Exhibit 10.2


 


AMENDMENT NUMBER 16 TO LOAN DOCUMENTS


 


This
AMENDMENT NUMBER 16 TO LOAN DOCUMENTS (this “Sixteenth Amendment”) is
entered into as of August 31, 2010, by and among GVEC RESOURCE IV INC.
(the “Agent”), as Agent and as a Lender, PRIVATE EQUITY MANAGEMENT GROUP
LLC, a Delaware limited liability company (“PEMG”), EMRISE CORPORATION,
a Delaware corporation (“Parent”), and Parent’s Subsidiaries that are
signatories hereto (collectively, with Parent, the “Borrowers” and each
individually, a “Borrower”), with reference to the following facts:


 


A.                                   Borrowers,
Agent and the Lenders named therein are parties to that certain Credit
Agreement, dated as of November 30, 2007, as amended by that certain
Amendment Number 1 to Loan Documents, dated as of August 20, 2008, that
certain Amendment Number 2 to Loan Documents, dated as of February 12,
2009, that certain Forbearance Agreement and Amendment Number 3 to Loan
Documents, dated as of March 20, 2009 (as amended by that certain
Amendment 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 Loan Documents, dated as of August 14,
2009, that certain Amendment Number 6 to Loan Documents, dated as of November 3,
2009, that certain Amendment Number 7 to Loan Documents, dated as of November 13,
2009, that certain Amendment Number 8 to Loan Documents, dated as of December 31,
2009, that certain Amendment Number 9 to Loan Documents, dated as of April 13,
2010, that certain Amendment Number 10 to Loan Documents, dated as of May 3,
2010, that certain Amendment Number 11 to Loan Documents, dated as of May 17,
2010, that certain Amendment Number 12 to Loan Documents, dated as of June 1,
2010, that certain Amendment Number 13 to Loan Documents, dated as of June 17,
2010, that certain Amendment Number 14 to Loan Documents, dated as of July 16,
2010 and that certain Amendment Number 15 to Loan Documents, dated as of July 31,
2010 (as further amended, restated, supplemented or modified from time to time,
the “Credit Agreement”).


 


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


 


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


 


2.                                       Representations
and Warranties.


 


(a)                                  Each Borrower
hereby represents and warrants that, after giving effect to this Sixteenth
Amendment, 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)                                 All
representations and warranties of Borrowers in this Sixteenth Amendment and the
Credit Agreement are true and correct as of the date hereof, and shall survive
the execution of this Sixteenth Amendment.


 


3.                                       Amendments.  Subject to the timely consummation of the
Stock Purchase Agreement (the “SPA”) between Emrise Electronics Corporation and
Aeroflex Incorporated dated as of June 7, 2010 (which shall, in any event,
be consummated not later than August 31, 2010), and the receipt by PEMG
for the benefit of Agent of proceeds sufficient to satisfy all amounts (which
amounts are more fully set forth in the payoff letter attached as Exhibit “B”)
due under the Credit Agreement (other than an amount on account of the Term
Loans not to exceed an aggregate of One Million Dollars ($1,000,000) and fees
otherwise due PEMG in the amount of Two Hundred Thirty Seven Thousand Five
Hundred Dollars ($237,500) which fees are permanently waived), the following
provisions of the Credit Agreement shall be deemed to be amended and restated
to read as follows:


 


(a)                                  The Revolver is
hereby terminated and Section 2.1 shall be deemed to be amended and
restated in its entirety to read as follows:


 


“[Intentionally
Omitted].”


 


(b)                                 Section 2.2(a) shall
be deemed to be amended and restated in its entirety to read as follows:


 


“(a)                            Subject to the
terms and conditions of this Agreement, on August 31, 2010, Lenders shall
be deemed to have made a term loan (the “Amended and Restated Term Loan A”) to
Borrowers in an amount not to exceed One Million Dollars ($1,000,000).


