def14a2011.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant ý

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-6(e)(2))
 x  Definitive Proxy Statement
  Definitive Additional Materials
  Soliciting Material Pursuant to §240.14a-12
 
NUMEREX CORP.
(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):
   
ý
No fee required.
   
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:
  
 
     (2)
Aggregate number of securities to which transaction applies:
  
 
     (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):
  
 
     (4)
Proposed maximum aggregate value of transaction:
  
 
     (5)
Total fee paid:
   
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:
  
 
     (2)
Form, Schedule or Registration Statement No.:
  
 
     (3)
Filing Party:
   
     (4)
Date Filed:


 

NUMEREX CORP.
1600 Parkwood Circle SE, Suite 500
Atlanta, Georgia 30339

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 20, 2011
11:00 a.m. Eastern Time

Dear Shareholders:

Notice is hereby given that the 2011 annual meeting of shareholders (the “Annual Meeting”) of Numerex Corp., a Pennsylvania corporation (the “Company”), will be held on Friday, May 20, 2011 at 11:00 a.m. Eastern Time in the Media Center at the Cobb Chamber of Commerce, 240 Interstate North Parkway, Atlanta, Georgia 30339 for the following purposes:

  1.
 
 To elect six nominees to serve as directors of the Company;
  2.
 
 To ratify the appointment of Grant Thornton LLP as the independent accountants of the Company;
    3.  
     To approve an advisory vote on executive compensation;
    4.  
     To conduct an advisory vote to approve frequency of vote on executive compensation; and
  5.
.
To transact such other business as may properly come before the Annual Meeting and any postponement(s) or adjournment(s) thereof.

Only shareholders of record as of the close of business on March 25, 2011 are entitled to receive notice of, to attend, and to vote at the Annual Meeting.

Under rules adopted by the Securities and Exchange Commission (the “SEC”), the Company is pleased to make this Proxy Statement and the Company’s Annual Report to Shareholders available on the internet instead of mailing a printed copy of these materials to each shareholder. Shareholders who receive a Notice of Internet Availability of Proxy Materials (the “Notice”) by mail will not receive a printed copy of these materials other than as described below. Instead, the Notice contains instructions as to how shareholders may access and review all of the important information contained in the materials on the Internet, including how shareholders may submit proxies by telephone or over the Internet.

If you received the Notice by mail and would prefer to receive a printed copy of the Company’s proxy materials, please follow the instructions for requesting printed copies included in the Notice.  The Company believes these rules allow it to provide you with the information you need while lowering delivery costs and reducing the environmental impact of the Annual Meeting.   This Proxy Statement will be made available to stockholders on or about April 8, 2011.

You are cordially invited to attend the Annual Meeting in person. However, to ensure your vote is counted at the Annual Meeting, please vote as promptly as possible as provided in the Notice.

 
Sincerely,
   
 
/s/ Stratton J. Nicolaides
 
Stratton J. Nicolaides
 
Chairman and Chief Executive Officer
   
   
 
/s/ Andrew J. Ryan
 
Andrew J. Ryan
 
General Counsel and Secretary
   
Atlanta, Georgia
 
April 8, 2011
 
 



NUMEREX CORP.
 1600 Parkwood Circle SE, Suite 500
 Atlanta, Georgia 30339

PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS

GENERAL INFORMATION

Why am I receiving these materials and why did I receive a one-page Notice of Internet Availability of Proxy Materials in the mail regarding the Internet availability of proxy materials this year instead of a full set of proxy materials?

These materials are being made available in connection with the Company's solicitation of proxies for use at the Annual Meeting, to be held on Friday, May 20, 2011 at 11:00 a.m. Eastern Time, and any postponement(s) or adjournment(s) thereof. Under SEC rules, the Company is making this Proxy Statement and the Company’s Annual Report to Shareholders available on the Internet instead of mailing a printed copy of these materials to each shareholder. Shareholders who received the Notice of Internet Availability of Proxy Materials (the “Notice”) by mail will not receive a printed copy of these materials other than as described in the Notice, which contains instructions as to how shareholders may access and review all of the important information contained in the materials on the Internet, including how shareholders may submit proxies by telephone or over the Internet.

What is included in the proxy materials?

These proxy materials include:
· 
the Proxy Statement for the Annual Meeting; and
·
the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2010, as filed with the SEC on March 30, 2011 (the “Annual Report”).
 
If you requested printed versions of these materials by mail as provided in the Notice, these materials also include the printed proxy card for the Annual Meeting.

What matters will be voted on at the Annual Meeting?

Shareholders will vote on four items at the Annual Meeting:
·  
the election to the Board of the six nominees named in this Proxy Statement (Proposal 1);
·  
ratification of the appointment of Grant Thornton LLP as the independent accountants of the Company (Proposal 2);
·  
select advisory resolution on executive compensation (Proposal 3); and
·  
select frequency of future advisory votes on executive compensation (Proposal 4)


Who may vote at the Annual Meeting?

As of the close of business on March 25, 2011 (the “Record Date”), there were 15,042,028 shares of the Company's common stock issued and outstanding, held by 55 shareholders of record. Only shareholders of record as of the Record Date are entitled to receive notice of the Annual Meeting and vote their shares as provided in the Notice. Each share of the Company's common stock has one vote on each matter.

What are the Board's voting recommendations?

The Board recommends that you vote your shares:
·  
“FOR” each of the nominees to the Board (Proposal 1);
·  
“FOR” ratification of the appointment of Grant Thornton LLP (Proposal 2);
·  
“FOR” approval of the advisory resolution of executive compensation (Proposal 3); and
·  
“3 years" for executive compensation approval and frequency of executive compensation review (Proposal 4).

What is the difference between a shareholder of record and a beneficial owner of shares held in street name?
Shareholder of Record. If your shares are registered directly in your name with the Company's transfer agent, Continental Stock Transfer & Trust Company (“Continental”), you are considered the shareholder of record with respect to those shares, and the Notice was sent directly to you by the Company. If you request printed copies of the proxy materials by mail, you will receive a proxy card.

Beneficial Owner of Shares Held in Street Name. If your shares are held in an account at a brokerage firm, bank, broker-dealer, or other similar organization, then you are the beneficial owner of shares held in “street name,” and the Notice was forwarded to you by that organization. The organization holding your account is considered the shareholder of record for purposes of voting at the Annual Meeting. As a beneficial owner, you have the right to direct that organization on how to vote the shares held in your account. If you request printed copies of the proxy materials by mail, you will receive a vote instruction form.

If I am a shareholder of record of the Company's shares, how do I vote?

There are four ways to vote:
·  
 In person. If you are a shareholder of record, you may vote in person at the Annual Meeting, The Company will give you a ballot when you arrive.
·  
 Via the Internet. You may vot by proxy via the Internet by following the instructions provided in the Notice.
·  
 By Telephone. If you request printed copies of the proxy materials by mail, you may vote by proxy by calling the toll free number found on the proxy card.
·  
 By Mail. If you request printed copies of the proxy maerials by mail, you may vote by proxy by filling out the proxy card and sending it back in the envelope provided.
 

 If I am a beneficial owner of shares held in street name, how do I vote?

There are four ways to vote:
·  
 In person.  If you are a beneficial owner of shares held in street name and you wish to vote in person at the Annual Meeting, you must obtain a legal proxy from the organization that holds your shares
·  
 Via the Internet. You may vote by proxy via the Internet by visiting the website designated in the Notice and entering the control number found in the Notice.
·  
 By Telephone. If you request printed copies of the proxy materials by mail, you may vote by proxy by calling the toll free number found on the vote instruction form.
·  
 By Mail. If you request printed copies of the proxy maerials by mail, you may vote by proxy by filling out the vote instruction form and sending it back in the envelope provided.
 
What is the quorum requirement for the Annual Meeting?

The holders of a majority of the shares entitled to vote at the Annual Meeting must be present at Annual Meeting for the transaction of business. This is called a quorum. Your shares will be counted for purposes of determining if there is a quorum, whether representing votes for, against, or abstentions, if you:
·
 are present and vote in person at the Annual Meeting; or
·
 have voted on the Internet, by telephone or by properly submitting a proxy card or vote instruction form by mail.
 
If a quorum is not present, the Annual Meeting will be adjourned until a quorum is obtained.

How are proxies voted?

All valid proxies received prior to the Annual Meeting will be voted. All shares represented by a proxy will be voted and, where a shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be voted in accordance with the shareholder's instructions.

 
What happens if I do not give specific voting instructions?
 
Shareholders of Record.  If you are a shareholder of record and you:
·
 indicate when voting on the Internet or by telephone that you wish to vote as recommended by the Board, or
·
 sign and return a proxy card without giving specific voting instructions,
 
then the proxy holders will vote your shares in the manner recommended by the Board on all matters presented in this Proxy Statement and as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the Annual Meeting. See the section entitled “Other Matters” below.

Beneficial Owners of Shares Held in Street Name. If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with specific voting instructions, under the rules of the SEC and the national securities exchanges, the organization that holds your shares may generally vote on routine matters but cannot vote on non-routine matters.

Who will serve as the inspector of election?

Alan Catherall, Chief Financial Officer of Numerex Corp., will serve as the inspector of election.
 
Who pays for this proxy solicitation?
 
This proxy is solicited by the Board, and the cost of solicitation will be paid by the Company. Additional solicitation may be made by mail, personal interview, telephone, or facsimile by Company personnel, who will not be additionally compensated for such effort. The cost of any such additional solicitation will be borne by the Company.
 
Which ballot measures are considered “routine” or “non-routine”?

Under Nasdaq rules governing brokers, your bank, broker or other nominee may vote your shares in its discretion on “routine” matters.   These rules also provide, however, that when a proposal is not a “routine” matter and your bank, broker or other nominee has not received your voting instructions with respect to such proposal, your bank, broker or other nominee cannot vote your shares on that proposal. When a bank, broker or other nominee does not cast a vote for a routine or a non-routine matter, it is called a “broker non-vote.”     Under current rules, your broker will not have discretionary authority to vote your shares at the Annual Meeting on any of the matters to be considered at the Annual Meeting other than the ratification of our independent public accountants. We encourage you to provide instructions to your bank, broker or nominee by carefully following the instructions provided. This will ensure that your shares are voted at the Annual Meeting as you direct.

How are broker non-votes treated?

