SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, For Use of the Commission Only
as permitted by Rule 14a-b(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to (ss.)240.14a-11(c) or (ss.)240.14a-12
NUMEREX CORP.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
/X/ No Fee Required.
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth the amount
on which the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the form or Schedule and the date of its filing.
(1) Amount previously paid:
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(2) Form, Schedule or Registration No.:
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(3) Filing party:
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(4) Date filed:
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<PAGE>
NUMEREX CORP.
100 Four Falls Corporate Center
Suite 407
Route 23 and Woodmont Road
West Conshohocken, PA 19428-2961
Dear Shareholders:
The Annual Meeting of Shareholders of Numerex Corp. will be held at 10:00
a.m. on February 26, 1998 at The Radisson Hotel Philadelphia, 500 Stevens Drive,
Lester, Pennsylvania 19113.
The items to be voted on at this meeting are listed in the attached proxy
statement.
Enclosed is a form of proxy for your use. We urge you to vote by signing
the proxy, even though you plan to attend the meeting, and mailing it to us in
the accompanying stamped envelope. Be sure it is signed exactly as the name or
names appear on the proxy.
A copy of our Annual Report for 1997 is enclosed.
Sincerely yours,
/s/ John J. Reis
-----------------------------
John J. Reis
President and Chief
Executive Officer
January 26, 1998
Enclosures
<PAGE>
NUMEREX CORP.
---------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 26, 1998
---------------------------
TO OUR SHAREHOLDERS:
Notice is hereby given that the annual meeting of shareholders of NUMEREX
CORP. (the "Company") will be held on February 26, 1998, at 10:00 A.M.
(prevailing time), at The Radisson Hotel Philadelphia, 500 Stevens Drive,
Lester, Pennsylvania 19113, for the following purposes:
1. To elect a Board of Directors consisting of seven persons to serve
until the next annual meeting of shareholders and until their
respective successors shall have been duly elected and qualified;
2. To consider and act upon a proposal to increase the number of shares
of Common Stock for issuance under the Company's Employee Stock Option
Plan;
3. To consider and act upon a proposal to increase the annual option
grants under the Company's Non-Employee Director Stock Option Plan;
and
4. To transact such other business as may properly come before this
meeting or any postponement or adjournment thereof.
The Board of Directors has fixed January 23, 1998 as the record date for
the determination of shareholders entitled to vote at the annual meeting. Only
shareholders of record at the close of business on that date will be entitled to
notice of, and to vote at, the annual meeting.
YOU ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING IN PERSON. WHETHER
OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING IN PERSON, YOU ARE URGED TO SIGN,
DATE AND PROMPTLY RETURN THE ENCLOSED PROXY. A SELF-ADDRESSED ENVELOPE IS
ENCLOSED FOR YOUR CONVENIENCE; NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED
STATES.
January 26, 1998 By Order of the Board of Directors
/s/ John J. Reis
---------------------------------------------------
John J. Reis, President and Chief Executive Officer
<PAGE>
NUMEREX CORP.
----------------------------
PROXY STATEMENT
----------------------------
The accompanying proxy is solicited by and on behalf of the Board of
Directors of Numerex Corp. (the "Company") for use at the annual meeting
("Annual Meeting") of shareholders to be held on February 26, 1998, at 10:00
A.M. (prevailing time) at The Radisson Hotel Philadelphia, 500 Stevens Drive,
Lester, Pennsylvania 19113, and at any postponement or adjournment thereof. The
approximate date on which this Proxy Statement and the accompanying form of
proxy will first be sent or given to shareholders is January 26, 1998.
Sending in a signed proxy will not affect a shareholder's right to attend
the annual meeting and vote in person since the proxy is revocable. Any
shareholder giving a proxy has the power to revoke it by, among other methods,
giving written notice to the Secretary of the Company at any time before the
proxy is exercised.
The expense of the proxy solicitation will be borne by the Company. In
addition to solicitation by mail, proxies may be solicited in person or by
telephone, telegraph or teletype by directors, officers or employees of the
Company without additional compensation. Upon request by record holders of the
Company's Class A Common Stock, no par value (the "Common Stock"), who are
brokers, dealers, banks or voting trustees, or their nominees, the Company is
required to pay the reasonable expenses incurred by such record holders for
mailing proxy material and annual shareholder reports to any beneficial owners
of Common Stock.
A form of proxy is enclosed. If properly executed and received in time for
voting, and not revoked, the enclosed proxy will be voted as indicated in
accordance with the instructions thereon. If no directions to the contrary are
indicated, the persons named in the enclosed proxy will vote all shares of the
Company's Common Stock for election of all nominees for directorships
hereinafter named.
The enclosed proxy confers discretionary authority to vote with respect to
any and all of the following matters that may come before the meeting: (i)
matters which the Company does not know, a reasonable time before the proxy
solicitation, are to be presented at the meeting; (ii) approval of the minutes
of a prior meeting of shareholders, if such approval does not amount to
ratification of the action taken at the meeting; (iii) the election of any
person to any office for which a bona fide nominee is unable to serve or for
good cause will not serve; (iv) any proposal omitted from this Proxy Statement
and form of proxy pursuant to Rules 14a-8 or 14a-9 under the Securities Exchange
Act of 1934, as amended; and (v) matters incident to the conduct of the meeting.
In connection with such matters, the persons named in the enclosed form of proxy
will vote in accordance with their best judgment.
<PAGE>
The Company is not currently aware of any matters which will be brought
before the annual meeting (other than procedural matters) which are not referred
to in the enclosed notice of the annual meeting.
The Company had 10,914,592 shares of Common Stock outstanding at the close
of business on January 23, 1998, the record date (the "Record Date"). The
presence, in person or by proxy, of holders of a majority of all of the shares
of stock entitled to vote constitutes a quorum. Each share of Common Stock
outstanding is entitled to one vote on each matter which may be brought before
the annual meeting. Directors shall be elected by a plurality of the votes
present in person or represented by proxy at the meeting and entitled to vote on
the election of directors. In all matters other than the election of directors,
the affirmative vote of the majority of shares present in person or represented
by proxy at the Annual Meeting and entitled to vote on the matter shall be the
act of the shareholders. Under the Pennsylvania Business Corporation Law, an
abstention, notwithstanding the authority to vote or broker non-vote will not
have the same legal affect as an "against" vote and will not be counted in
determining whether the proposal has received the required shareholder vote.
As used in this Proxy Statement, "fiscal 1995" means the Company's fiscal
year ended October 31, 1995, "fiscal 1996" means the Company's fiscal year ended
October 31, 1996 and "fiscal 1997" means the Company's fiscal year ended October
31, 1997.
SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of January 23, 1998, by (i) each
person known by the Company to be the beneficial owner of five percent or more
of the Common Stock, (ii) each director of the Company, (iii) each executive
officer of the Company named in the Summary Compensation Table which follows,
and (iv) all directors and executive officers of the Company as a group. Except
as otherwise indicated below, the beneficial owners of the Common Stock listed
below have sole investment and voting power with respect to such shares.
2
<PAGE>
Shares Beneficially Owned(1)
Name of Beneficial Owner ---------------------------------
or Identity of Group Number Percent
- ------------------------ ----------- -------
Gwynedd Resources, Ltd.
900 Market Street
Suite 200 3,302,280(2) 30.3%
Wilmington, DE 19801
Elizabeth Baxavanis, Trustee
Dominion Holdings #5
Revocable Trust for the
Benefit of Maria E. Nicolaides
900 Market Street
Suite 200
Wilmington, DE 19801 3,302,280(3) 30.3%
Maria E. Nicolaides
4193 Las Palmas Way
Sarasota, FL 34238 3,302,280(4) 30.3%
Douglas Holsclaw, MD
42 Llanberries Road
Bala Cynwyd, PA 19004 752,382(5) 6.9%
Kenneth F. Manser
Bronzebase Limited
Great Western House
Station Road
Reading, Berkshire RG11SX 1,334,658 12.2%
George Benson (6) 5,000(7) *
Matthew J. Flanigan (6) 7,700(7) *
Frederick C. Shay (6) 22,000(8) *
Gordon T. Ray (6) 6,097(7) *
John J. Reis (6) 10,000(9) *
Andrew J. Ryan (10) 10,000(10) *
Donald M. Hooton (6) 12,750(11) *
Charles L. McNew (6) 11,000(12) *
All Directors and Executive Officers 1,419,108(13) 13.0%
as a group (8 persons)
- ----------
*less than 1%
3
<PAGE>
(1) The shares "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they
may include shares owned by or for, among other things, the wife, minor
children or certain other relatives of such individual, as well as other
shares as to which the individual has or shares voting or investment power
or has the right to acquire within 60 days after January 23, 1998.
(2) The shareholders of Gwynedd Resources, Ltd. ("Gwynedd") include various
trusts for the benefit of Maria E. Nicolaides and her children (for which
Mrs. Baxavanis is trustee), Dr. Holsclaw and Mr. Hooton. Gwynedd has the
same shareholders as Dominion Group Limited, a Member Company of Dominion
Holdings. See "Certain Relationships and Related Transactions." See
footnotes (3), (4), (5), (10) and (11).
