Exhibit
10.4


 


THIS SECURITY AGREEMENT IS OR WILL BE SUBJECT TO SUBORDINATION
AGREEMENTS BETWEEN COLLATERAL AGENT AND THE HOLDERS OF THE SENIOR INDEBTEDNESS


 


AMENDED AND RESTATED SECURITY AGREEMENT


 


THIS
AMENDED AND RESTATED SECURITY AGREEMENT
(the “Security Agreement”),
is made as of August 31, 2010, by and among EMRISE Electronics Corporation, a
New Jersey corporation (“Borrower”),
EMRISE Corporation, a Delaware corporation (“Parent”),
the Subsidiaries (as listed on Exhibit A),
Charles S. Brand, an individual (“Collateral Agent”),
and the persons and entities listed on the Schedule of Lenders attached hereto
as Exhibit A
(each, a “Lender” and
collectively, the “Lenders”).


 


R E C I T A L S


 


A.            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 (“ACC”)
owned by Thomas P. M. Couse, Joanne Couse and Michael Gaffney and (ii) Custom Components, Inc. owned by
Charles S. Brand.  As a result of the consummation of the Stock
Purchase Agreement, Borrower beneficially owned all of the capital stock of
ACC.


 


B.            Pursuant to the terms of the Stock
Purchase Agreement, Borrower issued certain subordinated secured contingent
promissory notes (as amended, are referred to herein as the “Subordinated Contingent Notes”) to the
Lenders to satisfy a portion of the aggregate consideration to be paid by
Borrower for the purchase of the Shares. 
The Subordinated Contingent Notes were amended in November 2009 to add
additional payment amounts, and to modify the payment date and terms.  The Subordinated Contingent Notes have been
amended by Amendment No. 2 of even date herewith.


 


C.            Parent, the ultimate parent of
Borrower, delivered a Continuing Guaranty dated August 20, 2008 (the “Guaranty”) in favor of the Lenders pursuant
to which the obligations of Borrower to the Lenders under the Subordinated
Contingent Notes were guaranteed by Parent.


 


D.            The Lenders subordinated the
indebtedness owed to them under the Subordinated Contingent Notes to the holder
of the Senior Indebtedness pursuant to that certain Subordination Agreement
between the Collateral Agent and GVEC Resource IV Inc. dated as of August 20,
2008 (the “GVEC Subordination Agreement”).


 


E.             On June 7, 2010, Borrower entered
into an agreement to sell its direct and indirect interests in the Shares (the “Sale Transaction”). 
In connection with the Sale Transaction, the Borrower, Parent and the
Lenders entered into a Master Agreement, pursuant to which the Lenders agreed
to release their lien on all of the assets or property of ACC (the “Original Collateral”).


 

















 


E.             The parties desire to enter into
this Amended and Restated Security Agreement to grant the Collateral Agent, for
the benefit of himself and the Lenders, a security interest in the collateral
described below as substitute collateral for the Original Collateral.


 


F.             To perfect their grant of a
security interest hereunder, each of XCEL Power Systems, Ltd. and Pascall
Electronics Limited will enter into an All Assets Debenture dated as of the
date hereof in favor of the Collateral Agent (each, a “UK Debenture”).


 


G.            The Collateral Agent will enter into
that certain Deed of Priorities dated as of the date hereof between Lloyds TSB
Commercial Finance Limited, GVEC Resource IV, Inc., Collateral Agent and XCEL
Power Systems, Ltd. (the “XCEL Deed”) and
that certain Deed of Priorities dated as of the date hereof between Lloyds TSB
Commercial Finance Limited, GVEC Resource IV, Inc., Collateral Agent and
Pascall Electronics Limited (the “Pascall Deed”
and collectively with the GVEC Subordination Agreement and the XCEL Deed, the “Subordination Agreements”).


 


H.            The Subordinated Contingent Note
held by Michael Gaffney has been paid in full and he is no longer a “Lender”
hereunder.


