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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