(3) Represents the shares of Common Stock owned by Gwynedd. Trusts for the
benefit of Maria E. Nicolaides and her children, of which Mrs. Baxavanis,
Maria E. Nicolaides' mother-in-law, is trustee, own approximately 89.4% and
0.9%, respectively, of the outstanding stock of Gwynedd. Mrs. Baxavanis
disclaims beneficial ownership of all shares of Common Stock owned by
Gwynedd. See footnote (4) below.
(4) Represents the shares of Common Stock owned by Gwynedd. Trusts for the
benefit of Maria E. Nicolaides and her children, of which Mrs. Baxavanis,
Maria E. Nicolaides' mother-in-law, is trustee, own approximately 89.4% and
0.9%, respectively, of the outstanding stock of Gwynedd. Maria E.
Nicolaides disclaims beneficial ownership of 673,169 shares of Common Stock
owned by Gwynedd which may be deemed to be beneficially owned by the other
shareholders of Gwynedd, including trusts for the benefit of her children.
See footnote (3) above.
(5) Does not include any shares of Common Stock owned by Gwynedd. Dr. Holsclaw
is the owner of approximately 9.3% of the outstanding stock of Gwynedd.
(6) The address of such person is c/o Numerex Corp., 100 Four Falls Corporate
Center, Suite 407, Route 23 and Woodmont Road, West Conshohocken, PA
19428-2961.
(7) Represents or includes options to purchase Common Stock under the
Non-Employee Director Stock Option Plan (the "Director Plan"), as follows:
George Benson-5,000; Matthew J. Flanigan-6,700; and Gordon T. Ray-5,000.
(8) Includes options to purchase 16,000 shares of Common Stock under the
Employee Stock Option Plan (the "Employee Plan").
(9) Does not include options to purchase 200,000 shares of Common Stock under
the Employee Plan which are not currently exercisable.
(10) Mr. Ryan disclaims beneficial ownership of the 3,302,280 shares of Common
Stock owned by Gwynedd. Mr. Ryan's address is: Salisbury & Ryan, 1325
Avenue of the Americas, Seventh Floor, New York, NY 10019-6026.
(11) Does not include any shares of Common Stock owned by Gwynedd or 400 shares
of Common Stock owned by his wife, as to which beneficial ownership is
disclaimed. Mr. Hooton is the owner of approximately 0.5% of the
outstanding stock of Gwynedd. Mr. Hooton's employment with the Company
ceased in May 1997.
(12) Includes options to purchase 10,000 shares of Common Stock under the
Employee Plan.
(13) Does not include ownership of Mr. Hooton, who is not presently an executive
officer of the Company as of the date of this table. Includes options to
purchase 42,700 shares of Common Stock under the Employee Plan and the
Director Plan.
4
<PAGE>
PROPOSAL ONE
ELECTION OF DIRECTORS
The Bylaws of the Company provide that the Board of Directors shall consist
of not less than three nor more than ten directors and that the number of
directors to be elected, subject to the foregoing limits, shall be determined
from time to time by the Board of Directors. The Board has set the number of
directors at seven. At the Annual Meeting seven directors, who will constitute
the Company's entire Board of Directors, are to be elected to hold office until
the next annual meeting and until their respective successors have been duly
elected and qualified. The Board has designated the persons listed below to be
nominees for election as directors. The Company has no reason to believe that
any of the nominees will be unavailable for election; however, should any
nominee become unavailable for any reason, the Board of Directors may designate
a substitute nominee. The proxy agents intend (unless authority has been
withheld) to vote for the election of the Company's nominees.
All of the nominees currently serve as directors of the Company and have
consented to being named in this Proxy Statement and to serve if elected.
The bylaws of the Company require that nominations by shareholders for
directors to be elected, or proposals by shareholders to be considered, at an
annual meeting of shareholders and which have not been previously approved by
the Board of Directors must be submitted to the Secretary of the Company in
writing, either by personal delivery, nationally-recognized express mail or
United States mail, postage prepaid, not later than the latest date upon which
shareholder proposals must be submitted to the Company for inclusion in the
Company's proxy statement relating to such meeting pursuant to Rule 14a-8 under
the Securities Exchange Act of 1934, as amended, or other applicable rules or
regulations under the federal securities laws or, if no such rules apply, at
least ninety (90) days prior to the date one year from the date of the
immediately preceding annual meeting of shareholders. Each such nomination or
proposal shall set forth: (i) the name and address of the shareholder making the
nomination or proposal and the person or persons nominated, or the subject
matter of the proposal submitted; (ii) a representation that the shareholder is
a holder of record of capital stock of the Company entitled to vote at such
meeting and intends to appear in person or by proxy at the meeting to vote for
the person or persons nominated, or the proposal submitted; (iii) a description
of all arrangements and understandings between the shareholder and each nominee
and any other person or persons (naming such person or persons) pursuant to
which the nomination was made, or the proposal was submitted, by the
shareholder; (iv) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement filed
pursuant to the proxy rules of the Securities and Exchange Commission had the
nominee been nominated by the Board of Directors; and (v) the consent of each
nominee to serve as a director of the Company if so elected. All late
nominations and proposals will be rejected.
5
<PAGE>
Information as to Directors and Nominees
The following table contains information with respect to the nominees for
Directors.
Name Age Position Director Since
- ---- --- -------- --------------
George Benson(1)(2)(3) 63 Director 1995
Matthew J. Flanigan(1)(2) 52 Director 1994
Kenneth F. Manser 64 Chairman of the 1994
Board of Directors;
Managing Director
of the Company's
subsidiary, Versus
Technology Limited
Gordon T. Ray(1)(3) 69 Director 1995
John J. Reis 55 Director; President 1996
and Chief Executive
Officer
Andrew J. Ryan(1) 38 Director 1996
Frederick C. Shay 52 Director; Chief 1994
Technology Officer
- ----------
(1) Member of Audit Committee
(2) Member of Compensation Committee
(3) Member of Employee Stock Option Plan Committee
George Benson has served as a Director of the Company since June 1995. Mr.
Benson has served as Chairman and Chief Executive Officer of Wisconsin Wireless
Communications Corporation and Airadigm Communications since September 1992 and
Senior Vice President of Mitel, Inc., a public telecommunications company, from
September 1990 until September 1992. From 1979 until 1990 Mr. Benson served as
Founder, President and Chief Executive Officer of Telecom North, Inc.
Matthew J. Flanigan has served as a Director of the Company since July
1994. Mr. Flanigan has been the President of the Telecommunication Industry
Association, a trade association for telecommunication companies, since April
1994. From March 1987 to January 1994, he served as President of Cognitronics
Corporation, a telecommunications manufacturer.
Kenneth F. Manser has been the Managing Director of the Company's
subsidiary, Versus Technology Limited, since December 1990 and a Director of the
Company since February 1994.
6
<PAGE>
Prior thereto, since 1987, he was sales manager of the Telecommunications Group
of Base Ten Systems, Inc., a defense electronic systems manufacturer.
Gordon T. Ray has served as a Director of the Company since October 1995.
Mr. Ray has served as President of Global Information, Ltd., a technology
marketing consulting company, from September 1993 to present and for more than
five years prior thereto he served as Executive Vice President of NEC America,
an equipment manufacturing company. Mr. Ray is also a director of the
Telecommunication Industry Association and a member of the board of governors of
the Electronic Industries Association, trade associations for telecommunication
and electronics companies, respectively.
John J. Reis has been the President, Chief Executive Officer and Director
of the Company since June 1996. From 1989 to 1996 Mr. Reis served as President
and Chief Executive Officer of MAXM Systems Corporation, a provider of
automation software for network and systems management.
Andrew J. Ryan has served as a director of the Company since May 1996. Mr.
Ryan has practiced law with the law firm of Salisbury & Ryan from August 1994 to
present, from March 1993 to August 1994 with the law firm of Pepper Hamilton &
Scheetz and from December 1987 to March 1993 with the law firm of Lord Day &
Lord. Mr. Ryan serves as Gwynedd's designee on the Board. See "Arrangements with
Respect to the Board of Directors" and "Certain Relationships and Related
Transactions."
Frederick C. Shay has been a Director of the Company since February 1994,
and the President of the Company's subsidiary, DCX Systems, Inc. ("DCX Systems")
from November 1994 to October 1997. Since October 1997 he has served as Chief
Technology Officer of the Company. In addition, he has served as acting
President and acting Chief Executive Officer of the Company from June 1995 to
June 1996. From January 1992 until joining the Company, Mr. Shay provided
business development consulting services to electronics related companies,
including providing consulting services to the Company during 1994. From 1971 to
1991, Mr. Shay held various management positions with BellSouth Corporation or
its predecessor, including Sales Vice President from 1989 to 1991.
Board of Directors, Committees and Attendance at Meetings
During fiscal 1997, the Board of Directors of the Company held 7 meetings.
Each director attended 75% or more of the meetings of the Board and committees
of which they were members during fiscal 1997.
During fiscal 1997, the Audit Committee held four meetings. The purpose of
the Audit Committee is to review all recommendations made by the Company's
independent public accountants with respect to the accounting methods used and
the system of internal control followed by the Company and to advise the Board
of Directors with respect thereto.
During fiscal 1997, the Compensation Committee held two meetings. The
Compensation Committee makes recommendations to the Board with respect to the
compensation of the officers and key employees. See "Executive Compensation -
Report of the Compensation Committee."
