convertible Note”), which Convertible Note is convertible into
shares of the Company’s Class A common stock, no par value per share (the
“Common Stock”) at a fixed conversion price of $7.91 per share of Common Stock
(“Fixed Conversion Price”) and (ii) a Secured Non-Convertible Term Note in the
aggregate principal amount of Five Million Dollars ($5,000,000) (as amended,
restated, modified or supplemented from time to time, the “Non-Convertible Note”
and, together with the Convertible Note, the “Notes” and each, a “Note”);
     Whereas, the Company wishes to issue a warrant to the Purchaser to purchase
up to 241,379 shares (subject to adjustment in accordance with the terms
thereof) of the Company’s Common Stock in connection with Purchaser’s purchase
of the Notes (as amended, restated, modified or supplemented from time to time,
the “Warrant”);
     Whereas, Purchaser desires to purchase the Notes and Warrant on the terms
and conditions set forth herein; and
     Whereas, the Company desires to issue and sell the Notes and Warrant to
Purchaser on the terms and conditions set forth herein.
Agreement
     Now, Therefore, in consideration of the foregoing recitals and the mutual
promises, representations, warranties and covenants hereinafter set forth and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
     1. Agreement to Sell and Purchase. Pursuant and subject to the terms and
conditions set forth in this Agreement, on the Closing Date (as defined in
Section 3), the Company agrees to sell to the Purchaser, and the Purchaser
hereby agrees to purchase from the Company the Notes in accordance with the
terms of the Notes and this Agreement. The Notes and the Warrant purchased on
the Closing Date shall be known as the “Offering.” A form of the Convertible
Note is annexed hereto as Exhibit A-1 and a form of the Non-Convertible Note is
annexed hereto as Exhibit A-2. Each Note will have a Maturity Date (as defined
in the Note) forty eight (48) months from the date of issuance, subject to
acceleration in accordance with the terms thereof. Collectively, the Notes, the
Warrant and Common Stock issuable in payment of

 

--------------------------------------------------------------------------------

 

the Convertible Note, upon conversion of the Convertible Note and upon exercise
of the Warrant, are referred to as the “Securities”.
     2. Fees and Warrant. On the Closing Date:
               (a) The Company will issue and deliver to the Purchaser the
Warrant. pursuant to Section 1 hereof. The Warrant must be delivered on the
Closing Date. A form of Warrant is annexed hereto as Exhibit B. All the
representations, covenants, warranties, undertakings, and indemnification, and
other rights made or granted to or for the benefit of the Purchaser by the
Company are hereby also made and granted in respect of the Warrant and shares of
the Company’s Common Stock issuable upon exercise of the Warrant (the “Warrant
Shares”).
               (b) Upon execution and delivery of this Agreement by the Company
and Purchaser, the Company shall pay to Laurus Capital Management, LLC (“LCM”),
manager of Purchaser a servicing payment in an amount equal to four percent
(4.0%) of the aggregate principal amount of the Notes. The foregoing payment is
referred to herein as the “Servicing Payment”. The parties hereto acknowledge
that the Servicing Payment is a reasonable estimate of the expenses that LCM
will incur in monitoring and servicing the Notes, and the Servicing Payment is
intended to enable LCM to defray such expenses. Such Servicing Payment shall be
deemed fully earned on the Closing Date and shall not be subject to increase,
rebate or proration for any reason.
               (c) The Company shall reimburse the Purchaser for its expenses
(including reasonable legal fees and expenses) incurred in connection with the
entering into of this Agreement and the Related Agreements, and expenses
incurred in connection with the Purchaser’s due diligence review of the Company
and its Subsidiaries (as defined below) and all related matters. Amounts
required to be paid under this Section 2(c) will be paid on the Closing Date and
shall be $25,000.00 for such expenses referred to in this Section 2(c), plus up
to an additional $10,000.00 for the actual and reasonable cost of any required
third-party appraisals and/or extraordinary diligence, subject to the Company’s
prior approval.
               (d) The Servicing Payment and the expenses referred to in the
immediately preceding clause (c) (net of deposits previously paid by the
Company) shall be paid at Closing out of funds held pursuant to a Funds Escrow
Agreement of even date herewith among the Company, Purchaser, and the escrow
agent named therein (the “Funds Escrow Agreement”) and a disbursement letter
(the “Disbursement Letter”).
     3. Closing, Delivery and Payment.
          3.1 Closing. Subject to the terms and conditions herein, the closing
of the transactions contemplated hereby (the “Closing”), shall take place on the
date hereof, at such time, place or manner as the Company and Purchaser may
mutually agree (such date is hereinafter referred to as the “Closing Date”).
          3.2 Delivery. Pursuant to the Funds Escrow Agreement in the form
attached hereto as Exhibit D, at the Closing on the Closing Date, the Company
will deliver to the Purchaser, among other things, the Notes and the Warrant and
the Purchaser will deliver to the

2

--------------------------------------------------------------------------------

 

Company, among other things, the amounts set forth in the Funds Escrow Agreement
by wire transfer of immediately available funds.
     4. Representations and Warranties of the Company.
          The Company hereby represents and warrants to the Purchaser as of the
date of this Agreement as set forth below which disclosures are supplemented by,
and subject to the Company’s filings under the Securities Exchange Act of 1934
and any exhibits thereto (including without limitation any information furnished
under cover of Form 8-K) (collectively, the “Exchange Act Filings”). All
references herein to the Company’s “knowledge” shall refer to the actual
knowledge of any officer of the Company.
          4.1 Organization, Good Standing and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth of Pennsylvania. Each of the Company and its Subsidiaries,
as applicable, has the corporate or limited liability company power and
authority to own and operate its properties and assets, to execute and deliver
(i) this Agreement, (ii) the Notes and the Warrant to be issued in connection
with this Agreement, (iii) the Master Security Agreement relating to the Notes,
dated as of the date hereof, by and among the Company, certain Subsidiaries of
the Company and the Purchaser (as amended, restated, modified or supplemented
from time to time, the “Master Security Agreement”), (iv) the Registration
Rights Agreement relating to the Securities, dated as of the date hereof,
between the Company and the Purchaser (the “Registration Rights Agreement”),
(v) the Subsidiary Guaranty made by certain Subsidiaries of the Company, dated
as of the date hereof (as amended, modified or supplemented from time to time,
the “Subsidiary Guaranty”), (vi) the Pledge Agreement, dated as of the date
hereof, by and among the Company, certain Subsidiaries of the Company and the
Purchaser (as amended, modified or supplemented from time to time, the “Stock
Pledge Agreement”), (vii) the Escrow Agreement, and (viii) all other agreements
expressly referred to herein and expressly related to this Agreement (as each of
the foregoing clauses (ii) through (viii), inclusive, may be amended, restated,
modified and/or supplemented from time to time, collectively, the “Related
Agreements”), to issue and sell the Notes and the shares of Common Stock
issuable upon conversion of the Convertible Note (the “Note Shares”), to issue
and sell the Warrant and the Warrant Shares, and to carry out the provisions of
this Agreement and the Related Agreements and to carry on its business as
presently conducted. The Company is duly qualified and is authorized to do
business and is in good standing as a foreign corporation in all jurisdictions
in which the nature of its activities and of its properties (both owned and
leased) makes such qualification necessary, except for those jurisdictions in
which failure to do so would be reasonably expected not to have a material
adverse effect on the Company, its Subsidiaries or their assets, condition
(financial or otherwise), business or results of operations, taken as a whole (a
“Material Adverse Effect”).
          4.2 Subsidiaries. The Company owns all of the issued and outstanding
capital stock or other equity interests of the business entities listed on
Schedule 4.2 (the “Subsidiaries”). Except as otherwise disclosed on the attached
Schedule 4.2, the Company does not directly or indirectly own or control any
equity security or other interest of any other corporation, limited partnership
or other business entity. In addition, if and to the extent the Company or a
Subsidiary acquires any stock or other equity interest in a corporation or other

