EXHIBIT 10.26

                   SEVERANCE AGREEMENT BETWEEN THE COMPANY AND
                                DONALD M. HOOTON
                       (MANAGEMENT COMPENSATION CONTRACT)


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                               SEVERANCE AGREEMENT

      AGREEMENT dated as of this 22nd day of May, 1996, by and between NUMEREX
CORP. (the "Company"), a Pennsylvania business corporation, and Donald M. Hooton
("Employee").

                               B A C K G R 0 U N D

      Employee is Vice President - Sales and Marketing of the Company. The Board
of Directors of the Company (the "Board") has determined that in consideration
of Employee's past, present and future services to the Company, the Company
desires to provide for the payment of certain compensation and other benefits to
Employee upon the occurrence of certain events, all as more fully set forth
below.

      NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, the parties agree as
follows:

      1. Term. This Agreement shall continue for a period beginning on the date
hereof and ending on the earliest of the following dates: (a) the date Employee
dies or becomes permanently disabled (i.e. upon his failure to render services
of the character which he had previously rendered to the Company, because of his
physical or mental illness or other incapacity beyond his control for a
continuous period of six months or for shorter periods aggregating six months in
any twelve month period); (b) termination of Employee's employment with the
Company for cause; (c) mutual agreement of the Company and Employee; (d) subject
to Section 2 hereof, termination of Employee's employment with the Company by
resignation or otherwise; or (e) one (1) year from the date hereof (the "Term"),
and thereafter from year to year, unless terminated by either party giving
written notice to


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the other not less than ninety (90) days prior to expiration of any anniversary
of this agreement or any extension thereof. In the event the Employee's
employment with the Company is terminated during the Term other than as set
forth in Section 2 hereof, the Employee shall have no rights or benefits under
this Agreement, but shall be entitled to any other rights or benefits to which
he or she might otherwise be entitled to.

      2. Termination. If Employee's employment with the Company is terminated
whether by the Company or Employee during the Term upon the occurrence of any of
the following events, the Company will pay to Employee the amount set forth in
Section 3 hereof and Employee shall be entitled to the benefits set forth in
Section 4 hereof:

            (a) a merger, consolidation, reorganization, sale of all or
substantially all of the assets or other similar event; or

            (b) a "change in control" of the Company wherein within six months
prior to the occurrence of such event or within one year after the occurrence of
such event, Employee's position with the Company or the surviving or acquiring
Person is changed from his current position with the Company to a lesser
responsible position, the nature and scope of Employee's duties and authority or
his responsibilities with the Company or the surviving or acquiring Person are
reduced to a level below that which he enjoys on the date hereof or his then
current base annual salary is reduced to a level below that which he enjoys on
the date hereof. For purpose of this Section 2, a "change in control" of the
Company means a change in control of the Company of a nature that would be
required to be reported in response to Item 6(e) of Schedule 14A of Regulation
14A promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as enacted and enforced on the


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date hereof, whether or not the Company is subject to such reporting
requirement; provided that without limitation such a change in control shall
have been deemed to conclusively occur when any of the following events shall
have occurred:

            (i) within any period of two consecutive years during the Term, a
change in at least a majority of the members of the Board or the addition of
five or more new members to the Board; or

            (ii) a Person or group acting in concert, other than a Person or
group existing on the day hereof, as described in Section 13(d)(2) of the
Exchange Act holds or acquires beneficial ownership within the meaning of Rule
13d-3 promulgated under the Exchange Act of a number of common shares of the
Company which constitutes either (a) more than fifty percent of the shares which
voted in the election of directors of the Company at the shareholders' meeting
immediately preceding such determination or (b) more than twenty-five percent of
the Company's outstanding common shares. For purposes of this Section 2 hereof,
unexercised warrants or options or unconverted nonvoting securities shall count,
for this purpose, as constituting beneficial ownership of the Company's common
shares into which the warrants or options are exercisable or the nonvoting
convertible securities are convertible, notwithstanding anything to the contrary
contained in Rule 13d-3 of the Exchange Act.

            (c) a termination of employment of Employee, except termination "for
cause", a change from Employee's current position with the Company to a lesser
responsible position, or a change in the nature and scope of Employee's duties
and authority to a level


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below that which he enjoys on the date hereof. The term "for cause" shall
include and shall be limited to the following events:

                  (1) The Employee is convicted of a felony;

                  (2) The Employee willfully and deliberately fails or refuses
in a material respect to comply with a significant instruction of the Board of
Directors or the Chief Executive Officer of the Company, provided the Employee
fails to cure such non-compliance within 20 days after receiving written notice
of such non-compliance, other than non-compliance due to a physical or mental
illness, which willful failure results in, or which in the good faith judgment
of the Board of Directors or the Chief Executive Officer may result in
demonstrable material injury and damage to the Company; or

                  (3) The Employee willfully and deliberately makes material
misrepresentations to the Board of Directors of the Company.

      3. Termination Payments to Employee. Commencing not later than 30 days
after the date Employee's employment with the Company is terminated pursuant to
Section 2 hereof (the "Termination Date") and subject to Employee's compliance
with Section 6 hereof, the Company shall pay compensation to Employee for a
period of six (6) months following the Termination Date equal to 50% of the
Employee's annual base salary on the Termination Date. For purposes of this
Agreement, the term "base annual salary" shall mean the Employee's annual
compensation rate on the Termination Date exclusive of cash bonuses. The Company
agrees that it will make the payments due under this Section 3 on the first day
of each month following the Termination Date in an amount equal to 1/12 of 100%
of Employee's base annual salary on the Termination Date.


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<PAGE>

      4. Other Benefits. In addition to the compensation set forth in Section 3
hereof, Employee shall be entitled to the following benefits from the Company:

            (i) for a period of six months following the Termination Date,
reimbursement for all reasonable expenses incurred by Employee in connection
with the search for new employment, including, without limitation, those of a
placement agency or service; provided, however, in no event shall the Company be
obligated to reimburse Employee hereunder in excess of 20% of his base annual
salary on the Termination Date. At his option, the Employee may elect to receive
a lump sum payment of $10,000 in lieu of otherwise receiving reimbursement under
this Section 4(i).

            (ii) for a period of one year following the Termination Date,
Employee shall be entitled to participate in all Company non-discriminatory
benefits (i.e. medical care and life insurance benefits) except that should
subsequent employment be accepted during the one year period following the
Termination Date, continuation of any non-discriminatory benefits will
terminate, provided Employee receives coverages through the Employee's
subsequent employer.

      5. Employee Notice and No Mitigation.

      5.1 Employee shall have the right to terminate his employment hereunder if
he shall first give the Company not less than thirty days written notice of his
intention to so terminate his employment specifying the reason(s) for such
termination and the date of termination, and thereafter the Company shall not
have cured or remedied the reason(s) (provided the reason(s) are capable of
being cured or remedied) for such termination prior to the date of termination
set forth in such notice.


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      5.2 Anything in this Agreement to the contrary notwithstanding, Employee
shall not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment.

      6. Confidential Information and Non-Competition.

      6.1 Employee covenants and agrees that he will not, during the term of his
employment or at any time thereafter, except with the express prior written
consent of the Board, directly or indirectly disclose, communicate or divulge to
any Person, or use for the benefit of any Person, any knowledge or information
with respect to the conduct or details of the Company's business which he,
acting reasonably, believes or should believe to be of a confidential nature and
the disclosure of which to not be in the Company's interest.

      6.2 Employee covenants and agrees that he will not, during the term of his
employment hereunder and for so long as Employee receives benefits hereunder,
except with the express prior written consent of the Board, directly or
indirectly, whether as employee, owner, partner, consultant, agent, director,
officer, shareholder or in any other capacity, engage in or assist any Person to
engage in any act or action which he, acting reasonably, believes or should
believe would be harmful or inimical to the interests of the Company.

      6.3 (A) Employee covenants and agrees that he will not, except with the
express prior written consent of the Board, in any capacity (including, but not
limited to, owner, partner, shareholder, consultant, agent, employee, officer,
director or otherwise), directly or indirectly, for his own account or for the
benefit of any Person, establish, engage or participate in or otherwise be
connected with any business which competes with the businesses conducted by the
Company or any of its subsidiaries, in any geographic area in


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<PAGE>

which the Company and its subsidiaries is then conducting such business, except
that the foregoing shall not prohibit Employee from owning as a shareholder less
than 5% of the outstanding voting stock of an issuer whose stock is publicly
traded.

            (B) The provisions of Section 6.3(A) shall be applicable commencing
on the date of this Agreement and ending two (2) years following the effective
date of termination of this Agreement.

      6.4 The parties agree that any breach by Employee of any of the covenants
or agreements contained in this Section 6 will result in irreparable injury to
the Company for which money damages could not adequately compensate the Company
and therefore, in the event of any such breach, the Company shall be entitled
(in addition to any other rights and remedies which it may have at law or in
equity) to have an injunction issued by any competent court enjoining and
restraining Employee and/or any other Person involved therein from continuing
such breach. The existence of any claim or cause of action which Employee may
have against the Company or any other Person (other than a claim for the
Company's breach of this Agreement for failure to make payments hereunder) shall
not constitute a defense or bar to the enforcement of such covenants. In the
event of any alleged breach by Employee of any of the covenants or agreements
contained in this Section 6, the Company shall continue any and all of the
payments due Employee under this Agreement until such time as a Court shall
enter a final and unappealable order finding such a breach; provided, that the
foregoing shall not preclude a Court from ordering Employee to repay such
payments made to him for the period after the breach is determined to have


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<PAGE>

occurred or from ordering that payments hereunder be permanently terminated in
the event of a material and willful breach.

      6.5 If any portion of the covenants or agreements contained in this
Section 6, or the application hereof, is construed to be invalid or
unenforceable, the other portions of such covenant(s) or agreement(s) or the
application thereof shall not be affected and shall be given full force and
effect without regard to the invalid or unenforceable portions to the fullest
extent possible. If any covenant or agreement in this Section 6 is held to be
unenforceable because of the area covered, the duration thereof, or the scope
thereof, then the court making such determination shall have the power to reduce
the area and/or duration and/or limit the scope thereof, and the covenant or
agreement shall then be enforceable in its reduced form.

      6.6 For purposes of this Section 6, the term the "Company" shall include
the Company, any successor of the Company under Section 7 hereof, and all
present and future direct and indirect subsidiaries and affiliates of the
Company.

      7. Successors and Assigns.

            This Agreement shall inure to the benefit of and be binding upon any
corporate or other successor of the Company which will acquire, directly or
indirectly, by merger, consolidation, purchase, or otherwise, all or
substantially all of the assets of the Company, and shall otherwise inure to the
benefit of and be binding upon the parties hereto and their respective heirs,
executors, administrators, successors and assigns. Upon the death of Employee,
any payments or benefits otherwise due Employee hereunder shall be paid to or be
for the benefit of Employee's legal representatives. Nothing in the Agreement
shall


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preclude the Company from consolidating or merging into or with or transferring
all or substantially all of its assets to another Person. In that event, such
other Person shall assume this Agreement and all obligations of the Company
hereunder. Upon such a consolidation, merger, or transfer of assets and
assumption, the term the "Company" as used herein, shall mean such other Person
and this Agreement shall continue in full force and effect.

      8. Assignment.

            Neither this Agreement nor any rights to receive payments hereunder
shall be voluntarily or involuntarily assigned, transferred, alienated,
encumbered or disposed of, in whole or in part, without the Company's prior
written consent and approval, and shall not be subject to anticipation, levy,
execution, garnishment, attachment by, or interference or control of, any
creditor.

      9. Source of Payment and Timing.

            All payments provided under this Agreement shall be paid in cash
from the general funds of the Company, no special or separate fund shall be
required to be established and Employee shall have no right, title or interest
whatsoever in or to any investment which the Company may make to aid the Company
in meeting its obligations hereunder except to the extent that the Company
shall, in its sole and absolute discretion, choose to designate any of its
rights it may have under one or more life insurance policies it may obtain to
cover any of its obligations under this Agreement. Nothing contained in this
Agreement, and no action taken pursuant to its provisions, shall create or be
construed to


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create a trust of any kind or fiduciary relationship between the Company and
Employee or any other Person.

      10. Interest.

            In the event any benefits due to Employee are not paid when due
hereunder, Employee shall be entitled (in addition to his other rights and
remedies) to interest on the past due amounts at a rate equal to two percentage
points above the prime rate of interest as published in the Wall Street Journal,
such interest to commence on the date a benefit was due hereunder.