 


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(c)                                  The third
sentence of Section 2.2(c) hereby is amended and restated in its
entirety to read as follows:


 


“The
Amended and Restated Term Loan A shall be repaid in accordance with the terms
and conditions of that certain Amended and Restated Term Loan A Note.”


 


(d)                                 Sections 2.2(d) and
(e) hereby are deleted in their entireties.


 


(e)                                  Section 2.7
shall be deemed to be amended and restated in its entirety to read as follows:


 


“[Intentionally
Omitted].”


 


(f)                                    Section 2.8
shall be deemed to be amended and restated in its entirety to read as follows:


 


“[Intentionally
Omitted].”


 


(g)                                 Section 2.11
shall be deemed to be amended and restated in its entirety to read as follows:


 


“[Intentionally
Omitted].”


 


(h)                                 A phrase is
hereby added to the beginning of Section 5.2 as follows:


 


“If
requested by Agent,”


 


(i)                                     Section (c) of
Schedule 5.3 shall be deemed to be amended and restated in its entirety to read
as follows:


 


“[Intentionally
Omitted].”


 


(j)                                     Sections 5.4,
5.5, 5.9 and 5.15 shall be deemed to be amended and restated in their entirety
to read as follows:


 


“[Intentionally Omitted].”


 


(k)                                  A phrase is
hereby added to the end of the introductory paragraph of Section 6 as
follows:


 


“such
consent not to be unreasonably withheld”


 


(l)                                     Section 6.1(c) shall
be deemed to be amended and restated in its entirety to read as follows:


 


“(c)                            Purchase Money
Indebtedness and Indebtedness for working capital facilities,”


 


(m)                               Section 6.1(e) shall
be deemed to be amended and restated in its entirety to read as follows:


 


“(e)                            other unsecured
Indebtedness in an aggregate principal amount at any time outstanding not to
exceed One Million Five Hundred Thousand Dollars ($1,500,000),”


 


(n)                                 A new sentence
is hereby added to the end of Section 6.2 as follows:


 


“Borrower
may incur Liens to secure working capital facilities permitted under
Section 6.1(c) and Agent hereby agrees to subordinate its security
interest to such Liens on terms and conditions reasonably acceptable to Agent.”


 


(o)                                 Section 6.16(d) is
hereby deleted in its entirety.


 


(p)                                 Section 6.21
is hereby deleted in its entirety.


 


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(q)                                 All of Agent’s
and Lenders’ security interests in the assets of Advanced Control Components, Inc.
(“ACC”) and Custom Components, Inc. (“CCI”), including without limitation,
any pledge of stock in either ACC or CCI are automatically terminated and
released, Agent will promptly deliver to Borrowers the original stock
certificates of ACC and CCI and Borrowers are authorized to file of record UCC
amendment statements terminating any financing statements naming ACC or CCI as
debtor in favor of Agent or any Lender and Agent shall, at Borrowers’ expense,
execute any other lien termination documents as Borrowers may reasonably
request to effectuate this provision.


 


(r)                                    Agent and
Lenders hereby agree that as soon as is practical after execution hereof, Agent
and Lenders will take all necessary steps to terminate any Lockbox Agreements
(or related agreements) entered into by Agent, Lender, any Borrower and East
West Bank.  After the date hereof and
prior to termination of such Lockbox Agreements (or related agreements), Agent
shall turn over to Borrowers all items collected into the lockbox, on a daily
basis.


 


(s)                                  Agent consents
to the consummation of the transactions contemplated under that certain Master
Agreement dated June 7, 2010 among Parent, Borrowers, certain Subsidiaries
of Borrower, Charles S. Brand, Thomas P. Couse, Joanne Couse and Michael
Gaffney


 


(t)                                    Agent shall
execute and deliver Deeds of Priority in favor of Lloyds TSB Commercial Finance
Limited with respect to (i) XCEL Power Systems, Ltd and (ii) Pascall
Electronics Limited in form and substance reasonably acceptable to Agent.


