Exhibit 10.2


 


EXECUTION COPY


 


AMENDMENT NO. 1 TO STOCK
PURCHASE AGREEMENT


 


THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (the “Amendment”) is made as of August 20, 2008, by and among
EMRISE Electronics Corporation, a New Jersey corporation (“Buyer”),
EMRISE Corporation, a Delaware corporation and parent of Buyer (“EMRISE”), Charles S. Brand, an individual (“Brand”), Advanced Control Components, Inc., a New
Jersey corporation (the “Company”),
Thomas P. M. Couse, an individual (“Couse”), Joanne
Couse, an individual (“J. Couse”),
Michael Gaffney, an individual (“Gaffney”), and
Custom Components, Inc., a New Jersey corporation (“Parent”).  Couse and Brand are collectively referred to
as “Majority Owners,” and each individually
as a “Majority Owner.”  Couse, Brand, J. Couse and Gaffney are
collectively referred to as “Sellers,” and
each individually as a “Seller.”  Buyer, Sellers, EMRISE, the Company, and
Parent are referred to collectively as the “Parties,”
and each individually as a “Party.”


 


R  E
C  I  T  A  L  S


 


A.            The
Parties have executed a Stock Purchase Agreement dated May 23, 2008 (the “Purchase Agreement”).


 


B.            The
Parties desire to amend certain provisions of the Purchase Agreement, update
certain of the exhibits and schedules referenced in the Purchase Agreement, and
enter into certain other agreements as set forth below.


 


C.            Pursuant
to Section 12.8 of the Purchase Agreement, the Purchase Agreement may be
amended by execution of an instrument in writing signed by each of the Parties.


 


NOW THEREFORE, in consideration of the premises and
mutual covenants and promises contained herein and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties hereto agree as follows:


 


1.             Definitions.  Capitalized terms used in this Amendment that
are not otherwise defined herein shall have the meaning ascribed to them in the
Purchase Agreement.


 


2.             Amendments.


 


(a)           The last sentence of the preamble
paragraph of the Purchase Agreement is hereby amended by inserting the word “EMRISE”
after the word “Buyer.”


 


(b)           The definition of the term “Closing
Net Cash” contained in Article I of the Purchase Agreement is hereby deleted
in its entirety and replaced with the following:


 


““Closing Net Cash” shall equal (i) cash
on hand plus (ii) the amount of the
Employee Retention Bonuses paid at Closing plus (iii) up
to $50,000 related to the cost of equipment purchased by the Company since September 30,
2007 plus (iv) the amount of $600,000 minus (v) total debt (excluding
leases entered into by the Company after September 30, 2007 with an
aggregate value of up to $425,000) minus (vi) the
amount paid by


 

















 


Buyer at the Closing to
Sun National Bank to satisfy in full all amounts owed by the Company under the Company’s
Credit Facility as of the Closing Date minus (vii) the
amount of $21,750, all determined in accordance with GAAP, applying the same
accounting principles, policies and practices that were used in preparing the
Audited Company Financial Statements.”


 


(c)           Subsection (a) of Section 2.2
of the Purchase Agreement is hereby amended by deleting the reference to “$13,000,000”
and inserting in its place “$12,400,000.”


 


(d)           Subsection (f)(v) of Section 2.6
is hereby amended, in the twelfth line, immediately after “exceed $500,000”, by
deleting the “.” and inserting “, and Buyer agrees that it will not take any
action which would result in the inability of the Company to utilize such
working capital for capital expenditures within the limits set forth above in
this Section 2.6(f)(v).”


 


(e)           Subsection (a) of Section 3.4
of the Purchase Agreement is hereby amended by (i) deleting the reference
to the phrase “six months” in the 12th line of such subsection and inserting in its
place the phrase “nine months”; (ii) inserting the words “Parent and the”
after the word “the” the first time that appears in subsection (a)(b) of
Section 3.4; and (iii) inserting the words “Parent and the” after the
word “the” the first time it appears in subsection (a)(b) of Section 3.4.


