8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) November 20, 2009

EMRISE CORPORATION

(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction
of incorporation) 001-10346
(Commission
File Number) 77-0226211
(IRS Employer
Identification No.)

611 Industrial Way, Eatontown, NJ 07224

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code  (732) 389-0355

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01.Entry Into a Material Definitive Agreement.

Amendment to Stock Purchase Agreement and Subordinated Contingent Secured Notes

EMRISE Corporation (the “Company”) and its wholly-owned subsidiary, EMRISE Electronics Corporation (“EEC”) are party to that certain Stock Purchase Agreement, dated May 23, 2008, by and among the Company, EEC and Charles S. Brand, Thomas P. M. Couse, Joanne Couse and Michael Gaffney (collectively, the “Sellers”), Custom Components, Inc. (“CCI”) and Advanced Control Components, Inc. (“ACC”) pursuant to which EEC acquired CCI and its subsidiary, ACC (as amended by that certain Amendment No. 1 to Stock Purchase Agreement, dated August 20, 2008, the “Stock Purchase Agreement”).

Pursuant to the Stock Purchase Agreement, EEC issued certain subordinated contingent secured promissory notes to each of the Sellers (collectively, the “Notes”).

On November 20, 2009, EEC and Sellers entered into Amendment No. 2 to Stock Purchase Agreement (the “Amendment”) pursuant to which the Stock Purchase Agreement was amended to (a) confirm the amount of the closing net working capital adjustment equals $959,034, (b) confirm the amount of the closing net cash adjustment equals $302,421, (c) confirm the amount of operating income during the first earnout period equals $4,035,166 and (d) provide that (i) the closing net cash adjustment and (ii) the first earnout payment shall be paid through adjustment of the principal balance of the Notes.

On November 20, 2009, EEC also entered into that certain Amendment No. 1 to Subordinated Contingent Secured Promissory Notes with each of the Sellers (collectively, the “Note Amendments”) pursuant to which the Notes were amended to (a) add $1,337,587 (the sum of the closing net cash adjustment and the first earnout payment) to the aggregate principal balance of the Notes, (b) double the original interest rate of each of the Notes (the prime rate as reported in The Wall Street Journal plus 1%) until the aggregate principal balance of the Notes attributable to the closing net cash adjustment and the first earnout payment is repaid, at which time the interest rate shall be reduced back to the prime rate as reported in The Wall Street Journal plus 1%, and (c) revise the payment terms such that no payments are due until July 1, 2010, at which time EEC will make principal payments in the aggregate amount of $1,337,587 plus payments of interest accrued on such amount from the issuance date through the date of payment of such aggregate principal amount.

A copy of the Amendment is filed as Exhibit 10.1 to this report.  The Note Amendments are filed as Exhibits 10.2, 10.3, 10.4 and 10.5 to this report.

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Item 9.01Financial Statements and Exhibits.

(d)Exhibits:

Exhibit No.	Description
10.1	Amendment No. 2 to Stock Purchase Agreement, dated as of November 20, 2009 by and among EMRISE Electronics Corporation, Charles S. Brand, Thomas P. M. Couse, Joanne Couse and Michael Gaffney.
10.2	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Charles S. Brand.
10.3	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Thomas P. M. Couse.
10.4	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Joanne Couse.
10.5	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Michael Gaffney.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Date: November 25, 2009	EMRISE CORPORATION
	By:	/s/ D. JOHN DONOVAN
		D. John Donovan,
		Chief Financial Officer

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INDEX TO EXHIBITS ATTACHED TO THIS REPORT

Exhibit No.	Description
10.1	Amendment No. 2 to Stock Purchase Agreement, dated as of November 20, 2009 by and among EMRISE Electronics Corporation, Charles S. Brand, Thomas P. M. Couse, Joanne Couse and Michael Gaffney.
10.2	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Charles S. Brand.
10.3	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Thomas P. M. Couse.
10.4	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Joanne Couse.
10.5	Amendment No. 1 to Subordinated Contingent Secured Promissory Notes, dated as of November 20, 2009, by and between EMRISE Electronics Corporation and Michael Gaffney.