7
<PAGE>
Arrangements with Respect to the Board of Directors
The Company has entered into an agreement providing Gwynedd the right to
designate one director to the Board. Additionally, in the event the Board
consists of more than seven directors, Gwynedd, at its option, may designate one
additional director. Any designee's appointment will be subject to the exercise
by the Board of Directors of its fiduciary duties and the approval of the
Company's shareholders upon the expiration of any appointed term at the next
annual meeting of shareholders. Gwynedd's right to designate directors will
cease at such time as Gwynedd's equity interest in the Company drops below ten
percent of the outstanding shares of the Company's Common Stock. Mr. Ryan
currently serves as Gwynedd's designee.
Director Compensation
Each director of the Company who is not also an employee of the Company or
a Gwynedd designated director receives an annual fee of $8,000 (to be increased
to $12,000, effective January 1, 1998) and a fee of $250 for each meeting
(except telephonic meetings, in which case the fee is $125) of the Board or a
committee thereof attended plus reimbursement of expenses incurred in attending
meetings. No additional fee is paid for committee meetings held the same day as
Board meetings.
Directors who are not employees or a Gwynedd designated director are
entitled to receive options under the Company's Non-Employee Director Stock
Option Plan. See "Executive Compensation - Stock Option Plans" and "Proposal
Three - Approval of Amendment to the Non-Employee Director Stock Option Plan."
Litigation Settlement
In July and August 1995, the Company received complaints in three separate
purported lawsuits. The complaints, which were consolidated into a single
amended complaint, sought class action status and alleged violations arising
under certain federal securities laws for alleged material misstatements and
omissions in the prospectus associated with the Company's 1995 public offering.
The Company and the individual defendants believe the allegations are untrue and
without merit. The complaint was filed against certain of the Company's
directors and executive officers, principal shareholder and underwriters. The
complaint sought rescission and/or damages against all defendants, including the
awarding of costs and disbursements. The defendants filed a Motion to Dismiss
and in January 1996 and the defendants' Motion to Dismiss was granted and the
case was dismissed. In February 1996, the plaintiffs appealed the Order of the
U.S. District Court to the United States Court of Appeals. A settlement,
effective October 24, 1996 was reached among the parties and final court
approval was received on March 3, 1997. Certain defendants paid $2.1 million to
a settlement fund. The Company's contribution to the settlement fund was
$1,033,340.
EXECUTIVE COMPENSATION
Under rules established by the Securities and Exchange Commission ("SEC"),
the Company is required to provide certain data and information with respect to
the compensation and benefits provided to the Company's Chief Executive Officer
and other executive officers of the Company. The disclosure requirements for the
Chief Executive Officer and other executive officers include the use of tables
and a report explaining the rationale and considerations that led to fundamental
compensation decisions affecting
8
<PAGE>
those individuals. In fulfillment of this requirement, the Compensation
Committee of the Company (the "Committee"), at the direction of the Board of
Directors, has prepared the following report for inclusion in this proxy
statement.
Report of the Compensation Committee
Overview and Philosophy
The Committee is currently comprised of Matthew J. Flanigan, as Chairman,
and George Benson. The Committee's responsibilities include reviewing and making
recommendations to the Board of Directors regarding the compensation of the
Chief Executive Officer and approving the compensation paid to the Company's
other executives. For the 1998 fiscal year the Company has instituted an
incentive compensation program for senior employees. The Committee also
considers and recommends to the Employee Stock Option Plan Committee awards of
options to purchase shares of Common Stock pursuant to the Company's Employee
Stock Option Plan.
The compensation structure is aimed at establishing levels of compensation
sufficient to attract and retain qualified executive talent. To do so, the
Company seeks to provide total compensation packages that are comparable to
those offered by other companies of similar size, complexity and financial
performance. The compensation program also seeks to align the interests of
management with those of the Company's shareholders through the use of stock
based forms of compensation, including compensation through stock option grants.
Compensation Program Elements
The executive officer compensation program consists of a base salary,
incentive compensation in the form of cash bonuses and long-term incentive
compensation in the form of options to purchase Common Stock under the Employee
Stock Option Plan, bonus and miscellaneous fringe benefits, including group
benefits generally available to employees of the Company.
Base Salary. The Company's salary levels are intended to be consistent with
the competitive practices of comparable companies and each executive officer's
level of responsibility. Salary increases are intended to reflect the overall
financial performance of the Company as well as the specific contributions of
the individual executive officer.
Stock Options. Grants of options under the Company's Employee Stock Option
Plan are made at the Employee Plan Committee's discretion based on the level and
importance of the management position to the overall long term success of the
Company and the contribution of the executive officer. Grants are intended to
motivate the executive officers to build shareholder value and to relate a
significant portion of the executive's compensation directly to the financial
performance of the Company.
Incentive Compensation. The Company instituted an incentive compensation
program for fiscal 1998 for executive level employees whereby they can receive
cash bonuses ranging between 20-24% of base salary, based upon the achievement
of revenue and operating income objectives pursuant to the Company's business
plan. Additional incentive compensation will be paid for over-achievement of
objectives.
9
<PAGE>
Other Benefits. In addition to the items of compensation described above,
the Company provides medical, life insurance and a 401(k) plan to its executive
officers that are generally available to Company employees. The Company also
provides certain executive officers with a company car. The amount of these
benefits, as determined in accordance with the rules of the Securities and
Exchange Commission relating to executive compensation, did not exceed the
lesser of $50,000 or 10% of any such executive officer's salary for fiscal 1997.
Compensation of the Chief Executive Officer
Effective June 3, 1996, the Company entered into an employment agreement
with John J. Reis, whereby Mr. Reis is serving as President, Chief Executive
Officer and a Director of the Company. Pursuant to the agreement, Mr. Reis
received an annual salary of $225,000, increased to $250,000, effective January
1, 1997, plus a cash bonus equal to $50,000, $25,000 of which was pro-rated on a
monthly basis over the first six months of his employment, while the remaining
$25,000 was awarded at the discretion of the Board of Directors. As part of this
agreement, Mr. Reis was granted stock options to purchase, in the aggregate,
125,000 shares of Company Common Stock, exercisable as follows: (i) 50,000, at
such time as the closing price of Numerex Common Stock equals or exceeds $10.00
per share for a period of sixty (60) consecutive days; (ii) 25,000, at such time
as the closing price of Numerex Common Stock equals or exceeds $12.50 per share
for a period of sixty (60) consecutive days; and (iii) 50,000, at such time as
the closing price of Numerex Common Stock equals or exceeds $15.00 per share for
a period of sixty (60) consecutive days. The exercisability of the options was
modified. See "Repricing of Options and Exercisability Modifications." Mr. Reis'
base salary was increased to $275,000, effective June 1, 1997. See "Employment
and Related Agreements" and "Stock Option Plans." Also, during fiscal 1997 Mr.
Reis was granted additional options to purchase 75,000 shares of Common Stock.
This compensation was based upon the Company's belief that the background
and skills brought to the Company by Mr. Reis, as well as his contribution since
commencing employment, are important to the Company's achievement of its long
range strategic goals.
Policy with Respect to Section 162(m) of the Internal Revenue Code
Generally, Section 162(m) of the Internal Revenue Code, and the regulations
promulgated thereunder (collectively, "Section 162(m)"), denies a deduction to
any publicly held corporation, such as the Company, for certain compensation
exceeding $1,000,000 paid to the chief executive officer and the four other
highest paid executive officers during any taxable year, excluding, among other
things, certain performance-based compensation. The Compensation Committee
intends to evaluate the level of compensation and the importance to the Company
of qualifying for the performance-based exclusion with respect to options having
an exercise price of not less than the fair market value of the Common Stock on
the date of grant. The Compensation Committee will also continually evaluate to
what extent Section 162(m) will apply to its other compensation programs.
The Compensation Committee: Matthew J. Flanigan and George Benson.
10
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid to the Chief
Executive Officer of the Company, and the four most highly compensated executive
officers of the Company and its subsidiaries whose salary and bonus exceeded
$100,000 for services rendered in all capacities to the Company and its
subsidiaries, during the Company's fiscal years ended October 31, 1997, 1996 and
1995, except for the Chief Executive Officer.
<TABLE>
<CAPTION>
Long Term
Annual Compensation Compensation
------------------------------------ ------------
Other Securities
Annual Underlying All Other
Name and Principal Position Fiscal Year Salary Bonus Compensation Options Compensation
- --------------------------- ----------- -------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John J. Reis, 1997 $256,250 $66,983 -- 100,000 $6,431
President and Chief 1996(1) 93,750 20,833 -- 100,000 --
Executive Officer 1995 -- -- -- -- --
Donald M. Hooton, 1997 $ 77,943 $ 4,147 -- -- $7,936
Vice President - 1996 120,000 -- -- 25,000 3,150
Sales and Marketing 1995(2) 85,000 -- 10,000 --
Kenneth F. Manser, 1997 $156,218 $23,487 -- -- $29,681
Chairman of the Board of the 1996(3) 147,307 -- -- -- 27,988
Company and Managing 1995(3) 150,898 15,884 -- -- 22,693(4)
Director of Versus
Technology Limited
Charles L. McNew, Vice 1997 $133,500 $32,827 -- 25,000 $4,713
President and Chief 1996 123,500 -- -- 25,000 3,708
Financial Officer 1995 105,000 25,000 -- 30,000 3,450
Frederick C. Shay, 1997 $145,000 -- -- 10,000 $4,200
Chief Technology Officer 1996(6) 161,667 -- -- 40,000 4,445
1995(6) 138,833 22,500 -- 30,000 4,150
</TABLE>
11
<PAGE>
- ----------
(1) Mr. Reis became President and Chief Executive Officer of the Company in
June 1996 at a base salary of $225,000, which was increased to $250,000 on
January 1, 1997. His base salary was increased to $275,000, effective June
1, 1997. See "Employment and Related Agreements."