Broker non-votes are counted for purposes of determining whether a quorum is present. Broker non-votes will not affect the outcome of voting for the election of directors (Proposal 1), the ratification of Grant Thornton LLP (Proposal 2), advisory vote on executive compensation (Proposal 3) or advisory vote to approve frequency of vote on executive compensation (Proposal 4). We encourage you to provide voting instructions to the organization that holds your shares by carefully following the instructions provided in the Notice.

How are abstentions treated?

Abstentions are counted for purposes of determining whether a quorum is present. Shares not present at the Annual Meeting and abstentions have no effect on the election of directors (Proposal l), the ratification of Grant Thornton LLP (Proposal 2), advisory vote on executive compensation (Proposal 3) or advisory vote to approve frequency of vote on executive compensation (Proposal 4).

What is the voting requirement to approve each of the proposals?

For Proposal 1, the six nominees receiving the highest number of affirmative votes of the outstanding shares of the Company's common stock present or represented by proxy and voting at the Annual Meeting will be elected as directors to serve until the next annual meeting of shareholders and until their successors are duly elected and qualified. Approval of Proposals 2, 3 and 4 requires the affirmative vote of a majority of the voting power present or represented by proxy and voting at the Annual Meeting.


Can I change my vote after I have voted?

You may revoke your proxy and change your vote at any time before the final vote at the Annual Meeting. You may vote again on a later date via the Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the Annual Meeting will be counted), by signing and returning a new proxy card or vote instruction form with a later date, or by attending the Annual Meeting and voting in person. However, your attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again at the Annual Meeting or specifically request that your prior proxy be revoked by delivering to the Company's Secretary at 1600 Parkwood Circle SE, Suite 500, Atlanta, Georgia 30339 a written notice of revocation prior to the Annual Meeting.
 
 Is my vote confidential?

Proxy instructions, ballots, and voting tabulations that identify individual shareholders are handled in a manner that protects your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except:
·
as necessary to meet applicable legal requirements;
·
to allow for the tabulation and certification of votes by Alan Catherall, the Company’s Chief Financial Officer, who is serving as the Inspector of Election; and
·
to facilitate a successful proxy solicitation.

Occasionally, shareholders provide written comments on their proxy cards, which may be forwarded to the Company's management and the Board.

How can I attend the Annual Meeting?

Attendance at the Annual Meeting is limited to shareholders. Admission to the Annual Meeting will be on a first-come, first-served basis. Registration will begin at 11:00 a.m. Eastern Time, and each shareholder may be asked to present valid picture identification such as a driver's license or passport and proof of stock ownership as of the Record Date. The use of cell phones, PDAs, pagers, recording and photographic equipment and/or computers is not permitted in the meeting rooms at the Annual Meeting.

Where can I find the voting results of the Annual Meeting?

The preliminary voting results will be announced at the Annual Meeting.  We will include the voting results in a Form 8-K, which will be filed with the Securities and Exchange Commission within four business days following the conclusion of the Annual Meeting.

What is the deadline to propose actions for consideration or to nominate individuals to serve as directors at the 2012 annual meeting of shareholders?

Requirements for Shareholder Proposals to be Considered for Inclusion in the Company's Proxy Materials. Shareholder proposals to be considered for inclusion in the proxy statement and form of proxy relating to the 2012 annual meeting of shareholders must be received no later than December 31, 2011. In addition, all proposals must comply with Rule 14a-8 of the Securities Exchange Act of 1934 (the “Exchange Act”), which lists the requirements for the inclusion of shareholder proposals in company-sponsored proxy materials. Shareholder proposals must be delivered to the Company’s General Counsel and Secretary by mail at 1600 Parkwood Circle SE, Suite 500, Atlanta, Georgia 30339 or by facsimile at (770) 693-5951.

Requirements for Shareholder Proposals to be Brought before the 2012 Annual Meeting of Shareholders. Notice of any director nomination or other proposal that you intend to present at the 2012 annual meeting of shareholders, but do not intend to have included in the proxy statement and form of proxy relating to the 2012 annual meeting of shareholders, must be delivered to the Company's General Counsel and Secretary by mail at 1600 Parkwood Circle SE, Suite 500, Atlanta, Georgia 30339 or by facsimile at (770) 693-5951 not later than February 10, 2012.  In addition, your notice must set forth the information required by the Company's bylaws with respect to each director nomination or other proposal that you intend to present at the 2012 annual meeting of shareholders. Please read the bylaws carefully to ensure that you comply with all requirements.

Where the Company’s principal executive offices located and what are is the Company's main telephone number?

The Company's principal executive offices are located at 1600 Parkwood Circle SE, Suite 500, Atlanta, Georgia 30339 and the Company's main telephone number is (770) 693-5950.

What are the Company’s Fiscal Years?
     
As used in this Proxy Statement, “FY 2008” means the Company’s fiscal year ended December 31, 2008. “FY 2009” means the Company’s fiscal year ending December 31, 2009. “FY 2010” means the Company’s fiscal year ending December 31, 2010. “FY 2011” means the Company’s fiscal year ending December 31, 2011.
  
PROPOSAL ONE: ELECTION OF DIRECTORS

The Bylaws of the Company provide that the Board of Directors, or the “Board,” shall consist of not less than three nor more than ten directors and that the number of directors, subject to the foregoing limits, shall be determined from time to time by the Board of Directors. The Board of Directors has fixed the number of directors at six. At the Annual Meeting six 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 of Directors has designated the persons listed below to be nominees for election as directors, and each nominee has consented to being named in this Proxy Statement and to serve if elected. The Company has no reason to believe that any of the nominees will be unwilling or unable to serve; however, should any nominee become unavailable for any reason, the Board of Directors may designate a substitute nominee. The proxy holders intend (unless authority has been withheld) to vote for the election of the Company’s nominees.  

The Board of Directors has determined that Brian C. Beazer, George Benson, E. James Constantine, and John G. Raos, constituting a majority of the Board members, are “independent directors” as that term is defined in the NASDAQ listing standards and that Stratton Nicolaides and Andrew Ryan are not “independent directors” under the NASDAQ listing standards. The Director nominees for election at the 2011 Annual Meeting were recommended by the Nominating and Corporate Governance Committee and were approved by a majority of the independent members of the Board of Directors.

Listed below are the Company’s six director nominees, all of whom are nominated for re-election at the Annual Meeting. All of the directors elected at the Annual Meeting will serve a one-year term expiring at the next annual meeting of shareholders.

Name
 
Age*
 
Position
 
Director Since
 
Bri  Brian C. Beazer
    76  
Director
    2002  
George Benson
    76  
Director
    1995  
E. James Constantine
    63  
Director
    2008  
Stratton J. Nicolaides
    57  
Chairman of the Board and Chief Executive Officer
    1999  
John G. Raos
    62  
Lead Director and Vice-Chairman of the Board
    2000  
Andrew J. Ryan
    52  
Director
    1996  
*As of April 8, 2011.

Set forth below is a brief description of the principal occupation and business experience of each of our nominees for director, as well as the summary of our views as to the qualifications of each nominee to serve on the Board and each board committee of which he is a member. Our views are informed not only by the current and prior employment and educational background of our directors, but also by the Board’s experience in working with their fellow directors. Each director has served on the Board for at least three years, and certain nominees have ten or more years of experience on our Board. Accordingly, the Board has had significant experience with the incumbent directors and has had the opportunity to assess the contributions that the directors have made to the board as well as their industry knowledge, judgment and leadership capabilities.

Brian C. Beazer has served as a director of the Company since June 2002. Mr. Beazer is currently the Non-Executive Chairman of the Board of Beazer Homes USA Inc. a national homebuilder headquartered in Atlanta, Georgia, and has served as a director of Beazer since its inception in November 1993. Mr. Beazer served as Chief Executive Officer of Beazer PLC or its predecessors from 1968 to 1991 and as Chairman of that company from 1983 until the date of its acquisition by an indirect, wholly owned subsidiary of Hanson PLC effective December 1, 1991. Mr. Beazer is also a director of Beazer Japan, Ltd., and Seal Mint, Ltd.    As a result of Mr. Beazer’s long tenure at Beazer Homes USA, a public company, he provides valuable business, leadership and management insights into our strategic direction and business operations, among other things.  Mr. Beazer’s brings expertise in residential real estate, an important market for our products and services.  In addition, through his experience at Beazer Homes, Mr. Beazer brings financial expertise as well as executive compensation experience, qualifying him to serve on our Audit Committee and Compensation Committee, and his service on the board of directors of Beazer Homes provides the Nominating and Corporate Governance Committee with valuable insight on the selection of directors and corporate governance practices.

George Benson has served as a director of the Company since June 1995. Mr. Benson is currently Chairman and Chief Executive Officer of Wisconsin Wireless Communications Corp. and has served in such role since 1992.  He also founded Airadigm Communications, Inc. in 1994 and served as its Chairman and Chief Executive Officer until his retirement as Chairman Emeritus in June of 1999. We believe that Mr. Benson’s deep expertise in wireless communication provides a strong operational and strategic background and adds valuable business, leadership and management experience and insights into many aspects of our business.   Mr. Benson’s experience in developing appropriate compensation for the executives and senior management of his other companies qualifies him to serve on our Compensation Committee, and his experience on our board, as well as his management experience with Wisconsin Wireless Communications Corp, provides him with a solid background for service on our Auditing Committee as well as our Nominating and Corporate Governance Committee.

E. James Constantine has served as a director of the Company since October 2008. Since 2006, Mr. Constantine has served as Chief Executive Officer of HPE America LLC, a holding of Piero Ferrari involved in power train development for NASCAR and Formula 1 racing vehicles. From February 2003 until July 2006, Mr. Constantine was the Chief Executive Officer of Delta Motors LLC and a private holding company, MY Ventures, LLC, which held entities engaged in development of embedded cellular transceivers, GPS and location-based services and technology, special purpose vehicles, and commercial real estate. He previously served on the Board of Governors of Claremont McKenna College’s Kravis Leadership Institute, and was the commercial consultant to the City of Los Angeles for the creation of its electric vehicle initiative and development of the first parallel hybrid vehicle. Mr. Constantine’s tenure as CEO of a company in the auto industry and a wireless communications company provide valuable business, leadership and management experience, including expertise in creating value and product development for our customers in the auto and real estate sectors.   Mr. Constantine’s experience as a chief executive officer also provides valuable insights to our Nominating and Corporate Governance Committee.
 
