Document:

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.

 

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“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.

 

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“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.

 

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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.

 

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(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]EXHIBIT 10.10

 

GUARANTY

 

THIS GUARANTY (this “Guaranty”) is executed as
of November 30, 2007, by XCEL Japan Ltd. (the “Guarantor”), for the
benefit of GVEC Resource
IV Inc., as Arranger and Agent (the “Agent”) and the Lenders (as
defined below). All capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to such terms in the Credit Agreement (as
herein defined).

 

RECITALS:

 

A.            Pursuant to that certain Credit Agreement of even date
herewith (as amended, restated, supplemented or otherwise modified from time to
time, including all schedules thereto, the “Credit Agreement”) between
and among EMRISE Corporation, a Delaware corporation (the “Parent”),
each of Parent’s Subsidiaries identified on the signature pages thereof (such
Subsidiaries, together with the Parent, the “Borrowers”), the Agent, and
the Lenders from time to time party thereto (the “Lenders”), the Lenders
are willing to make certain financial accommodations available to the Borrowers
from time to time pursuant to the terms and conditions thereof.

 

B.            The Guarantor is an indirect wholly owned subsidiary of
the Parent and, as such, will benefit by virtue of the financial accommodations
extended to the Parent by the Lenders.

 

C.            In order to induce the Lenders to enter into the Credit
Agreement and to extend the financial accommodations to the Borrowers pursuant
to the Credit Agreement, and in consideration thereof, the Guarantor has agreed
to guarantee the Guaranteed Obligations.

 

NOW, THEREFORE, as an inducement to the Lenders to enter
into the Credit Agreement, and for other good and valuable consideration, the
receipt and legal sufficiency of which are hereby acknowledged, the parties do
hereby agree as follows:

 

ARTICLE I

NATURE AND SCOPE OF GUARANTY

 

Section 1.1.            Guaranty.
The Guarantor hereby unconditionally, absolutely and irrevocably guarantees to
the Agent, for the benefit of the Lenders, and the Guarantor shall be liable
for (a) the due and punctual payment of all Obligations including, without
limitation, the principal of, and interest (including any interest that, but
for the commencement of any applicable bankruptcy or insolvency proceeding,
would have accrued) on, any and all premium on, and any and all expenses
incurred in connection with, the Obligations pursuant to the terms of the
Credit Agreement, and (b) the due and punctual performance of all of the
covenants and obligations owing to the Agent and the Lenders (the “Guaranteed
Obligations”).

 

Section 1.2.            Nature
of Guaranty. This Guaranty is an irrevocable, absolute, continuing guaranty
of payment and not a guaranty of collection. This Guaranty may not be revoked
by the Guarantor and shall continue to be effective with respect to any
Guaranteed Obligations arising or created after any attempted revocation by the
Guarantor. The fact that at any time or from time to time the Guaranteed
Obligations may be increased or reduced shall not release or

 

 

discharge the obligation of the Guarantor to the Agent
or any Lender with respect to the Guaranteed Obligations. This Guaranty may be
enforced by the Agent and any permitted assignee of the Agent and shall not be
discharged by the assignment or negotiation of all or part of the Agent’s or
any Lender’s rights under the Credit Agreement.

 

Section 1.3.            Payment
By the Guarantor. If all or any part of the Guaranteed Obligations shall
not be punctually paid when due, whether at demand, maturity, acceleration or
otherwise, the Guarantor shall, immediately upon demand by the Agent, and
without presentment, protest, notice of protest, notice of non-payment, notice
of intention to accelerate the maturity, notice of acceleration of the
maturity, or any other notice whatsoever, pay in lawful money of the United
States of America, the amount due on the Guaranteed Obligations to the Agent at
the Agent’s address as set forth herein. Such demand(s) may be made at any time
coincident with or after the time for payment of all or part of the Guaranteed
Obligations, and may be made from time to time with respect to the same or
different items of Guaranteed Obligations. Such demand shall be deemed made,
given and received in accordance with the notice provisions hereof.

 

Section 1.4.            No
Duty To Pursue Others. The liability of the Guarantor shall be direct and
immediate as a primary and not a secondary obligation or liability. It shall
not be necessary for the Agent (and the Guarantor hereby waives any rights
which the Guarantor may have to require the Agent), in order to enforce the
obligations of the Guarantor hereunder, first to (a) institute suit or
exhaust its remedies against any Borrower or others liable on the Loans or the
Guaranteed Obligations or any other Person, (b) enforce the Agent’s rights
against any collateral which shall ever have been given to secure the Loans,
(c) enforce the Agent’s rights against any other guarantors of the
Guaranteed Obligations, (d) join the Borrowers or any others liable on the
Guaranteed Obligations in any action seeking to enforce this Guaranty,
(e) exhaust any remedies available to the Agent or any Lender against any
collateral which shall ever have been given to secure the Loans, or
(f) resort to any other means of obtaining payment of the Guaranteed
Obligations. Neither the Agent nor the Lenders shall be required to mitigate
damages or take any other action to reduce, collect or enforce the Guaranteed
Obligations.

 

Section 1.5.            Waivers.

 

(a)           Without
limitation to any other waivers contained in this Guaranty, the Guarantor
acknowledges and agrees to the provisions of the Loan Documents, and hereby waives
notice of: (i) any loans or advances made by the Lenders to any of the
Borrowers; (ii) acceptance of this Guaranty; (iii) any amendment or
extension of the Credit Agreement or of any other Loan Documents; (iv) the
execution and delivery by the Borrowers and the Agent or any Lender of any
other loan or credit agreement or of any Borrower’s execution and delivery of
any promissory notes or other documents arising under the Loan Documents or in
connection with the Collateral; (v) the occurrence of any breach by any
Borrower under any of the Loan Documents or an Event of Default; (vi) the
Agent’s or any Lender’s transfer or disposition of the Guaranteed Obligations,
or any part thereof; (vii) sale or foreclosure (or posting or advertising
for sale or foreclosure) of any collateral for the Guaranteed Obligations;
(viii) protest, proof of non-payment or default by any Borrower; and
(ix) any other action at any time taken or omitted by the Agent or any
Lender, and, generally, all demands and notices of every kind in connection

 

2

 

with this Guaranty, the Loan Documents, any documents
or agreements evidencing, securing or relating to any of the Guaranteed
Obligations and/or the obligations hereby guaranteed.

 

(b)           Without
limitation to any other waivers contained in this Guaranty, the Guarantor
hereby waives, to the fullest extent permitted by law: (i) presentment, demand,
protest, diligence, notice of demand, notice of protest, notice of dishonor,
notice of nonperformance, notice of non-payment, notice of acceptance and all
other notices and other formalities which may be required by statute, rule of
law or otherwise to preserve intact Agent’s rights against the Guarantor under
this Guaranty; (ii) all benefits and defenses under California Civil Code (“CC”)
Section 2849, including the right, if any, to the benefit of, or to direct
application of, any security hypothecated to, the Agent, until all the
Obligations, howsoever arising, shall have been paid and/or performed; (iii)
all benefits and defenses under CC Section 2845, including the right to require
the Agent to proceed against any Borrower or to pursue any other remedy in the
Agent’s power; (iv) all benefits and defenses under CC Section 2850, including
the right to require the Agent to proceed against or exhaust any security or
Collateral the Agent may hold; (v) any defense arising by reason of any
disability or other defense of any Borrower or by reason of the cessation from
any cause whatsoever of the liability of any Borrower other than full payment
of and full performance of the Obligations; (vi) all statutes of limitations as
a defense in any action or proceeding brought against the Guarantor by the
Agent, to the fullest extent permitted by law (and the Guarantor agrees that
any partial payment by any Borrower or other circumstances which operate to
toll any statute of limitations as to any Borrower shall also operate to toll
the statute of limitations as to the Guarantor); (vii) any defense based upon Agent’s
failure to perfect or continue the perfection of any lien or security interest
in Collateral that secures the Obligations; (viii) any defense arising due to
any failure by the Agent to inform the Guarantor of any facts the Agent may now
or hereafter know about any Borrower or any Borrower’s financial condition;
(ix) all benefits and defenses under CC Section 2809 purporting to reduce a
guarantor’s obligations in proportion to the principal obligation, and the
Guarantor agrees that by doing so the Guarantor’s liability may be larger in
amount or more burdensome than that of the Borrowers; (x) all benefits and
defenses under CC Section 2810, and the Guarantor agrees that by doing so the
Guarantor is liable even if the Borrowers had no liability at the time of
execution of the Loan Documents or thereafter ceased to be liable; (xi) all
rights and benefits of CC Section 2819, and the Guarantor agrees that by doing
so the Guarantor’s liability shall continue even if the Agent alters any Obligation
in any respect or the Agent’s remedies or rights against any Borrower are in
any way impaired or suspended without the Guarantor’s consent, whether or not
due to the act or omission of the Agent; (xii) any defense based on any action
taken or omitted by the Agent in any bankruptcy or other voluntary or
involuntary proceeding, in or out of court, for the adjustment of
debtor-creditor relationships; and (xiii) all other rights and remedies now or
hereafter accorded by applicable law to sureties or guarantors.