(2) Mr. Hooton has served as Vice President - Sales and Marketing from February
1995 until May 1997, at which time his employment with the Company ceased.
(3) Mr. Manser's salary, bonus and other compensation for fiscal 1995, 1996 and
1997 were (pound)95,000, (pound)10,000 and (pound)14,287; (pound)95,000,
(pound)-0-; and (pound)18,050; and (pound)95,000, (pound)14,283 and
(pound)18,050, respectively, which have been converted into dollars at the
exchange rate of $1.5884 for fiscal 1995, $1.5506 for fiscal 1996 and
$1.6444 for fiscal 1997, respectively, per (pound)100 based on the average
of the noon buying rates in New York City on the last day of each month
during fiscal 1995, 1996 and 1997, respectively, for cable transfers as
certified for customs purposes by the Federal Reserve Bank of New York.
(4) Represents private health insurance premium payments and amounts
contributed to Mr. Manser's account under a Limited Pension and Death
Benefits Plan. See "Limited Pension and Death Benefits Plan."
(5) Mr. McNew became Vice President and Chief Financial Officer in July 1994.
(6) Mr. Shay has served as Chief Technology Officer, since October 1997. From
June 1996 until October, 1997 Mr. Shay has served as President of the
Company's subsidiary, DCX Systems, Inc. Mr. Shay served as acting President
and acting Chief Executive Officer of the Company from June 1995 to June
1996 at a base salary of $175,000. From November 1, 1995 through June 30,
1995, Mr. Shay served as Vice President of the Company and has served as
President of DCX Systems, Inc. since November 1, 1995. Accordingly, Mr.
Shay's annual compensation includes amounts paid under various capacities.
Employment and Related Agreements
In June 1996, the Company entered into a one year employment agreement,
which may be extended by mutual agreement, with Mr. Reis pursuant to which he
will serve as President, Chief Executive Officer and a Director of the Company.
For all services rendered Mr. Reis will receive an annual salary of $225,000
(increased to $250,000 effective January 1, 1997), or such higher salary as may
be negotiated from time to time by Numerex and Mr. Reis ($275,000, effective
June 1, 1997), plus an initial bonus equal to $50,000, $25,000 of which shall be
pro-rated over the first six months of his employment, while the remaining
$25,000 shall be awarded at the discretion of the Board of Directors. Mr. Reis
will also be reimbursed for business travel and other business expenses.
Additionally, Mr. Reis received options to purchase, in the aggregate, 125,000
shares of Numerex Common Stock, at exercise prices equal to the fair market
value of the Company Common Stock in the dates of grant. The options are
exercisable as follows: (i) 50,000, at such time as the closing price of the
Company's Common Stock equals or exceeds $10.00 per share for a period of 60
consecutive days; (ii) 25,000, at such time as the closing price of the
Company's Common Stock equals or exceeds $12.50 per share for a period of 60
consecutive days; and (iii) 50,000, at such time as the closing price of the
Company's
12
<PAGE>
Common Stock equals or exceeds $15.00 per share for a period of 60 consecutive
days. The exercisability of the options was modified. See "Repricing of Options
and Exercisability Modifications." Mr. Reis is also entitled to benefits under
Company employee benefit plans and programs in which other executives of the
Company are eligible to participate. Mr. Reis is entitled to four weeks of
annual vacation. The Company may terminate this agreement "for cause" (as
defined therein) in which case Mr. Reis shall have no right to receive
compensation or other benefits for any period after such termination. In the
event of termination for "good reason" (as defined therein), which includes a
merger, consolidation or reorganization, sale of all or substantially all of the
assets or any similar event, a "change in control" (as defined therein), or for
termination without cause, Mr. Reis shall receive his base salary plus bonus for
the most recently completed year of employment, payment of which shall be made
at the time provided for in the agreement as though employment had not been
terminated. This payment would be in lieu of the base annual salary and bonus
compensation he would otherwise receive. The agreement also requires certain
payments by the Company in the event of disability or partial disability. The
agreement also contains non-competition, non-disclosure and confidentiality
provisions, certain of which extend beyond the term of the agreement.
In November 1993, the Company entered into an employment agreement with
Kenneth F. Manser, pursuant to which Mr. Manser has served as Managing Director
of Versus Technology Limited for two years, which ended in November 1995,
subject to automatic one year extensions unless notice of termination is given
by either party at least 90 days prior to the end of the then current term. The
employment agreement has been automatically extended. Mr. Manser's salary is
(pound)95,000 per year, or such higher rate as may from time to time be agreed.
In the event of Mr. Manser's death during the term of the agreement, his wife
will be entitled to receive a lump-sum payment equal to six months salary at his
then current rate. Versus Technology Limited provides Mr. Manser with an
automobile, which may be used for business and private use, private health
insurance coverage for Mr. Manser and his wife, and pension and life insurance
arrangements as shall from time to time be agreed upon. The agreement may be
terminated due to Mr. Manser's long-term disability, serious breach of the
agreement, grossly negligent conduct or personal bankruptcy. Mr. Manser is
prohibited from disclosing or using confidential information during and after
the term of his agreement and from soliciting business from the Company's
customers for a period of one year after the termination of his employment.
In May 1996, Numerex entered into severance agreements with Messrs. Shay,
McNew and Hooton, which terminate at the earlier of (i) death or permanent
disability, (ii) termination by the Company for cause, (iii) mutual agreement,
(iv) termination by resignation or otherwise; or (v) one year from the date of
the agreement, and year to year thereafter unless appropriate notice is given.
The agreements generally provide that if employment is terminated during the
term by reason of a merger or similar transaction, a "change in control" (as
defined therein), change to a less responsible position, termination of employee
(except for cause), employee shall receive, for a period of six months following
termination 50% of his annual base salary. In addition, the employee shall be
entitled to receive, for a period of six months following the termination date,
reimbursement of all reasonable expenses incurred in connection with his search
for new employment, not to exceed 20% of base annual salary, or, at employee's
option, a lump sum payment of $10,000. For a period of one year following the
termination date employee shall be entitled to all Company non-discriminatory
benefits, such as medical care and life insurance benefits. The agreements also
contain certain provisions preventing the employee from disclosing confidential
information and not competing with the Company.
13
<PAGE>
Stock Option Plans
In May 1994, the shareholders approved the Company's Employee Stock Option
Plan (the "Employee Plan") and the Non-Employee Director Stock Option Plan (the
"Director Plan" and, together with the Employee Plan, the "Plans"). In December
1994, the Plans were amended by the Board of Directors, and approved by the
shareholders in February 1995 to, among other things, permit options under the
Plans to be granted only with respect to Class A Common Stock and not with
respect to Class B Common Stock. In addition, the Employee Plan was amended to
increase the total number of shares for which options may be granted from
125,000 shares of Common Stock to 447,500 shares of Common Stock and to limit
the maximum number of shares of Common Stock for which options may be granted
under the Employee Plan to any one employee during any fiscal year of the
Company to 100,000 shares. In December 1996, the Employee Plan was amended by
the Board of Directors, and in February 1997 approved by shareholders, to
increase the total number of shares under the Employee Plan for which options
may be granted from 447,500 shares of Common Stock to 747,500. Proposal Number
Two seeks to increase the number of options to be granted under the Employee
Plan to 1,500,000 and Proposal Number Three seeks to increase the annual option
grant to directors from 2,500 to 4,000.
Employee Plan. All officers and key employees of the Company or any of its
current or future parents or subsidiaries are eligible to receive options under
the Employee Plan. In fiscal 1997, the Company granted options to purchase an
aggregate of 406,500 shares under the Employee Plan. Of these options, 12,300
are currently exercisable and the remaining options will become exercisable
starting in 1998. See Proposal Two "Approval of Amendment to the Employee Stock
Option Plan" for a description of the provisions of the Employee Plan.
Repricing of Options and Exercisability Modifications
General. The Company's executive compensation program consists of a base
salary, incentive compensation in the form of cash bonuses and long-term
incentive compensation in the form of options to purchase Common Stock under the
Employee Plan. The grant of options under the Employee Plan is intended to
motivate the executive officers to build shareholder value and to relate a
significant portion of the executives' compensation directly to the financial
performance of the Company. The value created by stock options has not
accomplished these intended benefits since the exercise prices of the
outstanding options were well in excess of current market prices. The purpose of
the option repricing (the "Option Repricing") described below is to restore the
incentive value. It is hoped that the Option Repricing will assist the Company
in its efforts to retain key employees and encourage their continued
contribution to the Company. The Board also believes that the Option Repricing
is necessary for the Company to remain competitive within its marketplace and
industry.