3

--------------------------------------------------------------------------------

 

entity after the date of this Agreement, the term “Subsidiary” shall mean and
also include such corporation or other entity if (i) such shares of stock or
other ownership interests having ordinary voting power (other than stock or
other ownership interests having such power only by reason of the happening of a
contingency) of such corporation or other entity that are acquired by the
Company or a Subsidiary have the power to elect a majority of the directors of
such corporation, or other persons or entities performing similar functions for
such person or entity, are owned, directly or indirectly, by such person or
entity or (ii) as a result of such acquisition, the Company or a Subsidiary
owns, directly or indirectly, more than fifty percent (50%) of the shares or
equity interests in such corporation or other entity at such time.
          4.3 Capitalization; Voting Rights.
               (a) The authorized capital stock of the Company, as of the date
hereof, consists of 38,000,000 shares, of which (i) 30,000,000 are shares of
Class A Common Stock, no par value per share, 12,5000,000 shares of which are
issued and outstanding, (ii) 5,000,000 are shares of Class B Common Stock, no
par value per share, none of which are issued and outstanding, and
(iii) 3,000,000 are shares of preferred stock, no par value per share, none of
which are issued and outstanding.
               (b) Except as disclosed on Schedule 4.3 or the Exchange Act
Filings, other than (i) the shares reserved for issuance under the Company’s
stock option plans; and (ii) shares which may be granted pursuant to this
Agreement and the Related Agreements, there are no outstanding options,
warrants, rights (including conversion or preemptive rights and rights of first
refusal), proxy or stockholder agreements, or arrangements or agreements of any
kind for the purchase or acquisition from the Company of any of its securities.
Except as disclosed on Schedule 4.3 or the Exchange Act Filings, neither the
offer, issuance or sale of any of the Notes or Warrant, or the issuance of any
of the Note Shares or Warrant Shares, nor the consummation of any transaction
contemplated hereby will result in a change in the exercise or conversion price
or number of any securities of the Company outstanding pursuant to anti-dilution
or other similar provisions binding upon the Company and contained in or
affecting any such securities.
               (c) All issued and outstanding shares of the Common Stock
(i) have been duly authorized and validly issued and are fully paid and
nonassessable and (ii) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities, except where the failure to
comply with state “blue sky” laws would not be reasonably expected to have a
Material Adverse Effect.
               (d) The rights, preferences, privileges and restrictions of the
shares of the Common Stock are as stated in the Company’s Articles of
Incorporation (the “Charter”) and as provided under applicable law. The Note
Shares and Warrant Shares have been duly and validly reserved for issuance. When
issued in compliance with the provisions of this Agreement and the Company’s
Charter, the Securities will be validly issued, fully paid and nonassessable,
and will be free of any liens or encumbrances; provided, however, that the
Securities may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at the
time a transfer is proposed.

4

--------------------------------------------------------------------------------

 

          4.4 Authorization; Binding Obligations. All corporate action on the
part of the Company, the Subsidiaries and their respective members, managers,
officers and directors, as applicable, necessary for the authorization of this
Agreement and the Related Agreements, the performance of all obligations of the
Company hereunder at the Closing and, the authorization, sale, issuance and
delivery of the Notes and Warrant has been taken or will be taken prior to the
Closing. This Agreement and the Related Agreements, when executed and delivered
and to the extent it is a party thereto, will be valid and binding obligations
of the Company enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other laws
of general application affecting enforcement of creditors’ rights, and
(b) general principles of equity that restrict the availability of equitable or
legal remedies. The sale of the Notes and the subsequent conversion of the
Convertible Note into Note Shares are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly waived
or complied with. The issuance of the Warrant and the subsequent exercise of the
Warrant for Warrant Shares are not and will not be subject to any preemptive
rights or rights of first refusal that have not been properly waived or complied
with.
          4.5 Liabilities. The Company, to its knowledge, has no material
contingent liabilities, except current liabilities incurred in the ordinary
course of business and liabilities disclosed in any Exchange Act Filings.
          4.6 Agreements; Action. Except as set forth on Schedule 4.6 or as
disclosed in any Exchange Act Filings or in connection with the Airdesk
Acquisition (as defined in Section 9.15 below):
               (a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or to its knowledge by which it is bound which may
involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $150,000 (other than obligations of, or payments to, the
Company arising from agreements entered into in the ordinary course of
business), or (ii) the transfer or license of any patent, copyright, trade
secret or other proprietary right to or from the Company (other than licenses
arising from the purchase of “off the shelf” or other standard products or
licenses by the Company as licensor in the ordinary course of the Company’s
business consistent with past practices); (iii) provisions restricting the
development, manufacture or distribution of the Company’s products or services,
or (iv) indemnification by the Company with respect to infringements of
proprietary rights other than as incidental to licenses by the Company as
licensor in the ordinary course of the Company’s business consistent with past
practices.
               (b) Except as disclosed in the Exchange Act Filings, since
December 31, 2005, the Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock or otherwise, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than ordinary course obligations)
individually in excess of $150,000 or, in the case of indebtedness and/or
liabilities individually less than $150,000, in excess of $250,000 in the
aggregate, (iii) made any loans or advances to any person not in excess,
individually or in the aggregate, of $150,000, other than ordinary advances for
travel expenses, or (iv) sold, exchanged or otherwise disposed

5

--------------------------------------------------------------------------------

 

of any of its assets or rights, other than the sale of its inventory in the
ordinary course of business.
               (c) For the purposes of subsections (a) and (b) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including persons
or entities the Company has reason to believe are affiliated therewith) shall be
aggregated for the purpose of meeting the individual minimum dollar amounts of
such subsections.
          4.7 Obligations to Related Parties. Except as set forth on
Schedule 4.7, there are no obligations of the Company to officers, directors, or
employees of the Company other than (a) for payment of salary for services
rendered and for bonus payments, (b) reimbursement for reasonable expenses
incurred on behalf of the Company, (c) for employee benefits made available to
employees or groups of employees (including stock option agreements outstanding
under any stock option plan approved by the Board of Directors of the Company)
and (d) obligations listed in the Company’s financial statements or disclosed in
any of its Exchange Act Filings. Except as described above or set forth on
Schedule 4.7, none of the officers, directors or, to the Company’s knowledge,
key employees of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $150,000
or have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business
relationship, or any firm or corporation which competes with the Company, other
than passive investments in publicly traded companies (representing less than 1%
of such company) which may compete with the Company. Except as described above,
no officer or director, or any member of their immediate families, is, directly
or indirectly, interested in any material contract with the Company and no
agreements, understandings or proposed transactions are contemplated between the
Company and any such person. Except as set forth on Schedule 4.7 or as disclosed
in the Exchange Act Filings, the Company is not a guarantor or indemnitor of any
indebtedness of any other person, firm or corporation other than guaranties of
obligations of any of the Subsidiaries.
          4.8 Changes. Since December 31, 2005, except as disclosed in any
Exchange Act Filing or on Schedule 4.8 or in any other Schedule to this
Agreement or to any of the Related Agreements and except for the Airdesk
Acquisition, there has not been:
               (a) Any change in the assets, liabilities, financial condition,
prospects or operations of the Company, other than changes in the ordinary
course of business, none of which individually or in the aggregate has had or
would reasonably be expected to have a Material Adverse Effect excluding
(i) general market, economic or geopolitical conditions affecting the U.S.
economy in general and (ii) any such effect resulting from consummation or
announcement of the transactions contemplated by this Agreement or the Related
Agreements or the Company’s or its Subsidiaries’ performance of their respective
obligations hereunder or thereunder, as the case may be;
               (b) Any resignation or termination of any officer, key employee
or groups of employees of the Company;