 


(f)            Section 3.19 of the Purchase
Agreement is hereby amended by adding the following as subsection (h):


 


“With respect to that certain No Further Action
Determination and Covenant Not to Sue letter dated July 28, 2008 (the “No
Action Letter”) issued by the State of New Jersey, Department of Environmental
Protection (the “Department”) to the Company, (i) the Company did not
withhold any material information from the Department in connection with its
issuance of the No Action Letter; and (ii) the representations and
information that were provided by the Company to the Department were and remain
true and correct in all material respects.”


 


(g)           The title to Article V of the
Purchase Agreement is hereby amended by deleting the reference to the phrase “Prior
to Closing.”


 


(h)           The title to Article VI of the
Purchase Agreement is hereby amended by deleting the reference to the phrase “Prior
to Closing Date.”


 


(i)            Section 5.7 of the Purchase
Agreement is hereby amended by deleting the phrase “the later of (i) the
Closing Date and (ii) the date ninety (90) days after the date of this
Agreement,” and inserting in its place the following:  “August 28, 2008.”


 


(j)            The Purchase Agreement is hereby
amended by inserting a new Section 6.3, which shall read in its entirety
as follows:


 

















 


“6.3         Payment of Security
Deposit.  At the Closing,
Buyer shall pay $21,750 to 611 Industrial Way, LLC, which amount is due by the
Company as an additional security deposit upon a change in control pursuant to
the lease governing 611 Industrial Way, Eatontown, New Jersey.”


 


(k)           The Purchase Agreement is hereby
amended by adding a new Section 6.4, which shall read in its entirety as
follows:


 


“6.4         Waiver of
EMRISE Employment Policy. 
EMRISE hereby waives its general policy prohibiting the employment and
supervision of certain related employees solely with respect to the employment
and supervision of Richard Williams and Kathleen Williams.”


 


(l)            The Purchase Agreement is hereby
amended by adding a new Section 6.5, which shall read in its entirety as
follows:


 


“6.5         Insurance.  Concurrent with the termination of the Employer
Practices Liability Insurance policy issued by Travelers Casualty and Surety
Company of America dated March 10, 2008, Buyer shall obtain and shall maintain
a replacement policy of insurance together with a tail coverage policy of
insurance, each covering employer practices liability in such form or forms and
in such amount or amounts as mutually agreed to by Buyer and Sellers.”


 


(m)      The Purchase Agreement is hereby amended
by adding a new Section 6.6, which shall read in its entirety as follows:


 


“6.6         Interest Payments.  On the 90th day after the Closing Date, Buyer shall pay to
each of Brand, Couse, J. Couse and Gaffney, by wire transfer in immediately
available funds, their proportionate share (i.e., in the percentages set forth
in Section 2.2(a) above) of the amount of interest calculated
on the principal  amount of $600,000 for
the period commencing on the Closing Date and ending on the later of the 90th day after the Closing Date or the actual date
of such interest payment, 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
amount is paid), plus one percent (1%).”


 


(n)           Section 7.11 of the Purchase
Agreement is hereby amended to delete the defined term “Confidential Employee
Retention Bonus Agreement” and inserting in its place the defined term “Employee
Retention Bonus Agreement.”


 


(o)           The information contained in Exhibit 2.6(f) of
the Purchase Agreement is hereby amended by deleting the information contained
therein and replacing the same with the information contained in Exhibit A
attached hereto, which shall hereafter constitute the mutually agreed upon “Forecasts.”


 

















 


(p)           The form of the Employee Retention
Bonus Agreement set forth in Exhibit 7.11 of the Purchase Agreement is
hereby revised (i) to delete subsection (c) of Section 2 thereof
and to change the reference to subsection “(d)” therein to subsection “(c)” and
(ii) to delete the word “at” in the third line of subsection (a) of Section 3
thereof and to insert in its place the words “within five (5) Business
Days.”


 


(q)           Subsection (d) of Section 9.1
is hereby amended by deleting the reference to “August 15, 2008” and
inserting in its place “August 20, 2008.”