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EX-10.1

Exhibit 10.1

AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT

THIS AMENDMENT NO. 2 TO STOCK PURCHASE AGREEMENT (the “Amendment”), dated as of November 20, 2009, is made by and among EMRISE Electronics Corporation, a New Jersey corporation (“Buyer”), Charles S. Brand, an individual (“Brand”), Thomas P. M. Couse, an individual (“Couse”), Joanne Couse, an individual (“J. Couse”), and Michael Gaffney, an individual (“Gaffney”).

R E C I T A L S

A.Buyer, Brand, Couse, J. Couse and Gaffney are each a party to that certain Stock Purchase Agreement, dated as of May 23, 2008, as amended by Amendment No. 1 to Stock Purchase Agreement dated as of August 20, 2008 by and among Buyer, Brand, Couse, J. Couse and Gaffney (the “Purchase Agreement”).  Capitalized terms used but not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement.

B.Buyer, Brand, Couse, J. Couse and Gaffney desire to amend the Purchase Agreement to confirm their agreement with respect to the amount by which (a) Adjusted Closing Net Working Capital exceeds the Net Working Capital Threshold; (b) Closing Net Cash exceeds the Net Cash Threshold; and (c) Operating Income during the First Measurement Period exceeds $3,000,000.

C.Buyer, Brand, Couse, J. Couse and Gaffney desire to amend the Purchase Agreement to provide that (i) the Closing Net Cash adjustment and (ii) the First Deferred Purchase Price Payment are paid through adjustment of the principal balance of the Subordinated Contingent Notes.

A G R E E M E N T

NOW, THEREFORE, in consideration of the facts recited above, and the terms, conditions and covenants contained in the Purchase Agreement and this Amendment, Buyer, Brand, Couse, J. Couse and Gaffney agree as follows:

1.Agreements with Respect to Amounts.  The amount by which: the Adjusted Closing Net Working Capital exceeds the Net Working Capital Threshold is $959,034; Closing Net Cash exceeds the Net Cash Threshold is $302,421; and Operating Income during the First Measurement Period exceeds $3,000,000 is $1,035,166.

2.Interest Rate on Subordinated Contingent Notes.  Notwithstanding any provision in the Purchase Agreement to the contrary, interest on the principal amount of the Subordinated Contingent Notes shall accrue from the Issuance Date at the rate per annum equal to the prime rate as reported in The Wall Street Journal plus 1%.; provided, however, that such rate shall be doubled until the Company has reduced the principal amount of the Note by an amount equal to (i) the amount of any increase in the principal balance of the Contingent Subordinate Notes attributable to the Closing Net Cash adjustment pursuant to Section 2.5(c) of the Stock Purchase Agreement plus (ii) the First Deferred Purchase Price Payment.

3.Amendments.

(a)Closing Net Cash.  Section 2.5(c) of the Purchase Agreement is hereby replaced in its entirety with the following:

Within ten (10) days following the date that the Closing Balance Sheet becomes final and binding upon Buyer and Sellers, if the Closing Net Cash as set forth in the Closing Balance Sheet is less than $1,117,000, then Sellers shall pay to Buyer an amount equal to the difference between the Closing Net Cash and $1,217,000 (the “Net Cash Threshold”).  If the Closing Net Cash as set forth on the Closing Balance Sheet is greater than $1,317,000, then the aggregate principal amounts of the Subordinated Contingent Notes shall be increased by the difference between the Closing Net Cash and the Net Cash Threshold.  All adjustments to the principal amounts of the Subordinated Contingent Notes shall be made by adjusting each Subordinated Contingent Note in proportion to the original principal amounts of the Subordinated Contingent Notes as set forth in Section 2.2(b).  All adjustments to the principal amount of the Subordinated Contingent Notes made under this Section 2.5(c) shall include interest, at a rate equal to the prime rate as reported in the Wall Street Journal on the Closing Date (provided that such interest rate shall be reset as of the first day of each calendar quarter if the prime rate has changed, until the Closing Balance Sheet becomes final), plus one percent (1%), on the amount so adjusted from the Closing Date to the date of adjustment.