6

--------------------------------------------------------------------------------

 

               (c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or other contractual arrangement;
               (d) Any damage, destruction or loss, whether or not covered by
insurance, that has had or would reasonably be expected to have a Material
Adverse Effect;
               (e) Any waiver by the Company of a material right or of a
material debt owed to it;
               (f) Any material change in any compensation arrangement or
agreement with any employee, officer or director other than routine annual
increases in compensation or promotions or bonuses awarded in the ordinary
course;
               (g) to the Company’s knowledge, any labor organization activity
related to the Company;
               (h) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
               (i) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets, other than the
nonexclusive license by the Company of any such patents, trademarks, copyrights,
trade secrets or other intangible assets to customers, suppliers or contract
manufacturers in the ordinary course of the Company’s business consistent with
past practices;
               (j) Any change in any material agreement to which the Company is
a party or by which it is bound which change has had or would reasonably be
expected to have a Material Adverse Effect;
               (k) Any other event or condition of any character that, either
individually or cumulatively, has or would reasonably be expected to have a
Material Adverse Effect; or
               (l) Any arrangement or commitment by the Company to do any of the
acts described in subsection (a) through (k) above.
          4.9 Title to Properties and Assets; Liens, Etc. Except as set forth on
Schedule 4.9 or as disclosed in the Exchange Act Filings, the Company has good
and marketable title to its properties and assets, and good title to its
leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent, (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, (c) those that have otherwise arisen in the ordinary
course of business and (d) those that arise pursuant to the transactions
described in this Agreement and the Related Agreements. To the Company’s
knowledge, all facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company are in good operating condition
and repair and are reasonably fit and usable for the purposes for which they

7

--------------------------------------------------------------------------------

 

are being used. Except as set forth on Schedule 4.9 or as disclosed in the
Exchange Act Filings, the Company is in compliance with all material terms of
each lease to which it is a party or is otherwise bound.
          4.10 Intellectual Property. Except as set forth in Schedule 4.10 or as
disclosed in the Exchange Act Filings:
               (a) The Company owns or possesses sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes necessary for
its business as now conducted (the “Intellectual Property”), without, to the
knowledge of the Company, any infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing Intellectual Property (other than for licenses of Intellectual
Property under which the Company is the licensor in connection with the
Company’s agreements with suppliers, contract manufacturers, customers or
clients in the ordinary course of the Company’s business consistent with past
practice) nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, service marks,
trade names, copyrights, trade secrets, licenses, information and other
proprietary rights and processes of any other person or entity other than such
licenses or agreements arising from the purchase of “off the shelf” or standard
products.
               (b) Since December 31, 2005, the Company has not received any
written communications alleging that the Company has violated any of the
patents, trademarks, service marks, trade names, copyrights or trade secrets or
other proprietary rights of any other person or entity.
               (c) The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of its
employees made prior to their employment by the Company, except for inventions,
trade secrets or proprietary information that have been rightfully assigned to
the Company.
          4.11 Compliance with Other Instruments. Except as set forth on
Schedule 4.11 or as disclosed in the Exchange Act Filings, the Company is not in
violation or default of any term of its Charter or Bylaws, or of any material
provision of any mortgage, indenture, contract, agreement, instrument or
contract to which it is party or by which it is bound or of any judgment,
decree, order or writ. Except as set forth on Schedule 4.11 or as disclosed in
the Exchange Act Filings, the execution, delivery and performance of and
compliance with this Agreement and the Related Agreements to which it is a
party, and the issuance and sale of the Notes by the Company and the other
Securities by the Company each pursuant hereto, will not, with or without the
passage of time or giving of notice, result in any such material violation, or
be in conflict with or constitute a default under any such term or provision, or
result in the creation of any mortgage, pledge, lien, encumbrance or charge upon
any of the properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit, license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.

8

--------------------------------------------------------------------------------

 

          4.12 Litigation. Except as set forth on Schedule 4.12 hereto or as
disclosed in the Exchange Act Filings, there is no action, suit, proceeding or
investigation pending or, to the Company’s knowledge, currently threatened
against the Company that prevents the Company to enter into this Agreement or
the Related Agreements, or to consummate the transactions contemplated hereby or
thereby, or which, if adversely determined, would reasonably be expected to have
a Material Adverse Effect. Except as set forth on Schedule 4.12 or as disclosed
in the Exchange Act Filings, the Company is not a party or subject to the
provisions of any material order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate, which if adversely determined, would reasonably be
expected to have a Material Adverse Effect.
          4.13 Tax Returns and Payments. The Company has timely filed all
material tax returns (federal, state and local) required to be filed by it. All
taxes shown to be due and payable on such returns, any assessments imposed, and
to the Company’s knowledge all other taxes due and payable by the Company on or
before the Closing, have been paid or will be paid prior to the time they become
delinquent. Except as set forth on Schedule 4.13 or as disclosed in the Exchange
Act Filings, the Company has not been advised (a) that any of its returns,
federal, state or other, have been or are being audited as of the date hereof,
or (b) of any material deficiency in assessment or proposed judgment to its
federal, state or other taxes. The Company has no knowledge of any material
liability of any tax to be imposed upon its properties or assets as of the date
of this Agreement that is not adequately provided for.
          4.14 Employees. Except as set forth on Schedule 4.14, the Company has
no collective bargaining agreements with any of its employees. There is no labor
union organizing activity pending or, to the Company’s knowledge, threatened
with respect to the Company. Except as disclosed in the Exchange Act Filings or
on Schedule 4.14 and except for any severance and/or employment agreements to be
entered into by the Company with Michael A. Marett and/or Alan B. Catherall (any
such agreement, a “Future Severance/Employment Agreement”), the Company is not a
party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee compensation plan or agreement other than
those entered into in the ordinary course. To the Company’s knowledge, no
employee of the Company, nor any consultant with whom the Company has
contracted, is in violation of any material term of any material employment
contract, proprietary information agreement or any other agreement relating to
the right of any such individual to be employed by, or to contract with, the
Company because of the nature of the business conducted by the Company; and to
the Company’s knowledge the continued employment by the Company of its present
employees, and the performance of the Company’s contracts with its independent
contractors, will not result in any such violation. To the Company’s knowledge,
none of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere in any material respect with their duties to the Company. The Company
has not received any written notice alleging that any such violation has
occurred. Except for employees who have a current effective employment agreement
with the Company and for any Future Severance/Employment Agreements, no employee
of the Company has been granted the right to continued employment by the Company
or to any material compensation following termination

