Exhibit 10.5


 


AMENDMENT NO. 2 TO

SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE


 


THIS
AMENDMENT NO. 2 TO SUBORDINATED CONTINGENT SECURED PROMISSORY NOTE (the “Amendment”) is entered into as of August 31,
2010, by and between EMRISE Electronics Corporation, a New Jersey corporation
(the “Company”), and                                       (“Holder”) and amends that certain
Subordinated Continent Secured Promissory Note (the “Note”) dated August 20, 2008 by and between the Company
and Holder in the original principal amount of up to
                      
Dollars
($                          ),
as amended by Amendment No. 1 dated as of November 20, 2009.  All capitalized terms not otherwise defined
in this Amendment shall have the meanings set forth in the Note.


 


NOW,
THEREFORE, the Company and Holder do hereby agree as follows:


 


1.             Amendments.


 


(a)           Definition of Maturity Date.  The definition of “Maturity Date” in Section 1
is hereby replaced in its entirety with the following:


 


“Maturity Date” shall mean August 31,
2013; provided that if all of the outstanding stock of EMRISE Corporation or
substantially all of the assets of EMRISE Corporation and its subsidiaries are
sold in one transaction, then the Maturity Date shall be the date of the
closing of such transaction.


 


(b)           Definition of Senior Indebtedness.  The definition of “Senior Indebtedness” in Section 1
is hereby replaced in its entirety with the following:


 


“Senior Indebtedness” shall mean the
principal of and unpaid interest on all indebtedness of Parent or any
Subsidiary regardless of whether incurred on, before or after the date of this
Note (i) for money borrowed from any bank, savings and loan or other
financial institution (including without limitation money borrowed from GVEC
Resource IV Inc. and Lloyds TSB Commercial Finance Limited and their
participants, successors and assigns), and is evidenced by notes, bonds,
debentures or other written obligations in an amount not to exceed Fifteen
Million Dollars ($15,000,000) without the prior written approval of Noteholder
(which shall not be unreasonably withheld) and, in any event, shall not exceed
Twenty Million Dollars ($20,000,000); and (ii) any renewals or extensions
of any indebtedness described in (i) above; provided, however,
that the term shall not include (w) any lease financing arrangement
involving Parent or any Subsidiary, (x) trade debt of Parent or any
Subsidiary, (y) indebtedness which by the terms of the instrument creating
or evidencing it is subordinated to or on a parity with this Note, and (z) money
borrowed from Noel C. McDermott, as Trustee of the Noel C. McDermott Revocable
Living Trust dated December 18, 1995, or Warren P. Yost and Gail A. Yost,
as Co-Trustees Under Declaration of Trust dated March 9, 1988
(collectively referred to as “McDermott and Yost”) relating to the purchase by
Parent of all of the capital stock of Larus Corporation (except that the debt
owed to McDermott and Yost is secured by the assets of CXR Larus Corporation 


 

















 


in
a position that has priority over the security interest position to be granted
to Noteholders).


 


(c)           Payments of Principal and Interest.


 


(i)            Section 3.1
is hereby replaced in its entirety with the following:


 


The Company shall make no principal payments during the period
commencing on the Issuance Date and ending on September 30, 2012.  On October 1, 2012 and on the first
business day of each of the three subsequent calendar quarters after such date,
the Company shall make principal payments on the Note in the amount of                      .


 


(ii)           Section 3.2
is hereby replaced in its entirety with the following:


 


Commencing on October 1, 2010, and on the first business day of
each calendar quarter thereafter until the Maturity Date, the Company shall
make quarterly payments of interest on the outstanding principal amount of the
Note.


 


(iii)          Section 3.3
is hereby replaced in its entirety with the following:


 


The outstanding principal amount, together with all accrued and unpaid
interest on this Note, shall be due and payable on the Maturity Date or such
earlier time as provided herein.


 


(iv)          As
of August 31, 2010, the principal balance of the Note is                        
and notwithstanding any provision to the contrary in the Note, as amended
through the date hereof, or the 2008 Stock Purchase Agreement, such principal
balance shall not decrease, except in the event of payment.


 


2.             Covenants, Asset Dispositions.  Section 8.2(a) shall be amended to
substitute the words “any Subsidiary” (with the meaning of Subsidiary as
defined in the Security Agreement) for “ACC” in each instance.


 


3.             Further Assurances.  Each of the parties hereby agrees that it
shall execute and deliver all additional documents and take such further
actions reasonably required to implement the terms and intent of this Amendment.


 


4.             Remaining Provisions of the Note.  All sections and/or paragraphs of the Note
not otherwise amended, modified or restated in this Amendment shall remain in
full force and effect and as set forth in the Note; provided, however,
that in the event of any discrepancy or inconsistency between the Note and this
Amendment, this Amendment shall control.


 


2

















 


IN
WITNESS WHEREOF, the undersigned have executed and acknowledge this Amendment
as of the date first written above.


 


 


	
  THE
  COMPANY:

  	
  EMRISE
  Electronics Corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Carmine T. Oliva

  
	
   

  	
  Name:

  	
  Carmine
  T. Oliva

  
	
   

  	
  Its:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  HOLDER: