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.]

 

2

--------------------------------------------------------------------------------

 

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

 

3

--------------------------------------------------------------------------------