9

--------------------------------------------------------------------------------

 

of employment with the Company. Except as set forth on Schedule 4.14, the
Company is not aware that any officer or key employee intends to terminate his,
her or their employment with the Company.
          4.15 Registration Rights and Voting Rights. Except as set forth on
Schedule 4.15 and except as disclosed in Exchange Act Filings, the Company is
presently not under any obligation, and has not granted any rights, to register
any of the Company’s presently outstanding securities or any of its securities
that may hereafter be issued. Except as set forth on Schedule 4.15 and except as
disclosed in Exchange Act Filings, to the Company’s knowledge, no stockholder of
the Company has entered into any agreement with respect to the voting of equity
securities of the Company.
          4.16 Compliance with Laws; Permits. Except as set forth on
Schedule 4.16, to its knowledge, the Company is not in violation in any material
respect of any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties which
violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
governmental orders, permissions, consents, approvals or authorizations are
required to be obtained and no registrations or declarations are required to be
filed in connection with the execution and delivery of this Agreement and the
issuance of any of the Securities, except such as has been duly and validly
obtained or filed, or with respect to any filings that may be made after the
Closing, as will be filed in a timely manner or except where failure to obtain
any such order, permission, consent, approval, or authorization would be
reasonably expected not to have a Material Adverse Effect. The Company has all
material franchises, permits, licenses and any similar authority necessary for
the conduct of its business as now being conducted by it, the lack of which
would materially and adversely affect the business, properties, prospects or
financial condition of the Company.
          4.17 Environmental and Safety Laws. The Company is not in violation of
any applicable statute, law or regulation relating to the environment or
occupational health and safety, except where the failure to so comply has not
had and/or could not reasonably be expected to have a Material Adverse Effect,
and to the Company’s knowledge, no material expenditures are or will be required
in order to comply with any such existing statute, law or regulation. Except as
set forth on Schedule 4.17, no Hazardous Materials (as defined below) are used
or have been used, stored, or disposed of by the Company or, to the Company’s
knowledge, by any other person or entity, in a manner not materially compliant
with any applicable statute, law or regulation relating to the environment or
occupational health and safety of any property owned, leased or used by the
Company. For the purposes of the preceding sentence, “Hazardous Materials” shall
mean (a) materials which are listed or otherwise defined as “Hazardous
Materials” or “toxic” under any applicable local, state or federal and/or
foreign laws and regulations that govern the existence and/or remedy of
contamination on property, the protection of the environment from contamination,
the control of hazardous wastes, or other activities involving hazardous
substances, including building materials, or (b) any petroleum products or
nuclear materials.
          4.18 Valid Offering. Assuming the accuracy of the representations and
warranties of the Purchaser contained in this Agreement, the offer, sale and
issuance of the

10

--------------------------------------------------------------------------------

 

Securities will be exempt from the registration requirements of the Securities
Act of 1933, as amended (the “Securities Act”), and will have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all applicable state
securities laws except where a failure to comply with state “blue sky” laws
would be reasonably expected not to have a Material Adverse Effect.
          4.19 Full Disclosure. The Company has provided the Purchaser with all
information requested by the Purchaser in connection with its decision to
purchase the Notes and Warrant. Neither this Agreement, the exhibits and
schedules hereto, the Related Agreements nor any other document delivered by the
Company to Purchaser or its attorneys or agents in connection herewith or
therewith or with the transactions contemplated hereby or thereby, contain any
untrue statement of a material fact nor omit to state a material fact necessary
in order to make the statements contained herein or therein, in light of the
circumstances in which they are made, not misleading. Any financial projections
and other estimates provided to the Purchaser by the Company were based on the
Company’s experience in the industry and on assumptions of fact and opinion as
to future events which the Company, at the date of the issuance of such
projections or estimates, believed to be reasonable.
          4.20 Insurance. The Company has general commercial, product liability,
fire and casualty insurance policies with coverages which the Company believes
are customary for companies similarly situated to the Company in the same or
similar business.
          4.21 SEC Reports. Except as set forth on Schedule 4.21, the Company
has filed all proxy statements, reports and other documents required to be filed
by it under the Exchange Act. The Company has furnished the Purchaser with
copies of (i) its Annual Report on Form 10-K for the fiscal year ended
December 31, 2005 and (ii) its Quarterly Reports on Form 10-Q for the fiscal
quarters ended March 31, 2006, and the Form 8-K filings which it has made during
2003 to date (collectively, the “SEC Reports”). Except as set forth on
Schedule 4.21, each SEC Report was, at the time of its filing, in substantial
compliance with the requirements of its respective form and none of the SEC
Reports, nor the financial statements (and the notes thereto) included in the
SEC Reports, as of their respective filing dates, contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
          4.22 Listing. The Company’s Common Stock is listed for trading on the
NASDAQ National Market System and satisfies the requirements for the
continuation of such listing in all material respects. The Company has not
received any written notice from the NASD or Nasdaq that its Common Stock will
be delisted from the NASDAQ National Market System or that its Common Stock does
not meet all requirements for listing.
          4.23 No Integrated Offering. Neither the Company, nor any of its
affiliates, nor any person acting on its or their behalf, has directly or
indirectly made any offers or sales of any security or solicited any offers to
buy any security under circumstances that would cause the offering of the
Securities pursuant to this Agreement to be integrated with prior offerings by
the Company for purposes of the Securities Act which would prevent the Company
from selling the Securities pursuant to Rule 506 under the Securities Act, or
any applicable exchange-related

11

--------------------------------------------------------------------------------

 

stockholder approval provisions, nor will the Company or any of its affiliates
or subsidiaries take any action or steps that would cause the offering of the
Securities to be integrated with other offerings.
          4.24 Stop Transfer. The Securities are restricted securities as of the
date of this Agreement. The Company will not issue any stop transfer order or
other order impeding the sale and delivery of any of the Note Shares or Warrant
Shares at such time as they are registered for public sale or an exemption from
registration is available, except as required by state and federal securities
laws.
          4.25 Dilution. The Company specifically acknowledges that its
obligation to issue the shares of Common Stock upon conversion of the
Convertible Note and exercise of the Warrant is binding upon the Company and
enforceable regardless of the dilution such issuance may have on the ownership
interests of other shareholders of the Company.
     5. Representations and Warranties of the Purchaser.
          The Purchaser hereby represents and warrants to the Company as
follows:
          5.1 No Shorting. Neither the Purchaser nor any of its affiliates or
investment partners has or has caused or advised any person or entity, 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.
          5.2 Requisite Power and Authority. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements and to carry out their provisions. All
corporate action on Purchaser’s part required for the lawful execution and
delivery of this Agreement and the Related Agreements have been or will be
effectively taken prior to the Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other laws of
general application affecting enforcement of creditors’ rights, and (b) as
limited by general principles of equity that restrict the availability of
equitable and legal remedies.
          5.3 Investment Representations. Purchaser understands that the
Securities are being offered and sold pursuant to an exemption from registration
contained in the Securities Act based in part upon Purchaser’s representations
contained in the Agreement, including, without limitation, that the Purchaser is
an “accredited investor” within the meaning of Regulation D under the Securities
Act of 1933, as amended (the “Securities Act”). The Purchaser confirms that it
has received or has had full access to all the information it considers
necessary or appropriate to make an informed investment decision with respect to
the Notes and the Warrant to be purchased by it under this Agreement and the
Note Shares and the Warrant Shares acquired by it upon the conversion of the
Convertible Note and the exercise of the Warrant, respectively. The Purchaser
further confirms that it has had an opportunity to ask questions and receive
answers from the Company regarding the Company’s business, management and
financial affairs and the terms and conditions of the Offering, the Notes, the

12

--------------------------------------------------------------------------------

 

Warrant and the Securities and to obtain additional information (to the extent
the Company possessed such information or could acquire it without unreasonable
effort or expense) necessary to verify any information furnished to the
Purchaser or to which the Purchaser had access.
          5.4 Purchaser Bears Economic Risk. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment until the Securities are sold pursuant to (i) an effective
registration statement under the Securities Act, or (ii) an exemption from
registration is available with respect to such sale.
          5.5 Acquisition for Own Account. Purchaser is acquiring the Notes and
Warrant and the Note Shares and the Warrant Shares for Purchaser’s own account
for investment only, and not as a nominee or agent and not with a view towards
or for resale in connection with their distribution.
          5.6 Purchaser Can Protect Its Interest. Purchaser represents that by
reason of its, or of its management’s, business and financial experience,
Purchaser has the capacity to evaluate the merits and risks of its investment in
the Notes, the Warrant and the Securities and to protect its own interests in
connection with the transactions contemplated in this Agreement, and the Related
Agreements. Further, Purchaser is aware of no publication of any advertisement
in connection with the transactions contemplated in this Agreement or the
Related Agreements.
          5.7 Accredited Investor. Purchaser represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
          5.8 Legends
               (a) The Convertible Note shall bear substantially the following
legend:
“THIS NOTE AND THE SHARES OF CLASS A COMMON STOCK ISSUABLE UPON CONVERSION OF
THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS. THIS NOTE AND THE CLASS A COMMON STOCK ISSUABLE
UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS
NOTE 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.”
               (b) The Note Shares and the Warrant Shares, if not issued by DWAC
system (as hereinafter defined), shall bear a legend which shall be in
substantially the following form until such shares are covered by an effective
registration statement filed with the SEC:

