EXHIBIT
10.8


 


NEITHER THESE SECURITIES
NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN
REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND,
ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES.


 


EMRISE CORPORATION


 


WARRANT


 


	
  Warrant No. PEM-1

  	
   

  	
  Original Issue Date: November 30, 2007

  



 


EMRISE Corporation, a
Delaware corporation (the “Company”), hereby certifies that, for value
received and pursuant to the terms of the Commitment Letter dated November 7,
2007 by and between the Company and Private Equity Management Group, Inc.,
Holder is entitled to purchase from the Company up to a total of 2,909,090
shares of Common Stock (each such share, a “Warrant Share” and all such
shares, the “Warrant Shares”), at any time and from time to time from
and after the Original Issue Date and through and including November 30, 2014
(the “Expiration Date”), and subject to the following terms and
conditions:


 


1.             Definitions. As used in this Warrant,
the following terms shall have the respective definitions set forth in this Section
1.


 


“Alternate
Consideration” shall have the meaning set forth in Section 9(b).


 


“Anti-Dilution
Excluded Securities” shall mean any of the following securities: (i)  securities issued to employees, consultants,
officers or directors of the Company pursuant to the Company’s 2007 Stock
Incentive Plan or Options granted by the Company to employees, consultants,
officers or directors of the Company pursuant to the Company’s 2007 Stock
Incentive Plan and the grant of which is approved by the compensation committee
of the Board of Directors; (ii) for the avoidance of doubt, securities issued
on the conversion of any Convertible Securities or the exercise of any Options,
in each case, outstanding on the Original Issue Date (as disclosed on Schedule
4.8(b) to the Credit Agreement dated November 30, 2007 by and among the
Company, GVEC Resource IV Inc. and certain other parties listed on the
signature pages to the Credit Agreement); and (iii) for the avoidance of doubt,
securities issued in connection with a stock split, stock dividend,
combination, reorganization, recapitalization or 


 

















 


other similar
event for which adjustment is made in accordance with the provisions of this
Warrant.


 


“Business Day”
shall mean any day other than Saturday, Sunday or other day on which commercial
banks in the State of California are authorized or required by law to remain
closed.


 


“Common Stock”
shall mean the Company’s common stock, $0.0033
par value per share.


 


“Common Stock
Equivalents” shall mean Options and Convertible Securities.


 


“Convertible
Securities” shall mean any stock or securities (other than Options)
convertible into or exchangeable for Common Stock.


 


“Date of Exercise”
shall have the meaning set forth in Section 5(a).


 


“Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended, or any successor
law, and regulations and rules issued pursuant to that Act or any successor
law.


 


“Exercise Price”
shall mean $1.10, subject to adjustment in accordance with Section 9.


 


“Fundamental
Transaction” shall mean any of the following: (i) the Company effects any
merger or consolidation of the Company with or into another Person pursuant to
which the Company is not the surviving entity (other than a migratory merger
conducted for the purpose of changing the Company’s state of incorporation),
(ii) the Company effects any sale of all or substantially all of its assets in
one or a series of related transactions, (iii) any tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which
holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (iv) the Company effects any
reclassification of the Common Stock or any compulsory share exchange pursuant
to which the Common Stock is effectively converted into or exchanged for other
securities, cash or property.


 


“Holder”
or “Holders” shall mean the holder or holders, as the case may be, from
time to time, whether direct or beneficially, of Registrable Securities
pursuant to this Warrant, including, without limitation, Private Equity
Management Group LLC and any of its permitted transferees.


 


“Indemnified
Party” shall have the meaning set forth in Section 12(c)(iii).


 


“Indemnifying
Party” shall have the meaning set forth in Section 12(c)(iii).


 


“Losses”
shall have the meaning set forth in Section 12(c)(i).


 


“Person” shall
mean an individual or a corporation, partnership, trust, incorporated or
unincorporated association, joint venture, limited liability company, joint
stock company, government (or an agency or political subdivision thereof) or
other entity of any kind.


 


“New Warrant”
shall have the meaning set forth in Section 3.


 


2

















 


“Options” shall
mean any outstanding rights, warrants or options to subscribe for or purchase
Common Stock or Convertible Securities.


 


“Original Issue Date”
shall mean the Original Issue Date first set forth on the first page of this
Warrant.