 


(u)                                 The Term Loan A
Note shall be replaced in its entirety with the Amended and Restated Term Loan
A Note


 


(v)                                 The defined
term “Term Loan A” in the Credit Agreement shall mean and refer to the “Amended
and Restated Term Loan A.”


 


4.                                       Default.  In addition to all other Events of Default
under the Credit Agreement, the following shall constitute Events of Default
under this Sixteenth Amendment and the Credit Agreement: (i) Borrowers’
failure to pay any amount when due under this Sixteenth Amendment or to perform
any covenant or other agreement contained in this Sixteenth Amendment, or any
other document entered into pursuant hereto, including but not limited to the
Amended and Restated Term Loan A Note, and/or (ii) the termination of the
SPA.


 


5.                                       Conditions
Precedent.  The
effectiveness of this Sixteenth Amendment is subject to Agent’s receipt of all
of the following:


 


(a)                                  this Sixteenth
Amendment and such other agreements and instruments reasonably requested by
Agent pursuant hereto (including such documents as are necessary to create and
perfect Agent’s interest in the Collateral, and including but not limited to
the Amended and Restated Term Loan A Note, substantially in the form attached
hereto as Annex Q), each duly executed by each Borrower;


 


(b)                                 payment by
Borrowers to PEMG of an amendment fee in the amount of Twenty Thousand Dollars
($20,000), which shall be nonrefundable as of the date hereof and due and payable
upon receipt of the “Closing Payment” under and as defined in the SPA;


 


(c)                                  payment by
Borrowers of all legal fees and expenses incurred through (which shall be due
and payable on, and nonrefundable as of) the date of this Sixteenth Amendment
(which shall be remitted via wire transfer according to the instructions set
forth on Exhibit A hereto); and


 


(d)                                 such other
documents and completion of such other matters as Agent may reasonably deem
necessary or appropriate.


 


6.                                       Conditions
Subsequent.  Parent shall
deliver to Agent, the following items by the respective dates following
consummation of the SPA, each in form and content reasonably acceptable to
Agent:


 


(a)                                  A detailed
post-closing outline of sources and uses of the purchase price, within 2
calendar days thereof; and


 


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(b)                                 Borrower’s
go-forward, pro forma financials.


 


7.                                       Release.


 


(a)                                  Each Borrower
acknowledges that neither Agent, any Lender nor PEMG (the “Released Parties”)
would enter into this Sixteenth Amendment without Borrowers’ assurance
hereunder.  Except for the obligations
arising hereafter under this Sixteenth Amendment, each Borrower hereby
absolutely discharges and releases the Released Parties, any person or entity
that has obtained any interest from any of them under the Credit Agreement or
otherwise and each of the Released Parties’ and such entities’ former and
present partners, stockholders, officers, directors, employees, successors,
assignees, agents and attorneys from any known or unknown claims which any
Borrower now has against any of them of any nature, including any claims that
any Borrower, its successors, counsel, and advisors may in the future discover
they would have now had if they had known facts not now known to them, whether
founded in contract, in tort or pursuant to any other theory of liability,
including but not limited to any claims arising out of or related to the Credit
Agreement or the transactions contemplated thereby.


 


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


 


A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN 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 Borrower
and each Borrower’s shareholders, agents, employees, assigns and successors in
interest.  The provisions, waivers and
releases of this section shall inure to the benefit of the Released Parties and
their respective agents, employees, officers, directors, assigns and successors
in interest.


 


(d)                                 Each Borrower
warrants and represents that such Borrower is the sole and lawful owner of all
right, title and interest in and to all of the claims released hereby and no
Borrower has heretofore assigned or transferred or purported to assign or
transfer to any person any such claim or any portion thereof.  Each Borrower shall indemnify and hold harmless
Agent, each Lender and PEMG from and against any claim, demand, damage, debt,
liability (including payment of attorneys’ fees and costs actually incurred
whether or not litigation is commenced) based on or arising out of any such
assignment or transfer.


 


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


 


8.                                       Consultation of
Counsel.  Each Borrower acknowledges
that such Borrower has had the opportunity to be represented by legal counsel
of its own choice throughout all of the negotiations that preceded the execution
of this Sixteenth Amendment.  Each
Borrower has executed this Sixteenth Amendment after reviewing and
understanding each provision of this Sixteenth Amendment and without reliance
upon any promise or representation of any person or persons acting for or on
behalf of Agent.  Each Borrower further
acknowledges that such Borrower and its counsel have had adequate opportunity
to make whatever investigation or inquiry they may deem necessary or desirable
in connection with the subject matter of this Sixteenth Amendment prior to the
execution hereof and the delivery and acceptance of the consideration described
herein.


 


9.                                       Miscellaneous.


 


(a)                                  Successors and
Assigns.  This Sixteenth Amendment shall
be binding upon and shall inure to the benefit of Borrower and Agent and their
respective successors and assigns; provided, however, that the foregoing shall
not authorize any assignment by Borrower of its rights or duties hereunder.


 


(b)                                 Integration.  This Sixteenth Amendment and any documents
executed in connection herewith or pursuant hereto contain the entire Sixteenth
Amendment between the parties with respect to the subject matter hereof and
supersede all prior agreements, understandings, offers and negotiations, oral
or written, with respect thereto and no extrinsic evidence whatsoever may be
introduced in any judicial or arbitration proceeding, if any, involving this
Sixteenth Amendment; except that any financing statements or other agreements
or instruments filed by Agent with respect to Borrower shall remain in full
force and effect.


 


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


 


(d)                                 Time is of the
Essence.  Time is of the essence as to
each and every term and provision of this Sixteenth Amendment and the other
Credit Agreement.


 


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


 


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


 


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


 


(h)                                 Upon the
effectiveness of this Sixteenth Amendment, each reference in the Loan Documents
to the “Credit Agreement” “thereunder,” “therein,” “thereof
or words of like import referring to the Credit Agreement shall mean and refer
to the Credit Agreement as amended by this Sixteenth Amendment.


 


(i)                                     Assignment and
Indemnity.  Borrower
consents to Agent’s assignment, in accordance with Section 13 of the
Credit Agreement, of all or any part of Agent’s rights under this Sixteenth
Amendment and the Credit Agreement.


 


10.                                 Entire
Amendment; Effect of Sixteenth Amendment.  This Sixteenth Amendment, and the terms and
provisions hereof, constitutes the entire Sixteenth Amendment among the parties
pertaining to the subject matter hereof and supersedes any and all prior or
contemporaneous amendments relating to the subject matter hereof. Except as
expressly set forth in this Sixteenth Amendment, the Credit Agreement and other
Loan Documents shall remain unchanged and in full force and effect. To the
extent any terms or provisions of this Sixteenth Amendment conflict with those
of the Credit Agreement or other Loan Documents, the terms and provisions of
this Sixteenth Amendment shall control. This Sixteenth Amendment is a Loan
Document.


 


11.                                 Counterparts; Electronic Transmission. This Sixteenth
Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one and the same instrument and any of the parties
hereto may execute this Sixteenth Amendment by signing any such counterpart.
Delivery of an executed counterpart of this Sixteenth Amendment by electronic
mail shall be equally as effective as delivery of an original executed
counterpart of this Sixteenth Amendment. Any party delivering an executed
counterpart of this Sixteenth Amendment by electronic mail also shall deliver
an original executed counterpart of this Sixteenth Amendment, but the failure
to deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Sixteenth Amendment.


 


[Balance of Page Intentionally Left Blank]


 


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IN
WITNESS WHEREOF, the parties have caused this AMENDMENT NUMBER 16 TO LOAN
DOCUMENTS 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 to
Amendment Number 16 to Loan Documents]


 

















 


ANNEX Q

(Amended and Restated Term Loan A Note)


 


[hard copy to be attached]