Exhibit 10.5


 


EXECUTION
COPY


 


THIS CONTINUING GUARANTY
IS SUBJECT TO A SUBORDINATION

AGREEMENT OF EVEN DATE (THE “SUBORDINATION AGREEMENT”)


BETWEEN COLLATERAL AGENT
AND THE HOLDER OF SENIOR INDEBTEDNESS


 


CONTINUING GUARANTY


 


THIS CONTINUING GUARANTY (the “Guaranty”) is made as of August 20,
2008 and is executed by EMRISE Corporation, a Delaware corporation (“Guarantor”), in favor of Thomas P. M. Couse, Joanne
Couse, Michael Gaffney and Charles Brand (each, a “Lender” and collectively, the “Lenders”).


 


R  E
C  I  T  A  L  S


 


A.            EMRISE
Electronics Corporation, a New Jersey corporation (“Borrower”)
and the Lenders are parties to that certain Stock Purchase Agreement dated as
of May 23, 2008 (the “Stock Purchase
Agreement”) relating to the purchase by Borrower of all of the
issued and outstanding shares of capital stock (collectively, the “Shares”) of (i) Advanced Control
Components, Inc., a New Jersey corporation (the “Company”),
owned by Thomas P. M. Couse, Joanne Couse and Michael Gaffney, and (ii) Custom
Components, Inc., a New Jersey corporation, owned by Charles S.
Brand.  Capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the Stock
Purchase Agreement.


 


B.            Pursuant
to the terms of the Stock Purchase Agreement, upon the happening of certain
events Borrower is obligated to deliver certain Deferred Purchase Price
Payments to Lenders.


 


C.            Pursuant
to the terms of the Stock Purchase Agreement, Borrower issued certain
subordinated secured contingent promissory notes (which are defined in the
Stock Purchase Agreement as well as herein as the “Subordinated Contingent Notes”) to Lenders to satisfy a
portion of the aggregate consideration to be paid by Borrower for the purchase
of the Shares.


 


D.            Lenders
require as a condition to the Stock Purchase Agreement, the Subordinated
Contingent Notes and the other Related Agreements, that a guaranty in the form
of this Guaranty be executed and delivered by Guarantor.


 


NOW, THEREFORE, for and in consideration of the
recitals contained herein and to induce Lenders to accept the terms of the
Stock Purchase Agreement, the Subordinated Contingent Notes and the other
Related Agreements and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, it is agreed as follows:


 


1.             Guarantor hereby
unconditionally, irrevocably and absolutely guarantees to and for the benefit
of Lenders or order, the full, prompt, unconditional and faithful payment, when
and as the same shall become due, whether at the stated maturity date, by
acceleration or otherwise and the full, prompt, unconditional and faithful
performance of all of Borrower’s and 


 

















 


the Company’s
present and future indebtedness and obligations, direct or indirect, to Lenders
and each and every term, condition and covenant arising under or with respect
to:  (i) the Stock Purchase
Agreement, including, without limitation, the Deferred Purchase Price Payments;
(ii) the Subordinated Contingent Notes and all extensions, renewals,
replacements, substitutions, amendments and modifications thereof, (iii) the
Security Agreement of even date herewith executed by Borrower and the Company
in favor of Lenders; (iv) the other Related Agreements, and (v) any
other document or instrument contemplated by or securing any obligation
whatsoever of Borrower or the Company to any of the Lenders (collectively, the “Obligations”).


 


2.             This Guaranty is a
primary obligation of the Guarantor and shall be a continuing, unconditional,
inexhaustible Guaranty.  This Guaranty
is, and is intended to be, a guaranty of the Obligations, in addition to any
other guaranty, endorsement or collateral held by Lenders therefor, whether or
not furnished by Guarantor.  Guarantor
shall have no right of subrogation with respect to any payments made by
Guarantor hereunder until all of the Obligations are paid or performed in full.


 


3.             No delay or
omission by Lenders in exercising any right or remedy hereunder shall operate
as a waiver thereof or of any other right or remedy, and no single or partial
exercise thereof shall preclude any other or further exercise thereof or the
exercise of any other right or remedy. 
All rights and remedies of Lenders hereunder are cumulative.  Guarantor waives the right to marshalling of
the Borrower’s or Company’s assets or any stay of execution and the benefit of
all exemption laws, to the extent permitted by law, and any other protection
granted by law to the Guarantor now or hereafter in effect with respect to any
action or proceeding brought against it. 
No invalidity, illegality or unenforceability of the Obligations shall
release, diminish, or extinguish the liability of Guarantor hereunder.  This Guaranty shall remain in full force and
effect until the date on which all Obligations shall be paid in full.