 


“Proceeding”
shall mean an action, claim, suit, investigation or proceeding (including,
without limitation, an investigation or partial proceeding, such as a
deposition), whether commenced or threatened.


 


“Prospectus”
shall mean the final prospectus filed with respect to the Registration
Statement (including, without limitation, a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by the Registration Statement, and all other amendments and
supplements to the Prospectus, including one or more other final prospectuses
filed with respect to post-effective amendments, and all material incorporated
by reference in such Prospectus.


 


“Registrable
Securities” shall mean: (i) the Warrant Shares; and (ii) any
securities issued or issuable with respect to such Warrant Shares by way of a
stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization with respect to
any of the securities referenced above.


 


“Registration
Statement” shall mean the registration statements contemplated by Section 12,
including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference in such
registration statement.


 


“Rule 144” shall
mean Rule 144 promulgated by the SEC pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the SEC having substantially the same effect as such Rule.


 


“SEC” shall mean
the United States Securities and Exchange Commission.


 


“Securities Act”
shall mean the Securities Act of 1933, as amended, or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.


 


“Subsidiary” shall
mean any direct or indirect subsidiary of the Company.


 


“Trading Day”
means (i) a day on which the Common Stock is traded on a Trading Market, or
(ii) if the Common Stock is not quoted on any Trading Market, a day on which
the Common Stock is quoted in the over the counter market as reported by the
Pink Sheets, LLC (or any similar organization or agency succeeding to its
functions of reporting prices); provided, that in the event that the Common
Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading
Day shall mean a Business Day.


 


3

















 


“Trading Market”
means whichever of NYSE Arca, the New York Stock Exchange, the American Stock
Exchange, the NASDAQ Global Market, the NASDAQ Capital Market or OTC Bulletin
Board on which the Common Stock is listed or quoted for trading on the date in
question.


 


“Warrant Register”
shall have the meaning set forth in Section 2.


 


2.             Registration of Warrant. The Company
shall register this Warrant upon records to be maintained by the Company for
that purpose (the “Warrant Register”), in the name of the record Holder
hereof from time to time. The Company may deem and treat the registered Holder
of this Warrant as the absolute owner hereof for the purpose of any exercise
hereof or any distribution to the Holder, and for all other purposes, absent
actual notice to the contrary.


 


3.             Registration of Transfers. The Company
shall register the transfer of any portion of this Warrant in the Warrant
Register, upon surrender of this Warrant, with the Form of Assignment attached
hereto duly completed and signed, to the Company at its address specified
herein. Upon any such registration or transfer, a new Warrant to purchase
Common Stock, in substantially the form of this Warrant (any such new Warrant,
a “New Warrant”), evidencing the portion of this Warrant so transferred
shall be issued to the transferee and a New Warrant evidencing the remaining
portion of this Warrant not so transferred, if any, shall be issued to the
transferring Holder. The acceptance of the New Warrant by the transferee
thereof shall be deemed the acceptance by such transferee of all of the rights
and obligations of a holder of a Warrant.


 


4.             Exercise and Duration of Warrants.


 


(a)           This
Warrant shall be exercisable by the registered Holder at any time and from time
to time on or after the Original Issue Date through and including the
Expiration Date. At 5:00 p.m., California time on the Expiration Date, the
portion of this Warrant not exercised prior thereto shall be and become void
and of no value. The Company may not call or redeem any portion of this Warrant
without the prior written consent of the affected Holder.


 


(b)           If
at any time after November 30, 2008  there
is no effective Registration Statement registering, or no current prospectus
available for, the resale of the Warrant Shares by the Holder, then this
Warrant may also be exercised at such time by means of a “cashless exercise” in
which event the Company shall issue to the Holder the number of Warrant Shares
determined as follows:


 


X = Y [(A-B)/A]


 


where:


 


X = the number of Warrant Shares to be issued to the
Holder.


 


Y = the number of Warrant Shares with respect to which
this Warrant is being exercised.


 


4

















 


A = the average of the closing sale prices for the
five Business Days immediately prior to (but not including) the Exercise Date.


 


B = the Exercise Price.