Stratton J. Nicolaides has served as Chief Executive Officer of the Company since April 2000, and served as Chief Operating Officer from April 1999 until March 2000, and as Chairman of the Board of Directors since December 1999. In 2007, Mr. Nicolaides began serving as a director the Taylor Hooton Foundation, a non-profit organization formed to fight steroid abuse by America’s youth. With his years of experience in the wireless communication industry, including more than eleven years of senior management experience at Numerex, we believe that Mr. Nicolaides’s deep industry knowledge and his expertise in our operations, product development and corporate strategy provides the Board with significant insight across a broad range of issues critical to our business.  As our chief executive officer, Mr. Nicolaides provides unique insight to the Board regarding our day-to-day operations, customer information, competitive intelligence, general trends in our industry and issues regarding our financial results.

John G. Raos has served as a director of the Company since February 2000, now serves as Lead Director, and was named Vice-Chairman of the Board in March 2008. Since August 2010, Mr. Raos has been Chief Executive Officer of Strategic Investments, LLC, a privately owned investment management and holding company.  Mr. Raos served as Chief Executive Officer of Precision Partners, Inc., a global, diversified manufacturing and engineering services company from July 2000 until June 2010. From June 1995 until January 2000, Mr. Raos served as President and Chief Operating Officer of US Industries, Inc. From February 1999 until January 2000, Mr. Raos also served as Chairman and Chief Executive Officer of Strategic Industries, Inc., a US Industries subsidiary. Prior to June 1995, Mr. Raos served as President, Chief Operating Officer, and Director of Hanson Industries, Inc., the North American arm of Hanson PLC. Mr. Raos also served as a director of Hanson PLC from 1990 until 1995.   In addition, Mr. Raos held the positions of Chief Financial Officer and Treasurer of Hanson Industries, Inc., and is a member of the American Institute of Certified Public Accountants (AICPA) and National Association of Corporate Directors (NADC).

We believe Mr. Raos’ more than 10 years of service as a director of Numerex and his career experience in the business markets which we serve provides the Board with valuable perspective on the issues facing the Company and insight into the markets we serve, and assists our Compensation Committee in developing our compensation policies and practices in order to secure talented employees, management and directors.  We believe that Mr. Raos’s operating experience brings a valuable perspective to the Board both with respect to accounting and financial and strategic aspects of our business and to the Audit Committee on which he serves as “audit committee financial expert.”

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 since August 1994 and serves as the Board of Directors designee of Gwynedd Resources, Ltd. in accordance with its contractual right to designate a member of the Board of Directors.  Mr. Ryan’s wide-ranging legal practice and breadth of experience gained with his more than 15 years of experience with the Company has been of particular value in assisting the Board with evaluating business and strategic issues.  Mr. Ryan provides the Board with significant operational insights regarding operational strategies and corporate governance issues.

Required Vote

If a quorum is present, the nominees receiving the highest number of affirmative votes of the shares present or represented by proxy and entitled to vote on the matter at the Annual Meeting shall be elected as directors. An abstention, withholding of authority to vote, or broker non-vote will have no effect on the vote and will not be counted in determining whether any proposal has received the required shareholder vote.

Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF MSSRS. BEAZER, BENSON, CONSTANTINE, NICOLAIDES, RAOS AND RYAN FOR ELECTION TO THE BOARD OF DIRECTORS.
* * *
 
PROPOSAL TWO: RATIFICATION OF INDEPENDENT ACCOUNTANTS

The Board of Directors, upon the recommendation of the Audit Committee, has selected the firm of Grant Thornton LLP as independent accountants of the Company for the fiscal year ending December 31, 2011. This nationally known firm has no direct or indirect financial interest in the Company.

Although not required to do so, the Board of Directors is submitting the appointment of Grant Thornton LLP as the Company’s independent accountants for FY 2011 for ratification by the shareholders at the Annual Meeting as a matter of good corporate governance.  If a majority of the votes cast in person or by proxy at the Annual Meeting is not voted for ratification, the Board of Directors will reconsider its appointment of Grant Thornton LLP as independent accountants for the current fiscal year.   Even if the selection is ratified, the Audit Committee in its discretion may direct the appointment of different independent registered public accounting firm at any time during the year if they determine that such a change would be in the best interests of Numerex and its shareholders.

A representative of Grant Thornton LLP will be present at the Annual Meeting and will have the opportunity to make a statement if he or she desires to do so. It is anticipated that such representative will be available to respond to appropriate questions from shareholders.
 
Required Vote
 
Ratification of the appointment of Grant Thornton LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2011 requires the affirmative “FOR” vote of a majority of the votes cast on the proposal. Unless marked to the contrary, proxies received will be voted “FOR” ratification of the appointment of Grant Thornton LLP.

Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” RATIFICATION OF THE APPOINTMENT OF GRANT THORNTON LLP AS INDEPENDENT ACCOUNTANTS FOR FY 2011.

***

MATTERS CONCERNING THE COMPANY’S INDEPENDENT AUDITORS

The Audit Committee Charter contains procedures for the pre-approval of audit and non-audit services (the “Pre-Approval Policy”) to ensure that all audit and permitted non-audit services to be provided to the Company have been pre-approved by the Audit Committee. Specifically, the Audit Committee pre-approves the use of Grant Thornton LLP for specific audit and non-audit services, except that pre-approval of non-audit services is not required if the “de minimis” provisions of Section 10A(i)(1)(B) of the Exchange Act are satisfied. If a proposed service has not been pre-approved pursuant to the Pre-Approval Policy, then it must be specifically pre-approved by the Audit Committee before it may be provided by Grant Thornton. For additional information concerning the Audit Committee and its activities with Grant Thornton, see “Corporate Governance — Audit Committee” and “Report of the Audit Committee” in this proxy statement.

During FY 2010 and FY 2009, Grant Thornton LLP provided services to the Company in the following categories and amounts:

 
Audit and Other Fees
 
FY 2010
($)
   
FY 2009
($)
 
             
Audit Fees
 
$
432,626
   
$
467,041
 
Audit-Related Fees
 
$
0
   
$
0
 
Tax Fees
 
$
0
   
$
0
 
All Other Fees
 
$
0
   
$
0
 
 
For FY 2009 and FY 2010, “Audit Fees” consist of fees for professional services associated with the annual consolidated financial statements audit, review of the interim consolidated financial statements included in the Company’s quarterly reports on Form 10-Q, and regulatory filings. Audit fees for both years also include fees for professional services rendered for the audits of management’s assessment of the effectiveness of internal controls over financial reporting and Sarbanes-Oxley compliance. The Audit Committee reviews each non audit service to be provided and assesses the impact of the service on the independent registered public accountant’s independence. There were no Audit-Related Fees for FY 2009 or FY 2010.


PROPOSAL THREE: ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION
 
The recently enacted Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (the “Dodd-Frank Act”) and related rules of the SEC enables stockholders to approve an advisory resolution on our executive compensation, as disclosed in this Proxy Statement.   We describe this item as an advisory vote on executive compensation, but it is more commonly known as “say-on-pay.”
 
In considering their vote, we urge our shareholders to review carefully our compensation policies and decisions regarding our named executive officers as presented in the “Compensation Discussion and Analysis” section beginning on page 18 of this Proxy Statement.  As described in that section, we believe that our compensation programs have been appropriately designed to meet their objectives and that the compensation of our named executive officers reported in this Proxy Statement has contributed to our growth, our ability to manage our business during the recent economic slowdown and to our future prospects.
 
Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to any named executive officer and will not be binding on or overrule any decisions by our Board of Directors.  Although non-binding, our Board of Directors and the Compensation Committee will review and consider the voting results when making future decisions regarding our executive compensation program.
 
Accordingly, we are asking our shareholders to approve, in a non-binding vote, the following resolution in respect of this Proposal 3:
 
“RESOLVED, that the stockholders of the Corporation hereby approve the compensation paid to the Company’s named executive officers as disclosed in the proxy statement for our 2011 Annual Meeting of Shareholders pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion.”
 
Vote Required
 
The affirmative vote of a majority of all shares of common stock present or represented and entitled to vote at the Annual Meeting is required for advisory approval of this proposal. This will be considered a non-routine item. As a non-routine item, there may be broker non-votes.  Broker non-votes and abstentions will have no effect on the outcome of the proposal.
 
Recommendation
THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” APPROVAL OF THE ADVISORY RESOLUTION ON EXECUTIVE COMPENSATION.
***

PROPOSAL FOUR: ADVISORY VOTE ON FREQUENCY OF FUTURE ADVISORY VOTES ON EXECUTIVE COMPENSATION
 
In accordance with the Dodd-Frank Act and the related rules of the SEC, we are requesting our shareholders recommend, in a non-binding vote, whether we should ask our shareholders to approve the compensation of our named executive officers in a non-binding vote (that is, a vote similar to the vote in Proposal 3 above) every one, two or three years.
 
After careful consideration of the frequency alternatives, we believe that conducting an advisory vote on executive compensation every three years is appropriate for us and our shareholders at this time. Our executive compensation program is designed such that executives are not encouraged to take risks for short-term gain at the expense of the long-term health of our business.   As a public company, elements of our executive compensation program are designed to align employee interests with those of our shareholders, which is why we implemented our long-term incentive compensation programs.  Conducting an advisory vote on executive compensation every year or every two years does not give our shareholders sufficient time to evaluate the effectiveness of our long-term compensation programs.  We believe that a three-year cycle will provide our shareholders sufficient time to evaluate the effectiveness of both our short- and long-term compensation programs.  In addition, we believe that a three-year cycle will give our Board of Directors and our Compensation Committee sufficient time to consider the results of the annual advisory vote on executive compensation, determine if any changes need to be made to our compensation programs and evaluate the effectiveness of the structure of our short- and long-term compensation programs.
 
Accordingly, we are asking our shareholders to vote to conduct an advisory vote on executive compensation every three years. Our Board of Directors will carefully consider the outcome of this vote when making future decisions regarding the frequency of advisory votes on executive compensation.  However, because this vote is advisory and not binding, our Board of Directors may decide that it is in the best interests of us and our shareholders to hold an advisory vote on executive compensation more or less frequently than the alternative that has been selected by our stockholders.
 
Vote Required
 
The affirmative vote of a majority of all shares of common stock present or represented and entitled to vote at the Annual Meeting is required for advisory approval of this proposal.   This will be considered a non-routine item. As a non-routine item, there may be broker non-votes.  Abstentions and broker non-votes will have no effect on the outcome of the proposal.
 

Recommendation

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR “EVERY THREE YEARS” TO CONDUCT AN ADVISORY VOTE ON EXECUTIVE COMPENSATION.