13

--------------------------------------------------------------------------------

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE, STATE SECURITIES LAWS.
THESE SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH SECURITIES ACT AND ANY
APPLICABLE STATE LAWS OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO
NUMEREX CORP. THAT SUCH REGISTRATION IS NOT REQUIRED.”
               (c) The Warrant shall bear substantially the following legend:
“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.”
     6. Covenants of the Company.
          The Company covenants and agrees with the Purchaser that for so long
as the Notes are outstanding, the Company shall do as follows:
          6.1 Stop-Orders. The Company will advise the Purchaser, promptly after
it receives notice of issuance by the Securities and Exchange Commission (the
“SEC”), any state securities commission or any other regulatory authority of any
stop order or of any order preventing or suspending any offering of any
securities of the Company, or of the suspension of the qualification of the
Common Stock of the Company for offering or sale in any jurisdiction, or the
initiation of any proceeding for any such purpose.
          6.2 Listing. The Company will use commercially reasonable efforts to
maintain the listing of its Common Stock on the NASDAQ National Market System or
other national securities exchange, and will comply in all material respects
with the Company’s reporting, filing and other obligations under the bylaws or
rules of the National Association of Securities Dealers (“NASD”) and such
exchanges, as applicable.

14

--------------------------------------------------------------------------------

 

          6.3 Market Regulations. The Company shall notify the SEC, NASD and, if
required under state securities laws, all applicable state authorities, in
accordance with their requirements, of the transactions contemplated by this
Agreement, and shall take all other necessary action and proceedings as may be
required and permitted by applicable law, rule and regulation, for the legal and
valid issuance of the Securities to Purchaser and promptly provide following
effectiveness thereof (except as otherwise provided in the Registration Rights
Agreement) copies thereof to Purchaser.
          6.4 Reporting Requirements. The Company will file with the SEC all
reports required to be filed pursuant to the Exchange Act on a timely basis
taking into account any and all extensions granted or permitted by the SEC, and
refrain from terminating its status as an issuer required by the Exchange Act to
file reports thereunder even if the Exchange Act or the rules or regulations
thereunder would permit such termination.
          6.5 Use of Funds. The Company agrees that it will use the proceeds of
the sale of the Notes and Warrant for retirement of debt and other obligations
and for general corporate purposes only.
          6.6 Access to Facilities. The Company will permit any representatives
designated by the Purchaser (or any successor of the Purchaser), upon reasonable
prior written notice and during normal business hours, at such person’s expense
and accompanied by a representative of the Company, to (a) visit and inspect any
of the properties of the Company, (b) examine the corporate and financial
records of the Company (unless such examination is not permitted by federal,
state or local law or by contract) and make copies thereof or extracts therefrom
and (c) discuss the affairs, finances and accounts of the Company with the
officers of the Company. Notwithstanding the foregoing, the Company will not
provide any material, non-public information to the Purchaser unless the
Purchaser signs a confidentiality agreement and otherwise complies with
Regulation FD, under the federal securities laws.
          6.7 Taxes. The Company will promptly pay and discharge, or cause to be
paid and discharged in all material respects, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company; provided, however, that any such
tax, assessment, charge or levy need not be paid if the validity thereof shall
currently be contested in good faith by appropriate proceedings and if the
Company shall have set aside on its books adequate reserves with respect
thereto, and provided, further, that the Company will pay all such taxes,
assessments, charges or levies forthwith upon the commencement of proceedings to
foreclose any lien which may have attached as security therefor.
          6.8 Insurance. The Company will keep its and its Subsidiaries’ assets
which are of an insurable character insured by insurers believed by the Company
to be financially sound and reputable against loss or damage by fire, explosion
and other risks customarily insured against by companies in similar business
similarly situated as the Company to the extent and in the manner which the
Company reasonably believes is customary for companies in similar business
similarly situated as the Company and to the extent available on commercially
reasonable terms; and the Company will maintain, with insurers believed by the
Company to be financially sound and reputable, insurance against other hazards
and risks and liability to persons

15

--------------------------------------------------------------------------------

 

and property to the extent and in the manner which the Company reasonably
believes is customary for companies in similar business similarly situated as
the Company and to the extent available on commercially reasonable terms.
          6.9 Intellectual Property. The Company shall maintain in full force
and effect its corporate existence, rights and franchises and all licenses and
other rights to use Intellectual Property owned or possessed by it and
reasonably deemed by it to be necessary to the conduct of its business.
          6.10 Properties. The Company will use its commercially reasonable
efforts to keep its properties in good repair, working order and condition,
reasonable wear and tear excepted, and from time to time make all needful and
proper repairs, renewals, replacements, additions and improvements thereto; and
the Company will at all times comply in all material respects with each
provision of all leases to which it is a party or under which it occupies
property if the breach of such provision would reasonably be expected to have a
Material Adverse Effect.
          6.11 Confidentiality. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of the Purchaser,
unless expressly agreed to by the Purchaser or unless and until such disclosure
is required by law or applicable regulation, and then only to the extent of such
requirement.
          6.12 Required Approvals. The Company shall not and, without the prior
written consent of the Purchaser, shall not permit any of its Subsidiaries to:
               (a) directly or indirectly declare or pay any dividends, other
than (i) dividends with respect to its preferred stock, and (ii) as to the
Subsidiaries only, dividends payable to the Company;
               (b) liquidate, dissolve or effect a material reorganization;
provided, that as to any Subsidiary, such Subsidiary may liquidate, dissolve or
effect a material reorganization without need of obtaining the prior written
consent of the Purchaser if such Subsidiary shall transfer all of its assets and
liabilities either to the Company or to another Subsidiary that is a party to
the Master Security Agreement, the Stock Pledge Agreement and the Subsidiary
Guaranty; provided further that, notwithstanding the foregoing, a Core
Subsidiary (as defined in the Master Security Agreement) shall not be permitted
to transfer any of its assets to a Non-Core Subsidiary (as defined in the Master
Security Agreement) without the consent of the Purchaser;
               (c) become subject to (including, without limitation, by way of
amendment to or modification of) any agreement or instrument which by its terms
would (under any circumstances) restrict the Company’s right to perform the
provisions of this Agreement or any Related Agreement to which the Company is a
party, or would restrict any Subsidiary from performing its obligations under
the Guaranty or any other Related Agreement to which such Subsidiary is a party;
               (d) materially alter or change the scope of the business of the
Company and its Subsidiaries taken as a whole;

16

--------------------------------------------------------------------------------

 