 


5.             Delivery of Warrant Shares.


 


(a)           To
effect exercises hereunder, the Holder shall not be required to physically
surrender this Warrant unless the aggregate Warrant Shares represented by this
Warrant is being exercised. Upon delivery of the Exercise Notice (in the form
attached hereto) to the Company (with the attached Warrant Shares Exercise Log)
at its address for notice set forth herein and upon payment of the Exercise
Price multiplied by the number of Warrant Shares that the Holder intends to
purchase hereunder, the Company shall promptly (but in no event later than
three (3) Business Days after the Date of Exercise) issue and deliver to the
Holder, a certificate for the Warrant Shares issuable upon such exercise,
which, shall contain the following restrictive securities legend:


 


THESE SECURITIES HAVE NOT
BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES
COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY
APPLICABLE STATE SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO,
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS.


 


The Company shall, upon
request of the Holder and subsequent to the date on which the Registration
Statement covering the resale of the Warrant Shares has been declared effective
by the SEC, use its reasonable best efforts to deliver Warrant Shares hereunder
electronically through the Depository Trust Corporation or another established
clearing corporation performing similar functions, if available, provided,
that, the Company may, but will not be required to change its transfer agent if
its current transfer agent cannot deliver Warrant Shares electronically through
the Depository Trust Corporation. A “Date of Exercise” means the date on
which the Holder shall have delivered to the Company: (i) the Exercise Notice
(with the Warrant Exercise Log attached to it), appropriately completed and
duly signed and (ii) if the Holder is not utilizing the cashless exercise
provisions set forth in Section 10(b), payment of the Exercise
Price for the number of Warrant Shares so indicated by the Holder to be
purchased.


 


5

















 


(b)           If
by the third (3rd) Business Day after a Date of Exercise the Company
fails to deliver the required number of Warrant Shares in the manner required
pursuant to Section 5(a), then the Holder will have the right to
rescind such exercise.


 


(c)           The
Company’s obligations to issue and deliver Warrant Shares in accordance with
the terms hereof are absolute and unconditional, irrespective of any action or
inaction by the Holder to enforce the same, any waiver or consent with respect
to any provision hereof, the recovery of any judgment against any Person or any
action to enforce the same, or any setoff, counterclaim, recoupment, limitation
or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation
of law by the Holder or any other Person, and irrespective of any other
circumstance which might otherwise limit such obligation of the Company to the
Holder in connection with the issuance of Warrant Shares. Nothing herein shall
limit a Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to
timely deliver certificates representing Warrant Shares upon exercise of the
Warrant as required pursuant to the terms hereof.


 


6.             Charges, Taxes and Expenses. Issuance
and delivery of Warrant Shares upon exercise of this Warrant shall be made
without charge to the Holder for any issue or transfer tax, withholding tax,
transfer agent fee or other incidental tax or expense in respect of the
issuance of such certificates, all of which taxes and expenses shall be paid by
the Company; provided, however, that the Company shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the registration of any certificates for Warrant Shares or Warrants
in a name other than that of the Holder. The Holder shall be responsible for
all other tax liability that may arise as a result of holding or transferring
this Warrant or receiving Warrant Shares upon exercise hereof.


 


7.             Replacement of Warrant. If this Warrant
is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be
issued in exchange and substitution for and upon cancellation hereof, or in
lieu of and substitution for this Warrant, a New Warrant, but only upon receipt
of evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity (which shall not include a
surety bond), if requested. Applicants for a New Warrant under such
circumstances shall also comply with such other reasonable regulations and
procedures and pay such other reasonable third-party costs as the Company may
prescribe. If a New Warrant is requested as a result of a mutilation of this
Warrant, then the Holder shall deliver such mutilated Warrant to the Company as
a condition precedent to the Company’s obligation to issue the New Warrant.


 


8.             Reservation of Warrant Shares. The
Company covenants that it will at all times reserve and keep available out of
the aggregate of its authorized but unissued and otherwise unreserved Common
Stock, solely for the purpose of enabling it to issue Warrant Shares upon
exercise of this Warrant as herein provided, the number of Warrant Shares which
are then issuable and deliverable upon the exercise of this entire Warrant,
free from preemptive rights or any other contingent purchase rights of Persons
other than the Holder (taking into account the adjustments and restrictions of Section
9). The Company covenants that all Warrant 


 


6

















 


Shares so issuable and
deliverable shall, upon issuance and the payment of the applicable Exercise
Price in accordance with the terms hereof, be duly and validly authorized,
issued and fully paid and nonassessable.