CORPORATE GOVERNANCE

Role of the Board
 
It is the duty of the Board to oversee the Company's Chief Executive Officer (the “CEO”) and other senior management in the competent and ethical operation of the Company on a day-to-day basis and to assure that the long-term interests of the shareholders are being served. To satisfy this duty, the directors take a proactive, focused approach to their position, and set standards to ensure that the Company is committed to business success through maintenance of high standards of responsibility and ethics.  In FY 2010, the full Board held eight meetings inclusive of the annual meeting of shareholders.

Director Independence

The Board has determined that all Board members, excluding Mssrs. Nicolaides and Ryan, are independent under applicable NASDAQ and SEC rules. Furthermore, the Board has determined that each member of each of the committees of the Board of Directors is independent within the meaning of NASDAQ’s and the SEC’s director independence standards. In making this determination, the Board solicited information from each of the Company’s directors regarding several factors, including whether such director, or any member of his immediate family, had a direct or indirect material interest in any transactions involving the Company, was involved in a debt relationship with the Company or received personal benefits outside the scope of such person’s normal compensation. The Board considered the responses of the Company’s directors, and independently considered all other material information relevant to each such director in determining such director’s independence under applicable SEC and NASDAQ rules.
 
Board Leadership Structure

The Board does not have a policy regarding the separation of the roles of Chief Executive Officer and Chairman of the Board, as the Board believes it is in the best interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. The Board believes the combined role of Chairman and Chief Executive Officer, together with an independent lead director, is in the best interest of stockholders at this time because it provides the appropriate balance between strategy development and independent oversight of management.  In addition, much of the work of the Board is conducted through its committees.  Our Board has three standing committees—Audit, Compensation, and Corporate Governance and Nominating, as further described below.  Each of the Board committees is comprised solely of independent directors, with each of the three committees having a separate chair.   One of the key responsibilities of the Board is to develop the strategic direction for the Company, and provide management oversight for the execution of that strategy.

Board Role in Risk Oversight

The responsibility for the day-to-day management of risk lies with management, while the Board, and each of the Board committees, is responsible for overseeing the risk management process to ensure that it is properly designed, well-functioning and consistent with the Company’s overall corporate strategy.  The role of the Board of Directors in the Company’s risk oversight process includes reviewing the Company’s key business risks, understanding how these risks could affect our Company and receiving regular reports from members of senior management on areas of material risk to the Company, including operational, financial, legal, investment and liquidity, and strategic and reputational risks.  The Board also believes its oversight of risk is enhanced by its current leadership structure (discussed above) because the Chief Executive Officer, who is ultimately responsible for the Company's management of risk, also chairs regular Board meetings, and with his in-depth knowledge and understanding of the Company, is best able to bring key business issues and risks to the Board's attention.
 
 Compensation Risk
 
Our Compensation Committee has considered the various elements of Numerex’s compensation program and does not believe it encourage excessive or inappropriate risk taking.
 
We structure our pay to consist of both fixed and variable compensation. The fixed (or salary) portion of compensation is designed to provide a steady income regardless of our stock price performance or short-term business performance so that executives and managers have a threshold level of financial security and are not pressured to produce short-term gains at the expense of long-term business results or through means at odds with our corporate values.
 
The variable (the short-term performance award or bonuses and equity) portions of compensation are designed to reward both short- and long-term corporate performance in a balanced manner. Our short-term performance awards for all Named Executive Officers and most other executives are based on the balanced achievement of annual EBITDA and revenue goals (EBITDA refers to earnings before interest, taxes, depreciation, amortization and non-recurring items).   Further, short-term incentive awards are capped at two times targeted payouts and are only paid in the event of exceptional business results.
 
For long-term performance, our stock option awards generally vest over four years and provide value only if our stock price increases over time. This is a further encouragement to our executives to consider their actions in the context of the long-term health of our business.
 
We feel that that our balanced mix of cash and equity compensation, revenue and profitability, fixed and variable pay and capped bonus payouts provide sufficient incentives to keep executives focused on those activities that produce long-term shareholder growth while not creating incentives for them take unnecessary or excessive risks.

Board Committees

The Board has a standing Audit and Finance Committee (the “Audit Committee”), Compensation Committee (the “Compensation Committee”), and Nominating and Corporate Governance Committee (the “Nominating Committee”). The Board has determined that all committee chairs and committee members are independent under the applicable NASDAQ and SEC rules. The members of each of the Company’s committees are identified in the table below.
 
 
Name
 
Audit
Committee
   
Compensation Committee
   
Nominating Committee
 
Brian C. Beazer
   
*
     
*
   
Chairman
 
George Benson
   
*
   
Chairman
     
*
 
E. James Constantine
   
*
             
*
 
Stratton J. Nicolaides
                       
John G. Raos
 
Chairman
     
*
         
Andrew J. Ryan
                       
 
Audit Committee
     
The Audit Committee met nine times in FY 2010. The Board of Directors has determined that John Raos, Chairman of the Audit Committee, is an “audit committee financial expert” as defined by the SEC. The principal functions of the Audit Committee are to: (a) assist in the oversight of the integrity of the Company’s financial statements, the Company’s compliance with legal and regulatory requirements, the qualifications and independence of the Company’s independent auditors and the performance of the Company’s independent auditors; (b) approve the selection, appointment, retention and/or termination of the Company’s independent auditors, as well as approving the compensation thereof; and (c) approve all audit and permissible non-audit services provided to the Company and certain other persons by such independent auditors.  The Audit Committee Charter is available on the Company’s website at http://www.numerex.com/Company/Corporate-Governance2.aspx.

Compensation Committee

The Compensation Committee met nine times in FY 2010. The Compensation Committee is responsible primarily for reviewing the compensation arrangements for the Company's executive officers, including the Chief Executive Officer, and for formulating the Company's equity compensation plans. The Compensation Committee Charter is available on the Company’s website at http://www.numerex.com/Company/Corporate-Governance2.aspx.  All of the members of the Compensation Committee have been determined by the Board to be independent under applicable NASDAQ and SEC rules.

Nominating and Corporate Governance Committee

The Nominating Committee met two times during FY 2010. The Nominating Committee assists the Board in identifying qualified individuals to become directors, determines the composition of the Board and its committees, monitors the process to assess the Board's effectiveness and helps develop and implement the Company's Corporate Governance Guidelines. The Nominating Committee reviews the performance of the Board, its Committees, together with their members. The Nominating Committee also considers nominees for election as directors proposed by shareholders. The Nominating Committee Charter specifies that the composition of the Board should reflect experience in the following areas: finance, compensation, sales and marketing, technology and production. The Nominating Committee Charter is available on the Company’s website at http://www.numerex.com/Company/Corporate-Governance2.aspx.

Attendance at Meetings

Each director attended at least 96% of the meetings of the Board of Directors and its committees of which he was a member. Directors are encouraged, but not required, to attend the Company’s annual meetings of shareholders. Although no director is required to do so, all six of the Company’s directors attended the annual meeting of shareholders on May 21, 2010. Non-management members of the Board meet in executive sessions, absent the Company’s employee director, following regularly scheduled in-person meetings of the Board.

Executive Sessions

Executive sessions of the independent directors are held at least once each year following regularly scheduled in-person meetings of the Board of Directors. These executive sessions include only those directors who meet the independence requirements promulgated by NASDAQ, and Mr. Raos, as the Lead Director and Vice-Chairman of the Board, is responsible for chairing these executive sessions. The Board’s independent directors attended two executive sessions in FY 2010.

Code of Ethics

The Company has a Code of Ethics and Business Conduct (the “Code”) that applies to the Company’s directors, officers, and employees, including the Company’s Chief Executive Officer and Chief Financial Officer. The Code is available on the Company’s website at http://www.numerex.com/Company/Corporate-Governance2.aspx. We will disclose any future amendments to, or waivers from, provisions of these ethics policies and standards on our website as promptly as practicable, as may be required under applicable SEC and Nasdaq rules.

Right to Designate Director

The Company has entered into an agreement providing Gwynedd Resources Ltd. (“Gwynedd”) the right to designate one director to the Board of Directors. Additionally, if 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 a director will cease at such time as Gwynedd’s equity interest in the Company drops below 10% of the outstanding shares of Common Stock. Mr. Ryan currently serves as Gwynedd’s sole designee on the Board.

Communications with the Board of Directors

Any shareholder who wishes to send any communications to the Board or a specific director should deliver such communications to the General Counsel and Secretary of the Company at 1600 Parkwood Circle SE, Suite 500, Atlanta, Georgia 30339, who will forward appropriate communications to the Board. Inappropriate communications include correspondence that is unrelated to the operation of the Company or the Board, is inappropriate for Board consideration, such as advertisements or other commercial communications, or is threatening or otherwise offensive. The Company’s General Counsel and Secretary may consult with other officers of the Company, counsel, and other advisers as appropriate, in making this determination.
 
Consideration of Director Nominees
    
The Nominating Committee will consider nominees for director recommended by a shareholder submitted in accordance with the procedure set forth in the Company’s Bylaws. In general, the procedure set forth in the Company’s Bylaws provides that a notice relating to the nomination must be timely given in writing to the: Secretary of the Company, Numerex Corp., 1600 Parkwood Circle SE, Atlanta, Georgia 30339. To be timely, the notice must have been delivered by the 90th day prior to the anniversary of the prior year’s annual meeting.  Such notice must include all information relating to such person that is required to be disclosed in solicitations of proxies for the election of directors, including information relating to the business experience and background of the potential nominee, and certain information with respect to the nominating shareholder and any persons acting in concert with the nominating shareholder. Any such recommendation must also be accompanied by a written consent of the individual to stand for election if nominated by the Board of Directors and to serve if elected by the shareholders.

The Nominating Committee generally identifies potential nominees through its network of contacts, and may also engage, if it deems appropriate, a professional search firm. The Nominating Committee meets to discuss and consider such candidates’ qualifications and then chooses director candidates by majority vote. There are no differences in the manner in which the Nominating Committee evaluates potential nominees for director based on whether such potential nominees are recommended by a shareholder or by any other source. The Nominating Committee does not have specific, minimum qualifications for nominees and has not established specific qualities or skills that it regards as absolutely necessary for one or more of the Company’s directors to possess (other than any qualities or skills that may be required by applicable law, regulation or listing standard). The Nominating Committee’s Charter identifies diversity as a consideration with regard to the identification of director nominees, and the Nominating Committee strives to nominate directors with a variety of complementary skills such that, as a group, the Board will possess an appropriate diversity of professional experience, education, knowledge, skills, and abilities to oversee the Company's businesses. Further to the foregoing, in evaluating a person as a potential nominee to serve as a Director of the Company, the Committee considers the following factors, among any others it may deem relevant:

whether or not the person has any relationships that might impair his or her independence, such as any business, financial or family relationships with Company management, Company service providers or their affiliates;
   

whether or not the person serves on boards of, or is otherwise affiliated with, competing organizations;
   

whether or not the person is willing to serve, and willing and able to commit the time necessary for the performance of the duties of a Director of the Company;
   

as specifically provided in the Nominating Committee’s Charter, whether the nominee has experience in one or more of the following areas—finance, compensation, technology, sales and marketing, and production; and
 
the character and integrity of the person.