 


(r)            Section 10.2 of the Purchase
Agreement is hereby amended by (i) deleting the word “and” at the end of
subsection (d) thereof, (ii) deleting the period at the end of subsection
(e) and inserting in its place the following: “;and”, and (iii) by
adding a new subsection (f), which shall read in its entirety as follows:


 


“(f) any Liability related to a breach by the
Company of any term or provision of any non-disclosure agreement entered into
by the Company prior to the Closing Date and identified in Section 3.2(b) of
the Disclosure Schedule.”


 


(s)           Section 10.5 of the Purchase
Agreement is hereby amended by deleting the reference to “Section 10.2(a), (b) or
(c)” and inserting in its place “Section 10.2(a), (b), (c) or
(f).”


 


(t)            Section 10.6 of the Purchase
Agreement is hereby amended by deleting the reference to “Section 10.2” contained
on the 3rd and
7th lines of
such section and inserting in each case “Section 10.2 (a) – (e).”


 


3.             Acceptance
of Revised and Restated Disclosure Schedule.  Buyer hereby acknowledges and accepts in its
entirety Seller’s revised and restated Disclosure Schedule as set forth on Exhibit B
attached hereto.


 


4.             Acceptance
of Revised Interim Company Financial Statements.  Buyer hereby acknowledges and accepts in its
entirety Parent and the Company’s revised Interim Company Financial Statements
as set forth on Exhibit C attached hereto and the Interim Company
Financial Statements previously delivered by the Company to Buyer are hereby
amended by deleting the information contained therein and replacing same with
the information contained in Exhibit C attached hereto.


 


5.             Waiver of
Customer Interviews.       Buyer
hereby waives its rights to conduct customer interviews as provided by Section 7.3
of the Purchase Agreement.


 


6.             Miscellaneous.  Except as modified and amended pursuant to
this Amendment, the Purchase Agreement shall remain in full force and
effect.  This Amendment may be executed
in one or more counterparts, each of which shall be deemed an original, but all
of which taken together shall constitute one and the same instrument. This
Amendment will become binding when one or more counterparts hereof,
individually or taken together, will bear the signatures of all the parties
reflected hereon as signatories.


 

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed on their respective behalf, by their
respective officers thereunto duly authorized, all as of the day and year first
above written.


 


	
  BUYER:

  	
  EMRISE
  ELECTRONICS CORPORATION, a

  New Jersey
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Carmine T. Oliva

  
	
   

  	
   

  	
  Carmine T. Oliva,

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  



 


[Signatures
continued on following page.]


 

















 


	
  EMRISE:

  	
  EMRISE
  CORPORATION, 

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Carmine T. Oliva

  
	
   

  	
   

  	
  Carmine T. Oliva, 

  
	
   

  	
   

  	
  President and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  THE COMPANY:

  	
  ADVANCED CONTROL
  COMPONENTS,

  INC., a New Jersey corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Charles S. Brand

  
	
   

  	
   

  	
  Charles S. Brand, 

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  PARENT:

  	
  CUSTOM
  COMPONENTS, INC., 

  a New Jersey corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles S. Brand

  
	
   

  	
   

  	
  Charles S. Brand, 

  President

  
	
   

  	
   

  
	
   

  	
   

  
	
  BRAND:

  	
  /s/ Charles S. Brand

  
	
   

  	
  CHARLES S. BRAND

  
	
   

  	
   

  
	
   

  	
   

  
	
  COUSE:

  	
  /s/ Thomas P. M. Couse

  
	
   

  	
  THOMAS P. M.
  COUSE

  
	
   

  	
   

  
	
   

  	
   

  
	
  GAFFNEY:

  	
  /s/ Michael
  Gaffney

  
	
   

  	
  MICHAEL GAFFNEY

  
	
   

  	
   

  
	
   

  	
   

  
	
  J. COUSE:

  	
  /s/ Joanne Couse

  
	
   

  	
  JOANNE COUSE