 


9.             Certain Adjustments. The Exercise Price
and number of Warrant Shares issuable upon exercise of this Warrant are subject
to adjustment from time to time as set forth in this Section 9.


 


(a)           Stock
Dividends and Splits. If the Company, at any time while this Warrant is
outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a
distribution on any class of capital stock that is payable in shares of Common
Stock, (ii) subdivides outstanding shares of Common Stock into a larger number
of shares, or (iii) combines outstanding shares of Common Stock into a smaller
number of shares, then in each such case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common
Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after
such event. Any adjustment made pursuant to clause (i) of this paragraph shall
become effective immediately after the payment of the dividend or the making of
the distribution, and any adjustment pursuant to clause (ii) or (iii) of this
paragraph shall become effective immediately after the effective date of such
subdivision or combination.


 


(b)           Fundamental
Transactions. If, at any time while this Warrant is outstanding there is a
Fundamental Transaction, then as a condition to the Company consummating any
such Fundamental Transaction, the Holder shall have the right thereafter to
receive, upon exercise of this Warrant, the same amount and kind of securities,
cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such
Fundamental Transaction, the holder of the number of Warrant Shares then
issuable upon exercise in full of this Warrant (the “Alternate Consideration”).
For purposes of any such exercise, the determination of the Exercise Price
shall be appropriately adjusted to apply to such Alternate Consideration based
on the amount of Alternate Consideration issuable in respect of one share of
Common Stock in such Fundamental Transaction, and the Company shall apportion
the Exercise Price among the Alternate Consideration in a reasonable manner
reflecting the relative value of any different components of the Alternate
Consideration. If holders of Common Stock are given any choice as to the
securities, cash or property to be received in a Fundamental Transaction, then
the Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. At the Holder’s option and request, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant substantially in the form of this Warrant and consistent with the
foregoing provisions and evidencing the Holder’s right to purchase the
Alternate Consideration for the aggregate Exercise Price upon exercise thereof.
The terms of any agreement pursuant to which a Fundamental Transaction is
effected shall include terms requiring any such successor or surviving entity
to comply with the provisions of this paragraph (b) and insuring that the
Warrant 


 


7

















 


(or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction.


 


(c)           Number
of Warrant Shares. Simultaneously with any adjustment to the Exercise Price
pursuant to this Section 9, the number of Warrant Shares that may be
purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price
payable hereunder for the adjusted number of Warrant Shares shall be the same
as the aggregate Exercise Price in effect immediately prior to such adjustment.


 


(d)           Calculations.
All calculations under this Section 9 shall be made to the nearest cent
or the nearest 1/100th of a share, as applicable. The number of shares of
Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such
shares shall be considered an issue or sale of Common Stock.


 


(e)           Notice
of Adjustments. Upon the occurrence of each adjustment pursuant to this Section
9, the Company at its expense will promptly compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment, including a statement of the adjusted Exercise Price and
adjusted number or type of Warrant Shares or other securities issuable upon
exercise of this Warrant (as applicable), describing the transactions giving
rise to such adjustments and showing in detail the facts upon which such
adjustment is based. Upon written request, the Company will promptly deliver a
copy of each such certificate to the Holder and to the Company’s transfer
agent.


 


(f)            Notice
of Corporate Events. If the Company (i) declares a dividend or any other
distribution of cash, securities or other property in respect of its Common
Stock, including without limitation any granting of rights or warrants to
subscribe for or purchase any capital stock of the Company or any Subsidiary,
(ii) authorizes or approves, enters into any agreement contemplating or
solicits shareholder approval for any Fundamental Transaction or (iii)
authorizes the voluntary dissolution, liquidation or winding up of the affairs
of the Company, then the Company shall deliver to the Holder a notice
describing the material terms and conditions of such transaction at least ten
(10) calendar days prior to the applicable record or effective date on which a
Person would need to hold Common Stock in order to participate in or vote with
respect to such transaction, and the Company will take all steps reasonably
necessary in order to insure that the Holder is given the practical opportunity
to exercise this Warrant prior to such time so as to participate in or vote
with respect to such transaction; provided, however, that the failure to
deliver such notice or any defect therein shall not affect the validity of the
corporate action required to be described in such notice.