               (e) create or acquire, or permit any of its Subsidiaries to
create or acquire, any Subsidiary after the date hereof unless such Subsidiary
becomes a party to the Master Security Agreement, the Stock Pledge Agreement and
the Subsidiary Guaranty (either by executing a counterpart thereof or an
assumption or joinder agreement in respect thereof) and, to the extent required
by the Purchaser, satisfies each condition of this Agreement and the Related
Agreements as if such New Company were designated as a Subsidiary on the Closing
Date; or
               (f) make investments in, make any loans or advances to, or
transfer assets to, DCX Systems Australia Limited, Inc. (“DCX Australia”) or
Bronzetech Limited (“Bronzetech”) or (ii) permit any Subsidiary to make
investments in, make any loans or advances to, or transfer assets to, DCX
Australia or Bronzetech, other than, in the case of each of the foregoing
clauses (i) and (ii), immaterial investments, loans, advances and/or asset
transfers made in the ordinary course of business.
          6.13 Reissuance of Securities. The Company agrees to reissue
certificates representing the Securities without the legends set forth in
Section 5.7 above at such time as (a) the holder thereof is permitted to dispose
of such Securities pursuant to Rule 144(k) under the Securities Act, or (b) upon
resale subject to an effective registration statement after such Securities are
registered under the Securities Act. The Company agrees to cooperate with the
Purchaser in connection with all resales pursuant to Rule 144(d) and Rule 144(k)
and provide legal opinions necessary to allow such resales provided the Company
and its counsel receive reasonably requested representations from the selling
Purchaser and broker, if any.
          6.14 Opinion. On the Closing Date, the Company will deliver to the
Purchaser an opinion or opinions acceptable to the Purchaser from the Company’s
legal counsel. The Company will provide, at the Company’s expense, such other
legal opinions in the future as are reasonably necessary for the conversion of
the Convertible Note and exercise of the Warrant.
     7. Covenants of the Purchaser.
          The Purchaser covenants and agrees with the Company as follows:
          7.1 Confidentiality. The Company agrees that it will not disclose, and
will not include in any public announcement, the name of the Purchaser, unless
expressly agreed to by the Purchaser or unless and until such disclosure is
required by law or applicable regulation, and then only to the extent of such
requirement.
          7.2 Non-Public Information. The Purchaser agrees not to effect any
sales in the shares of the Company’s Common Stock while in possession of
material, non-public information regarding the Company if such sales would
violate applicable securities law.
          7.3 No Shorting. Neither the Purchaser nor any of its affiliates or
investment partners shall or shall cause or advise any person or entity,
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.
          7.4 Limitation on Acquisition of Common Stock of the Company.
Notwithstanding anything to the contrary contained in this Agreement, any
Related Agreement,

17

--------------------------------------------------------------------------------

 

any document, instrument or agreement entered into in connection with the
transactions contemplated hereby or any document, instrument or agreement
entered into in connection with any other transaction entered into by and
between the Purchaser and the Company (and/or subsidiaries or affiliates of the
Company), the Purchaser shall not acquire stock in the Company (including,
without limitation, pursuant to a contract to purchase, by exercising an option
or warrant, by converting any other security or instrument, by acquiring or
exercising any other right to acquire, shares of stock or other security
convertible into shares of stock in the Company, or otherwise, and such options,
warrants, conversion or other rights shall not be exercisable) to the extent
such stock acquisition would cause any interest (including any original issue
discount) payable by the Company to the Purchaser not to qualify as portfolio
interest, within the meaning of Section 881(c)(2) of the Internal Revenue Code
of 1986, as amended (the “Code”) by reason of Section 881(c)(3) of the Code,
taking into account the constructive ownership rules under Section 871(h)(3)(C)
of the Code.
     8. Covenants of the Company and Purchaser Regarding Indemnification.
          8.1 Company Indemnification. The Company agrees to indemnify, hold
harmless, reimburse and defend Purchaser, each of Purchaser’s officers,
directors, agents, affiliates, control persons, and principal shareholders,
against any claim, cost, expense, liability, obligation, loss or damage
(including reasonable legal fees) of any nature, incurred by or imposed upon the
Purchaser which results, arises out of or is based upon (i) any
misrepresentations by Company or any breach of representation or warranty by
Company in this Agreement or in any exhibits or schedules attached hereto or any
Related Agreement, or (ii) any breach or default in performance by Company of
any covenant or undertaking to be performed by Company hereunder, or any other
agreement entered into by the Company and Purchaser relating hereto.
          8.2 Purchaser’s Indemnification. The Purchaser agrees to indemnify,
hold harmless, reimburse and defend the Company and each of the Company’s
officers, directors, agents, affiliates, control persons and principal
shareholders, at all times against any claim, cost, expense, liability,
obligation, loss or damage (including reasonable legal fees) of any nature,
incurred by or imposed upon the Company which results, arises out of or is based
upon (i) any misrepresentation by Purchaser or any breach of any representation
or warranty by Purchaser in this Agreement or in any exhibits or schedules
attached hereto or any Related Agreement; or (ii) any breach or default in
performance by Purchaser of any covenant or undertaking to be performed by
Purchaser hereunder, or any other agreement entered into by the Company and
Purchaser relating hereto.
          8.3 Procedures. The procedures and limitations set forth in
Section 9.5(c) and (d) shall apply to the indemnifications set forth in
Sections 8.1 and 8.2.
          8.4 Offering Restrictions. Except as previously disclosed in the SEC
Reports or in the Exchange Act Filings, or stock or stock options granted to
employees or directors of the Company; or shares of preferred stock issued to
pay dividends in respect of the Company’s preferred stock; or equity or debt
issued in connection with an acquisition of a business or assets by the Company;
or the issuance by the Company of stock in connection with the establishment of
a joint venture partnership or licensing arrangement (these exceptions

18

--------------------------------------------------------------------------------

 

hereinafter referred to as the “Excepted Issuances”), the Company will not for
so long as the Convertible Note is outstanding issue any securities with a
continuously variable/floating conversion feature which are or could be (by
conversion or registration) free-trading securities (i.e. common stock subject
to a registration statement) prior to the full repayment or conversion of the
Note (the “Exclusion Period”). Nothing contained in this Section 8.4 shall
prohibit any fixed-price offering of Company’s Common Stock (including the
offering of securities convertible into Common Stock at a fixed price).
     9. Miscellaneous.
          9.1 Except as previously disclosed in the SEC Reports or in the
Exchange Act Filings, or stock or stock options granted to employees or
directors of the Company; or shares of preferred stock issued to pay dividends
in respect of the Company’s preferred stock; or equity or debt issued in
connection with an acquisition of a business or assets by the Company; or the
issuance by the Company of stock in connection with the establishment of a joint
venture partnership or licensing arrangement (these exceptions hereinafter
referred to as the “Excepted Issuances”), the Company will not for so long as
the Notes are outstanding issue any securities with a continuously
variable/floating conversion feature which are or could be (by conversion or
registration) free-trading securities (i.e. common stock subject to a
registration statement) prior to the full repayment or conversion of the Notes
(the “Exclusion Period”). Nothing contained in this Section 9.1 shall prohibit
any fixed-price offering of Company’s Common Stock (including the offering of
securities convertible into Common Stock at a fixed price).
          9.2 Governing Law. THIS AGREEMENT 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 PURCHASER 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 PARTIES AND THE INDIVIDUALS EXECUTING
THIS AGREEMENT AND OTHER AGREEMENTS ON BEHALF OF SUCH PARTIES AGREE TO SUBMIT TO
THE JURISDICTION OF SUCH COURTS AND WAIVE TRIAL BY JURY. BOTH PARTIES AND THE
INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS ON BEHALF OF SUCH
PARTIES 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 OR THEREUNDER, MAY BE SERVED BY
REGISTERED OR CERTIFIED MAIL, RETURN RECEIPT REQUESTED, OR BY PERSONAL SERVICE

19

--------------------------------------------------------------------------------

 