 


NOW,
THEREFORE, in consideration of the foregoing premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:


 


1.             Definitions and
Interpretation.  Unless
otherwise defined herein, all other capitalized terms used herein and defined
in the Subordinated Contingent Notes shall have the respective meanings given
to those terms in the Subordinated Contingent Notes, and all terms defined in
the New Jersey Uniform Commercial Code (the “UCC”)
shall have the respective meanings given to those terms in the UCC.


 


2.             Grant of Security
Interest.


 


2.1           To secure the Obligations as defined in Section 3
hereof, each of the Subsidiaries hereby grants to Collateral Agent a continuing security interest and lien in and to
all of the assets and properties of the Subsidiaries, whether now owned or
existing or hereafter acquired or arising and regardless of where located and
all additions and accessions thereto, substitutions and replacements therefor,
and all proceeds thereof (the “Collateral”),
including, without limitation, the following property: all tangible and
intangible assets of  the
Subsidiaries, including, but not limited to, all existing and future inventory,
accounts, deposit accounts, accounts receivable, furniture, fixtures,
equipment, general intangibles, books and records, patents, patent
applications, trademarks, copyrights, trade secrets, and any other property
interest or proprietary right, as well as any document, instrument or drawings
embodying the same.


 


2.2           Borrower, Parent and each of the Subsidiaries hereby jointly
and severally warrant and represent to and covenant and agree with the
Collateral Agent and the Lenders that the continuing security interest and lien
granted pursuant to this Security Agreement is and shall at all times be a
priority security interest in the assets of each Subsidiary, subordinate only
to Senior Indebtedness.


 


2

















 


3.             Security for
Obligations.  The
obligations secured by this Security Agreement (the “Obligations”) shall mean and include all obligations of
Borrower as provided in (i) the Subordinated Contingent Notes, (ii) 
the Stock Purchase Agreement, and (iii) all of the other Related Agreements (as
such term is defined in the Stock Purchase Agreement).


 


4.             Possession and Location of
Collateral.  Unless and until any default occurs
hereunder as set forth in Section 11 hereof, each of the Subsidiaries
shall have possession of its Collateral for its use and enjoyment in any lawful
manner not inconsistent with this Security Agreement or the Subordinated
Contingent Notes.  The Collateral will be
kept at any of Parent’s place of business or the place of business of any of
the Subsidiaries (or such other places as any of Parent or the Subsidiaries
customarily keeps the Collateral) with respect to such Collateral and will not
be moved therefrom without the prior written consent of Collateral Agent,
except that Parent and the Subsidiaries may make sales of inventory items in
the ordinary course of business.  No
Subsidiary shall replace or make material alterations in the Collateral without
the prior written consent of Collateral Agent. 
The consent of Collateral Agent required hereby shall not be
unreasonably withheld.


 


5.             Financing Statements.  Concurrently with the execution of this
Security Agreement, each of the Subsidiaries shall execute and deliver to
Collateral Agent (a) the UCC-1 financing statement, or its foreign equivalent,
provided by Collateral Agent evidencing the Collateral Agent’s interest in the
Collateral and (b) a UCC-3 financing statement provided by Collateral Agent
evidencing Collateral Agent’s release of its lien on the Original
Collateral.  Collateral Agent hereby
authorizes and directs each of Borrower and Parent to file or cause to be filed
the UCC-3 financing statement.


 


6.             Transfer, Taxes,
Liens and Encumbrances. 
Each of the Subsidiaries represents and warrants that it has title to
its respective Collateral free and clear of any lien, security interest or
encumbrance, except for the security interests of the holders of the Senior
Indebtedness and the security interest created by this Security Agreement, and
if such Subsidiary is party to a UK Debenture, the applicable UK
Debenture.  Title to the Collateral will
remain in and continue to be vested in each respective Subsidiary.  Each of the Subsidiaries will defend its
Collateral and will not sell, offer to sell or otherwise transfer the
Collateral, any portion thereof, or any interest therein, without the prior
written consent of Collateral Agent, except that Parent and Subsidiaries may
make sales of inventory items in the ordinary course of business.  The consent of Collateral Agent required
hereby shall not be unreasonably withheld. 
As applicable, Parent, Borrower or the Subsidiaries shall pay all taxes,
assessments and other charges made against the Collateral.