 

(c)           Without
limiting the generality of the foregoing and without limitation to any other
waivers contained in this Guaranty, the Guarantor waives, to the fullest extent
permissible by law, all benefits and defenses under CC Sections 2847 and 2848
and agrees that the Guarantor shall have no right of subrogation or
reimbursement against any Borrower and no right of contribution against any
other guarantor or pledgor unless and until all Obligations have been satisfied
and the Agent has released, transferred or disposed of all of its right, title
and interest in any Collateral.

 

3

 

(d)           Without
limiting the generality of the foregoing and without limitation to any other
waivers contained in this Guaranty, the Guarantor hereby waives, to the fullest
extent permitted by law, any and all rights and defenses a guarantor or surety
would otherwise have under applicable California law to the enforcement of this
Guaranty, including, but not limited to, all rights and defenses arising under
or by virtue of or pursuant to the provisions of CC Sections 2787 to 2855,
inclusive, and CC Sections 2899 and 3433, and any additional rights or defenses
relating any of the foregoing statutory provisions pursuant to any applicable
judicial decisions of the State of California.

 

(e)           The
Guarantor acknowledges that the waivers made by the Guarantor in this Guaranty
are made knowing that their intent is to deprive the Guarantor of the benefits
and defenses that would or could otherwise be available to the Guarantor under
the statutory provisions referenced herein.

 

Section 1.6.            Payment
of Expenses. In the event that the Guarantor should breach or fail to
timely perform any provision of this Guaranty, the Guarantor shall pay on
demand to the Agent all costs and expenses (including court costs and
reasonable attorneys’ fees) incurred by the Agent in the enforcement hereof or
the preservation of the Agent’s rights hereunder. The covenant contained in
this Section 1.6 shall survive the payment of the Guaranteed
Obligations.

 

Section 1.7.            Effect
of Bankruptcy. In the event that, pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief law, or any judgment, order
or decision thereunder, the Agent or any Lender must rescind or restore any
payment, or any part thereof, received by the Agent or any Lender in
satisfaction of the Guaranteed Obligations, as set forth herein, any prior
release or discharge from the terms of this Guaranty given to the Guarantor by
the Agent shall be without effect, and this Guaranty shall remain in full force
and effect. It is the intention of the Guarantor that the Guarantor’s
obligations hereunder shall not be discharged except by the Guarantor’s
performance of such obligations and then only to the extent of such
performance.

 

Section 1.8.            Waiver
of Subrogation, Reimbursement and Contribution. Notwithstanding anything to
the contrary contained in this Guaranty and without limitation to any other
waivers contained in this Guaranty, the Guarantor hereby unconditionally and
irrevocably waives, releases and abrogates any and all rights it may now or
hereafter have under any agreement, at law or in equity (including, without
limitation, any law subrogating the Guarantor to the rights of the Agent or the
Lenders), to assert any claim against or seek contribution, indemnification or
any other form of reimbursement from the Borrower or any other party liable for
payment of any or all of the Guaranteed Obligations for any payment made by the
Guarantor under or in connection with this Guaranty or otherwise until ninety
one (91) days after the Agent has received payment in full of the
Obligations.

 

ARTICLE II

EVENTS AND CIRCUMSTANCES NOT REDUCING OR 

DISCHARGING GUARANTOR’S OBLIGATIONS

 

The Guarantor hereby consents and agrees to each of
the following, and agrees that the Guarantor’s obligations under this Guaranty
shall not be released, diminished, impaired, reduced

 

4

 

or adversely affected by
any of the following, and without limitation to any other waivers contained in
this Guaranty waives any common law, equitable, statutory or other rights
(including without limitation rights to notice) which the Guarantor might
otherwise have as a result of or in connection with any of the following:

 

Section 2.1.            Modifications.
Any renewal, extension, increase, modification, alteration or rearrangement of
all or any part of the Guaranteed Obligations, the Credit Agreement, the other
Loan Documents, or any other document, instrument, contract or understanding
between the Borrowers and the Agent or any Lender, or any other parties,
pertaining to the Guaranteed Obligations or any failure of the Agent to notify the
Guarantor of any such action.

 

Section 2.2.            Adjustment.
Any adjustment, indulgence, forbearance or compromise that might be granted or
given by the Agent or any Lender to any Borrower or any other guarantor.

 

Section 2.3.            Condition
of Borrowers or Guarantor. (a) The insolvency, bankruptcy,
arrangement, adjustment, composition, liquidation, disability, dissolution or
lack of power of any Borrower, the Guarantor, any other guarantor or any other
party at any time liable for the payment of all or part of the Guaranteed
Obligations; or any dissolution of any Borrower or the Guarantor, (b) Agent’s
or any Lender’s election, in any proceeding instituted under the United States
Bankruptcy Code, of the application of Section 1111(b)(2) of the United States
Bankruptcy Code or any successor statute, (c) any borrowing or any grant of a
security interest under Section 364 of the United States Bankruptcy Code or (d)
any action taken or omitted by the Agent or any Lender in any bankruptcy,
insolvency, reorganization, composition, adjustment, dissolution, liquidation
or other like proceeding (each, an “Insolvency
Proceeding”) involving any Borrower, the Guarantor or any other
guarantor, including any election to have the Agent’s or any Lender’s claim
allowed as being secured, partially secured or unsecured, any extension of
credit by the Agent or any Lender to any Borrower, the Guarantor or any other
guarantor in any Insolvency Proceeding and the taking and holding by the Agent
or any Lender of any security for any such extension of credit, (d) any
sale, lease or transfer of any or all of the assets of any Borrower, the
Guarantor or any other guarantor, or (e) any changes in the shareholders,
partners or members of any Borrower, the Guarantor or any other guarantor; or
any reorganization of any Borrower or the Guarantor.

 

Section 2.4.            Invalidity
of Guaranteed Obligations. The invalidity, illegality or unenforceability
of all or any part of the Guaranteed Obligations, or any document or agreement
executed in connection with the Guaranteed Obligations, for any reason
whatsoever, including without limitation the fact that (a) the Guaranteed
Obligations, or any part thereof, exceed the amount permitted by law, (b) the
act of creating the Guaranteed Obligations or any part thereof is ultra vires,
(c) the officers or representatives executing the Credit Agreement or the
other Loan Documents or otherwise creating the Guaranteed Obligations acted in
excess of their authority, (d) the Guaranteed Obligations violate
applicable usury laws, (e) any Borrower has valid defenses, claims or
offsets (whether at law, in equity or by agreement) (other than a defense based
upon the actual payment of the Guaranteed Obligations sought to be enforced),
which render the Guaranteed Obligations wholly or partially uncollectible from such
Borrower, (f) the creation, performance or repayment of the Guaranteed
Obligations (or the execution, delivery and performance of any document or
instrument representing part of the Guaranteed Obligations or executed in
connection with the Guaranteed Obligations, or given to secure the repayment of

 

5

 

the Guaranteed Obligations) is illegal, uncollectible
or unenforceable, (g) the Credit Agreement or any of the other Loan
Documents have been forged or otherwise are irregular or not genuine or authentic,
(h) the failure of consideration for the granting of this Guaranty, (i) the
expiration of any statute of limitations affecting the liability of the Guarantor
hereunder, the liability of any Borrower or any guarantor under the Loan
Documents; it being agreed that the Guarantor shall remain liable hereon
regardless of whether any Borrower or any other Person be found not liable on
the Guaranteed Obligations or any part thereof for any reason.

 

Section 2.5.            Release
of Obligors. Any full or partial release of the liability of any Borrower
on the Guaranteed Obligations, or any part thereof, or of any co-guarantors, or
any other Person now or hereafter liable, whether directly or indirectly,
jointly, severally, or jointly and severally, to pay, perform, guarantee or
assure the payment of the Guaranteed Obligations, or any part thereof, it being
recognized, acknowledged and agreed by the Guarantor that the Guarantor may be
required to pay the Guaranteed Obligations in full without assistance or
support of any other party, and the Guarantor has not been induced to enter
into this Guaranty on the basis of a contemplation, belief, understanding or
agreement that other Persons will be liable to pay the Guaranteed Obligations,
or that the Agent or the Lenders will look to other Persons to pay the
Guaranteed Obligations.

 

Section 2.6.            Other
Collateral. The taking or accepting of any other security, collateral or
guaranty, or other assurance of payment, for all or any part of the Guaranteed
Obligations.

 

Section 2.7.            Release
of Collateral. Any release, surrender, exchange, subordination,
deterioration, waste, loss or impairment (including without limitation
negligent, willful, unreasonable or unjustifiable impairment) of any
collateral, property or security at any time existing in connection with, or
assuring or securing payment of, all or any part of the Guaranteed Obligations,
or the application by any Borrower of the proceeds of the Loans for purposes
other than the purposes represented by such Borrower to the Agent and Lenders
or intended or understood by the Agent and Lenders or Guarantor.

 

Section 2.8.            Care
and Diligence. The failure of the Agent or any Lender to diligently
exercise its rights and remedies under any of the Loan Documents, or to
exercise diligence or reasonable care in the preservation, protection,
enforcement, sale or other handling or treatment of all or any part of such
collateral, property or security, including but not limited to any neglect,
delay, omission, failure or refusal of the Agent or any Lender (a) to take
or prosecute any action for the collection of any of the Guaranteed Obligations
or (b) to foreclose, or initiate any action to foreclose, or, once
commenced, prosecute to completion any action to foreclose upon any security
therefor, or (c) to take or prosecute any action in connection with any
instrument or agreement evidencing or securing all or any part of the
Guaranteed Obligations, (d) to take any other acts or omissions of which
vary, increase or decrease the risk on the Guarantor, other than any loss,
damage liability or cost arising from the Agent’s or such Lender’s gross
negligence or willful misconduct following the Agent’s taking title to the
Collateral.

 

Section 2.9.            Lender Disclosure. The failure of the
Agent or the Lenders to disclose to the Guarantor (a) any facts it may now
or hereafter know regarding any Borrower, regardless of whether the Agent or
the Lenders have reason to believe that any such facts materially increase the
risk beyond that which the Guarantor intends to assume or has reason to believe
that such

 

6

 

facts are unknown to the Guarantor, the Guarantor
acknowledging that it is fully responsible for being and keeping informed of
the financial condition and affairs of the Borrowers, or (b) any default,
demand of performance or notice of acceleration to the Borrowers or any other
Person with respect to the Loans or the Guaranteed Obligations.

 

Section 2.10.          Unenforceability.
The fact that any collateral, security, security interest or lien contemplated
or intended to be given, created or granted as security for the repayment of
the Guaranteed Obligations, or any part thereof, shall not be properly
perfected or created, or shall prove to be unenforceable or subordinate to any
other security interest or lien, it being recognized and agreed by the Guarantor
that the Guarantor is not entering into this Guaranty in reliance on, or in
contemplation of the benefits of, the validity, enforceability, collectibility
or value of any of the collateral for the Guaranteed Obligations.

 

Section 2.11.          Offset.
The Guaranteed Obligations and the liabilities and obligations of the Guarantor
to the Agent hereunder shall not be reduced, discharged or released by reason
of any existing or future right of offset, claim or defense (other than a
defense based upon the actual payment of the Guaranteed Obligations sought to
be enforced) of any Borrower against the Agent, any Lender or any other Person,
or against payment of the Guaranteed Obligations, whether such right of offset,
claim or defense arises in connection with the Guaranteed Obligations (or the
transactions creating the Guaranteed Obligations) or otherwise.