PROVIDED A REASONABLE TIME FOR APPEARANCE IS PERMITTED, OR IN SUCH OTHER MANNER
AS MAY BE PERMISSIBLE UNDER THE RULES OF SAID COURTS. BOTH PARTIES AND THE
INDIVIDUALS EXECUTING THIS AGREEMENT AND OTHER AGREEMENTS ON BEHALF OF SUCH
PARTIES WAIVE ANY OBJECTION TO JURISDICTION AND VENUE OF ANY ACTION INSTITUTED
HEREON OR THEREON 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. IN THE
EVENT THAT ANY PROVISION OF THIS AGREEMENT OR ANY OTHER AGREEMENT DELIVERED IN
CONNECTION HEREWITH 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 ANY AGREEMENT.
          9.3 Survival. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by the Purchaser and
the closing of the transactions contemplated hereby to the extent provided
therein. All statements as to factual matters contained in any certificate or
other instrument delivered by or on behalf of the Company pursuant hereto in
connection with the transactions contemplated hereby shall be deemed to be
representations and warranties by the Company hereunder solely as of the date of
this Agreement or such other certificate or instrument.
          9.4 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, heirs, executors and administrators of the parties hereto
and shall inure to the benefit of and be enforceable by each person who shall be
a holder of the Securities from time to time, other than the holders of Common
Stock which has been sold by the Purchaser pursuant to Rule 144 or an effective
registration statement. Purchaser may assign the Notes (or any portion thereof)
or the Warrant, provided that the assignees of either Note or the Warrant agree
in writing to be bound by the terms of and perform all of Purchaser’s
obligations under this Agreement and the Related Agreements and such assignee
provides evidence reasonably satisfactory to the Company demonstrating
compliance with applicable securities laws, which shall include, without
limitation, written certification from the assignee of its sophistication and
status as an accredited investor under Regulation D of the Securities Act and a
legal opinion from the transferor’s counsel that such transfer is exempt from
the registration requirements of applicable securities laws. Purchaser or any
assignee may not assign any of its rights or remedies under the Master Security
Agreement, the Stock Pledge Agreement or the Subsidiary Guaranty to any person
or entity other than a permitted assignee of either Note, and Purchaser may not
assign any of its rights under the Registration Rights Agreement to any person
or entity other than a permitted assignee of either Note or the Warrant.
Purchaser or any assignee of either Note or the Warrant may not assign its
rights hereunder or thereunder to a Competitor (as defined herein) of the
Company, unless an Event of Default (as defined in either Note) has occurred and
is continuing.

20

--------------------------------------------------------------------------------

 

A “Competitor” shall mean any business entity that (i) is primarily engaged in
providing similar products or services as the Company and from which such
products and services the Company derived material revenues for the prior twelve
(12) months, and (ii) does business in any U.S. state in which the Company has
an established business. In the event there is more than one holder of the
rights and obligations under the Note, then an agent for such holders shall be
appointed by the then holder(s) of the majority principal amount outstanding
under the Note for the sole purpose of dealing with the Company in connection
with administrative matters relating to this Agreement and the Related
Agreements, including in requesting waivers and consents. Unless such agent has
authority from the holders to grant any such waiver, consent or to make any
amendments to this Agreement, the Notes, the Subsidiary Guaranty, the Stock
Pledge Agreement or the Master Security Agreement without the consent of the
holders, all such grants of waivers, consents or amendments shall be made by
such agent acting upon the consent of the holders of a majority in principal
amount then outstanding except for (i) any modifications in the principal
amount, rate of interest or fees payable under the Notes or any Related
Agreement, (ii) postponements in any fixed payment date, (iii) releases or
discharges of the Company or any Subsidiary of any obligation or releases of any
collateral except as provided in this Agreement or the Related Agreements or
(iv) any amendment to this Section 9.4, which shall be approved by all holders
affected thereby.
          9.5 Entire Agreement. This Agreement, the exhibits and schedules
hereto, the Related Agreements and the other documents delivered pursuant hereto
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and no party shall be liable or bound to any
other in any manner by any representations, warranties, covenants and agreements
except as specifically set forth herein and therein.
          9.6 Severability. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
          9.7 Amendment and Waiver.
               (a) This Agreement may be amended or modified only upon the
written consent of the Company and the Purchaser.
               (b) The obligations of the Company and the rights of the
Purchaser under this Agreement may be waived only with the written consent of
the Purchaser.
               (c) The obligations of the Purchaser and the rights of the
Company under this Agreement may be waived only with the written consent of the
Company.
          9.8 Delays or Omissions. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement or the Related
Agreements, shall impair any such right, power or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or any
acquiescence therein, or of or in any similar breach, default or noncompliance
thereafter occurring. All remedies, either under this Agreement, the Notes or
the

21

--------------------------------------------------------------------------------

 

Related Agreements, by law or otherwise afforded to any party, shall be
cumulative and not alternative.
          9.9 Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed facsimile if sent during normal
business hours of the recipient, if not, then on the next business day,
(c) three (3) business days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof with a copy in
the case of the Company to Legal Counsel, Numerex Corp., 1600 Parkwood Circle
SE, Suite 500, Atlanta, Georgia 30339, facsimile number (770) 693-5951 and to
William Carmody, Esq., Arnold & Porter LLP, 555 12th Street, N.W., Washington,
D.C. 20004, facsimile number (202) 942-5999, to the Purchaser at the address set
forth on the signature page hereof for such Purchaser, with a copy in the case
of the Purchaser to Scott J. Giordano, Esq., Loeb & Loeb LLP, 405 Park Avenue,
New York, NY 10154, facsimile number (212) 407-4990, or at such other address as
the Company or the Purchaser may designate by written notice to the other
parties hereto given in accordance herewith.
          9.10 Attorneys’ Fees. In the event that any suit or action is
instituted to enforce any provision in this Agreement, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including, without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals. In the event of a
settlement, each party shall bear its own fees, costs and expenses unless
otherwise directed by a court of competent jurisdiction.
          9.11 Titles and Subtitles. The titles of the sections and subsections
of the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
          9.12 Facsimile Signatures; Counterparts. This Agreement may be
executed by facsimile signatures and in any number of counterparts, each of
which shall be an original, but all of which together shall constitute one
instrument. Any party delivering an executed counterpart of this Agreement by
facsimile transmission shall deliver an original of such counterpart to the
other party hereto within two (2) business days; provided, however, that the
failure to so deliver any original counterpart shall not affect the validity or
enforceability of this Agreement as against such party.
          9.13 Broker’s Fees. Except as set forth on Schedule 9.13 hereof, Each
party hereto represents and warrants that no agent, broker, investment banker,
person or firm acting on behalf of or under the authority of such party hereto
is or will be entitled to any broker’s or finder’s fee or any other commission
directly or indirectly in connection with the transactions contemplated herein.
Each party hereto further agrees to indemnify each other party for any claims,
losses or expenses incurred by such other party as a result of the
representation in this Section 11.12 being untrue.

22

--------------------------------------------------------------------------------

 

          9.14 Construction. Each party acknowledges that its legal counsel
participated in the preparation of this Agreement and the Related Agreements
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 Agreement to favor any party against the other.
          9.15 Definition of Airdesk Acquisition. For purposes of this
Agreement, the term “Airdesk Acquisition” means the acquisition of the assets of
AIRDESK, Inc. by and through Airdesk, LLC, a Georgia limited liability company
and a wholly-owned subsidiary of the Company. The Airdesk Acquisition is more
particularly described in the press release attached to this Agreement as
Exhibit E. At closing of the Airdesk Acquisition, the Company also made a loan
in the amount of $250,000.00 to the former owner of AIRDESK, Inc.