 


7.             Risk of Loss and
Inspection of Collateral. 
As applicable, Parent or the Subsidiaries shall have all risk of loss of
the Collateral, and each Subsidiary will keep its Collateral in good order and
repair.  Collateral Agent shall have the
right, at any reasonable time, to enter upon the premises where the Collateral
is located to examine and inspect the Collateral in person or by agent.  Any refusal to permit such entry shall be a
breach of this Security Agreement.


 


8.             Insurance.  As applicable, Parent or the Subsidiaries
shall keep the Collateral insured, at its own expense, in an amount not less
than its full insurable value, against loss by fire, theft, vandalism and
malicious mischief, storm, earthquake and extended coverage, and 


 


3

















 


shall cause the Lenders to be named as additional
insured parties and loss payees in such insurance, and furnish to Collateral
Agent written evidence thereof.


 


9.             Representations and
Warranties.  Borrower,
Parent and each of the Subsidiaries hereby jointly and severally represent and
warrant to Collateral Agent and
the Lenders that: (i) each of Borrower, Parent and the Subsidiaries has full
power and authority to enter into this Security Agreement (and, if party to a
UK Debenture, such UK Debenture) and to grant the security interest and lien in
and to the Collateral and has taken all proper and necessary actions to
authorize the execution, delivery and performance of this Security Agreement
(and, if party to a UK Debenture, such UK Debenture); (ii) that the Parent owns
one hundred percent (100%) of the issued and outstanding capital stock,
directly or indirectly, of the Borrower and each of the Subsidiaries; (iii)
this Agreement is valid and binding upon and enforceable against Borrower,
Parent and Subsidiaries, except as such enforceability may be limited by
applicable insolvency, bankruptcy, reorganization, moratorium or other similar
laws affecting creditors’ rights generally and general principles of equity;
and (iv) the making and performance of this Security Agreement (and if a party
to a UK Debenture, such UK Debenture) by Borrower, Parent and the Subsidiaries
will not conflict with their respective certificates of incorporation, bylaws,
or other organizational documents, breach or violate any law, statute, rule or
regulation of, or any judgment, order, decree, writ, injunction or award issued
by any governmental authority or violate or result in a default (immediately or
with the passage of time or notice or both) under any contract, indenture,
agreement or instrument to which Borrower, Parent or the Subsidiaries, as
applicable, is a party, or by which any of Borrower, Parent or the Subsidiaries
is bound.


 


10.           Covenants.  Borrower, Parent and each of the Subsidiaries
hereby agree as follows:


 


10.1         (Liens on Collateral)  not to create, incur, assume or suffer to
exist any lien or security interest of any kind upon the Collateral other than
in favor of the holders of any Senior Indebtedness; provided that no additional
liens or security interest will be granted in favor of McDermott and Yost as
defined in the Note;


 


10.2         (Further Assurances)  that at any time and from time to time, at
Parent’s expense, Parent, Borrower and the Subsidiaries will promptly execute
and deliver all further instruments and documents and take all further action,
that may be necessary or desirable, or that Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or purported
to be granted hereby or to enable Collateral Agent to exercise and enforce
Collateral Agent’s rights and remedies hereunder with respect to any
Collateral;


 


10.3         (Parent Financial
Statements)  from and
after the date hereof until the Notes are paid in full, on a quarterly basis
within five (5) business days after the scheduled filing date (including any
extensions pursuant to Rule 12b-25 of the Securities Exchange Act of 1934) for
Parent’s Form 10-Q or Form 10-K, as applicable, with the Securities and
Exchange Commission, Parent will provide Collateral Agent with copies of Parent’s
quarterly and annual financial statements and any related notes;


 