 

Section 2.12.          Merger.
The reorganization, merger or consolidation of any Borrower into or with any
Person.

 

Section 2.13.          Preference.
Any payment by any Borrower to the Agent or any Lender is held to constitute a
preference under bankruptcy laws, or for any reason the Agent or such Lender is
required to refund such payment or pay such amount to such Borrower or someone
else.

 

Section 2.14.          Attempted Revocation. Any
revocation or repudiation hereof by the Guarantor or the revocation or
repudiation of any of the Loan Documents by any Borrower or any other Person,
including any right the Guarantor might have to revoke this Guaranty pursuant
to the terms of any of the Loan Documents.

 

Section 2.15.          Surety Defenses. Any other
suretyship defense that might, but for the terms hereof, be available to the Guarantor,
including without limitation, any statute or rule of law which provides that
the obligation of a surety must be neither larger in amount nor in any other
aspects more burdensome than that of any Borrower.

 

Section 2.16.          Other
Actions Taken or Omitted. Any other action taken or omitted to be taken
with respect to the Loan Documents, the Guaranteed Obligations, or the security
and collateral therefor, other than any loss, damage liability or cost arising
from the Agent’s gross negligence or willful misconduct following the Agent’s
taking title to the Collateral, whether or not such action or omission
prejudices the Guarantor or increases the likelihood that the Guarantor will be
required to pay the Guaranteed Obligations pursuant to the terms hereof, it
being the unambiguous and unequivocal intention of the Guarantor that the Guarantor
shall be obligated to pay the Guaranteed Obligations when due, notwithstanding
any occurrence,

 

7

 

circumstance, event, action, or omission whatsoever,
whether contemplated or uncontemplated, and whether or not otherwise or
particularly described herein, which obligation shall be deemed satisfied only
upon the full and final payment and satisfaction of the Guaranteed Obligations.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

To induce the Agent and the Lenders to enter into the
Loan Documents and extend credit to the Borrowers, the Guarantor represents and
warrants to the Agent and the Lenders as follows, as of the date hereof, and as
of each date that the Lenders make a Term Loan or Advance to any Borrower under
the Credit Agreement:

 

Section 3.1.            Benefit.
The Guarantor is an Affiliate of the Parent and has received, or will receive,
direct or indirect benefit from the making of this Guaranty with respect to the
Guaranteed Obligations.

 

Section 3.2.            Familiarity
and Reliance. The Guarantor is familiar with, and has independently
reviewed books and records regarding, the financial condition of the Borrowers
and is familiar with the value of any and all collateral intended to be created
as security for the payment of the Loans or Guaranteed Obligations; however, the
Guarantor is not relying on such financial condition or the collateral as an
inducement to enter into this Guaranty.

 

Section 3.3.            No
Representations by the Agent and Lenders. None of the Agent, the Lenders,
nor any other party has made any representation, warranty or statement to the Guarantor
in order to induce the Guarantor to execute this Guaranty.

 

Section 3.4.            Guarantor’s
Financial Condition. As of the date hereof , and after giving effect to
this Guaranty and the contingent obligation evidenced hereby, the Guarantor is,
and will be, solvent, and has and will have assets which, fairly valued, exceed
its obligations, liabilities (including contingent liabilities) and debts, and
has and will have property and assets sufficient to satisfy and repay its
obligations and liabilities.

 

Section 3.5.            Legality.
This Guaranty has been duly authorized
by all necessary corporate action and the execution, delivery and
performance by the Guarantor of this Guaranty and the consummation of the
transactions contemplated hereunder do not, and will not, contravene or
conflict with any law, statute or regulation whatsoever to which the Guarantor
is subject or constitute a default (or an event which with notice or lapse of
time or both would constitute a default) under, or result in the breach of, any
indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or
other instrument to which the Guarantor is a party or which may be applicable
to the Guarantor. This Guaranty is a legal and binding obligation of the Guarantor
and is enforceable in accordance with its terms, except as limited by
bankruptcy, insolvency or other laws of general application relating to the
enforcement of creditors’ rights.

