**Exhibit 10.3**

 

AMENDMENT NUMBER 12 TO LOAN DOCUMENTS

 

ThisAMENDMENT NUMBER 12 TO LOAN DOCUMENTS (this “Twelfth Amendment”) isentered into as of June 1, 2010, by and among GVEC RESOURCE IV INC. (the “Agent”),as Agent and as a Lender, PRIVATE EQUITY MANAGEMENT GROUP LLC, a Delawarelimited liability company (“PEMG”), EMRISE CORPORATION, a Delawarecorporation (“Parent”), and Parent’s Subsidiaries that are signatorieshereto (collectively, with Parent, the “Borrowers” and eachindividually, a “Borrower”), with reference to the following facts:

 

A.                                   Borrowers,Agent and the Lenders named therein are parties to that certain CreditAgreement, dated as of November 30, 2007, as amended by that certainAmendment Number 1 to Loan Documents, dated as of August 20, 2008, thatcertain Amendment Number 2 to Loan Documents, dated as of February 12,2009, that certain Forbearance Agreement and Amendment Number 3 to LoanDocuments, dated as of March 20, 2009 (as amended by that certainAmendment to Forbearance Agreement and Amendment Number 3 to Loan Documents,dated as of April 9, 2009), that certain Amendment Number 4 to Loan Documents, dated as of April 14, 2009,that certain  Amendment Number 5 to LoanDocuments, dated as of August 14, 2009, that certain  Amendment Number 6 to Loan Documents, datedas of November 3, 2009, that certain Amendment Number 7 to Loan Documents,dated as of November 13, 2009, that certain Amendment Number 8 to LoanDocuments, dated as of December 31, 2009, that certain Amendment Number 9to Loan Documents, dated as of April 13, 2010, that certain AmendmentNumber 10 to Loan Documents, dated as of May 3, 2010 and that certainAmendment Number 11 to Loan Documents, dated as of May 17, 2010 (asfurther amended, restated, supplemented or modified from time to time, the “CreditAgreement”).

 

NOW,THEREFORE, for good and valuable consideration, the parties agree as follows:

 

1.                                       Defined Terms.  Capitalized terms not otherwise definedherein shall have the same meanings as set forth in the Credit Agreement.

 

2.                                       Representationsand Warranties.

 

(a)                                  Each Borrowerhereby represents and warrants that, after giving effect to this TwelfthAmendment, no Event of Default or failure of condition has occurred or exists,or would exist with notice or lapse of time or both under the Credit Agreement.

 

(b)                                 Allrepresentations and warranties of Borrowers in this Twelfth Amendment and theCredit Agreement are true and correct as of the date hereof, and shall survivethe execution of this Twelfth Amendment.

 

3.                                       Amendments.  “Key Milestones” numbered 8 and 9, as setforth in Annex Y to the Credit Agreement, as amended by Annex Y-2 to the CreditAgreement, are hereby replaced in their entireties with the Key Milestones setforth in Annex Y-3 attached hereto.  Forsake of clarity, Key Milestone number 10, as set forth in Annex Y-1 to theCredit Agreement, shall remain as set forth in Annex Y-1.

 

4.                                       Consent.  Notwithstanding any provision of the CreditAgreement or other Loan Agreements, PEMG, as Court-appointed Receiver for theAgent, hereby consents to the execution, delivery, and performance by BorrowerEmrise Electronics Corporation (“ECC”) of that certain Stock PurchaseAgreement (the “Purchase Agreement”) by and between AeroflexIncorporated (or its designated affiliate) and ECC, and such other documentsand instruments reasonably necessary to effectuate the Purchase Agreement, andto the consummation of the transactions contemplated thereby.

 

5.                                       Default.  In addition to all other Events of Defaultunder the Credit Agreement, Borrowers’ failure to pay any amount when due underthis Twelfth Amendment or to perform any covenant or other agreement containedin this Twelfth Amendment, or any other document entered into pursuant hereto,shall constitute Events of Default under this Twelfth Amendment and the CreditAgreement.

 

6.                                       ConditionsPrecedent.  Theeffectiveness of this Twelfth Amendment is subject to Agent’s receipt of all ofthe following:

 

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(a)                                  this TwelfthAmendment and such other agreements and instruments reasonably requested byAgent pursuant hereto (including such documents as are necessary to create andperfect Agent’s interest in the Collateral), each duly executed by eachBorrower;

 

(b)                                 payment byBorrowers of all legal fees and expenses incurred through the date of thisTwelfth Amendment (which shall be remitted via wire transfer according to theinstructions set forth on Exhibit A hereto); and

 

(c)                                  such otherdocuments and completion of such other matters as Agent may reasonably deemnecessary or appropriate.

 

7.                                       Release.

 

(a)                                  Each Borroweracknowledges that neither Agent, any Lender nor PEMG (the “Released Parties”)would enter into this Twelfth Amendment without Borrowers’ assurancehereunder.  Except for the obligationsarising hereafter under this Twelfth Amendment, each Borrower hereby absolutelydischarges and releases the Released Parties, any person or entity that hasobtained any interest from any of them under the Credit Agreement or otherwiseand each of the Released Parties’ and such entities’ former and presentpartners, stockholders, officers, directors, employees, successors, assignees,agents and attorneys from any known or unknown claims which any Borrower nowhas against any of them of any nature, including any claims that any Borrower,its successors, counsel, and advisors may in the future discover they wouldhave now had if they had known facts not now known to them, whether founded incontract, in tort or pursuant to any other theory of liability, including butnot limited to any claims arising out of or related to the Credit Agreement orthe transactions contemplated thereby.

 

(b)                                 Each Borrowerwaives the provisions of California Civil Code Section 1542, which states:

 

AGENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW ORSUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IFKNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

 

(c)                                  The provisions,waivers and releases set forth in this section are binding upon each Borrowerand each Borrower’s shareholders, agents, employees, assigns and successors ininterest.  The provisions, waivers andreleases of this section shall inure to the benefit of the Released Parties andtheir respective agents, employees, officers, directors, assigns and successorsin interest.

 

(d)                                 Each Borrowerwarrants and represents that such Borrower is the sole and lawful owner of allright, title and interest in and to all of the claims released hereby and noBorrower has heretofore assigned or transferred or purported to assign ortransfer to any person any such claim or any portion thereof.  Each Borrower shall indemnify and holdharmless Agent, each Lender and PEMG from and against any claim, demand, damage,debt, liability (including payment of attorneys’ fees and costs actuallyincurred whether or not litigation is commenced) based on or arising out of anysuch assignment or transfer.

 

(e)                                  The provisionsof this section shall survive payment in full of the Obligations, fullperformance of all the terms of this Twelfth Amendment and the CreditAgreement, and/or Agent’s, any Lender’s or PEMG’s actions to exercise anyremedy available under the Credit Agreement or otherwise.

 

8.                                       Consultation ofCounsel.  Each Borrower acknowledgesthat such Borrower has had the opportunity to be represented by legal counselof its own choice throughout all of the negotiations that preceded theexecution of this Twelfth Amendment. Each Borrower has executed this Twelfth Amendment after reviewing andunderstanding each provision of this Twelfth Amendment and without relianceupon any promise or representation of any person or persons acting for or onbehalf of Agent.  Each Borrower further acknowledgesthat such Borrower and its counsel have had adequate opportunity to makewhatever investigation or inquiry they may deem necessary or desirable inconnection with the subject matter of this Twelfth Amendment prior to theexecution hereof and the delivery and acceptance of the consideration describedherein.

 

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9.                                       Miscellaneous.

 

(a)                                  Successors andAssigns.  This Twelfth Amendment shallbe binding upon and shall inure to the benefit of Borrower and Agent and theirrespective successors and assigns; provided, however, that the foregoing shallnot authorize any assignment by Borrower of its rights or duties hereunder.

 

(b)                                 Integration.  This Twelfth Amendment and any documentsexecuted in connection herewith or pursuant hereto contain the entire TwelfthAmendment between the parties with respect to the subject matter hereof andsupersede all prior agreements, understandings, offers and negotiations, oralor written, with respect thereto and no extrinsic evidence whatsoever may beintroduced in any judicial or arbitration proceeding, if any, involving thisTwelfth Amendment; except that any financing statements or other agreements orinstruments filed by Agent with respect to Borrower shall remain in full forceand effect.

 

(c)                                  Course of Dealing;Waivers.  No course of dealing on thepart of Agent or its officers, nor any failure or delay in the exercise of anyright by Agent, shall operate as a waiver thereof, and any single or partialexercise of any such right shall not preclude any later exercise of any suchright.  Agent’s failure at any time torequire strict performance by Borrower of any provision shall not affect anyright of Agent thereafter to demand strict compliance and performance.  Any suspension or waiver of a right must bein writing signed by an officer of Agent.

 

(d)                                 Time is of theEssence.  Time is of the essence as toeach and every term and provision of this Twelfth Amendment and the otherCredit Agreement.

 

(e)                                  Legal Effect.  The Credit Agreement remains in full forceand effect.  If any provision of thisTwelfth Amendment conflicts with applicable law, such provision shall be deemedsevered from this Twelfth Amendment, and the balance of this Twelfth Amendmentshall remain in full force and effect.

 

(f)                                    Choice of Lawand Venue; Jury Trial Waiver; Judicial Reference; Service of Process.  Section 12 of the Credit Agreementhereby is incorporated herein by this reference as though fully set forth.

 

(g)                                 Upon theeffectiveness of this Twelfth Amendment, each reference in the Credit Agreementto “this Twelfth Amendment,” “hereunder,” “herein,” “hereof”or words of like import referring to the Credit Agreement shall mean and referto the Credit Agreement as amended by this Twelfth Amendment.

