exv10w1



 





Exhibit 10.1




SECURITIES PURCHASE AGREEMENT




     This Securities Purchase Agreement (this “Agreement”) is made and entered into as of December
29, 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 a Secured Convertible Term
Note in the aggregate principal amount of Ten Million Dollars ($10,000,000) (as amended, restated,
modified or supplemented from time to time, the “Note”), which 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 $10.37 per share of Common Stock (“Fixed Conversion Price”);



     Whereas, the Company wishes to issue a warrant to the Purchaser to purchase up to 158,562
shares (subject to adjustment in accordance with the terms thereof) of the Company’s Common Stock
in connection with Purchaser’s purchase of the Note (as amended, restated, modified or supplemented
from time to time, the “Warrant”);



     Whereas, Purchaser desires to purchase the Note and Warrant on the terms and conditions set
forth herein; and



     Whereas, the Company desires to issue and sell the Note 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 Note in accordance with
the terms of the Note and this Agreement. The Note and the Warrant purchased on the Closing Date
shall be known as the “Offering.” A form of the Note is annexed hereto as Exhibit A. The
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 Note,
the Warrant and Common Stock issuable in payment of the Note, upon conversion of the 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 non-refundable
payment in an amount equal to four percent (4%) of the aggregate principal amount of the Note. The
foregoing payment is referred to herein as the “LCM Payment.” Such payment shall be deemed fully
earned on the Closing Date and shall not be subject to rebate or proration for any reason.




              (c) On the Closing Date, the Company shall reimburse the Purchaser in the amount of $35,000.00
for the following expenses: (i) expenses (including reasonable legal fees and expenses) incurred
by the Purchaser in connection with the entering into of this Agreement and the Related Agreements,
(ii) expenses incurred in connection with the Purchaser’s due diligence review of the Company and
its Subsidiaries (as defined below) and all related matters and (iii) expenses incurred in
connection with any required third-party appraisals and/or extraordinary diligence.




              (d) The LCM 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 Note and the Warrant and the Purchaser will deliver to the Company, among
other things, the amounts set forth in the Funds Escrow Agreement by wire transfer of immediately
available funds. The Company hereby acknowledges and agrees that Purchaser’s obligation to
purchase the Note from the Company, and to authorize the release of the proceeds of the Note, on
the Closing Date shall be contingent upon the satisfaction (or waiver by the Purchaser in its sole
discretion) of the items and matters set forth in the closing checklist provided by the Purchaser
to the Company on or prior to the Closing Date.




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     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 Note and the Warrant to be issued in connection
with this Agreement, (iii) the Master Security Agreement relating to the Note, 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 Note and the shares of Common Stock issuable upon
conversion of the 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 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





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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 either the Note 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 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,





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sale, issuance and
delivery of the Note 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 Note and the subsequent conversion of the 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:




              (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
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.




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          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, 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;




             (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;





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             (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 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:




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               (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 Note 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.




          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.






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          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, Stratton
Nicolaides and/or Alan B. Catherall (any such agreement, a “Severance 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 Severance Agreements, no
employee of the Company has been granted the
right to continued employment by the Company or to any material compensation following
termination 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.




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          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 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.





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          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 Note 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 provided Purchaser with access to 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, June 30, 2006 and September 30, 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 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.




11









 








          4.25 Dilution. The Company specifically acknowledges that its obligation to issue the shares
of Common Stock upon conversion of the 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 Note 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
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 Note,
the 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.





12









 








          5.5 Acquisition for Own Account. Purchaser is acquiring the Note 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 Note, 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 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:




“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.”



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                    (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 Note is
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.




          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.





14









 








          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 Note
and Warrant for retirement of debt and/or 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 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.





15









 








          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. Notwithstanding the foregoing, the Company may disclose the
Purchaser’s identity and the terms of this Agreement and the Related Agreements to its current and
prospective debt and equity financing sources. The Company acknowledges and agrees that the
Purchaser shall be permitted to discuss, distribute or otherwise transfer non-public information of
the Company and its Subsidiaries to potential or actual (i) direct or indirect investors in the
Purchaser or any affiliated investment fund and (ii) third party assignees or transferees of all or
a portion of the obligations of the Company and/or its Subsidiaries hereunder and under the Related
Agreements, to the extent that such investor or assignee or transferee enters into a
Confidentiality Agreement (as defined below) for the benefit of the Company and its Subsidiaries.
For purposes of this Agreement, the term “Confidentiality Agreement” means, as to each actual or
potential, direct or indirect investor in the Purchaser (or any affiliated investment fund) or
third party assignee or transferee of all or any portion of the obligations of the Company and/or
its Subsidiaries hereunder or under any Related Agreement
(each, a “Recipient”), a confidentiality agreement in the form executed by the Company and the
Purchaser in May 2006, signed by such Recipient and to the benefit and in favor of the Company and
its Subsidiaries. The Purchaser shall deliver to the Company a Confidentiality Agreement from each
Recipient at least two (2) business days prior to the date upon which the Purchaser discusses,
distributes, delivers or otherwise transfers any non-public information of or about the Company
and/or any Subsidiary to such Recipient and, at such time, shall notify the Company of the extent
and type of non-public information being delivered to such Recipient.




          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;



16









 





               (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;



               (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 Subsidiary 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 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 Purchaser agrees that it will not disclose, and will not include in
any public announcement, the name of the Company, unless expressly agreed to by the Company or
unless and until such disclosure is required by law or applicable regulation, and then only to the
extent of such requirement.




17









 








          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, 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.




18









 








          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 [Intentionally Deleted]




     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 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 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 Note (or any portion thereof) or the Warrant, provided that
the assignees of the 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 the 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 the Note or the Warrant. Purchaser or any assignee of
the 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 the Note) has occurred
and is continuing. A





20









 







“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 Note, 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 Note 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 Note or the other Related Agreements, by law or
otherwise afforded to any party, shall be cumulative and not alternative.




21









 








          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.




          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.




22









 








          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:

	 	 /s/ Stratton J. Nicolaides	 	By:	 	 /s/ David Grin	 	 	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	Name: Stratton J. Nicolaides	 	Name:	 	 David Grin	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Title: Chairman and CEO	 	Title:	 	 Director	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Address:	 	1600 Parkwood Circle SE, Suite 500

Atlanta, Georgia 30039

Attn: Chief Financial Officer

Facsimile No.: (770) 693-5951	 	Address: c/o M&C Corporate Services Ltd.,

P.O. Box 309 G.T.

Ugland House

South Church Street

George Town

Grand Cayman, Cayman Islands






23









 






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
	 
	 	 
	Schedule 9.13

	 	Broker Fees
	 
	 	 
	Exhibit A

	 	Form of Note
	 
	 	 
	Exhibit B

	 	Form of Warrant
	 
	 	 
	Exhibit C

	 	Form of Opinion
	 
	 	 
	Exhibit D

	 	Form of Escrow Agreement






24









 






EXHIBIT A




FORM OF NOTE




A - 1









 





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