23

--------------------------------------------------------------------------------

 

          IN WITNESS WHEREOF, the parties hereto have executed the Securities
Purchase Agreement as of the date set forth in the first paragraph hereof.

                      COMPANY:       PURCHASER:
 
                    NUMEREX CORP.       LAURUS MASTER FUND, LTD.
 
                   
By:
              By:    
 
                   
Name:
              Name:    
 
                   
Title:
              Title:    
 
                   
 
                    Address:       1600 Parkwood Circle SE, Suite 500      
Address: c/o M&C Corporate Services Ltd.,         Atlanta, Georgia 30039      
P.O. Box 309 G.T.         Attn: Chief Financial Officer       Ugland House      
  Facsimile No.: (770) 693-5951       South Church Street                 George
Town                 Grand Cayman, Cayman Islands

24

--------------------------------------------------------------------------------

 

List of Schedules and Exhibits

     
Schedule 4.2
  Subsidiaries
 
   
Schedule 4.3
  Options, Warrants, Etc.
 
   
Schedule 4.6
  Agreements, Actions, Etc.
 
   
Schedule 4.7
  Obligations to Related Parties
 
   
Schedule 4.8
  Changes
 
   
Schedule 4.9
  Title to Property
 
   
Schedule 4.10
  Intellectual Property
 
   
Schedule 4.11
  Defaults
 
   
Schedule 4.12
  Litigation, Investigations, Etc.
 
   
Schedule 4.13
  Taxes
 
   
Schedule 4.14
  Employees
 
   
Schedule 4.15
  Registration Rights and Voting Rights
 
   
Schedule 4.16
  Compliance with Laws; Permits
 
   
Schedule 4.17
  Environmental and Safety Laws
 
   
Schedule 4.21
  SEC Reports
 
   
Exhibit A-1
  Form of Convertible Term Note
 
   
Exhibit A-2
  Form of Non-Convertible Term Note
 
   
Exhibit B
  Form of Warrant
 
   
Exhibit C
  Form of Opinion
 
   
Exhibit D
  Form of Escrow Agreement
 
   
Exhibit E
  Press Release for Airdesk Acquisition

25

--------------------------------------------------------------------------------

 

EXHIBIT A-1
FORM OF CONVERTIBLE NOTE

A-1

--------------------------------------------------------------------------------

 

EXHIBIT A-2
FORM OF NON-CONVERTIBLE NOTE

A-2

--------------------------------------------------------------------------------

 

EXHIBIT B
FORM OF WARRANT

B-1

--------------------------------------------------------------------------------

 

EXHIBIT C
FORM OF OPINION
          The legal opinions rendered by counsel to the Company shall be in form
and substance reasonably acceptable to Purchaser.

C-1

--------------------------------------------------------------------------------

 

EXHIBIT D
FORM OF ESCROW AGREEMENT

D-1

--------------------------------------------------------------------------------

 

EXHIBIT E
PRESS RELEASE FOR AIRDESK ACQUISITION

E-1

--------------------------------------------------------------------------------

 

NUMEREX CORP.
SECURITIES PURCHASE AGREEMENT
May 30, 2006

 

--------------------------------------------------------------------------------

 

UPDATE TABLE OF CONTENTS

                              Page(s)   1.   Agreement to Sell and Purchase.    
1  
 
                2.   Fees and Warrant Fees and Warrants     2  
 
                3.   Closing, Delivery and Payment. Closing, Delivery and
Payment     2  
 
               
 
  3.1   Closing     2  
 
               
 
  3.2   Delivery     2  
 
                4.   Representations and Warranties of the Company     3  
 
               
 
  4.1   Organization, Good Standing and Qualification     3  
 
               
 
  4.2   Subsidiaries     3  
 
               
 
  4.3   Capitalization; Voting Rights. Capitalization; Voting Rights     3  
 
               
 
  4.4   Authorization; Binding Obligations     5  
 
               
 
  4.5   Liabilities     5  
 
               
 
  4.6   Agreements; Action     5  
 
               
 
  4.7   Obligations to Related Parties     6  
 
               
 
  4.8   Changes     6  
 
               
 
  4.9   Title to Properties and Assets; Liens, Etc     7  
 
               
 
  4.10   Intellectual Property     8  
 
               
 
  4.11   Compliance with Other Instruments     8  
 
               
 
  4.12   Litigation     9  
 
               
 
  4.13   Tax Returns and Payments     9  
 
               
 
  4.14   Employees     9  
 
               
 
  4.15   Registration Rights and Voting Rights     10  
 
               
 
  4.16   Compliance with Laws; Permits     10  

i

--------------------------------------------------------------------------------

 

                              Page(s)  
 
  4.17   Environmental and Safety Laws     10  
 
               
 
  4.18   Valid Offering     10  
 
               
 
  4.19   Full Disclosure     11  
 
               
 
  4.20   Insurance     11  
 
               
 
  4.21   SEC Reports     11  
 
               
 
  4.22   Listing     11  
 
               
 
  4.23   No Integrated Offering     11  
 
               
 
  4.24   Stop Transfer     12  
 
               
 
  4.25   Dilution     12  
 
                5.   Representations and Warranties of the Purchaser     11  
 
               
 
  5.1   No Shorting     12  
 
               
 
  5.2   Requisite Power and Authority     12  
 
               
 
  5.3   Investment Representations     12  
 
               
 
  5.4   Purchaser Bears Economic Risk     13  
 
               
 
  5.5   Acquisition for Own Account     13  
 
               
 
  5.6   Purchaser Can Protect Its Interest     13  
 
               
 
  5.7   Accredited Investor     13  
 
               
 
  5.8   Legends. Legends     12  
 
                6.   Covenants of the Company.     14  
 
               
 
  6.1   Stop-Orders     14  
 
               
 
  6.2   Listing     14  
 
               
 
  6.3   Market Regulations     15  
 
               
 
  6.4   Reporting Requirements     15  
 
               
 
  6.5   Use of Funds     15  

ii

--------------------------------------------------------------------------------

 

                              Page(s)  
 
  6.6   Access to Facilities     15  
 
               
 
  6.7   Taxes     15  
 
               
 
  6.8   Insurance     15  
 
               
 
  6.9   Intellectual Property     16  
 
               
 
  6.10   Properties     16  
 
               
 
  6.11   Confidentiality     16  
 
               
 
  6.12   Required Approvals     16  
 
               
 
  6.13   Reissuance of Securities     17  
 
               
 
  6.14   Opinion     17  
 
                7.   Covenants of the Purchaser     17  
 
               
 
  7.1   Confidentiality     17  
 
               
 
  7.2   Non-Public Information     17  
 
               
 
  7.3   No Shorting     17  
 
                8.   Covenants of the Company and Purchaser Regarding
Indemnification     18  
 
               
 
  8.1   Company Indemnification     18  
 
               
 
  8.2   Purchaser's Indemnification     18  
 
               
9.
               
 
                10.   Miscellaneous     21  
 
               
 
  10.1   Offering Restrictions     18  
 
                    Governing Law     19  
 
               
 
  10.2   Survival     20  
 
               
 
  10.3   Successors and Assigns     20  
 
               
 
  10.4   Entire Agreement     21  
 
               
 
  10.5   Severability     21  

iii

--------------------------------------------------------------------------------

 

                              Page(s)  
 
  10.6   Amendment and Waiver     22  
 
               
 
  10.7   Delays or Omissions     21  
 
               
 
  10.8   Notices     22  
 
               
 
  10.9   Attorneys' Fees     22  
 
               
 
  10.10   Titles and Subtitles     22  
 
               
 
  10.11   Facsimile Signatures; Counterparts     22  
 
               
 
  10.12   Broker's Fees     22  
 
               
 
  10.13   Construction     23  

iv