Compensation Committee Interlocks and Insider Participation

Brian Beazer, George Benson and John Raos served on our Compensation Committee during FY10.   No member of the Compensation Committee during FY 2010 served as an officer, former officer, or employee of the Company or had a relationship requiring disclosure under “Related Person Transactions.”  During FY 2010, none of our executive officers served as:

·  
a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive  officers served on our Compensation Committee;
·  
a director of another entity, one of whose executive officers served on our Compensation Committee; or
·  
a member of the compensation committee (or other committee of the board of directors performing equivalent functions or, in the absence of any such committee, the entire board of directors) of another entity, one of whose executive officers served as a director on our Board of Directors.
 
 


DIRECTOR COMPENSATION

Compensation of Directors – FY 2010

The Board of Directors uses a combination of cash and stock-based incentives to attract and retain qualified candidates to serve as directors.  In determining director compensation, the Board of Directors considers the significant amount of time required of our directors in fulfilling their duties, as well as the skill and expertise of our directors. The Compensation Committee periodically reviews director compensation with the assistance of our independent compensation consultant and recommends to the Board of Directors the form and amount of compensation to be provided.

The annual retainer fee for directors is $25,000 plus additional fees for participation in committees of the Board of Directors as follows: $6,500 for the Lead Director, Compensation Committee Chairperson, and Nominating Committee Chairperson, $10,000 for the Audit Committee Chairperson, and $5,000 for Audit, Compensation and Nominating Committee members. Directors also receive reimbursement of expenses incurred in attending meetings. In accordance with the Company’s Directors’ Stock Plan, in FY 2010 two directors (Mssrs. Benson and Ryan) elected to have their annual fees paid entirely in cash and three directors (Mssrs. Beazer, Constantine, and Raos) elected to have their annual fees paid in stock. Directors also receive a grant of 12,000 stock appreciation rights (SARs) on the date of the Annual Shareholders Meeting and each received 1,105 restricted shares on June 30, 2010.

The following table provides information concerning compensation paid by the Company to its non-employee directors for FY 2010. Mr. Nicolaides is not compensated for his service as director. Mr. Ryan began receiving compensation as a director as of May 21, 2010.
 
 
Name
 
Fees Earned or Paid in Cash ($)(1)
   
Stock Awards
($)(2)
   
Option Awards
($)(3)
   
All Other Compensation
($)
   
Total
($)
 
Brian C. Beazer
 
$
31,025
     
4,795
   
$
11,228
     
--
   
$
47,048
 
George Benson
 
$
31,025
     
4,795
   
$
11,228
     
--
   
$
47,048
 
E. James Constantine
 
$
26,725
     
4,795
   
$
11,228
     
--
   
$
42,748
 
Andy Ryan
 
$
15,000
     
4,795
   
$
11,228
     
--
   
$
31,023
 
John G. Raos
 
$
35,525
     
4,795
   
$
11,228
     
--
   
$
51,548
 

(1) Includes annual fees and committee fees. Directors may elect to have their annual fee and committee fees paid in shares of the Company’s common stock. Each of Messrs Beazer, Constantine, and Raos elected to have those fees paid in stock as follows: Mr. Beazer, 5,307 shares; Mr. Constantine, 4,604 shares; and Mr. Raos, 6,122 shares.

(2) Includes restricted stock awarded to the directors on June 30, 2010.  Excludes stock paid in lieu of cash compensation. See Note 1, above.  
  
(3) On May 21, 2010, each director was granted 12,000 SARs of the Company’s common stock at grant date fair market value of  $4.51 per share.
  

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth certain information regarding the beneficial ownership of the Company’s Common Stock as of March 25, 2011, by (i) each person known by the Company to be the beneficial owner of more than 5% of the Common Stock, (ii) each director, director nominee, and named executive officer of the Company, and (iii) all current directors and named 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. The shares “beneficially owned” by an individual are determined in accordance with the definition of “beneficial ownership” set forth in the regulations of the SEC. Accordingly, they may include shares owned by or for, among other things, the spouse, minor children or certain other relatives of such individual, as well as other shares as to which the individual has or shares votes or investment power or has the right to acquire within 60 days after March 25, 2011.

   
Shares Beneficially Owned (1)
 
Name and Address of Beneficial Owner or Identity of Group
    (# )  
(%)
 
Gwynedd Resources, Ltd. (2)
1011 Centre Road, Suite 322
Wilmington, DE 19805
    3,207,280       21.32 %
Elizabeth Baxavanis, Trustee (3)
Dominion Holdings #5
Revocable Trust for the
Benefit of Maria E. Nicolaides
c/o Salisbury & Ryan LLP
1325 Avenue of the Americas
New York, NY 10019
    3,207,280       21.32 %
Maria E. Nicolaides (4)
c/o Salisbury & Ryan LLP
1325 Avenue of the Americas
New York, NY 10019
    3,207,280       21.32 %
Paul J. Solit (5)
825 Third Avenue, 33rd Floor
New York, New York 10022
    1,416,781       9.41 %
Kenneth Lebow (6)
The Lebow Family Revocable Trust
Santa Barbara, CA 93108
    1,356,692       8.80 %
Brian C. Beazer (7)(9)
    419,218       *  
George Benson
    92,588       *  
Alan B. Catherall
    140,750       *  
E. James Constantine
    34,897       *  
Louis Fienberg
    98,750       *  
Michael A Marett
    171,497       *  
Stratton J. Nicolaides (8)
    298,500       *  
John G. Raos
    201,928       *  
Andrew J. Ryan (7)(9)
    468,220       *  
Jeffrey Smith
    353,312       *  
All Current Directors and Executive Officers as a group (7)(8)(9)
    2,279,660       15.15 %

 (1) Percentage calculations are based on the 15,042,028 of shares of the Company’s Class A Common Stock, no par value, that were outstanding at the close of business on March 25, 2011; includes the subset of shares issuable upon the exercise of outstanding options exercisable within 60 days after March 25, 2011 in the following amounts:  Mr. Beazer, 76,000 shares; Mr. Benson, 66,000 shares; Mr. Constantine, 24,000 shares; Mr. Raos, 94,000 shares, and 62,000 shares for Mr. Ryan.
 
(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)  Douglas Holsclaw owns 9.3% of the outstanding stock of Gwynedd and 4.9% of Numerex Class A Common Stock. See footnotes (3) and (4).
 
(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 89.8% 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).
 
(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 89.8% and 0.9%, respectively, of the outstanding stock of Gwynedd. Maria E. Nicolaides disclaims beneficial ownership of 327,143 shares of Common Stock owned by Gwynedd that may be deemed to be beneficially owned by the other shareholders of Gwynedd, including trusts for the benefit of her children. See footnote (3).
 
(5) According to Schedule 13G, filed jointly with the SEC on March 1, 2011, by Paul J. Solit, et al (“Solit”), Solit beneficially owned 1,416,781 shares, or 9.4% of the total number of shares of Class A Common Stock, no par value, of the Company that were outstanding as of the close of business on March 25, 2011.

(6) According to Schedule 13D, filed jointly with the SEC on August 2, 2010, by Kenneth Lebow, et al (“Lebow”), Lebow beneficially owned 1,356,692 shares, or 8.8% of the total number of shares of Class A Common Stock, no par value, of the Company that were outstanding as of the close of business on March 25, 2011.
 
(7) The 250,000 shares held by Rye 68, LLC with respect to which there is shared voting and dispositive power as between Messrs. Beazer and Ryan were counted for purposes of calculating this total and the corresponding percentage
  
(8) Does not include the 3,207,280 shares of Common Stock owned by Gwynedd, with respect to which Mr. Nicolaides disclaims beneficial ownership.
 
(9) Includes the 250,000 shares held by Rye 68, LLC. Further represents options to purchase 50,000 shares owned by Salisbury & Ryan, LLC granted in 2001 as to which there is shared voting and dispositive power between Mr. Ryan and his law partner; and represents 156,220 shares owned individually by Mr. Ryan. Does not include the 3,207,280 shares of Common Stock owned by Gwynedd, with respect to which Mr. Ryan disclaims beneficial ownership. See footnotes (7) and (10).
  
*Represents less than 5% of the Company’s total number of shares outstanding on March 25, 2011.
 
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Under Section 16(a) of the Exchange Act, the Company’s directors, executive officers and persons who are the beneficial owners of more than 10% of the outstanding Common Stock are required to report their beneficial ownership of Common Stock and any changes in that ownership to the SEC. Based solely on a review of the copies of reports furnish to, or filed by, us and written representations that no other reports were required, we believe that during FY 2010, the Company’s officers and directors complied with all applicable Section 16(a) filing requirements, except as follows:

There were five late Form 4 filings in 2010 as follows: January 5, 2010 board compensation for Brian Beazer, EJ Constantine and John G. Raos; and reports regarding stock purchases by EJ Constantine on May 28, 2010 and June 7, 2010.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company does not have a formal written policy regarding the review of related party transactions. However, the Board reviews all relationships and transactions in which the Company and its directors and senior executive officers or their immediate family members are participants to determine whether such persons have a direct or indirect material interest. The Company’s senior management is primarily responsible for the development and implementation of processes and controls to obtain information from the directors and senior executive officers with respect to related person transactions and for then determining, based on the facts and circumstances, whether the company or a related person has a direct or indirect material interest in the transaction. As required under SEC rules, transactions, if any, that are determined to be directly or indirectly material to the company or a related person are disclosed in the company’s proxy statement. In addition, the Audit Committee reviews and approves or ratifies any related person transaction that is required to be disclosed.  Any member of the Audit Committee who is a related person with respect to a transaction under review may not participate in the deliberations or vote respecting approval or ratification of the transaction, provided, however, that such director may be counted in determining the presence of a quorum at a meeting of the Committee that considers the transaction.

Mr. Ryan, a Director of the Company, is a partner in the law firm of Salisbury & Ryan LLP. Salisbury & Ryan provided legal services to the Company in FY 2010 and will continue to provide such services in FY 2011. For services performed in FY 2010, Salisbury & Ryan invoiced the Company legal fees in the amount of approximately $361,000.