 

Section 3.6.            Financial
Statements. Any and all balance sheets, net worth statements and other
financial data that have been given or may be given to the Agent with respect
to the Guarantor did or will, at the time of such delivery, fairly and
accurately present the financial condition of the Guarantor in all material
respects.

 

8

 

Section 3.7.            Representations
and Warranties of Borrowers. All representations and warranties made by the
Borrowers with respect to the Guarantor in the Credit Agreement are true and
correct in all material respects.

 

ARTICLE IV

 

SUBORDINATION OF CERTAIN
INDEBTEDNESS

 

Section 4.1.            Subordination
of All Guarantor Claims. As used herein, the term “Guarantor Claims”
shall mean all debts and liabilities of the Borrowers to the Guarantor, whether
such debts and liabilities now exist or are hereafter incurred or arise, or
whether the obligations of the Borrowers thereon be direct, contingent,
primary, secondary, several, joint and several, or otherwise, and irrespective
of whether such debts or liabilities be evidenced by note, contract, open
account, or otherwise, and irrespective of the Person or Persons in whose favor
such debts or liabilities may, at their inception, have been, or may hereafter
be created, or the manner in which they have been or may hereafter be acquired
by the Guarantor. The Guarantor Claims shall include without limitation all
rights and claims of the Guarantor against the Borrowers (arising as a result
of subrogation or otherwise) as a result of the Guarantor’s payment of all or a
portion of the Guaranteed Obligations. Upon the occurrence of a Default or an
Event of Default, the Guarantor shall not receive or collect, directly or indirectly,
from any Borrower or any other party any amount upon the Guarantor Claims.

 

Section 4.2.            Claims
in Bankruptcy. In the event that, pursuant to any insolvency, bankruptcy,
reorganization, receivership or other debtor relief law, or any judgment, order
or decision involving the Guarantor as debtor, the Agent shall have the right
to prove its claim in any such proceeding so as to establish its rights
hereunder and receive directly from the receiver, trustee or other court
custodian dividends and payments which would otherwise be payable upon
Guarantor Claims. The Guarantor hereby assigns such dividends and payments to
the Agent for the benefit of the Lenders. Should the Agent receive, for
application against the Guaranteed Obligations, any such dividend or payment which
is otherwise payable to the Guarantor, and which, as between such Borrower and
the Guarantor, shall constitute a credit against the Guarantor Claims, then
upon payment to the Agent in full of the Guaranteed Obligations, the Guarantor
shall become subrogated to the rights of the Agent to the extent that such
payments to the Agent on the Guarantor Claims have contributed toward the
liquidation of the Guaranteed Obligations, and such subrogation shall be with
respect to that proportion of the Guaranteed Obligations which would have been
unpaid if the Agent had not received dividends or payments upon the Guarantor
Claims.

 

Section 4.3.            Payments
Held in Trust. Notwithstanding anything to the contrary in this Guaranty,
in the event that the Guarantor shall receive any funds, payments, claims or
distributions which are prohibited by this Guaranty, the Guarantor agrees to
hold in trust for the Agent, an amount equal to the amount of all funds,
payments, claims or distributions so received, and agrees that it shall have
absolutely no dominion over the amount of such funds, payments, claims or
distributions so received except to pay such funds, payments, claims and/or
distributions promptly to the Agent, and the Guarantor covenants promptly to
pay the same to the Agent.

 

9

 

Section 4.4.            Liens
Subordinate. The Guarantor agrees that any liens, security interests,
judgment liens, charges or other encumbrances upon any Borrowers’ assets
securing payment of the Guarantor Claims shall be and remain inferior and
subordinate to any liens, security interests, judgment liens, charges or other
encumbrances upon such Borrowers’ assets securing payment of the Guaranteed
Obligations, regardless of whether such encumbrances in favor of the Guarantor
or the Agent presently exist or are hereafter created or attach. Until ninety
one (91) days after the Obligations shall have been paid in full and the
Guaranteed Obligations fully satisfied, without the prior written consent of
the Agent, the Guarantor shall not (a) exercise or enforce any creditor’s
right it may have against any Borrower, or (b) foreclose, repossess,
sequester or otherwise take steps or institute any action or proceedings
(judicial or otherwise, including without limitation the commencement of, or
joinder in, any liquidation, bankruptcy, rearrangement, debtor’s relief or
insolvency proceeding) to enforce any liens, mortgages, deeds of trust,
security interests, collateral rights, judgments or other encumbrances on
assets of any Borrower held by the Guarantor.