10.4         (Parent, Borrower and
Subsidiary Financial Statements) 
from and after the date hereof until the Notes are paid in full, on a
quarterly basis within forty-five (45) 


 


4

















 


days after the end of each fiscal quarter, and
within sixty (60) days after the end of each fiscal year, Parent, Borrower and
each Subsidiary will provide Collateral Agent with copies of separate company
quarterly and annual financial statements and any related notes for each of
Parent (only to the extent such separate company financial statements may no be
longer required to be filed with the Securities and Exchange Commission),
Borrower and each Subsidiary;


 


10.5         (Sale of Parent, Borrower
or Subsidiaries).  in the
event that Parent, Borrower or any of the Subsidiaries or any assets of the
Subsidiaries (other than assets of the Subsidiaries sold in the ordinary course
of business) is proposed to be sold, including by way of stock sale, merger or
otherwise, the Parent shall provide notice to the Collateral Agent of such
proposed sale promptly and to the extent possible at least thirty (30) days
prior to the consummation thereof and in no event less than fourteen (14) days
prior to the consummation thereof; and


 


10.6         (Senior Indebtedness).
on an aggregate basis, not to incur Senior Indebtedness in an amount
outstanding exceeding Fifteen Million Dollars ($15,000,000) without the prior
written approval of the Lenders (which shall not be unreasonably withheld) and,
in no event, in an amount outstanding exceeding Twenty Million Dollars
($20,000,000).


 


11.           Events of Default;
Remedies.


 


11.1         Event of Default.  An Event of Default shall be deemed to have
occurred under this Security Agreement upon the occurrence and during the
continuance of an Event of Default (as defined in the Subordinated Contingent
Notes).


 


11.2         Rights Under the UCC.  In addition to all other rights granted
hereby and by the UK Debentures, and otherwise by law, subject to the
Subordination Agreements, Collateral Agent shall have, with respect to the
Collateral, the rights and obligations of a secured party under the UCC.


 


11.3         Notice, Etc.  In any case where notice of sale is required,
ten (10) days notice shall be deemed reasonable notice.  Subject to the Subordination Agreements,
Collateral Agent may have resort to the Collateral or any portion thereof with
no requirement on the part of Collateral Agent to proceed first against any
other Person (as defined in the Subordinated Contingent Notes) or property.


 


11.4         Other Remedies.  Upon the occurrence and during the
continuance of an Event of Default, subject to the Subordination Agreements, at
the request of Collateral Agent, Parent, Borrower and each Subsidiary, as
applicable, shall assemble and make available to Collateral Agent all of the
Collateral at a place or places reasonably convenient to each of Borrower,
Parent and the Subsididaries, as applicable, and Collateral Agent; provided,
however, that none of Parent, Borrower or any Subsidiary shall be obligated
under this Agreement to ship any Collateral internationally.


 


11.5         Application of
Collateral Proceeds. 
Subject to the Subordination Agreements, the proceeds and/or avails of
the Collateral, or any part thereof, and the proceeds and the avails of any
remedy hereunder (as well as any other amounts of any kind held by 


 


5

















 


Collateral Agent at the time of, or received by
Collateral Agent after, the occurrence of an Event of Default) shall be paid to
and applied as follows:


 


(a)           first, to the payment of reasonable costs and expenses,
including all amounts expended to preserve the value of the Collateral, of
foreclosure or suit, if any, and of such sale and the exercise of any other
rights or remedies, and of all proper fees, expenses, liability and advances,
including reasonable legal expenses and attorneys’ fees, incurred or made hereunder
by Collateral Agent;


 


(b)           second, to the payment to each Lender of the amount then
owing or unpaid on such Lender’s Subordinated Contingent Note, and in case such
proceeds shall be insufficient to pay in full the whole amount so due, owing or
unpaid upon such Subordinated Contingent Note, then its Pro Rata Share of the
amount remaining to be distributed (to be applied first to accrued interest and
second to outstanding principal); and


 


(c)           third, to the payment of the surplus, if any, to Borrower,
its successors and assigns, or to whomsoever may be lawfully entitled to
receive the same.