Equity Compensation Plan Information

The following table provides information as of December 31, 2010 about the securities authorized for issuance to our employees and non-employee directors under our stock-based compensation plans:

Plan Category
 
Column A
   
Column B
   
Column C
 
   
Number of securities to be issued upon exercise of outstanding options, warrants and rights
(#)
   
Weighted-average exercise price of outstanding options, warrants and rights
($)
   
Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in Column A
(#)
 
Equity compensation
plans approved by
security holders
    2,463,864     $ 5.88       1,513,415  
Equity compensation plans not approved
By security holders
    --       --          
Total
    2,463,864     $ 5.88       1,513,415  


  REPORT OF THE COMPENSATION COMMITTEE
 
This report is submitted by the Compensation Committee of the Board of Directors. The Compensation Committee has reviewed the Compensation Discussion and Analysis included in this Proxy Statement and discussed it with management. Based on its review of the Compensation Discussion and Analysis and its discussions with management, the Compensation Committee has recommended to the Board of Directors that the Compensation Discussion and Analysis be included in this Proxy Statement and incorporated into our Annual Report on Form 10-K for the year ended December 31, 2010.
 
No portion of this Compensation Committee Report shall be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act, as amended, through any general statement incorporating by reference in its entirety the Proxy Statement in which this report appears, except to the extent that the Company specifically incorporates this report or a portion of it by reference. In addition, this report shall not be deemed filed under either the Securities Act or the Exchange Act.

                                                                                                                                                                      THE COMPENSATION COMMITTEE

                                                                                                                                                                Brian Beazer
                                                                                                                                            George Benson, Chairman
                                                                                                                                                               John G. Raos

COMPENSATION DISCUSSION AND ANALYSIS

 
This Compensation Discussion and Analysis explains the objectives, strategy and features of our executive compensation program, and it describes how the compensation of our leaders aligns with our corporate objectives and stockholder interests. Although our executive compensation program is generally applicable to each of our senior officers, this discussion and analysis focuses primarily on the program as applied to our Chief Executive Officer, Chief Financial Officer and the other officers included in the “Summary Compensation Table,” or the “named executive officers” (NEOs).


EXECUTIVE SUMMARY

Numerex requires a highly skilled, motivated and experienced executive team to lead its efforts to develop and sell complex end-to-end machine-to-machine (M2M) solutions that help customers monitor processes, equipment, condition or location. We must make investments that might not pay off for several years, while managing costs and staying ahead of a market that changes rapidly due to advances in technology and competitive conditions around.

While our business offers great opportunities, as the uses of our products and services are almost limitless, there is potential for over-investment in initiatives that do not find a market. Consequently, our growth strategy balances revenue and earnings targets without letting either component get too far in front of the other.  Annual cash bonuses for our executive team are based on achieving both revenue and earnings goals. For 2010, our incentive compensation plan provides somewhat more of an emphasis on earnings in line with a focus on making smart investments and controlling costs.

Company-wide revenue grew by 15% during 2010 to $58.2MM but fell short of our aggressive targets. At the same time, EBITDA almost doubled to $6.0MM, exceeding our target. Our 2010 incentive bonuses to the NEOs with responsibility for corporate-wide results – the CEO, CFO and CTO – reflected those mixed results with payouts somewhat below targeted ranges. Incentive bonuses for NEOs responsible for a particular business unit reflected their unit’s particular contribution to corporate results (see sections on non-equity incentive compensation and individual pay decisions below)

Base pay adjustments and equity grants during 2010 was based in part on short-term business results as noted above but were primarily based on other factors. These factors include evaluations of individual performance, reference to competitive benchmarks, the importance of maintaining management continuity, past increases in base pay, changes in job responsibilities and historical equity grants.


PROCESS FOR SETTING EXECUTIVE PAY

The three-member Compensation Committee (the “Committee”) oversees the Company’s executive compensation program. All of the members of the Committee have been determined by the Board to be independent under applicable NASDAQ and SEC rules.

The Committee’s responsibilities include:
 
·  
Establishing the overall level of targeted compensation for each NEO and how targeted compensation should be allocated among the three principal elements of compensation.
 
–  
Base Salary;
 
–  
Non-equity incentive plan awards – commonly referred to as cash bonuses;
 
–  
Equity awards in the form of options to purchase company stock.
 
·  
Setting the performance levels that must be achieved for NEOs to receive or exceed their targeted compensation.
 
·  
Approving base pay adjustments for the NEOs after reviewing, among a number of factors, executive performance, business results and competitive benchmarks.
 
·  
Approving non-equity incentive awards after reviewing the NEO’s individual performance and business results against established performance benchmarks.
 
·  
Approving equity compensation grants to NEOs after reviewing, among a number of factors, executive performance, business results, prior equity grants, and competitive benchmarks.
 
·  
Reviewing and recommending to the full board appropriate levels of board compensation.

The Company’s CEO and CFO as well as the Committee’s compensation consultant participate in the Committee’s meetings and provide input into compensation decisions at the Committee’s request. In particular, the Company’s CEO participates by making recommendations on NEO compensation and input on objectives (other than for himself). The CEO’s compensation is determined solely by the Committee.

The Use of Compensation Consultants
 
In FY 2010, the Committee retained MarksonHRC, an independent outside compensation consultant, to assist it in developing analyses and data around the Company’s executive compensation program and practices. MarksonHRC prepared analysis for the Compensation Committee based on its review of Numerex job responsibilities and business goals, trends in compensation practices, regulatory changes, and competitive compensation benchmarks.
 
MarksonHRC also provided general human resource consulting services to Numerex at levels not deemed to cause any conflict with its role as an independent consultant to the Committee.

The Use of Compensation Survey Data and Peer Companies
 
The Committee uses competitive compensation data from surveys and at “peer” companies (see below) as one input into the compensation setting process and does not apply the data in a formulaic manner. Numerex’s product and service offerings are somewhat unique and a number of senior level jobs at Numerex – particularly those at the business unit level – are not readily comparable to jobs referred to in survey data. Further, Numerex’s organization and executive responsibilities often evolve rapidly in response to market opportunities and business conditions, making matches between Numerex jobs and survey jobs that much more problematic.
 
Nevertheless, the Compensation Committee periodically reviews compensation survey data developed by its compensation consultant to get a general sense of whether our executive compensation is reasonable and competitive. In 2010, the compensation consultant used three principle sources to produce competitive benchmarks for Numerex executive positions.
 
1.  
Pay publicly reported by a group of public companies in the technology and software industries that are, on average, of comparable size to Numerex (the “peer” group). A peer group has been historically used by Numerex but is refined from time to time in response to Numerex and industry changes. In 2010, the peer group consisted of the following companies:
 
     Acne Packet    LoJack  
     CalAmp    Network Equipment Technologies  
     Digi International    ORBCOMM  
     DITECH Networks    PCTEL  
     8X8, Inc    Pinnacle Data Systems  
     Frequency Electronics    RF Monolithics  
     Fiber Tower Corporation    Telular  
     Globalstar    Veraz Networks  
     Communications Systems    Westell Technologies  
     Lantronix    
 
2.  
Survey data from Watson Wyatt’s 2010 Top Management Survey
 
3.  
ERI’s Executive Compensation database


COMPETITIVE BENCHMARKS

The table below summarizes a synthesis of the competitive data the Committee reviewed in 2010 along with Numerex’s targeted 2010 cash compensation and targeted cash compensation plus actual 2010 equity grants. The data is shown for only three of the NEO positions: CEO, CFO, and COO.  These three positions are shown because they are most readily comparable to positions at the peer companies and positions included in general compensation survey data.

While the Committee is not necessarily targeting median compensation for all positions at all times, the data indicates that pay for these three positions is well within median competitive benchmarks.


NEO COMPENSATION COMPARED TO COMPETITIVE BENCHMARKS(1)

Median Competitive Compensation benchmarks
based on competitive Survey data
  Incumbent Pay (FY 2010)
Target Incentives
   
Target Incentives
Title
 
Base
   
Cash Compensation:
Base + Target Bonus
     
Total Direct
Compensation: Cash +
Equity Grants
Base
   
Cash Compensation:
Base + Target Bonus
   
Targeted Cash +
Actual Equity
Grants in 2010 (2)
   
CEO
  $ 336,000     $ 556,000     $ 992,000     $ 330,000     $ 528,000     $ 692,999  
CFO
    226,000       327,000       497,000       255,000       350,625       478,124  
COO
    221,000       314,000       480,000       250,000       343,750       468,750  
 
(1)  
CEO and CFO benchmarks are based on the peer group while the COO benchmarks are based on a mix of data from the peer group, Watson Wyatt’s Top Management Survey and ERI’s executive database
 
(2)  
Numerex does not have targeted equity grants; amounts included in this column are the Black-Scholes value of equity grants made in 2010
 

COMPENSATION OBJECTIVES & INDIVIDUAL ELEMENTS

The Compensation Committee does not use any particular formula to determine targeted levels of executive pay or specific allocations among the foregoing components. Instead, the Committee looks to ensure that NEO compensation (1) is competitive with compensation provided to similarly situated executives at companies of similar size and complexity to Numerex (2) effectively drives short- and long-term performance and (3) is aligned with shareholders’ long-term interests.

The Committee draws on survey data, advice of its compensation consultant, input from management and its own collective experience and expertise in deciding how much and in what way to pay the named executive officers.

The following describes the general purpose of each element of compensation and how the Committee makes pay decisions around each element.

Elements of Compensation

Base Salaries

We strive to provide competitive base salaries that allow us to attract and retain a high performing leadership team at a reasonable level of fixed costs. Base pay levels generally are set with reference to the market median, where such data is available, although exceptions can exist both above and below median to reflect a variety of factors such as skills and experience, individual performance track record, the difficulty of replacement and affordability. Base salaries are generally reviewed annually during the first quarter of the year, and at other times if an executive officer’s responsibilities have materially changed or other special circumstances warrant a review.

Non-Equity Incentive Based Awards

The annual “non-equity incentive based awards”, or cash bonuses are designed to maintain NEO focus and motivation around annual activities deemed critical to growing shareholder value.  In 2010, we continued our focus on a balance of growing revenue and growing EBITDA (earnings before interest, depreciation, taxes, amortization and exceptional one-time adjustments). Keeping our NEOs focused on EBITDA is particularly critical in a technology-based, growth business such as ours where the opportunities for fruitful investment are plentiful but where there is also significant risk of over-investment in opportunities that may not yield a return on investment.