 


(g)           Subsequent
Equity Sales. If the Company at any time while this Warrant is outstanding,
shall offer, sell, grant any option to purchase or offer, sell or grant any
right to reprice its securities, or otherwise dispose of or issue (or announce
any offer, sale, grant or any option to purchase or other disposition) any
Common Stock or Common Stock Equivalents entitling any Person to acquire shares
of Common Stock, at an 


 


8

















 


effective price per share
less than the then Exercise Price (each such issuance, a “Dilutive Issuance”),
as adjusted hereunder (if the holder of the Common Stock or Common Stock
Equivalents so issued shall at any time, whether by operation of purchase price
adjustments, reset provisions, floating conversion, exercise or exchange prices
or otherwise, or due to warrants, options or rights per share which is issued
in connection with such issuance, be entitled to receive shares of Common Stock
at an effective price per share which is less than the Exercise Price, such
issuance shall be deemed to have occurred for less than the Exercise Price),
then the Exercise Price shall be reduced to such price and, in each case, the
number of Warrant Shares issuable hereunder shall be increased such that the
aggregate Exercise Price payable hereunder, after taking into account the
decrease in the Exercise Price, shall be equal to the aggregate Exercise Price
prior to such adjustment. Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment of the Exercise Price in
the case of the issuance or sale from and after the Original Issue Date of
Anti-Dilution Excluded Securities. The Company shall notify the Holder in
writing, no later than the Business Day following the issuance of any Common
Stock or Common Stock Equivalents subject to this section, indicating therein
the applicable issuance price, or if applicable, reset price, exchange price,
conversion price and other pricing terms.


 


10.           Payment of Exercise Price. Except in
connection with a cashless exercise as set forth in Section 4(b), the
Holder shall pay the Exercise Price by delivering to the Company immediately
available funds.


 


11.           No Fractional Shares. No fractional
shares of Warrant Shares will be issued in connection with any exercise of this
Warrant. In lieu of any fractional shares which would, otherwise be issuable,
the Company shall pay cash equal to the product of such fraction multiplied by
the closing sale price of one Warrant Share as reported by the applicable
Trading Market on the date of exercise.


 


9

















 


12.           Registration Rights.


 


(a)           Incidental
Registration. If at any time prior to the Expiration Date the Company shall
determine to prepare and file with the SEC a registration statement relating to
an offering for its own account or the account of others under the Securities
Act of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with the stock option or other employee benefit plans (the “Registration
Statement”), then the Company shall send to Holder written notice of such
determination and, if within fifteen (15) days after receipt of such notice,
any such Holder shall so request in writing, the Company shall include in such
Registration Statement all or any part of such Registrable Securities such
holder requests to be registered. The Company will take all steps reasonably
necessary in order to ensure that the Holder is given the practical opportunity
to exercise this Warrant prior to such time so as to have its Warrant Shares
included in the Registration Statement.


 


(b)           Registration
Expenses. All fees and expenses incident to the performance of or
compliance with Section 12 this Agreement by the Company, except as
and to the extent specified in this Section 12(b), shall be borne
by the Company whether or not the Registration Statement is filed or becomes
effective and whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation: 
(A) all registration and filing fees; (B) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement); (C) messenger,
telephone and delivery expenses; (D) fees and disbursements of counsel for
the Company; (E) Securities Act liability insurance, if the Company so
desires such insurance; and (F) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Section 12, including, without limitation, the
Company’s independent public accountants (including the expenses of any comfort
letters or costs associated with the delivery by independent public accountants
of a comfort letter or comfort letters). Except as otherwise expressly provided
in this Agreement, any fees or expenses incurred by Holder or its legal counsel
or Holder’s other advisors or consultants in connection with any review of the
Registration Statement or with respect to any other matters related to this
Agreement shall be borne solely by Holder.


 


(c)           Indemnification.


 


(i)            Indemnification by the Company. The Company shall, notwithstanding
any termination of this Warrant, indemnify and hold harmless the Holder, the
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment advisors and employees
of each of them, each Person who controls the Holder (within the 


 


10

















 


meaning of
Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the officers, directors, agents and employees of each such controlling
Person, to the fullest extent permitted by applicable law, from and against any
and all losses, claims, damages, liabilities, costs (including, without
limitation, costs of preparation and attorneys’ fees) and expenses
(collectively, “Losses”) (as determined by a court of competent
jurisdiction in a final judgment not subject to appeal or review), as incurred,
arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in the Registration Statement, any related Prospectus
or any form of prospectus or in any amendment or supplement thereto or in any
preliminary prospectus, or arising solely out of or based upon any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any related Prospectus or form
of prospectus or supplement thereto, in the light of the circumstances under
which they were made) not misleading, except to the extent, but only to the
extent, that such untrue statements or omissions are based upon information
regarding the Holder furnished in writing to the Company by the Holder
expressly for use therein. The Company shall notify the Holder promptly of the
institution, threat or assertion of any  Proceeding of which the Company is
aware in connection with the transactions contemplated by this Agreement.


 


(ii)           Indemnification by Holder. The
Holder shall indemnify and hold harmless the Company, the directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses (as determined by a court of competent jurisdiction in a final
judgment not subject to appeal or review), as incurred, arising solely out of
or based solely upon any untrue statement or alleged untrue statement of a
material fact contained in the Registration Statement, any related Prospectus,
or any form of prospectus or form of prospectus or in any amendment or
supplement thereto or in any preliminary prospectus, or arising solely out of
or based solely upon any omission of a material fact required to be stated
therein or necessary to make the statements therein (in the case of any related
Prospectus or supplement thereto, in the light of the circumstances under which
they were made) not misleading, to the extent, but only to the extent, that
such untrue statement or omission or alleged untrue statement or omission is
contained in information so furnished by the Holder in writing to the Company
expressly for inclusion in the Registration Statement or such related
Prospectus. In no event shall the liability of the Holder hereunder be greater
in amount than the dollar amount of the net proceeds received by the Holder
upon the sale of the Registrable Securities giving rise to such indemnification
obligation.


 


(iii)          Conduct of Indemnification Proceedings.
If any Proceeding shall be brought or asserted against any Person entitled to
indemnity hereunder (an “Indemnified Party”), such Indemnified Party
promptly shall notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the 


 


11

















 


Indemnifying Party shall
assume the defense thereof, including the employment of counsel reasonably
satisfactory to the Indemnified Party and the payment of all fees and expenses
incurred in connection with defense thereof; provided, however,
that the failure of any Indemnified Party to give such notice shall not relieve
the Indemnifying Party of its obligations or liabilities pursuant to this
Agreement, except to the extent that such failure shall have proximately and
materially adversely prejudiced the Indemnifying Party.


 


An Indemnified Party
shall have the right to employ separate counsel in any such Proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party or Parties unless: (x) the
Indemnifying Party has agreed in writing to pay such fees and expenses; or (y)
the Indemnifying Party shall have failed promptly to assume the defense of such
Proceeding and to employ counsel reasonably satisfactory to such Indemnified
Party in any such Proceeding; or (z) the named parties to any such Proceeding
(including any impleaded parties) include both such Indemnified Party and the
Indemnifying Party, and such Indemnified Party shall have been advised by
counsel that a conflict of interest is likely to exist if the same counsel were
to represent such Indemnified Party and the Indemnifying Party (in which case,
if such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld or delayed. No Indemnifying Party shall, without the
prior written consent of the Indemnified Party, effect any settlement of any
pending Proceeding in respect of which any Indemnified Party is a party, unless
such settlement includes an unconditional release of such Indemnified Party
from all liability on claims that are the subject matter of such Proceeding.


 


All fees and expenses of
the Indemnified Party (including reasonable fees and expenses to the extent
incurred in connection with investigating or preparing to defend such
Proceeding in a manner not inconsistent with this Section 12(c))
shall be paid to the Indemnified Party, as incurred, within ten (10) Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, however, that the
Indemnifying Party may require such Indemnified Party to undertake to reimburse
all such fees and expenses to the extent it is finally judicially determined
that such Indemnified Party is not entitled to indemnification hereunder).


 


(iv)          Contribution. If a claim for
indemnification under Section 12(c)(i) or Section 12(c)(ii)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate 


 


12

















 


to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying, Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 12(c)(iii), any reasonable attorneys’ or other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in this Section was available
to such party in accordance with its terms.


 


The parties hereto agree
that it would not be just and equitable if contribution pursuant to this Section 12(c)(iv)
were determined by pro rata allocation or by any other method of allocation
that does not take into account the equitable considerations referred to in the
immediately preceding paragraph. Notwithstanding the provisions of this Section 12(c)(iv),
no Holder shall be required to contribute, in the aggregate, any amount in
excess of the amount of the proceeds actually received by such Holder from the
sale of the Registrable Securities subject to the proceeding. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.


 


The indemnity and
contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.


 


13.           Notices. Any and all notices or other
communications or deliveries hereunder (including, without limitation, any
Exercise Notice) shall be in writing and shall be deemed given and effective on
the earliest of (i) the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number specified in this Section
prior to 5:00 p.m. (California time) on a Business Day, (ii) the next Business
Day after the date of transmission, if such notice or communication is
delivered via facsimile at the facsimile number specified in this Section on a
day that is not a Business Day or later than 5:00 p.m. (California time) on any
Business Day, (iii) the Business Day following the date of mailing, if sent by
nationally recognized overnight courier service, or (iv) upon actual receipt by
the party to whom such notice is required to be given. The addresses for such
communications shall be:  (i) if to the
Company, to EMRISE Corporation, 9485 Haven Avenue, Suite 100, Rancho Cucamonga,
California 91730, Attn: President, or to Facsimile No.: (909) 987-5186 (or such
other address as the Company shall indicate in writing in accordance with this
Section), or (ii) if to the Holder, to 


 


13

















 


the address or facsimile
number appearing on the Warrant Register or such other address or facsimile
number as the Holder may provide to the Company in accordance with this
Section.


 


14.           Warrant Agent. The Company shall serve
as warrant agent under this Warrant. Upon ten (10) days’ notice to the Holder,
the Company may appoint a new warrant agent. Any corporation into which the
Company or any new warrant agent may be merged or any corporation resulting
from any consolidation to which the Company or any new warrant agent shall be a
party or any corporation to which the Company or any new warrant agent
transfers substantially all of its corporate trust or shareholders services
business shall be a successor warrant agent under this Warrant without any
further act. Any such successor warrant agent shall promptly cause notice of
its succession as warrant agent to be mailed (by first class mail, postage
prepaid) to the Holder at the Holder’s last address as shown on the Warrant
Register.


 


15.           Holder Status. The Holder is an “accredited
investor” as defined in Rule 501(a) under the Securities Act or a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act.


 


16.           Miscellaneous.


 


(a)           This Warrant shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns. Subject to the preceding sentence, nothing in this
Warrant shall be construed to give to any Person other than the Company and the
Holder any legal or equitable right, remedy or cause of action under this
Warrant. This Warrant may be amended only in writing signed by the Company and
the Holder and their successors and assigns.


 


(b)           THE CORPORATE LAWS OF
THE STATE OF DELAWARE SHALL GOVERN ALL ISSUES CONCERNING THE RELATIVE RIGHTS OF
THE COMPANY AND ITS SHAREHOLDERS. ALL QUESTIONS CONCERNING THE CONSTRUCTION,
VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE. THE COMPANY
AND HOLDER HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTION OF THE
STATE AND FEDERAL COURTS SITTING IN THE COUNTY OF ORANGE, STATE OF CALIFORNIA,
FOR THE ADJUDICATION OF ANY DISPUTE BROUGHT BY THE COMPANY OR HOLDER HEREUNDER,
IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED
HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF THIS WARRANT, AND HEREBY
IRREVOCABLY WAIVE, AND AGREE NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING
BROUGHT BY THE COMPANY OR ANY HOLDER, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, OR THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER. EACH PARTY HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE
OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR
OVERNIGHT DELIVERY (WITH 


 


14

















 


EVIDENCE OF DELIVERY) TO
SUCH PARTY AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND
AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF
PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT
IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. THE
COMPANY AND HOLDER HEREBY WAIVE ALL RIGHTS TO A TRIAL BY JURY.


 


(c)           The headings herein are
for convenience only, do not constitute a part of this Warrant and shall not be
deemed to limit or affect any of the provisions hereof.