 


For
purposes of this Security Agreement, the term “Pro Rata Share” shall mean, when calculating a Lender’s
portion of any distribution or amount, that distribution or amount (expressed
as a percentage) equal to a fraction (i) the numerator of which is the
outstanding principal amount of such Lender’s Subordinated Contingent Note as
set forth on Exhibit A hereto, and (ii)
the denominator of which is the aggregate outstanding principal amount of all
Subordinated Contingent Notes issued under the Stock Purchase Agreement as set
forth on Exhibit A hereto.  In the event that a Lender receives payments
or distributions in excess of its Pro Rata Share, then such Lender shall hold
in trust all such excess payments or distributions for the benefit of the other
Lenders and shall pay such amounts held in trust to such other Lenders upon
demand by such Lenders.


 


12.           Authorized Action by
Collateral Agent.


 


(a)           Borrower, Parent and each of the Subsidiaries each hereby
appoint Collateral Agent  as
attorney-in-fact for each of Borrower, Parent and each Subsidiary,
respectively, with full authority in the place and stead of Borrower, Parent
and each Subsidiary, respectively, and in the name of Borrower, Parent and each
Subsidiary, as applicable, or otherwise, from time to time in Collateral Agent’s  discretion and to the full extent
permitted by law to take any action and to execute any instrument which
Collateral Agent may deem reasonably necessary or advisable to accomplish the
purposes of this Security Agreement in accordance with the terms and provisions
hereof, including without limitation, to receive, endorse and collect all
instruments made payable to Borrower, Parent or any Subsidiary representing any
dividend, interest payment or other distribution in respect of the Collateral
or any part thereof and to give full discharge for the same.


 


(b)           This power of attorney is a power coupled with an interest
and shall be irrevocable.  The powers
conferred on Collateral Agent hereunder are solely to protect 


 


6

















 


the Collateral Agent and
Lenders’ interests in the Collateral and shall not impose any duty upon
Collateral Agent to exercise any such powers. 
Collateral Agent shall be accountable only for amounts that he actually
receives as a result of the exercise of such powers and in no event shall
Collateral Agent or any of his employees or agents be responsible to Borrower,
Parent or any Subsidiary for any act or failure to act, except for gross
negligence or willful misconduct.


 


13.           Collateral Agent.


 


13.1         Appointment.  The Lenders hereby appoint Charles S. Brand
as Collateral Agent for the Lenders under this Security Agreement (in such
capacity, the “Collateral Agent”) to serve from
the date hereof until the termination of this Security Agreement.


 


13.2         Powers and Duties of
Collateral Agent, Indemnity by Lenders.


 


(a)           Each Lender hereby irrevocably authorizes the Collateral
Agent to take such action and to exercise such powers hereunder as provided
herein, together with such powers as are reasonably incidental thereto.  Collateral Agent may execute any of his
duties hereunder by or through agents or employees at his discretion.


 


(b)           Upon the death or resignation of the Collateral Agent, the
Lenders shall appoint a successor collateral agent to act under the
Subordinated Contingent Notes and this Security Agreement. If no such successor
collateral agent shall have been so appointed by the Lenders and shall have
accepted such appointment within thirty (30) days after Collateral Agent’s
death or giving of notice of resignation as Collateral Agent, then Collateral
Agent shall be deemed to be Thomas P. M. Couse or his successor-in-interest to
his Subordinated Contingent Note.  Upon
the acceptance of any appointment as successor collateral agent hereunder by a
successor collateral agent, such successor collateral agent shall thereupon
succeed to and become vested with all rights, powers, privileges, duties and
obligations of Collateral Agent hereunder, and the Collateral Agent shall be
discharged from his duties and obligations. After Collateral Agent’s death or
resignation hereunder as the Collateral Agent, the provisions of this Section
13 shall continue in effect for his benefit in respect of any actions taken
or omitted to be taken by him while he was acting as such Collateral Agent.