The Incentive awards pay out at targeted levels if revenue and EBITDA achieve the challenging goals of revenue and EBITDA growth budgeted for the fiscal year. A bonus is not paid if the budgets are not achieved. Awards can exceed the target levels up to the maximum payout if revenue is at least at budgeted levels and EBITDA results exceed budgeted levels. These annual awards are subject to reductions at the Committee’s or CEO’s discretion if the NEOs fail to meet specific objectives such as expense control.

 
Non-Equity Plan Incentive compensation  payable for FY 2010 as a % of Base
Position
Corporate/Business Unit
Revenue Achieves Budget (1)
Corporate EBITDA Achieves Budget (1)
Maximum Additional payable if Corporate/Business Unit EBITDA exceeds Budget (2)
Maximum Payable
CEO
30%
30%
60%
120%
CFO
18.75%
18.75%
37.5%
75%
CTO
18.75%
18.75%
37.5%
75%
COO
18.75%
18.75%
37.5%
75%
EVP, Corporate Development
18.75%
18.75%
37.5%
75%

(1)  
Zero bonus is payable for revenue or EBITDA if the target is not achieved
(2)  
Maximum target for most NEO’s including CEO is at least 20% over Budget. Bonus is prorated for EBITDA results between Budget and Maximum

Equity Awards
 
We use equity compensation as a long-term incentive to enhance the alignment of NEO compensation with stockholder returns  and as a retention tool focused on top executives that have the most direct line of sight to results.

The primary form of equity compensation awarded by the Committee has historically consisted of stock options or stock appreciation rights (SARs).  While the Committee references competitive benchmarks including those for the peer group and does not generally target equity compensation in excess of the median, the number of options awarded also reflects the Committee’s qualitative assessment of a variety of factors including the Company’s overall financial performance, individual contributions towards that performance, prior grants and individual contributions to particular strategic initiatives or special projects.

The SARs we granted to NEOs in May, 2010 do not vest until four years after grant as a means of encouraging executive retention, to enhance executive alignment with shareholder interests and to encourage a long-term perspective among the executive team.
 
Perquisites and Other Benefits

The Company does not provide its NEOs with perquisites or employee benefits that are not generally available to other full-time employees.   These include a medical, dental, and life insurance plans  and a 401(k) that matches 50% of an employee’s contributions up to the first 6% of the employee’s salary subject to an overall dollar cap. The Company does not provide a pension plan or a supplemental retirement plan for its named executive officers or any other employees.


COMPENSATION DECISIONS FOR FISCAL 2010
 
 
Stratton J. Nicolaides - Chief Executive Officer.
 
 
·  
Base Pay: Mr. Nicolaides received an increase in base salary from $305,000 to $330,000 at the beginning of 2010. This increase was made in recognition of Mr. Nicolaides strong performance in leading Numerex through a difficult economic environment and a review by the Compensation Committee of relevant competitive compensation data described above.
 
·  
Non-equity incentive compensation:  Mr. Nicolaides’ target incentive for achieving a budgeted level of revenue and EBITDA results was increased from 37.5% to 60% of base pay in line with competitive benchmarks. His maximum bonus, for achievement of revenue budget and EBITDA results in excess of budget, was proportionately increased from 75% to 120% of base pay.  Based on FY 2010 results, Mr. Nicolaides was awarded an incentive bonus of $142,576 or 43% of base pay.
 
·  
Equity Compensation. Taking into account that Mr. Nicolaides had not received any equity grants in 2008 or 2009, competitive benchmarks and retention interests, Mr. Nicolaides was awarded 55,932 stock appreciation rights during 2010 with a Black-Scholes value at the time of grant of $164,999.

Alan Catherall - Chief Financial Officer.

·  
Base Pay: Effective January, 1, 2010, the Committee approved an increase in Mr. Catherall’s base pay from $245,000 to $255,000 in recognition of competitive benchmarks, the value of his position to the organization and continued strong performance.
 
·  
Non-equity incentive compensation:  Mr. Catherall’s target incentive for achieving a budgeted level of revenue and EBITDA remained unchanged from 2009 at 37.5% of base pay as did his maximum bonus for achievement of revenue budget and EBITDA results in excess of the budget: 75% of base pay. Mr. Catherall’s EBITDA and Revenue budget were the same as the CEO (based on Corporate-wide results) and based on FY 2010 results, he was awarded an incentive bonus of  $68,858 or 27% of base pay.
 
·  
Equity Compensation. Mr. Catherall was awarded 43,220 stock appreciation rights during 2010 with a Black-Scholes value of $127,499. The award was in line with competitive benchmarks and in recognition of Mr. Catherall’s importance to the long-term success of the business.
 

Michael Marett - Chief Operating Officer.

·  
Base Pay: Mr. Marett’s base pay during 2010 was unchanged from 2009 at $250,000.
 
·  
Non-equity incentive compensation:  Mr. Marrett’s target incentive for achieving a budgeted level of revenue and EBITDA remained unchanged from 2009 at 37.5% of base pay as did his maximum bonus for achievement of revenue budget and EBITDA results in excess of budget: 75% of base pay.  Mr. Marett’s EBITDA and revenue budgets were based on the performance of the business unit he was directly responsible for. Based on his business unit’s results during FY 2010, Mr. Marett  was awarded an incentive bonus of $187,500 or  75% of base pay.
 
·  
Equity Compensation. Mr. Marett was awarded 42,373 stock appreciation rights during 2010 with a Black-Scholes value of $125,000. The award was in line with competitive benchmarks and in recognition of Mr. Marret’s importance to the long-term success of the business.

Louis Fienberg - Executive Vice President – Corporate Development.

·  
Base Pay: Louis Feinberg’s base pay during 2010 remain unchanged from 2009 at $200,000.
 
·  
Non-equity incentive compensation: Mr. Fienberg’s target incentive for achieving a budgeted level of revenue and EBITDA remained unchanged from 2009 at 37.5% of base pay as did his maximum bonus for achievement of revenue budget and  EBITDA results in excess of budget: 75% of base pay.  Mr. Feinberg’s EBITDA and revenue budgets were based on the performance of the business unit for which he was directly responsible.  Mr. Fienberg did not receive a bonus for FY 2010.
 
·  
Equity Compensation. Mr. Feinberg was awarded 33,898 SARs during 2010 with a Black-Scholes value of $99,999. The award was in line with competitive benchmarks and in recognition of the importance of Mr. Feinberg to the long-term success of the business.

Jeffrey Smith, Chief Technology Officer.

·  
Base Pay: Effective March 1, 2010, the Committee approved an increase in Dr. Smith’s base pay from $225,000 to $250,000 in recognition of the value of his position to the organization and continued strong performance.
 
·  
Non-equity incentive compensation:  Dr. Smith’s target incentive for achieving a budgeted level of revenue and EBITDA remained unchanged from 2009 at 37.5% of base pay as did his maximum bonus for achievement of revenue budget and EBITDA results in excess of budget: 75% of base pay.  Dr. Smith’s EBITDA and revenue goals were the same as the CEO (based on Corporate-wide results) and based on FY 2010 results, adjusted for a budget variance, Dr. Smith was awarded an incentive bonus of $37,570 or 15% of base pay.
 
·  
Equity Compensation. Dr. Smith was awarded 42,373 SARs during 2010 with a Black-Scholes value of $125,000. The award was in line with competitive benchmarks and in recognition of the importance of Dr. Smith to the long-term success of the business.


 

SUMMARY COMPENSATION TABLE

The following table sets forth certain information with respect to compensation for the fiscal years ended December 31, 2010 and 2009 and 2008 earned by or paid to the Company’s named executive officers, as determined in accordance with applicable SEC rules.
 
Name and Title   Year
 Salary
           ($)   
 Stock
Awards
($)(1)
 Option
Awards
 ($) (2)
 Non-Equity
Incentive Plan
Compensatin
($)
 All Other
Compensation
($)(4)
 Total
($)(5)
Stratton Nicolaides
Chief Executive
Officer
 2010  330,000  --  164,999  142,576  13,240  650,815
 2009  305,000  --  --  --  14,089  319,089
 2008  305,000  --  --  5,719  22,329  333,048
Alan Catherall
Chief Financial
Officer
 2010  255,000  --  127,499  68,858  10,306  461,383
 2009  245,000  --    85,600  --    8,702  339,302
 2008  245,000  --  --  28,050  21,322  294,372
Michael Marett 
Chief Operating
Officer
 2010  250,000  --  125,000  187,500  15,879  562,500
 2009  250,000  --    85,600  --  15,185  350,785
 2008  250,000  --  --  25,000  22,269  297,269
 Louis Fienberg
Executive Vice
President
 2010  200,000  --    99,999  20,000(3)  12,207  332,206
 2009  200,000   --  109,462  --  12,187  321,649
 2008  200,000  --  --  51,750  14,956  266,706
 Jeffrey Smith
Chief Technology
Officer
 2010  250,000  --  125,000  37,750  15,274  427,844
 2009  225,000  --    70,775  --    8,025  303,800
 2008  --  --  --  --  --  --
 
 
(1) No stock was awarded to any named executive officer in FYs, 2008 - 2010. 
(2) Options were awarded to each NEO in FY 2010. The amount in this column reflects the aggregate grant date fair value of the award in accordance with FASB ASC Topic 718.
(3) With reference to Mr. Fienberg, consists of the $20,000 discretionary bonus as set forth in the CD&A above.
(4) Includes Company contributions to a qualified defined contribution plan, i.e., a 401(k) matching up to a maximum of 50% of 6% of the individual’s salary in the following amounts FY 2010: Mr. Nicolaides ($ 7,302.48), Mr. Catherall ($ 6,925.00), Mr. Marett ($ 7,187.50), Mr. Fienberg ($6,012.49) and Mr. Smith ($6,708.31). In addition, the column includes contributions by the Company to the individual’s health, dental, and life/disability premiums. All of these benefits are also available to all of the Company’s full time employees.
(5) Totals do not reflect the compensation actually paid but include, as required by SEC rules, the fair value of stock options awarded in the applicable fiscal year; see note (2) above.

 

 
GRANTS OF PLAN-BASED AWARDS

The following table summarizes, except as noted, all plan based awards that the Company’s NEOs were eligible to receive for FY 2010 performance.