      11. Reimbursement of Enforcement Expenses.

            If the Company fails to pay or provide Employee any of the amounts
due him hereunder or fails to provide Employee with any of the other benefits
due him under this Agreement, and provided the Company does not cure any such
failure within thirty days after having received written notice from Employee of
such failure, Employee shall be entitled to full reimbursement from the Company
for all costs and expenses (including reasonable attorneys' fees and costs)
incurred by Employee in enforcing his rights under this Agreement.

      12. Notices.

            All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered by
hand or mailed, certified or registered mail, return receipt requested, with
postage prepaid, to the following addresses or to such other address as either
party may designate by like notice:


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<PAGE>

            A. If to Employee, to:

            Donald M. Hooton
            Vice President - Sales and Marketing
            Numerex Corp.
            Rose Tree Corporate Center
            1400 North Providence Road
            Suite 5500
            Media, PA 19063

            B. If to the Company, to

            Numerex Corp.
            Rose Tree Corporate Center II
            1400 North Providence Road
            Suite 5500
            Media, PA 19063

            Attn: Chairman of the Board of Directors

and to such other or additional person or persons as either party shall have
designated to the other party in writing by like notice.

      13. General provisions.

      13.1 This Agreement constitutes the entire agreement between the parties
with respect to the subject matter hereof, and supersedes and replaces all prior
agreements between the parties. No amendment, waiver or termination of any of
the provisions hereof shall be effective unless in writing and signed by the
party against whom it is sought to be enforced. Any written amendment, waiver or
termination hereof executed by the Company and Employee (or his legal
representatives) shall be binding upon them and upon all other Persons, without
the necessity of securing the consent of any other Person including, but not
limited to, Employee's spouse, and no Person shall be deemed to be a third party
beneficiary under this Agreement.


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      13.2 "Person" as used in this Agreement means a natural person, joint
venture, corporation, sole proprietorship, trust, estate, partnership,
cooperative, association, non-profit organization or any other legal entity.

      13.3 This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same Agreement.

      13.4 Except as otherwise expressly set forth herein, no failure on the
part of any party hereto to exercise and no delay in exercising any right, power
or remedy hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or remedy hereunder preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.

      13.5 The Company and Employee consent to the exclusive jurisdiction and
venue of the courts of, or located in, the Commonwealth of Pennsylvania in any
and all actions arising hereunder and irrevocably consent to service of process
hereunder.

      13.6 The headings of the sections of this Agreement have been inserted for
convenience of reference only and shall in no way restrict or modify any of the
terms or provisions hereof.

      13.7 This Agreement shall be governed and construed and the legal
relationships of the parties determined in accordance with the laws of the
Commonwealth of Pennsylvania


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applicable to contracts executed and to be performed solely in the Commonwealth
of Pennsylvania.

      EMPLOYEE AFFIRMS THAT THE ONLY CONSIDERATION FOR SIGNING THIS AGREEMENT
ARE THE TERMS STATED HEREIN, THAT NO OTHER PROMISES OR AGREEMENTS OF ANY KIND
HAVE BEEN MADE TO OR WITH HIM BY ANY PERSON OR ENTITY WHATSOEVER TO CAUSE HIM TO
SIGN THIS AGREEMENT, AND THAT HE FULLY UNDERSTANDS THE MEANING AND INTENT OF
THIS DOCUMENT. EMPLOYEE STATES AND REPRESENTS THAT HE HAS BEEN ADVISED, AND HAD
AN OPPORTUNITY, TO DISCUSS FULLY AND REVIEW THE TERMS OF THIS AGREEMENT WITH AN
ATTORNEY. EMPLOYEE FURTHER STATES AND REPRESENTS THAT HE HAS CAREFULLY READ THIS
AGREEMENT, UNDERSTANDS THE CONDITIONS HEREOF, FREELY AND VOLUNTARILY ASSENTS TO
ALL THE TERMS AND CONDITIONS HEREOF, AND SIGNS THE SAME AS HIS OWN FREE ACT.

                              NUMEREX CORP.


(Corporate Seal)              By: /s/Kenneth F. Manser
                                  -------------------------------------------
                                    Kenneth F. Manser,
                                    Chairman


                              Attest: _______________________________________


                              _______________________________________________
                                    [                                   ]


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                              EMPLOYEE


                              /s/ Donald M. Hooton
                              -----------------------------------------------
                                    Donald M. Hooton,
                                    Vice President - Sales and Marketing


                        Attest:


                              Attest: _______________________________________


                              _______________________________________________
                                    [                                   ]


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