 


(d)           In case any one or more
of the provisions of this Warrant shall be invalid or unenforceable in any
respect, the validity and enforceability of the remaining terms and provisions
of this Warrant shall not in any way be affected or impaired thereby and the
parties will attempt in good faith to agree upon a valid and enforceable
provision which shall be a commercially reasonable substitute therefor, and
upon so agreeing, shall incorporate such substitute provision in this Warrant.


 


(e)           Prior to exercise of
this Warrant, the Holder hereof shall not, by reason of by being a Holder, be
entitled to any rights of a shareholder with respect to the Warrant Shares.


 


(f)            This Warrant may be
transferred by the original Holder to any other Person provided such Person is
an “accredited investor” as defined in Rule 501(a) under the Securities Act or
a “qualified institutional buyer” as defined in Rule 144A(a) under the
Securities Act.


 


[Signature Page Follows]


 


15

















 


IN WITNESS WHEREOF, the
Company has caused this Warrant to be duly executed by its authorized officer
as of the date first indicated above.


 


	
   

  	
  EMRISE CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
        /s/
  Carmine T. Oliva

  	
   

  
	
   

  	
   

  	
  Carmine T. Oliva,
  President and

  
	
   

  	
   

  	
  Chief Executive Officer

  



 


[Signature Page to Warrant]


 

















 


IN WITNESS WHEREOF, the
Holder has caused this Warrant to be duly executed by its authorized officer as
of the date first indicated above.


 


 


	
   

  	
  PRIVATE EQUITY
  MANAGEMENT GROUP 

  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
      /s/
  Robert J. Anderson

  	
   

  
	
   

  	
   

  	
  Robert J. Anderson,
  Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
      /s/
  Peter Paul Mendel

  	
   

  
	
   

  	
   

  	
  Peter Paul Mendel,
  Authorized Signatory

  	
   

  
					



 


[Signature Page to Warrant]


 

















 


EXERCISE
NOTICE

EMRISE CORPORATION

WARRANT DATED NOVEMBER 30, 2007


 


The undersigned Holder
hereby irrevocably elects to purchase                
shares of Common Stock pursuant to the above referenced Warrant. Capitalized
terms used herein and not otherwise defined have the respective meanings set
forth in the Warrant.


 


(1)           The undersigned Holder
hereby exercises its right to purchase                  
Warrant Shares pursuant to the Warrant.


 


(2)           The Holder intends that
payment of the Exercise Price shall be made as (check one):


 


                “Cash Exercise” under Section
4(a).


 


                “Cashless Exercise”
under Section 4(b).


 


(3)           If the Holder has
elected a Cash Exercise, the Holder shall pay the sum of $            
to the Company in accordance with the terms of the Warrant.


 


(4)           Pursuant to this
Exercise Notice, the Company shall deliver to the Holder                
Warrant Shares in accordance with the terms of the Warrant.


 


(5)           The undersigned
represents that it has and will comply with the prospectus delivery
requirements, if any, of the Securities Act.


 


	
  Dated:               ,       

  	
  Name
  of Holder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature
  must conform in all respects to 

  name of holder as specified on the face of the 

  Warrant)

  
							



 


[Exercise Notice]


 

















 


Warrant
Shares Exercise Log


 


	
  Date

  	
   

  	
  Number of Warrant 

  Shares Available to be 

  Exercised

  	
   

  	
  Number of Warrant Shares 

  Exercised

  	
   

  	
  Number of 

  Warrant Shares 

  Remaining to be 

  Exercised

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  



 


[Warrant Exercise Log]


 

















 


EMRISE
CORPORATION

WARRANT ORIGINALLY ISSUED NOVEMBER 30, 2007

WARRANT NO. PEM-1


 


FORM
OF ASSIGNMENT


 


[To be
completed and signed only upon transfer of Warrant]


 


FOR VALUE RECEIVED, the
undersigned hereby sells, assigns and transfers unto                                   
the right represented by the above-captioned Warrant to purchase              
shares of Common Stock to which such Warrant relates and appoints                 
attorney to transfer said right on the books of the Company with full power of
substitution in the premises.


 


	
  Dated:                 ,     

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Signature must conform
  in all respects to name of

  holder as specified on the face of the Warrant)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address of Transferee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  In the presence of:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


[Form of Assignment]