Option Repricing. In connection with certain stock options issued under the
Company's Employee Plan, the Option Committee approved and the Board of
Directors, on February 27, 1997, ratified the repricing of these options. As a
result of the Option Repricing, outstanding employee stock options ("Old
Options") for an aggregate of 141,000 shares of Common Stock with exercise
prices ranging from $9.00 to $15.00 per share were repriced at $4.50 per share
("New Options"), the closing price for the Common Stock on February 27, 1997,
the date on which the Option Repricing was approved. In connection with New
Options to purchase 31,000 shares of Common Stock, the vesting and exercise
schedules remain unchanged. In connection with Old Options to purchase 40,000
shares which vested at the rate of 20% a year, over a five year period and Old
Options to purchase 70,000 shares, which vested at the rate of 20% a year, but
were not exercisable unless the market price of Numerex Common Stock exceeds
$15.00 per share in the first year, $17.25 in the second year, $19.84 per share
in the third year, $22.81 per share in the fourth year and $26.24 per share in
the fifth year, the vesting
14
<PAGE>
schedule and exercisability features have been changed. The New Options,
representing an equivalent number of options (110,000), are exercisable as
follows (except as modified below. See "Exercisability Modifications."): 40% at
such time as the closing price of the Company's Common Stock equals or exceeds
$10.00 per share for a period of 60 days; 20% at such time as the closing price
of the Company's Common Stock equals or exceeds $12.50 per share for a period of
60 days; and 40% at such time as the closing price of the Company's Common Stock
equals or exceeds $15.00 per share for a period of 60 days. The following table
sets forth the name of each executive officer who participated in the Option
Repricing, his position with the Company at the time of the repricing and
certain information concerning the repricing of their respective options.
<TABLE>
<CAPTION>
TEN YEAR OPTION REPRICINGS
Length of
Original
Per Share Per Share Term
Number Market Exercise Remaining
of Price At Price At New at Date of
Options Time Of Time Of Exercise Repricing or
Name Date Repriced Repricing(1) Repricing Price(1) Amendment
---- ------- -------- ------------ --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Frederick C. Shay 10/4/94 20,000 $4.50 $11.00 $4.50 7.7 years
Chief Technology 5/24/95 30,000 $4.50 $15.00 $4.50 8.3 years
Officer
Charles L. McNew 7/6/94 20,000 $4.50 $ 9.00 $4.50 7.4 years
Vice President 5/24/95 30,000 $4.50 $15.00 $4.50 8.3 years
and Chief
Financial
Officer
Donald M. Hooton 5/24/95 10,000 $4.50 $15.00 $4.50 8.3 years
Vice President -
Sales and
Marketing(2)
</TABLE>
- ----------
(1) Closing price of the Company's Common Stock on February 27, 1997.
(2) Mr. Hooton's employment with the Company ceased in May 1997. Under the
terms of the Employee Plan options to purchase 40,000 shares of Common
Stock terminated unexercised.
Exercisability Modifications. In December 1997, the Option Committee, upon
the recommendation of the Company's Audit Committee, modified options to
purchase 515,000 shares granted under the Employee Plan, including the options
to purchase 100,000 of the 110,000 shares referenced above. See "Repricing of
Option and Exercisability Modifications - Option Repricing." The remaining
options were granted to Mr. Reis and two individuals not included in the Summary
Compensation Table. The options, at the time of grant, or as repriced, provided
for exercise upon the Common Stock attaining trading levels ranging between
$10.00 and $20.00 per share for 60 consecutive days (the "Trading Thresholds").
It has always been the intent of the Board of Directors and the Option
Committee, that all options granted under the Plan be deemed "fixed" for
15
<PAGE>
accounting purposes, thereby affording the Company's management with ownership
opportunities in the Company which would not result in compensation expense to
the Company. Accordingly, the options were amended, effective February 27, 1997,
for all affected options granted on or prior to that date to provide that they
may be exercised upon the earlier of attaining the Trading Thresholds, or five
(5) years from February 27, 1997. Options granted after February 27, 1997 were
also amended, effective as of the date of grant, to provide that they may be
exercised upon the earlier of attaining the Trading Thresholds, or five (5)
years from the date of such grant. The Board of Directors believes such
modifications are in the best interests of the Company.
The following table sets forth certain information concerning stock options
granted under the Employee Plan during the fiscal year ended October 31, 1997 to
the executive officers of the Company named in the Summary Compensation Table:
<TABLE>
<CAPTION>
OPTION GRANTS IN FISCAL 1997
Potential Realized
Value at
Assumed Annual
Rates of Stock Price
Appreciation For
Individual Grants Option Term (1)
-------------------------------------------------------- --------------------
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees In Exercise Expiration
Name Granted Fiscal Year(2) Price Date 5% 10%
- ----------------- ---------- -------------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Donald M. Hooton 15,000(3) 3.7% $4.50 2/26/2007 -- --
Charles L. McNew 25,000 6.2% $4.50 2/26/2007 $ 70,751 $179,296
Kenneth F. Manser -- -- -- -- -- --
John J. Reis 100,000 24.6% $5.00 10/31/2006- $306,586 $776,949
5/28/2007
Frederick C. Shay 10,000 2.5% $4.50 2/26/2007 $ 28,300 $ 71,718
</TABLE>
- ----------
(1) Shows the difference between the market value of the Common Stock for which
the option may be exercised, assuming that the market value of the Common
Stock appreciates in value from the date of grant to the end of the
ten-year option term at annualized rates of 5% and 10%, respectively, less
the exercise price of the option.
(2) Does not include options which have been repriced. See "Repricing of
Options and Exercisability Modifications."
(3) These options terminated pursuant to the terms of the Employee Plan.
16
<PAGE>
The following table sets forth certain information concerning the number of
unexercised options and the value of unexercised options at the end of the
fiscal year ended October 31, 1997 held by the executive officers of the Company
named in the Summary Compensation Table. No options were exercised by such
executive officers in fiscal 1997.
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN FISCAL 1997 AND OCTOBER 31, 1997 OPTION VALUES
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money Options at
Options at October 31, 1997 October 31, 1997(1)
--------------------------- --------------------------
Name Exercisable Unexerciseable Exercisable Unexercisable
- ---------------- ----------- -------------- ----------- -------------
<S> <C> <C> <C> <C>
Donald M. Hooton (2) -- -- $ -0- $ -0-
Charles L. McNew 10,000 90,000 $11,900 $200,850
Kenneth F. Manser -- -- -- --
John J. Reis -- 200,000 -0- $288,000
Frederick C. Shay 16,000 84,000 $19,040 $174,960
</TABLE>
- ----------
(1) Although the option exercise price per share exceeded the last sale price
of the Common Stock on October 31, 1997 on the Nasdaq National Market,
pursuant to the terms of 335,000 of the 374,000 options included hereunder,
they may not be exercised until the earlier of (i) the closing price of
Numerex Common Stock exceeds certain per share thresholds ranging between
$10.00-$15.00 for 60 consecutive days, or (ii) five years from February 27,
1997, or such later date of grant.
(2) These options terminated pursuant to the terms of the Employee Plan.
Director Plan. Under the Director Plan, each director who is not also an
employee of the Company or a Gwynedd designated director automatically is
granted options under the Director Plan. The Director Plan is administered by
the Board of Directors of the Company, including non-employee directors, who may
modify, amend, suspend or terminate the plan, provided that such action may not
affect outstanding options and provided further that provisions concerning the
number of shares with respect to which options are to be granted, the option
exercise price and the class of persons eligible to participate, may not be
amended more than once every six months except in certain circumstances.
Pursuant to the Director Plan, options may be granted for an aggregate of
62,500 shares of Common Stock. Options granted under the Director Plan are not
incentive stock options under Section 422 of the Code. Options under the
Director Plan are granted at the fair market value of the Common Stock on the
date of grant and are exercisable beginning one year after the date of grant.
Each person who was not a director of the Company for at least one year as
of April 1, 1995, and was not an employee of the Company or any subsidiary, or a
Gwynedd designated director, and who on or after April 1, 1995 was elected as a
director of the Company at any annual or special meeting of shareholders of the
Company, shall, as of the date of such election, automatically be granted an
option to purchase 2,500 shares of the Common Stock. On each anniversary of the
initial option granted hereunder and provided a person described above continues
to be a director who is not also an employee of the Company or any subsidiary,
or a Gwynedd designated director, on such anniversary, such person shall
automatically be granted an option to purchase 2,500 shares of the Common Stock,
or such lower number of shares as shall be equal to the number
17
<PAGE>
of shares as shall then be available (if any) for grant under this Director Plan
divided by the number of persons who are to receive an option on such
anniversary. Pursuant to the Director Plan, during fiscal 1997 Messrs. Benson,
Ray and Flanigan each received options to purchase 2,500 shares of Company
Common Stock.
Limited Pension and Death Benefits Plan
Mr. Manser, as a full-time employee of Versus Technology Limited,
participates in the Limited Pension and Death Benefits Plan (the "Versus
Technology Plan") maintained for employees of Versus Technology Limited. Under
the Versus Technology Plan, a participant who retires at the normal retirement
age of 65 will be entitled to receive an annual pension equal to 1/60th of such
participant's "final pensionable earnings" for each complete year of pensionable
service (subject to a maximum of 40 years). Final pensionable earnings are the
average of a participant's highest three consecutive annual earnings from Versus
Technology Limited in the last ten years before the normal retirement date,
except that if a participant retires or leaves the Versus Technology Limited
Plan more than ten years before the normal retirement date, a participant's
final pensionable earnings will be equal to such participant's last annual
earnings from Versus Technology Limited. Participants are required to contribute
five percent of annual earnings towards the cost of their pension benefits.
Assuming that Mr. Manser retired at age 65 and that his final pensionable
earnings were equal to (pound)95,000 (his current base annual salary), Mr.
Manser would be entitled to receive an annual pension of approximately
(pound)17,500.
Incentive Compensation
The Company has implemented an incentive compensation program for fiscal
1998 for executive level employees based upon the business plan attainment. The
amount of incentive compensation will range between 20-24% of the executive's
base salary if certain revenue and operating income objectives are achieved
pursuant to the Company's business plan. One-half of the incentive compensation
can be earned and paid, based upon quarterly performance, while the other half
will be earned and paid, based upon annual performance. Additional incentive
compensation will be paid for over-achievement of objectives. To be eligible to
receive incentive compensation the employee must be in the Company's employ on
the date of distribution. The Company reserves the right to make modifications
to the incentive compensation program.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company has entered into various transactions and arrangements with
Dominion Group Limited, a Member Company of Dominion Holdings or a corporation
which previously carried on certain activities of such entity (collectively,
"Dominion"). Dominion is an investment and merchant banking firm which has
provided financial advisory and investment banking services to the Company.
Gwynedd owns approximately 29.8% of the outstanding Common Stock of the Company.
The shareholders of Dominion are also shareholders of Gwynedd. See "Security
Ownership of Management and Certain Beneficial Owners." Gwynedd has the right to
designate one member of the Company's Board of Directors (two members if the
Board consists of more than seven directors) as long as Gwynedd owns at least
ten percent of the outstanding Common Stock. Mr. Ryan serves as Gwynedd's
designee. See Proposal One - "Election of Directors - Arrangements with Respect
to the Board of Directors."
Pursuant to a letter agreement between Dominion and the Company effective
January 1, 1995 which terminated December 31, 1996, Dominion provided financial
advisory services to the Company, including the evaluation of debt and equity
financing alternatives; development of new joint venture and licensing
18
<PAGE>
relationships and assistance in the structuring thereof; technical writing,
computer and other related services; identification of investment opportunities
for the Company in the security and telecommunications areas; and such other
services as may be agreed from time to time. The Company paid to Dominion a fee
of $20,000 per month and reimbursed Dominion for certain expenses during the
term of the agreement. In addition, the agreement provided that the Company
would pay Dominion a negotiated finder's fee, comparable to that which the
Company would pay to an unaffiliated party, for any transaction resulting from
an investment opportunity identified by Dominion, although none was paid.
Dominion received fees and expense reimbursement (including reimbursements of
legal and accounting fees incurred by Dominion for services rendered to the
Company or its subsidiaries) of $240,000 and $88,038 for the fiscal year ended
October 31, 1996. During the fiscal year ended October 31, 1997, the Company
paid $234,000 to Dominion for investment banking related services. The Company
believes the above arrangements with Dominion were on terms no less favorable to
the Company than those which could have been obtained from an unaffiliated party
for substantially similar services.
During fiscal 1995 the Company's subsidiary, DA Systems, manufactured
certain products for CellTel Data Services, Inc. ("CellTel"), a company in which
Dominion owns a controlling interest. Sales to CellTel approximated $368,500
during fiscal 1995. In October 1996 Numerex invested $375,000 in return for an
initial 10% equity interest in CellTel. These funds were used by CellTel to
repay the account receivable relating to the 1995 product sales. In 1999 Numerex
has the right to put its initial equity interest to Dominion and Dominion can
call this interest for $500,000. In addition, in 1999, if the above-referenced
call is not exercised by Numerex, it may acquire an additional 10% interest in
CellTel for $1.00. The Company believes that the terms related to the
manufacture and sale of products to CellTel and its investment in CellTel are no
less favorable to the Company than those generally available from an
unaffiliated party.
19
<PAGE>
STOCK PERFORMANCE GRAPH
The following graph shows a comparison of the cumulative total return for
the Company's Common Stock, the Nasdaq Composite Index and the Nasdaq Industrial
Index, assuming an investment of $100 in each on March 3, 1994, the date that
the Company's Common Stock was first traded on the Nasdaq SmallCap Market, and,
in the case of the Indexes, the reinvestment of all dividends.
[IN THE PRINTED SAMPLE THE CHART SHOWS THE FOLLOWING INFORMATION]
<TABLE>
<CAPTION>
NUMEREX CORP
STOCK PERFORMANCE
3/4/94 4/30/94 7/31/94 10/31/94 1/31/95 4/30/95 7/31/95 10/31/95
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Numerex 100 242 223 274 332 293 159 111
NASDAQ Composite Index 100 93 91 98 96 107 127 131
NASDAQ Industrial Index 100 92 88 95 90 98 115 113
1/31/96 4/30/96 7/31/96 10/31/96 1/31/97 4/30/97 7/31/97 10/31/97
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Numerex 99 113 77 77 84 82 131 133
NASDAQ Composite Index 133 140 151 156 162 152 183 213
NASDAQ Industrial Index 117 135 119 130 140 120 152 153
</TABLE>
PROPOSAL TWO
APPROVAL OF AMENDMENT TO
THE EMPLOYEE STOCK OPTION PLAN
In May 1994, the shareholders approved the Company's Employee Stock Option
Plan (the "Employee Plan") and the Non-Employee Director Stock Option Plan (the
"Director Plan"). In December 1994, the Employee Plan was amended by the Board
of Directors, and approved by the shareholders in February 1995 to, among other
things, permit options under the Employee Plan to be granted only with respect
to Class A Common Stock and not with respect to Class B Common Stock. In
addition, the Employee Plan was amended to increase the total number of shares
for which options may be granted from 125,000 shares of Common Stock to 447,500
shares of Common Stock and to limit the maximum number of shares of Common Stock
for which options may be granted under the Employee Plan to any one employee
during any fiscal year of the Company to 100,000 shares. In December 1996, the
Employee Plan was amended to increase the total number of shares under the
Employee Plan for which options may be granted from 447,500 shares of Common
Stock to 747,500. In December 1997, the Employee Plan was amended by the Board
of Directors, subject to shareholder approval, to increase the total number of
shares under the Employee Plan for which options may be granted from 747,500 to
1,500,000.
20
<PAGE>
The Board of Directors recommends that the amendment to the Employee Plan
be approved because it believes that the Plan, as amended, will advance the
interests of the Company and its shareholders by strengthening the Company's
ability to attract, retain and motivate officers and key employees.
Set forth below is a summary of the provisions of the Employee Plan. This
summary is qualified in its entirety by the detailed provisions of the text of
the Employee Plan.
Purpose
The purpose of the Employee Plan is to provide additional incentive to
employees of the Company by encouraging them to invest in the Company's Common
Stock and thereby acquire a proprietary interest in the Company and an increased
personal interest in the Company's continued success and progress.
Administration
The Employee Plan is administered by an Option Committee ("Committee")
which is appointed by the Board of Directors and consists only of Directors who
are not eligible to receive options under the Employee Plan. The Committee
determines, among other things, which officers and key employees receive an
option or options under the Employee Plan, the type of option (incentive stock
options or non-qualified stock options, or both) to be granted, the number of
shares subject to each option, the rate of option exercisability, and, subject
to certain other provisions to be discussed below, the option price and duration
of the option.
The Committee may, in its discretion, modify or amend any of the option
terms hereafter described, provided that if an incentive option is granted under
the Plan, the option as modified or amended continues to be an incentive stock
option.
Aggregate Number of Shares
The aggregate number of shares which may be issued upon the exercise of
options under the Employee Plan, if this proposal is approved by shareholders,
is 1,500,000 shares of Common Stock. In the event of any change in the
capitalization of the Company, such as by stock dividend, stock split or what
the Board of Directors deems in its sole discretion to be similar circumstances,
the aggregate number and kind of shares which may be issued under the Employee
Plan will be appropriately adjusted in a manner determined in the sole
discretion of the Board of Directors. Reacquired shares of the Company's Common
Stock, as well as unissued shares, may be used for the purpose of the Employee
Plan. Common Stock of the Company subject to options which have terminated
unexercised, either in whole or in part, will be available for future options
granted under the Employee Plan.
Option Price
The option price for options issued under the Employee Plan must be at
least equal to 100% of the fair market value of the Common Stock as of the date
the option is granted. The fair market value on a particular day shall mean the
last reported sale price of a share of the Company's Common Stock on any stock
exchange on which such stock is then listed or admitted to trading, or on the
NASDAQ National Market System or NASDAQ, on such date, or if no sale took place
on such day, the last day on which a
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sale took place, or if the Common Stock is not then quoted on the NASDAQ
National Market System or NASDAQ, or listed or admitted to trading on any stock
exchange, the average of the bid and ask prices in the over-the-counter market
on such date, or if none of the foregoing, a price determined by the Committee.
Payment
Payment of the option price on exercise of options granted under the
Employee Plan may be made in (a) cash, (b) (unless prohibited by the Board of
Directors) Company Common Stock which will be valued by the Secretary of the
Company at its fair market value or (c) (unless prohibited by the Board of
Directors) any combination of cash and Common Stock of the Company valued as
provided in clause (b).
Under the terms of the Employee Plan, the Board has interpreted the
provision of the Employee Plan which allows payment of the option price in
Common Stock of the Company to permit the "pyramiding" of shares in successive
exercises. Thus, an optionee could initially exercise an option in part,
acquiring a small number of shares of Common Stock, and immediately thereafter
effect further exercises of the option, using the Common Stock acquired upon
earlier exercises to pay for an increasingly greater number of shares received
on each successive exercise. This procedure could permit an optionee to pay the
option price by using a single share of Common Stock or a small number of shares
of Common Stock and to acquire a number of shares of Common Stock having an
aggregate fair market value equal to the excess of (a) the fair market value (as
determined above) of all shares to which the option relates over (b) the
aggregate exercise price under the option.
Exercisability
The Committee may determine the rate of option exercisability. In the event
of "change in control" of the Company, as defined in the Employee Plan, each
optionee may exercise the total number of shares then subject to the option.
Consequently, the Employee Plan may be deemed to have certain "anti-takeover"
effects.
Option Expiration and Termination
Unless terminated earlier by the option's terms, incentive stock options
expire ten years after the date they are granted and non-qualified stock options
expire ten years and thirty days after the date they are granted.
Options terminate three months after the date on which employment is
terminated (whether such termination be voluntary or involuntary), other than by
reason of death or disability. The option terminates one year from the date of
termination due to death or disability (but not later than the scheduled
termination date).
Non-Transferability
Options granted pursuant to the Plan are not transferable, except by will
or the laws of descent and distribution in the event of death. During an
optionee's lifetime, the option is exercisable only by the optionee, including,
for this purpose, the optionee's legal guardian or custodian in the event of
disability.
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Amendment or Termination; Plan Expiration
The Company's Board of Directors has the right at any time, and from time
to time, to modify, amend, suspend or terminate the Employee Plan, without
shareholder approval, except to the extent that shareholder approval of the
Employee Plan modification amendment is required by the Internal Revenue Code of
1986, as amended, to permit the granting of incentive stock options under the
Employee Plan. Any such action will not affect options previously granted. If
the Board of Directors voluntarily submits a proposed modification, amendment,
suspension or termination for shareholder approval, such submission will not
require any future modifications, amendments, suspensions or terminations
(whether or not relating to the same provision or subject matter) to be
similarly submitted for shareholder approval.
Federal Income Tax Consequences
THE FOLLOWING INFORMATION IS NOT INTENDED TO BE A COMPLETE DISCUSSION OF
THE FEDERAL INCOME TAX CONSEQUENCES OF PARTICIPATION IN THE EMPLOYEE PLAN AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE INTERNAL REVENUE CODE OF 1986, AS
AMENDED (THE "CODE"), AND THE REGULATIONS ADOPTED PURSUANT THERETO. THE
PROVISIONS OF THE CODE DESCRIBED IN THIS SECTION INCLUDE CURRENT TAX LAW ONLY
AND DO NOT REFLECT ANY PROPOSALS TO REVISE CURRENT TAX LAW.
Incentive Stock Options
Generally, under the Code, an optionee will not realize taxable income by
reason of the grant or the exercise of an incentive stock option intended to
qualify under Section 422 of the Code ("Incentive Option") (see, however,
discussion of Alternative Minimum Tax below). If an optionee exercises an
Incentive Option and does not dispose of the shares until the later of (i) two
years from the date the option was granted and (ii) one year from the date of
exercise, the entire gain, if any, realized upon disposition of such shares will
be taxable to the optionee as long-term capital gain, and the Company will not
be entitled to any deduction. If an optionee disposes of the shares within the
period of two years from the date of grant or one year from the date of exercise
(a "disqualifying disposition"), the optionee generally will realize ordinary
income in the year of disposition and the Company will receive a corresponding
deduction, in an amount equal to the excess of (1) the lesser of (a) the amount,
if any, realized on the disposition and (b) the fair market value of the shares
on the date the option was exercised (or such later date, if applicable, as
described below in "Non-Qualified Options", if the optionee is a 16(b) Person
who has not made an 83(b) Election as such terms are defined in "Non-Qualified
Options" below) over (2) the option price. Any additional gain realized on the
disposition will be long-term or short-term capital gain and any loss will be
long-term or short-term capital loss. The optionee will be considered to have
disposed of a share if he sells, exchanges, makes a gift of or transfers legal
title to the share (except transfers, among others, by pledge, on death or to
spouses). If the disposition is by sale or exchange, the optionee's tax basis
will equal the amount paid for the share plus any ordinary income realized as a
result of the disqualifying disposition.
The exercise of an Incentive Option may subject the optionee to the
alternative minimum tax. The amount by which the fair market value of the shares
purchased at the time of the exercise (or such later date, if applicable, as
described above in "Non-Qualified Options", if the optionee is a 16(b) Person
who has not made an 83(b) Election) exceeds the option exercise price is an
adjustment for purposes of computing the so-called alternative minimum tax. In
the event of a disqualifying disposition of the shares in
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the same taxable year as exercise of the Incentive Option, no adjustment is then
required for purposes of the alternative minimum tax, but regular income tax, as
described above, may result from such disqualifying disposition.
An optionee who surrenders shares as payment of the exercise price of his
Incentive Option generally will not recognize gain or loss on his surrender of
such shares. The surrender of shares previously acquired upon exercise of an
Incentive Option in payment of the exercise price of another Incentive Option,
is, however, a "disposition" of such stock. If the incentive stock option
holding period requirements described above have not been satisfied with respect
to such stock, such disposition will be a disqualifying disposition that may
cause the optionee to recognize ordinary income as discussed above.
Under the Code, all of the shares received by an optionee upon exercise of
an Incentive Option by surrendering shares will be subject to the incentive
stock option holding period requirements. Of those shares, a number of shares
(the "Exchange Shares") equal to the number of shares surrendered by the
optionee will have the same tax basis for capital gains purposes (increased by
any ordinary income recognized as a result of any disqualifying disposition of
the surrendered shares if they were incentive stock option shares) and the same
capital gains holding period as the shares surrendered. For purposes of
determining ordinary income upon a subsequent disqualifying disposition of the
Exchange Shares, the amount paid for such shares will be deemed to be the fair
market value of the shares surrendered. The balance of the shares received by
the optionee will have a tax basis (and a deemed purchase price) of zero and a
capital gains holding period beginning on the date of exercise. The Incentive
Stock Option holding period for all shares will be the same as if the option had
been exercised for cash.
Non-Qualified Options
Generally, there will be no federal income tax consequences to either the
optionee or the Company on the grant of a stock option not intended to qualify
under Section 422 of the Code (a "Non-Qualified Option"). On the exercise of a
Non-Qualified Option, the optionee (except as described below) has taxable
ordinary income equal to the excess of the fair market value of the shares
acquired on the exercise date over the option price of the shares. The Company
will be entitled to a federal income tax deduction in an amount equal to such
excess, provided that the Company complies with applicable withholding rules.
However, special rules apply where stock is registered under the Exchange Act
and the optionee is an officer, director or 10% or greater shareholder of the
Company subject to potential liability under Section 16(b) of the Exchange Act
for so-called "short-swing" profits (a "16(b) Person") in connection with
certain purchases and sales, or sales and purchases, of the Company's stock
within a period of six months.
Under SEC rules promulgated under Section 16(b) of the Exchange Act, the
grant of an option, not its exercise, is treated as a "purchase" for Section
16(b) purposes. If such grant is made pursuant to a plan qualifying under the
SEC rules and six months elapse between the grant of the option and the sale of
the shares received upon the exercise thereof, such grant will be exempt from
Section 16(b). With respect to the exercise of a Non-Qualified Option, if a
16(b) Person has not purchased or acquired shares of Common Stock within the six
month period prior to the exercise date (other than purchases or acquisitions
exempt from Section 16(b)), the 16(b) Person will be required to recognize
ordinary income (i) six months after the date of grant (in the event of exercise
within six months of the date of grant) or (ii) the date of exercise (in the
event of exercise after six months from the date of grant). The timing of income
recognition with respect to a 16(b) Person who exercises a Non-Qualified Option
within six months of a prior non-exempt purchase or acquisition of Common Stock
is uncertain. It is possible that the Internal Revenue Service will
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take the position that, despite the prior non-exempt purchase or acquisition,
the 16(b) Person recognizes income on the date of exercise rather than the date
which is six months following the date of such prior non-exempt purchase or
acquisition. A 16(b) Person can be certain of recognizing income on the exercise
date by making an election not later than 30 days following the exercise date to
have the income determined as of the date of exercise (an "83(b) Election"), in
which case the Company's deduction will also be determined as of the exercise
date.
Upon the sale of stock acquired by exercise of a Non-Qualified Option,
optionees will realize long-term or short-term capital gain or loss depending
upon their holding period for such stock. Under current law, net capital gains
(net long term capital gain less net short term capital loss) is subject to a
maximum rate of 28%. Capital losses are deductible only to the extent of capital
gains for the year plus $3,000 for individuals.