 


14.           Miscellaneous.


 


14.1         Notices.  Any notice, request or other communication
required or permitted hereunder shall be in writing and shall be deemed to have
been duly given if personally delivered or mailed by registered or certified
mail, postage prepaid, or by recognized overnight courier or personal delivery
at the respective addresses of the parties as set forth on Exhibit
A hereto or on the register maintained by the Parent.  Any party hereto may by notice so given
change its address for future notice hereunder. 
Notice shall conclusively be deemed to have been given when received.


 


14.2         Nonwaiver.  No failure or delay on Borrower, Parent, a
Subsidiary, Collateral Agent or Lenders’ part in exercising any right hereunder
shall operate as a waiver 


 


7

















 


thereof or of any other right nor shall any single
or partial exercise of any such right preclude any other further exercise
thereof or of any other right.


 


14.3         Amendments and Waivers.  This Security Agreement may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by Borrower, Parent, each Subsidiary and Collateral Agent.  Each waiver or consent under any provision
hereof shall be effective only in the specific instances for the purpose for
which given.


 


14.4         Assignments.  This Security Agreement shall be binding upon
and inure to the benefit of Lenders, Collateral Agent, Parent, Borrower and
each Subsidiary and their respective successors, assigns, heirs, beneficiaries
and legal representatives; provided, however, that none of
Borrower, Parent and any Subsidiary may assign their respective rights and
duties hereunder without the prior written consent of Collateral Agent.


 


14.5         Cumulative Rights, etc.  The rights, powers and remedies of Lenders
and Collateral Agent under this Security Agreement shall be in addition to all
rights, powers and remedies given to Lenders and Collateral Agent by virtue of
any applicable law, rule or regulation of any governmental authority, the Stock
Purchase Agreement, the Subordinated Contingent Notes, the Guaranty, the UK
Debentures, the XCEL Deeed, the Pascall Deed or any other agreement, all of
which rights, powers, and remedies shall be cumulative and may be exercised
successively or concurrently without impairing Collateral Agent’s rights
hereunder.  Each of Borrower, Parent and
each Subsidiary waive any right to require Collateral Agent or Lenders to
proceed against any Person or to exhaust any collateral or to pursue any remedy
in Collateral Agent or Lenders’ power.


 


14.6         Partial Invalidity.  If at any time any provision of this Security
Agreement is or becomes illegal, invalid or unenforceable in any respect under
the law or any jurisdiction, neither the legality, validity or enforceability
of the remaining provisions of this Security Agreement nor the legality,
validity or enforceability of such provision under the law of any other
jurisdiction shall in any way be affected or impaired thereby.


 


14.7         Expenses.  Parent, Borrower and each Subsidiary, jointly
and severally, agree to pay on demand all reasonable fees and expenses,
including reasonable attorneys’ fees and expenses, incurred by Collateral Agent
with respect to any amendments or waivers hereof requested by Parent, Borrower
or a Subsidiary or in the enforcement or attempted enforcement of any of the
Obligations or in preserving any of Collateral Agent’s or Lenders’ rights and
remedies (including, without limitation, all such fees and expenses incurred in
connection with any “workout” or restructuring affecting this Security
Agreement, the Subordinated Contingent Notes, the Guaranty, the UK Debentures,
the XCEL Deeed, the Pascall Deed or the Obligations or any bankruptcy or
similar proceeding involving Parent, Borrower or any Subsidiary).


 


14.8         Governing Law;
Jurisdiction.  This
Security Agreement shall be governed by and construed in accordance with the
laws of the State of New Jersey without reference to conflicts of law rules
(except to the extent governed by the UCC). 
Any action or proceeding seeking to enforce any provision of, or based
on any right arising out of, this Security Agreement, may be brought against
any party to this Security Agreement in the courts of the State of New Jersey,
Monmouth County, or, if it has or can acquire jurisdiction, the United States 


 


8

















 


District Court for the District of New Jersey, and
each of the parties hereto consents to the jurisdiction of such courts (and of
the appropriate appellate courts) in any such action or proceeding and waives
any objection to venue laid therein. 
Process in any action or proceeding referred to in the preceding
sentence may be served on any party anywhere in the world.