Name
 
 
Grant
Date
   
Estimated Possible Payouts Under
Non-Equity Incentive Plan Awards (1)
   
All Other
Option
Awards
Number of
Securities
Underlying
Options
 
   
Exercise
of Base
Price of
Option
Awards
($/sh)
   
Grant
Date Fair
Value of
Stock and
Option
Awards
($)
 
 
       
Threshold
   
Target(2)
   
Maximum
                   
 
       
($)
   
($)
   
($)
                   
Stratton Nicolaides
   
05/21/2010
     
0
     
198,000
     
396,000
     
55,932
     
4.51
     
164,999
 
Alan Catherall
 
05/21/2010
     
0
     
95,625
     
191,250
     
43,220
     
4.51
     
127,499
 
Michael Marett
 
05/21/2010
     
0
     
93,750
     
187,500
     
42,373
     
4.51
     
125,000
 
Louis Feinberg
 
05/21/2010
     
0
     
75,000
     
150,000
     
33,898
     
4.51
     
99,999
 
Jeffrey Smith
 
05/21/2010
     
0
     
93,750
     
187,500
     
42,373
     
4.51
     
125,000
 
 

(1)  
Actual payouts for 2010 performance are shown in the Non-Equity Compensation Column of the Summary Compensation Table.
(2)  
Payable in the event that both revenue and EBITDA targets are met. See the discussion on Non-Equity Incentive Compensation under the Compensation Discussion & Analysis.
(3)  
Shares shown consist of SARs which vest four years after grant and have a ten year term.

 
   

  
OPTION EXERCISES AND STOCK VESTED
 
The following table shows the number of shares acquired upon exercise of stock options and vesting of performance shares for each of our named executive officers during FY 2010.

 
 
 
Name
 
Option Awards(1)
   
Stock Awards
   
 
 
Shares Acquired on Exercise
(#)
   
Value Realized on Exercise
($)
   
Shares Acquiring on Vesting
#
   
Value Realized on Vesting
($)
   
Stratton Nicolaides
                                 
Alan Catherall
                                 
Michael Marett      25,000        22,103                    
Louis Fienberg
                                 
Jeffrey Smith
                                 
  
In a cashless exercise on November 16, 2010, Mr. Marett received 2,897 shares of the Company’s stock at the current stock price of $8.83


OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

The following table sets forth certain information with respect to the outstanding equity awards at December 31, 2010 for each of the named executive officers.
Name
No. Of Securities Underlying Unexercised Options (#)
Exercisable (2)
No. Of Securities Underlying Unexercised Options (#)
Unexercisable
Option Exercise Price
($)
Option Expiration Date (1)
Stratton Nicolaides
Chief Executive Officer
50,000
0
$6.10
10/25/2011
55,000
0
$2.79
1/30/2013
100,000
0
$1.62
3/30/2013
25,000
0
$4.75
1/2/2016
50,000
0
$9.46
10/25/2016
0
55,932
$4.51
5/21/2020
Alan Catherall
Chief Financial Officer
75,000
0
$2.84
6/3/2013
25,000
0
$4.00
11/8/2014
10,000
0
$4.57
12/19/2015
30,000
0
$9.46
10/25/2016
6,250
18,750
$5.50
7/30/2019
0
43,220
$4.51
5/21/2020
Michael Marett
Chief Operating Officer
21,000
0
$2.79
1/30/2013
25,000
0
$4.59
6/29/2014
25,000
0
$4.00
11/8/2014
15,000
0
$4.57
12/19/2015
50,000
0
$9.46
10/25/2016
6,250
18,750
$5.50
7/30/2019
0
42,373
$4.51
5/21/2020
Louis Fienberg
Executive Vice
President
50,000
0
$4.83
7/18/2014
5,000
0
$4.57
12/4/2015
15,000
0
$9.46
10/25/2016
15,000
0
$9.34
3/4/2017
4,375
13,125
$5.50
7/30/2019
4,375
13,125
$4.35
11/24/2019
0
33,898
$4.51
5/21/2020
Jeffrey Smith
Chief Technology
Officer
37,500
37,500
$3.49
10/9/2018
6,250
18,750
$4.35
11/24/2019
0
42,373
$4.51
5/21/2020

(1)  
All options granted by the Company vest at the rate of 25% per year over four years except for the SARs granted on May 21, 2010 which vest four years after the date of grant. 
 
(2)  
All options granted to named executive officers contain stock price hurdles that are in excess of the option exercise price.  These hurdles must be satisfied before the stock option can be exercised.



 
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL
 
We do not have employment agreements with our named executive officers. The employment of all of our named executive officers is at will. However, our named executive officers will be entitled to certain severance benefits upon their termination of employment under certain defined circumstances, as described further below.  There are no payments made to the named executive officers upon voluntary retirement, voluntary resignation or upon death or disability.

The Company’s named executive officers have each made major contributions towards building the Company into the enterprise that it is today, and the Company believes that it is important to protect them in the event of an involuntary termination following a change in control. Further, it is the Company’s belief that the interests of its shareholders will be best served if the interests of the Company’s senior management team are aligned with them, and providing change in control benefits should eliminate, or at least reduce, the reluctance of senior management to pursue potential change in control transactions that are in the best interests of the Company’s shareholders.

Accordingly, the Company has entered into change of control agreements with each of Messrs. Nicolaides, Catherall, Marett, Fienberg, and Smith. Pursuant to those agreements, “involuntary termination” is deemed to be a “separation from service” as defined under Section 409A of the Internal Revenue Code of 1986 (“the Code”) at any time within two years following a change in control if such separation is without cause. The concept of separation without cause encompasses termination of employment following a diminution in title, responsibility, or salary level as well as required relocation outside of 50 miles from Numerex’s current headquarters location. A “change in control” as defined in the change in control agreements is deemed to occur if (a) Numerex consummates a sale, transfer, assignment, exchange, or other conveyance of all or substantially all of the assets of Numerex, (b) there is a sale, transfer, assignment, exchange, or other conveyance resulting in any third party’s acquisition of more than 50% of the outstanding voting stock of Numerex, or a merger or consolidation occurs which results in a third party’s ownership of more than 50% of the merged or consolidated entity.

 Each agreement provides that if the officer’s employment is terminated, without cause, within two years of a change of control, he will receive a lump sum payment equal to 12 months of his base salary. The payment will be made six months after the date of termination or upon such earlier date as is permitted under the Code. In the event of termination following a change in control, the Company will also continue to provide health and medical benefits, i.e., COBRA coverage, to the extent required by applicable law. All outstanding options will vest immediately. Vested options can be exercised up to 90 days from the date of termination.
 
The table below reflects the amount of compensation payable to each of the Company’s named executive officers in the event of a termination as defined above. For illustrative purposes, the tables assume that such termination was effective as of December 31, 2010 and thus include amounts earned through that date. The option price used was the closing price of the Company’s common stock on December 31, 2010, or $8.65 per share.
 
Name
Executive Benefit and Payments Upon Separation
Payout
 
Stratton Nicolaides
Cash Severance Payment
$
     330,000
 
Fair Value of Options
$
1,481,858
 
Total:
$
1,811,858
 
Alan Catherall
Cash Severance Payment
$
255,000
 
Fair Value of Options
$
850,480
 
Total:
$
1,105,480
 
Michael Marett
Cash Severance Payment
$
250,000
 
Fair Value of Options
$
656,184
 
Total:
$
906,184
 
Louis Fienberg
Cash Severance Payment
$
200,000
 
Fair Value of Options
$
482,112
 
Total:
$
682,112
 
Jeffrey Smith
Cash Severance Payment
$
0
 
Fair Value of Options
$
669,924
 
Total:
$
669,924
 
 
 

 
REPORT OF THE AUDIT COMMITTEE

The Board of Directors has adopted a written charter for the Audit Committee. The Audit Committee’s job is one of oversight as set forth in the Audit Committee Charter. It is not the duty of the Audit Committee to prepare the Company’s financial statements, to plan or conduct audits, or to determine that the Company’s financial statements are complete and accurate and are in accordance with generally accepted accounting principles. The Company’s management is responsible for preparing the Company’s financial statements and for maintaining internal control. The independent accountants are responsible for auditing the financial statements and for expressing an opinion as to whether those audited financial statements fairly present the financial position, results of operations, and cash flows to the Company in conformity with generally accepted accounting principles.

The Audit Committee has reviewed and discussed the Company’s audited consolidated financial statements with management and with Grant Thornton LLP, the Company’s independent accountants for FY 2010.

The Audit Committee has discussed with Grant Thornton the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T.

The Audit Committee also has received and reviewed the written disclosures and the letter from Grant Thornton required by applicable requirements of the Public Company Accounting Oversight Board regarding Grant Thornton communications with the Audit Committee concerning independence, and has discussed with Grant Thornton its independence.

Based on the review and discussions referred to above, the Audit Committee has recommended to the Board of Directors that the audited consolidated financial statements be included in the Company’s Annual Report on Form 10-K for FY 2010 for filing with the Securities and Exchange Commission (the “SEC”).
   
THE AUDIT COMMITTEE
   
Brian C. Beazer
   
George Benson
E. James Constantine
   
John G. Raos, Chairman
  
In accordance with and to the extent permitted by applicable law or regulation, the information contained in the Report of the Audit Committee and the Audit Committee Charter shall not be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and shall not be deemed to be soliciting material or to be filed with the SEC under the Exchange Act.
OTHER BUSINESS

The Company does not presently know of any matters that will be presented for action at the meeting other than those set forth herein. If other matters properly come before the meeting, proxies submitted on the enclosed form will be voted by the persons named in the enclosed proxy with respect to such other matters in accordance with their best judgment.

ANNUAL REPORT

Copies of the Annual Report are available upon written request to the Company at its principal executive offices which are located at 1600 Parkwood Circle SE, Suite 500, Atlanta, Georgia 30339, Attention: Shareholder Communications.

EACH PERSON SOLICITED HEREUNDER CAN OBTAIN WITHOUT CHARGE A COPY OF THE COMPANY’S ANNUAL REPORT ON FORM 10-K FOR FY 2010 FILED WITH THE SEC, EXCEPT FOR EXHIBITS TO THE REPORT, BY SENDING A REQUEST THEREFOR TO: NUMEREX CORP., ATTN: SHAREHOLDER COMMUNICATIONS, 1600 PARKWOOD CIRCLE SE, SUITE 500, ATLANTA, GEORGIA 30339. THE COMPANY’S SEC FILINGS ARE ALSO AVAILABLE AT THE SEC’S WEBSITE AT http://www.sec.gov.
   
By Order of the Board of Directors
     
   
Andrew J. Ryan
   
General Counsel and Secretary