(b)First Deferred Purchase Price Payment.  Section 2.6(d)(ii) of the Purchase Agreement is hereby replaced in its entirety with the following:

First Deferred Purchase Price Payment.  If Operating Income (as set forth in the Payment Statement) during the First Measurement Period exceeds $3,000,000 (the “First Deferred Purchase Price Payment Threshold”), the aggregate principal amount of the Subordinated Contingent Notes shall be increased by an aggregate amount (the “First Deferred Purchase Price Payment”) equal to one hundred percent (100%) of every dollar of Operating Income (as set forth in the Payment Statement) in excess of the First Deferred Purchase Price Payment Threshold during the First Measurement Period, up to a maximum of $1,500,000.  The principal amount of each Subordinated Contingent Note shall be in proportion to the Cash Consideration received by each Seller at Closing as set forth in Section 2.2(a).

4.No Further Changes.  Except as set forth in this Amendment, no further changes shall be made to the Purchase Agreement, which shall remain in full force and effect.

5.Counterparts.  This Amendment may be executed in any number of counterparts, each of which shall be enforceable, and all of which together shall constitute one instrument.

[Signature page follows.]

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IN WITNESS WHEREOF, the undersigned have executed this Amendment effective as of the date first set forth above.

BUYER:	EMRISE ELECTRONICS
	CORPORATION, a New Jersey corporation
	By:	/s/ Carmine T. Oliva
		Carmine T. Oliva,
		President and Chief Executive Officer
COUSE:	/s/ Thomas P.M. Couse
	THOMAS P. M. COUSE
J. COUSE:	/s/ Joanne Couse
	JOANNE COUSE
GAFFNEY:	/s/ Michael Gaffney
	MICHAEL GAFFNEY
BRAND:	/s/ Charles S. Brand
	CHARLES S. BRAND

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EX-10.2

Exhibit 10.2

AMENDMENT NO. 1 TO
SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE

THIS AMENDMENT NO. 1 TO SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE (the “Amendment”) is entered into as of November 20, 2009, by and between Emrise Electronics Corporation, a New Jersey corporation (the “Company”), and Charles S. Brand (“Holder”) and amends that certain Subordinated Continent Secured Promissory Note (the “Note”) dated August 20, 2008 by and between the Company and Holder in the original principal amount of up to One Million Five Hundred Eighty-Four Thousand Dollars ($1,584,000).  All capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Note.

NOW, THEREFORE, the Company and Holder do hereby agree as follows:

1.Amendments.

(a)           Definition of Applicable Interest Rate.  The definition of “Applicable Interest Rate” in Section 1 is hereby replaced in its entirety with the following:

“Applicable Interest Rate” shall mean the rate per annum equal to the prime rate as reported in The Wall Street Journal plus 1%; provided, however, that such rate shall be doubled until the Company has reduced the principal amount of the Note by an amount equal to (i) the amount of any increase in the principal balance of this Note attributable to the Closing Net Cash adjustment pursuant to Section 2.5(c) of the Stock Purchase Agreement plus (ii) the First Deferred Purchase Price Payment.

2.Initial Principal Balance.  All references in the Note to $1,584,000 shall be changed to $3,402,923.80.

3.Adjustment of Principal Balance.  Section 2.2 is hereby replaced in its entirety with the following:

As of the Issuance Date, the principal balance of the Note is $3,402,923.80 and notwithstanding any provision to the contrary in the Note or the Stock Purchase Agreement, such principal balance shall not decrease, except in the event of payment or pursuant to Section 10.8 of the Stock Purchase Agreement.

4.First Measurement Period Principal Balance.  Section 2.3 is hereby deleted in its entirety.

5.Payments of Principal and Interest.