 

(h)                                 Upon theeffectiveness of this Twelfth Amendment, each reference in the Loan Documentsto the “Credit Agreement” “thereunder,” “therein,” “thereofor words of like import referring to the Credit Agreement shall mean and referto the Credit Agreement as amended by this Twelfth Amendment.

 

(i)                                     Assignment andIndemnity.  Borrowerconsents to Agent’s assignment, in accordance with Section 13 of theCredit Agreement, of all or any part of Agent’s rights under this TwelfthAmendment and the Credit Agreement.

 

10.                                 EntireAmendment; Effect of Twelfth Amendment.  This Twelfth Amendment, and the terms andprovisions hereof, constitutes the entire Twelfth Amendment among the partiespertaining to the subject matter hereof and supersedes any and all prior orcontemporaneous amendments relating to the subject matter hereof. Except asexpressly set forth in this Twelfth Amendment, the Credit Agreement and otherLoan Documents shall remain unchanged and in full force and effect. To theextent any terms or provisions of this Twelfth Amendment conflict with those ofthe Credit Agreement or other Loan Documents, the terms and provisions of thisTwelfth Amendment shall control. This Twelfth Amendment is a Loan Document.

 

11.                                 Counterparts; Electronic Transmission**.**This TwelfthAmendment may be executed in any number of counterparts, all of which takentogether shall constitute one and the same instrument and any of the partieshereto may execute this Twelfth Amendment by signing any such counterpart.Delivery of an executed counterpart of this Twelfth Amendment by electronicmail shall be equally as effective as delivery of an original executedcounterpart of this Twelfth Amendment. Any party delivering an executedcounterpart of this Twelfth Amendment by electronic mail also shall deliver anoriginal executed counterpart of this Twelfth Amendment, but the failure todeliver an original executed counterpart shall not affect the validity,enforceability, and binding effect of this Twelfth Amendment.

 

**[*Balance of Page Intentionally Left Blank*]**

 

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INWITNESS WHEREOF, the parties have caused this AMENDMENT NUMBER 12 TO LOANDOCUMENTS to be executed and delivered on the date first written above.

 
| **EMRISE  CORPORATION**                  | ** **               | **EMRISE  ELECTRONICS CORPORATION**         |
|------------------------------------------|--------------------------|---------------------------------------------|
|                                     |                     |                                        |
|                                     |                     |                                        |
| By:                                      | /s/  Carmine Oliva       |                                        | By: | /s/  Carmine Oliva |
| Name:                                    | Carmine  Oliva           |                                        | Name: | Carmine  Oliva |
| Title:                                   | Chief  Executive Officer |                                        | Title: | President |
|                                     |                     |                                        |
|                                     |                     |                                        |
| **CXR  LARUS CORPORATION**               | ** **               | **ADVANCED  CONTROL COMPONENTS, INC.** |
|                                     |                     |                                        |
|                                     |                     |                                        |
| By:                                      | /s/  Carmine Oliva       |                                        | By: | /s/  Carmine Oliva |
| Name:                                    | Carmine  Oliva           |                                        | Name: | Carmine  Oliva |
| Title:                                   | President                |                                        | Title: | President |
|                                     |                     |                                        |
|                                     |                     |                                        |
| **CUSTOM  COMPONENTS, INC.**        |                     | **GVEC  RESOURCE IV INC.**,            |
|                                     |                     | as  Agent and a Lender                      |
|                                     |                     |                                        |
| By:                                      | /s/  Carmine Oliva       |                                        | By:  PRIVATE EQUITY MANAGEMENT GROUP LLC, its Court-Appointed Receiver |
|                                     |                     |                                        |
| Name:                                    | Carmine  Oliva           |                                        |   |
| Title:                                   | President                |                                        | By: | /s/  Jim LeSieur |
|                                     |                     | Name:                                       | Jim  LeSieur |
|                                     |                     | Title:                                      | Chief  Operating Officer |
| **PRIVATE  EQUITY MANAGEMENT GROUP LLC** |                     |                                        |
|                                     |                     |                                        |
|                                     |                     |                                        |
| By:                                      | /s/  Jim LeSieur         |                                        |   |
| Name:                                    | Jim  LeSieur             |                                        |   |
| Title:                                   | Chief  Operating Officer |                                        |   |

 

**[*Signature Page toAmendment Number 12 to Loan Documents*]**

 

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**ANNEX Y-3**(Amended “Key Milestones” re Sale of ACC)

 
| **Key  Milestone  #** | ** ** | **Date** | ** ** | **PEM Deliverable** | ** ** | **Description**                                                                                                                                                        |
|-----------------------|------------|----------|------------|---------------------|------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 8                     |       | 6/8      |       | Binding  SPA        |       | ·                  Sign binding SPA                                          |
| 9                     |       | 6/11     |       | Preliminary  proxy  |       | ·                  File preliminary proxy  with SEC for shareholder approval |

 

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