 


4.             Guarantor agrees
that in the event all or any part of the liability of Borrower or the Company
in respect of the Obligations hereafter ceases as a result of a non-judicial
foreclosure by Lenders of any or all of any collateral delivered to secure the
Obligations, Guarantor nevertheless expressly assumes liability for the
Obligations, notwithstanding that the effect of any applicable statutes or
other governing law, may limit or prohibit Guarantor’s right to proceed or
pursue any remedies against Borrower or the Company, and notwithstanding that
Guarantor may not be permitted to subrogate to Lenders’ position.  Guarantor hereby waives any defense to the
obligations and liabilities of Guarantor hereunder and any and all rights with
respect thereto that Guarantor may otherwise have under the provisions of
applicable statutes or other governing law as a result of Lenders’ election of
any remedy which impairs or alters the rights of Guarantor against Borrower or
the Company or any collateral held by Lenders, and Guarantor expressly
acknowledges and agrees that Lenders may, in their sole discretion, elect to
foreclose upon any collateral Lenders hold by non-judicial foreclosure rather
than by judicial foreclosure without impairing or affecting in any way
whatsoever Lenders’ rights under this Guaranty, including the right to proceed
against Guarantor for any deficiency following a non-judicial foreclosure
sale.  Guarantor understands and agrees
that upon any foreclosure or assignment in lieu of foreclosure of any security
held by Lenders:  (i) such security
will no longer exist and that any right that Guarantor might otherwise have,
upon full payment and performance of the Obligations to Lenders by Guarantor,
to participate in any such security or to be subrogated to any rights of
Lenders with respect to any such security, will be nonexistent; and (ii) Guarantor
shall be 


 


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deemed to have
waived any right, title, interest or claim under any circumstances in or to any
real or personal property held by Lenders or any third party following any
foreclosure or assignment in lieu of foreclosure of any such security.


 


5.             Guarantor waives
any right to require Lenders to:  (i) proceed
against Borrower or the Company; (ii) proceed against or exhaust any
security held from Borrower or the Company; or (iii) pursue any other
remedy Lenders may have whatsoever. 
Until all Obligations of Borrower and the Company to Lenders shall have
been paid or performed in full, Guarantor shall have no right of subrogation,
and waives any right to enforce any remedy which Lenders now has or may
hereinafter have against Borrower or the Company, and waives any benefit of and
any right to participate in any security now or hereinafter held by Lender.  Guarantor waives all presentments, demands
for performance, notices of non-performance, protests, notices of protest,
notices of dishonor and notices of acceptance of this Guaranty and of the
existence, creation or incurring of new or additional Obligations.  Guarantor’s obligations and liabilities
hereunder shall be separate and distinct from those of Borrower and the
Company.  If Borrower or the Company
defaults under any of the Obligations, Lenders, at their option, may proceed directly
against Guarantor, without having commenced any action or obtained any judgment
against Borrower or the Company or any other guarantor, and without applying
any property of Borrower or the Company (or any other person) held as security
for the payment and performance of the Obligations.  The liability of Guarantor hereunder shall
not be released, diminished, or extinguished by Lenders’ failure or delay in
enforcing any of their rights.


 


6.             Any indebtedness of
Borrower now or hereafter held by Guarantor is hereby subordinated to the
Obligations; and such indebtedness of Borrower to Guarantor if Lenders so
request, shall be collected, enforced and received by Guarantor as trustee for
Lenders, and be paid over to Lenders on account of the Obligations but without
reducing or affecting in any manner, the liability of Guarantor under any other
provision of this Guaranty.


 


7.             Guarantor further
agrees to pay, as the principal obligor and not as a guarantor only, all
reasonable costs and expenses, including, without limitation, reasonable
attorneys’ fees, at any time paid or incurred by Lenders in endeavoring to
enforce this Guaranty.


 


8.             This Guaranty is
absolute and unconditional and shall not be affected by any act or thing
whatsoever, except as herein provided. 
This Guaranty is not an accommodation, but rather a material
consideration bargained for by Lenders in agreeing to accept the terms of the
Stock Purchase Agreement, the Subordinated Contingent Notes, and the other
Related Agreements.  No modification or
amendment of any provision of this Guaranty shall be effective unless in
writing and signed by Lenders.


 


9.             This Guaranty and
the transactions evidenced hereby shall be construed and interpreted under the
laws of the State of New Jersey, without regard to conflicts of laws principles.  Guarantor irrevocably submits to the
exclusive jurisdiction of any New Jersey State court sitting in Monmouth
County, New Jersey or the United States Federal Court for the District of New
Jersey over any action or proceeding arising out of or relating to this
Guaranty, and irrevocably agrees that all claims in respect of such action or
proceeding may be heard and determined in such New Jersey State or Federal
court.  Guarantor agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by 


 


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suit on the
judgment or in any other manner provided by law.  Guarantor waives any objection to venue in
the State of New Jersey and any objection to an action or proceeding in the
State of New Jersey on the basis of forum non conveniens.


 


10.           Nothing herein shall
be construed to constitute Guarantor as a maker, co-maker or principal debtor.


 


11.           If any provision of
this Guaranty or portion of such provision, or the application thereof to any
person or circumstance, shall, to any extent, be held invalid or unenforceable,
the remainder of this Guaranty or the remainder of such provision and the
application thereof to other persons or circumstances, other than those as to
which it is held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Guaranty shall be valid and be enforced to the
fullest extent permitted by the law. 
Unless the context otherwise requires, the masculine, feminine and
neuter genders and the singular and the plural shall each be deemed to include
one another, as appropriate.


 


12.           Lenders
may, upon written notice to Guarantor, assign this Guaranty in whole or in
part.


 


[Signature Page Follows]


 


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IN WITNESS WHEREOF, Guarantor has caused this
Continuing Guaranty to be executed as of the date first set forth above.


 


	
   

  	
  EMRISE CORPORATION,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Carmine T. Oliva

  
	
   

  	
  Name: Carmine T. Oliva

  
	
   

  	
  Its: Chief Executive
  Officer