(a)           Section 3.1 is hereby replaced in its entirety with the following:

The Company shall make no principal or interest payments during the period commencing on the Issuance Date and ending on July 1, 2010, at which time the Company shall make a principal payment on the Note in the amount of $1,059,368.90 plus a payment of interest accrued on such amount from the Issuance Date through the date of payment of such principal amount.  The amount of $1,059,368.90 is comprised of the amount attributable to the Closing Net Cash Adjustment plus the First Deferred Purchase Price Payment.  During such period, interest will accrue on a quarterly basis pursuant to the terms of this Section 3.

(b)           Section 3.2 is hereby deleted in its entirety.

(c)           Section 3.3 is hereby replaced in its entirety with the following:

The outstanding principal amount, together with all accrued and unpaid interest on this Note, shall be due and payable on the Maturity Date or such earlier time as provided herein.

6.             Further Assurances.  Each of the parties hereby agrees that it shall execute and deliver all additional documents and take such further actions reasonably required to implement the terms and intent of this Amendment.

7.             Remaining Provisions of the Note.  All sections and/or paragraphs of the Note not otherwise amended, modified or restated in this Amendment shall remain in full force and effect and as set forth in the Note; provided, however, that in the event of any discrepancy or inconsistency between the Note and this Amendment, this Amendment shall control.

IN WITNESS WHEREOF, the undersigned have executed and acknowledge this Amendment as of the date first written above.

THE COMPANY:	Emrise Electronics Corporation
	By:		/s/ Carmine T. Oliva
	Name:		Carmine T. Oliva
	Its:		CEO
HOLDER:		/s/ Charles S. Brand
	Charles S. Brand

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EX-10.3

Exhibit 10.3

AMENDMENT NO. 1 TO
SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE

THIS AMENDMENT NO. 1 TO SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE (the “Amendment”) is entered into as of November 20, 2009, by and between Emrise Electronics Corporation, a New Jersey corporation (the “Company”), and Thomas P. M. Couse (“Holder”) and amends that certain Subordinated Continent Secured Promissory Note (the “Note”) dated August 20, 2008 by and between the Company and Holder in the original principal amount of up to One Hundred Ninety-Eight Thousand Dollars ($198,000).  All capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Note.

NOW, THEREFORE, the Company and Holder do hereby agree as follows:

1.Amendments.

(a)           Definition of Applicable Interest Rate.  The definition of “Applicable Interest Rate” in Section 1 is hereby replaced in its entirety with the following:

“Applicable Interest Rate” shall mean the rate per annum equal to the prime rate as reported in The Wall Street Journal plus 1%; provided, however, that such rate shall be doubled until the Company has reduced the principal amount of the Note by an amount equal to (i) the amount of any increase in the principal balance of this Note attributable to the Closing Net Cash adjustment pursuant to Section 2.5(c) of the Stock Purchase Agreement plus (ii) the First Deferred Purchase Price Payment.

2.             Initial Principal Balance.  All references in the Note to $198,000 shall be changed to $425,365.48.

3.             Adjustment of Principal Balance.  Section 2.2 is hereby replaced in its entirety with the following:

As of the Issuance Date, the principal balance of the Note is $425,365.48 and notwithstanding any provision to the contrary in the Note or the Stock Purchase Agreement, such principal balance shall not decrease, except in the event of payment or pursuant to Section 10.8 of the Stock Purchase Agreement.

4.             First Measurement Period Principal Balance.  Section 2.3 is hereby deleted in its entirety.

5.            Payments of Principal and Interest.

(a)           Section 3.1 is hereby replaced in its entirety with the following:

The Company shall make no principal or interest payments during the period commencing on the Issuance Date and ending on July 1, 2010, at which time the Company shall make a principal payment on the Note in the amount of $132,421.11 plus a payment of interest accrued on such amount from the Issuance Date through the date of payment of such principal amount.  The amount of $132,421.11 is comprised of the amount attributable to the Closing Net Cash Adjustment plus the First Deferred Purchase Price Payment.  During such period, interest will accrue on a quarterly basis pursuant to the terms of this Section 3.

(b)           Section 3.2 is hereby deleted in its entirety.