An optionee who surrenders shares in payment of the exercise price of a
Non-Qualified Option will not recognize gain or loss with respect to the shares
so delivered unless such shares were acquired pursuant to the exercise of an
Incentive Option and the delivery of such shares is a disqualifying disposition.
See "Federal Income Tax Consequences - Incentive Stock Options". The optionee
will recognize ordinary income on the exercise of the Non-Qualified Option as
described above. Of the shares received in such an exchange, that number of
shares equal to the number of shares surrendered will have the same tax basis
and capital gains holding period as the shares surrendered. The balance of the
shares received will have a tax basis equal to their fair market value on the
date of exercise and the capital gains holding period will begin on the date of
exercise (or such later date, as described above, if the optionee is a 16(b)
Person who has not made an 83(b) Election, and such later date is applicable).
Section 162(m)
Generally, Section 162(m), denies a deduction to any publicly held
corporation, such as the Company, for certain compensation exceeding $1,000,000
paid to the chief executive officer and the other four highest paid executive
officers during any taxable year. Although ordinary income that is realized upon
the exercise of a Non-Qualified Option or the disqualifying disposition of
shares acquired pursuant to the exercise of an Incentive Option is potentially
subject to the limitation imposed under Section 162(m), Section 162(m) and the
regulations thereunder provide that compensation attributable to the stock
options granted under the Employee Plan having an exercise price of not less
than the fair market value of the Common Stock on the date of grant may qualify
for the performance-based exclusion in Section 162(m). If the stock options
qualify for the performance-based exclusion, the compensation received upon
their exercise would not be subject to the deduction limit set forth in Section
162(m). The Company believes that, assuming satisfaction of certain other
conditions set forth in Section 162(m), the compensation attributable to the
stock options granted under the Employee Plan will meet the performance-based
exclusion under Section 162(m) and therefore the deduction limitation will be
inapplicable to options to be issued under the Employee Plan.
Option Grants
Except as provided herein, no determinations have been made as to the
number of options, if any, to be granted in the fiscal year ending October 31,
1998 or as to how the proposed additional option shares will be allocated among
any particular officers or key employees. To date, options to acquire 712,000
shares of Common Stock have been granted under the Employee Plan. Information
concerning options
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granted in the fiscal year ended October 31, 1997 under the Employee Plan to the
persons named in the Summary Compensation Table is set forth under "Executive
Compensation - Stock Option Plans - Option Grants in Fiscal 1997." In fiscal
1997, the Option Committee granted options under the Employee Plan to purchase
150,000 shares to all executive officers of the Company as a group and 256,500
shares to all employees of the Company, other than executive officers and
directors, as a group. There would not have been any material difference in the
amount of these grants had they been made under the Employee Plan if the
proposed amendment had already been approved.
PROPOSAL THREE
APPROVAL OF AMENDMENT TO THE
STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
In March 1994 the Director Plan was adopted and subsequently approved by
shareholders. In December 1994, the Board of Directors adopted and in February
1995 shareholders approved, amendments to the Director Plan to provide that
options under the Director Plan be granted only with respect to shares of Class
A Common Stock and that the director(s) designated by Gwynedd not be eligible to
receive options under the Director Plan. See "Proposal One - Executive
Compensation - Stock Option Plans." For a summary of the other material
provisions of the Director Plan, see "Executive Compensation - Stock Option
Plans."
The Company is seeking shareholder approval of the Director Plan amendments
to satisfy the requirements of the Nasdaq Marketplace Rules.
Since the adoption of the Director Plan in March 1994 there has been no
increase in the number of options to be granted to directors thereunder, other
than as a result of a stock split. The Board of Directors recommends that the
amendment to the Director Plan be approved because it believes that the Director
Plan, as amended, will advance the interests of the Company and its shareholders
by strengthening the Company's ability to attract and retain outside directors.
The Board further believes that in order to remain competitive, there should be
an increase in the number of options granted on an annual basis. The Board
further believes that the amendment will help provide additional incentive to
Board members who are not also employees by encouraging them to invest in the
Company's Common Stock and increased personal interest in the Company's
continued success and progress.
The Board of Directors unanimously recommends that you vote "FOR" approval
of Proposal Three.
Summary of Director Plan Amendments
Increase the Number of Options granted annually to Directors. The only
amendment sought to the Director Plan is to increase the number of options
granted to purchase Common Stock under the Director Plan, on an annual basis,
from 2,500 to 4,000. All other provisions of the Director Plan remain unchanged.
Stock Option Grants
To date, options to purchase 16,700 shares of Common Stock have been
granted under the Director Plan, and if the amendment is approved, options to
purchase 4,000 shares will be granted on February 26, 1998, to Messrs. Benson,
Flanigan and Ray, respectively.
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Federal Income Tax Consequences
Options granted pursuant to the Director Plan will be non-qualified stock
options. See "Proposal Two - Approval of Amendments to the Employee Stock Option
Plan - Federal Income Tax Consequences - Non-Qualified Options" for a
description of the federal income tax effects of non-qualified stock options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors and
executive officers, and persons who own more than 10% of a registered class of
the Company's equity securities, to file with the Securities and Exchange
Commission initial reports of ownership and reports of changes in ownership of
Common Stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) reports they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company and written representations that no other
reports were required during the fiscal year ended October 31, 1997, all Section
16(a) filing requirements applicable to its executive officers, directors and
greater than 10% beneficial owners were met, except that a Form 5 report of Mr.
Hooton (reporting an option grant, option repricing and stock sale) whose
employment with the Company ceased in May 1997, was not timely filed.
INDEPENDENT PUBLIC ACCOUNTANTS
Deloitte & Touche LLP has acted as the Company's independent public
accountant for the fiscal year ended October 31, 1997. A representative of
Deloitte & Touche LLP is expected to be present at the annual meeting of
shareholders and to have the opportunity to make a statement, if he desires to
do so, and is expected to be available to respond to appropriate questions.
SHAREHOLDER PROPOSALS
Shareholder proposals regarding the 1999 Annual Meeting must be submitted
to the Company by September 29, 1998.
ANNUAL REPORT
This Proxy Statement is accompanied by the Annual Report to Shareholders of
the Company for the year ended October 31, 1997.
EACH PERSON SOLICITED HEREUNDER CAN OBTAIN A COPY OF THE COMPANY'S ANNUAL
REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED OCTOBER 31, 1997 REQUIRED TO BE
FILED WITH THE SECURITIES AND EXCHANGE COMMISSION WITHOUT CHARGE, EXCEPT FOR
EXHIBITS TO THE REPORT, BY SENDING A WRITTEN REQUEST THEREFOR TO: 100 FOUR FALLS
CORPORATE CENTER, SUITE 407, ROUTE 23 AND WOODMONT ROAD, WEST CONSHOHOCKEN,
PENNSYLVANIA 19428-2961.
By Order of the Board of Directors
Charles L. McNew, Secretary
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Proxy for Annual Meeting of Shareholders
February 26, 1998
Solicited on behalf of the Board of Directors
The undersigned hereby constitutes and appoints John J. Reis and
Frederick C. Shay, and each of them, as attorneys-in-fact and proxies of the
undersigned, with full power of substitution for and in the name, place and
stead of the undersigned to appear at the Annual Meeting of Shareholders of
Numerex Corp. ("Numerex"), to be held on the 26th day of February, 1998, and at
any postponement or adjournment thereof, and to vote all of the shares of Common
Stock of Numerex which the undersigned is entitled to vote, with all the powers
and authority the undersigned would possess if personally present. The
undersigned directs that this proxy be voted as indicated below.
The proxy agents present and acting in person or by their substitute
(or, if only one is present and acting, then that one) may exercise all the
powers conferred by this proxy. Discretionary authority is conferred by this
proxy as to certain matters described in the Company's Proxy Statement.
(To be Completed and Signed on Reverse Side)
<PAGE>
1. For / / the election of George Benson, Matthew J. Flanigan, Kenneth F.
Manser, Gordon T. Ray, John J. Reis, Andrew J. Ryan and Frederick C.
Shay, as Directors of the Company, as more fully described in the
accompanying Proxy Statement (to withhold authority to vote for all
directors, check this box:
/ /
To withhold authority to vote for any individual nominee, write that
nominee's name on the space provided below.
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2. To increase the number of shares of Common Stock for issuance under the
Company's Employee Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
3. To increase annual option grants under the Company's Non-Employee
Director Stock Option Plan.
/ / FOR / / AGAINST / / ABSTAIN
4. To transact such other business as may properly come before this
meeting or any postponement or adjournment thereof.
This proxy, when properly executed, will be voted as directed. If no directions
to the contrary are indicated, the persons named herein intend to vote for the
election of the named nominees for director, for the proposal to increase the
number of shares of Common Stock for issuance under the Company's Employee Stock
Option Plan and for the proposal to increase the annual option grants under the
Company's Non-Employee Director Stock Option Plan.
PLEASE DATE AND SIGN THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE.
The undersigned hereby acknowledges receipt of the Company's 1997
Annual Report to Shareholders, Notice of the Company's 1998 Annual Meeting of
Shareholders and the Proxy Statement relating thereto.
SIGNATURE(S) DATE
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Note: It would be helpful if you signed your name exactly as it appears hereon,
indicating any official position or representative capacity. If shares are
registered in more than one name, all owners should sign.