 


14.9         Jury Trial.  BORROWER, PARENT, EACH SUBSIDIARY, LENDERS
AND COLLATERAL AGENT, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY
IRREVOCABLY WAIVE ALL RIGHT TO TRIAL BY JURY AS TO ANY ISSUE RELATING HERETO IN
ANY ACTION, PROCEEDING, OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
SECURITY AGREEMENT.


 


[Signature page follows.]


 


9

















 


IN
WITNESS WHEREOF, the parties have caused this Security Agreement to be executed
as of the day and year first above written.


 


	
   

  	
  EMRISE ELECTRONICS CORPORATION,

  
	
   

  	
  a
  New Jersey corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carmine T. Oliva

  
	
   

  	
  Name:

  	
  Carmine T. Oliva

  
	
   

  	
  Its:

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EMRISE
  CORPORATION,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carmine T. Oliva

  
	
   

  	
  Name:

  	
  Carmine T. Oliva

  
	
   

  	
  Its:

  	
  Chairman and Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CXR
  LARUS CORPORATION,

  
	
   

  	
  a
  Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carmine T. Oliva

  
	
   

  	
  Name:

  	
  Carmine T. Oliva

  
	
   

  	
  Its:

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  PASCALL
  ELECTRONICS LIMITED,

  
	
   

  	
  a
  United Kingdom corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Graham Jefferies

  
	
   

  	
  Name:

  	
  Graham Jefferies

  
	
   

  	
  Its:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  XCEL
  POWER SYSTEMS, LTD.,

  
	
   

  	
  a
  United Kingdom corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Graham Jefferies

  
	
   

  	
  Name:

  	
  Graham Jefferies

  
	
   

  	
  Its:

  	
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/
  Charles S. Brand

  
	
   

  	
  Charles S. Brand, as Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  See
  Schedule of Lenders on Exhibit A for signatures of Lenders.

  



 


Amended
and Restated Security Agreement


 

















 


EXHIBIT A


 


Schedule of Subsidiaries


 


·                                          CXR Larus Corporation, a
Delaware corporation


 


·                                          Pascall Electronics Limited,
a United Kingdom company


 


·                                          XCEL Power Systems, Ltd., a
United Kingdom company


 


Schedule of Lenders


 


	
  Lender’s Name and Address

  	
   

  	
  Principal Amount of

  Note outstanding

  on August 31, 2010

  	
   

  	
  Lender’s Signature

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Charles S. Brand

  	
   

  	
  $

  	
  2,211,766.43

  	
   

  	
   

  	
   

  
	
  175 Boundary Road

  	
   

  	
   

  	
   

  	
  /s/ Charles S. Brand

  	
   

  
	
  Colts Neck, NJ 07722

  	
   

  	
   

  	
   

  	
  Charles S. Brand

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Thomas P. M. Couse

  	
   

  	
  $

  	
  332,720.81

  	
   

  	
   

  	
   

  
	
  1 Waltham Way

  	
   

  	
   

  	
   

  	
  /s/ Charles S. Brand

  	
   

  
	
  Jackson, NJ 08527

  	
   

  	
   

  	
   

  	
  Charles S. Brand, as
  attorney in fact for Thomas P.M. Couse

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Joanne Couse

  	
   

  	
  $

  	
  332,720.81

  	
   

  	
   

  	
   

  
	
  1 Waltham Way

  	
   

  	
   

  	
   

  	
  /s/ Charles S. Brand

  	
   

  
	
  Jackson, NJ 08527

  	
   

  	
   

  	
   

  	
  Charles S. Brand, as
  attorney in fact for Joanne Couse

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Aggregate Principal Amount:

  	
   

  	
  $

  	
  2,877,208.05

  	
   

  	
   

  	
   

  



 


Amended
and Restated Security Agreement