(c)           Section 3.3 is hereby replaced in its entirety with the following:

The outstanding principal amount, together with all accrued and unpaid interest on this Note, shall be due and payable on the Maturity Date or such earlier time as provided herein.

6.             Further Assurances.  Each of the parties hereby agrees that it shall execute and deliver all additional documents and take such further actions reasonably required to implement the terms and intent of this Amendment.

7.             Remaining Provisions of the Note.  All sections and/or paragraphs of the Note not otherwise amended, modified or restated in this Amendment shall remain in full force and effect and as set forth in the Note; provided, however, that in the event of any discrepancy or inconsistency between the Note and this Amendment, this Amendment shall control.

IN WITNESS WHEREOF, the undersigned have executed and acknowledge this Amendment as of the date first written above.

THE COMPANY:	Emrise Electronics Corporation
	By:		/s/ Carmine T. Oliva
	Name:		Carmine T. Oliva
	Its:		CEO
HOLDER:		/s/ Thomas P. M. Couse
	Thomas P. M. Couse

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EX-10.4

Exhibit 10.4

AMENDMENT NO. 1 TO
SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE

THIS AMENDMENT NO. 1 TO SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE (the “Amendment”) is entered into as of November 20, 2009, by and between Emrise Electronics Corporation, a New Jersey corporation (the “Company”), and Joanne Couse (“Holder”) and amends that certain Subordinated Continent Secured Promissory Note (the “Note”) dated August 20, 2008 by and between the Company and Holder in the original principal amount of up to One Hundred Ninety-Eight Thousand Dollars ($198,000).  All capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Note.

NOW, THEREFORE, the Company and Holder do hereby agree as follows:

1.Amendments.

(a)           Definition of Applicable Interest Rate.  The definition of “Applicable Interest Rate” in Section 1 is hereby replaced in its entirety with the following:

“Applicable Interest Rate” shall mean the rate per annum equal to the prime rate as reported in The Wall Street Journal plus 1%; provided, however, that such rate shall be doubled until the Company has reduced the principal amount of the Note by an amount equal to (i) the amount of any increase in the principal balance of this Note attributable to the Closing Net Cash adjustment pursuant to Section 2.5(c) of the Stock Purchase Agreement plus (ii) the First Deferred Purchase Price Payment.

2.Initial Principal Balance.  All references in the Note to $198,000 shall be changed to $425,365.48.

3.Adjustment of Principal Balance.  Section 2.2 is hereby replaced in its entirety with the following:

As of the Issuance Date, the principal balance of the Note is $425,365.48 and notwithstanding any provision to the contrary in the Note or the Stock Purchase Agreement, such principal balance shall not decrease, except in the event of payment or pursuant to Section 10.8 of the Stock Purchase Agreement.

4.First Measurement Period Principal Balance.  Section 2.3 is hereby deleted in its entirety.

5.Payments of Principal and Interest.

(a)           Section 3.1 is hereby replaced in its entirety with the following:

The Company shall make no principal or interest payments during the period commencing on the Issuance Date and ending on July 1, 2010, at which time the Company shall make a principal payment on the Note in the amount of $132,421.11 plus a payment of interest accrued on such amount from the Issuance Date through the date of payment of such principal amount.  The amount of $132,421.11 is comprised of the amount attributable to the Closing Net Cash Adjustment plus the First Deferred Purchase Price Payment.  During such period, interest will accrue on a quarterly basis pursuant to the terms of this Section 3.

(b)           Section 3.2 is hereby deleted in its entirety.

(c)           Section 3.3 is hereby replaced in its entirety with the following:

The outstanding principal amount, together with all accrued and unpaid interest on this Note, shall be due and payable on the Maturity Date or such earlier time as provided herein.

6.             Further Assurances.  Each of the parties hereby agrees that it shall execute and deliver all additional documents and take such further actions reasonably required to implement the terms and intent of this Amendment.

7.             Remaining Provisions of the Note.  All sections and/or paragraphs of the Note not otherwise amended, modified or restated in this Amendment shall remain in full force and effect and as set forth in the Note; provided, however, that in the event of any discrepancy or inconsistency between the Note and this Amendment, this Amendment shall control.

IN WITNESS WHEREOF, the undersigned have executed and acknowledge this Amendment as of the date first written above.

THE COMPANY:	Emrise Electronics Corporation
	By:		/s/ Carmine T. Oliva
	Name:		Carmine T. Oliva
	Its:		CEO
HOLDER:		/s/ Joanne Couse
	Joanne Couse

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EX-10.5

Exhibit 10.5

AMENDMENT NO. 1 TO
SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE

THIS AMENDMENT NO. 1 TO SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE (the “Amendment”) is entered into as of November 20, 2009, by and between Emrise Electronics Corporation, a New Jersey corporation (the “Company”), and Michael Gaffney (“Holder”) and amends that certain Subordinated Continent Secured Promissory Note (the “Note”) dated August 20, 2008 by and between the Company and Holder in the original principal amount of up to Twenty Thousand Dollars ($20,000).  All capitalized terms not otherwise defined in this Amendment shall have the meanings set forth in the Note.

NOW, THEREFORE, the Company and Holder do hereby agree as follows:

1.Amendments.

(a)           Definition of Applicable Interest Rate.  The definition of “Applicable Interest Rate” in Section 1 is hereby replaced in its entirety with the following:

“Applicable Interest Rate” shall mean the rate per annum equal to the prime rate as reported in The Wall Street Journal plus 1%; provided, however, that such rate shall be doubled until the Company has reduced the principal amount of the Note by an amount equal to (i) the amount of any increase in the principal balance of this Note attributable to the Closing Net Cash adjustment pursuant to Section 2.5(c) of the Stock Purchase Agreement plus (ii) the First Deferred Purchase Price Payment.

2.Initial Principal Balance.  All references in the Note to $20,000 shall be changed to $42,966.21.

3.Adjustment of Principal Balance.  Section 2.2 is hereby replaced in its entirety with the following:

As of the Issuance Date, the principal balance of the Note is $42,966.21 and notwithstanding any provision to the contrary in the Note or the Stock Purchase Agreement, such principal balance shall not decrease, except in the event of payment or pursuant to Section 10.8 of the Stock Purchase Agreement.

4.First Measurement Period Principal Balance.  Section 2.3 is hereby deleted in its entirety.

5.Payments of Principal and Interest.

(a)           Section 3.1 is hereby replaced in its entirety with the following:

The Company shall make no principal or interest payments during the period commencing on the Issuance Date and ending on July 1, 2010, at which

time the Company shall make a principal payment on the Note in the amount of $13,375.87 plus a payment of interest accrued on such amount from the Issuance Date through the date of payment of such principal amount.  The amount of $13,375.87 is comprised of the amount attributable to the Closing Net Cash Adjustment plus the First Deferred Purchase Price Payment.  During such period, interest will accrue on a quarterly basis pursuant to the terms of this Section 3.

(b)           Section 3.2 is hereby deleted in its entirety.

(c)           Section 3.3 is hereby replaced in its entirety with the following:

The outstanding principal amount, together with all accrued and unpaid interest on this Note, shall be due and payable on the Maturity Date or such earlier time as provided herein.

6.             Further Assurances.  Each of the parties hereby agrees that it shall execute and deliver all additional documents and take such further actions reasonably required to implement the terms and intent of this Amendment.

7.             Remaining Provisions of the Note.  All sections and/or paragraphs of the Note not otherwise amended, modified or restated in this Amendment shall remain in full force and effect and as set forth in the Note; provided, however, that in the event of any discrepancy or inconsistency between the Note and this Amendment, this Amendment shall control.

IN WITNESS WHEREOF, the undersigned have executed and acknowledge this Amendment as of the date first written above.

THE COMPANY:	Emrise Electronics Corporation
	By:		/s/ Carmine T. Oliva
	Name:		Carmine T. Oliva
	Its:		CEO
HOLDER:		/s/ Michael Gaffney
	Michael Gaffney

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