 

ARTICLE V

 

MISCELLANEOUS

 

Section 5.1.            No
Waiver; Cumulative Remedies; Compliance with Laws. No failure or delay by
the Agent or any Lender in exercising any right, power or remedy under the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy under the
Loan Documents. The remedies provided in the Loan Documents are cumulative and
not exclusive of any remedies provided by law. The Agent may comply with any
applicable state or federal law requirements in connection with a disposition
of the Collateral and such compliance will not be considered adversely to
affect the commercial reasonableness of any sale of the Collateral.

 

Section 5.2.            Enforcement.
The Agent shall have the right to enforce this Guaranty in separate actions
against the Guarantor, or by an action against any other Person liable for the
Guaranteed Obligations.

 

Section 5.3.            Severability
of Provisions. Any provision of this Guaranty which is prohibited or
unenforceable shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof.

 

Section 5.4.            Amendments.
This Guaranty may be amended only by an instrument in writing executed by the
party or an authorized representative of the party against whom such amendment
is sought to be enforced.

 

Section 5.5.            Parties
Bound; Assignment. This Guaranty shall be binding upon and inure to the
benefit of the parties hereto and their respective successors, assigns and
legal representatives; provided, however, that the Guarantor may not, without
the prior written consent of the Agent, assign any of its rights, powers, duties
or obligations hereunder.

 

10

 

Section 5.6.            Headings.
Article, Section and subsection headings in this Guaranty are included herein
for convenience of reference only and shall not constitute a part of this Guaranty
for any other purpose.

 

Section 5.7.            Recitals.
The recital and introductory paragraphs hereof are a part hereof, form a basis
for this Guaranty and shall be considered prima facie evidence of the facts and
documents referred to therein.

 

Section 5.8.            Telefacsimile
Execution. Delivery of an executed signature page to this Guaranty by
telefacsimile shall be equally as effective as delivery of an original executed
signature page of this Guaranty. Any party delivering an executed signature
page of this Guaranty by telefacsimile also shall deliver an original executed signature
page of this Guaranty but the failure to deliver an original executed signature
page shall not affect the validity, enforceability, and binding effect of this Guaranty.

 

Section 5.9.            Rights
and Remedies. If the Guarantor becomes liable for any indebtedness owing by
any Borrower to the Agent or Lenders, by endorsement or otherwise, other than
under this Guaranty, such liability shall not be in any manner impaired or
affected hereby and the rights of the Agent hereunder shall be cumulative of
any and all other rights that the Agent and the Lenders may ever have against the
Guarantor. The exercise by the Agent of any right or remedy hereunder or under
any other instrument, or at law or in equity, shall not preclude the concurrent
or subsequent exercise of any other right or remedy.

 

Section 5.10.          Complete
Agreement. This Guaranty, together with the Loan Documents, comprises the
complete and integrated agreement of the parties on the subject matter hereof
and supersedes all prior agreements, written or oral, on the subject matter
hereof.

 

Section 5.11.          Cooperation.
The Guarantor acknowledges that the Agent and its successors and assigns may,
subject to any applicable limitations set forth in the Credit Agreement assign,
or sell participations in, its rights under the Credit Agreement pursuant to
the terms thereof. The Guarantor shall reasonably cooperate with the Agent and
Lenders in effecting any such assignment or participation.

 

Section 5.12.          Reinstatement
in Certain Circumstances. If at any time any payment of the principal of or
interest on the Term Loans, any amount payable on the Advances or any other
amount payable by any Borrower under the Loan Documents relating to the Term
Loans or the Advances is rescinded or must be otherwise restored or returned
upon the insolvency, bankruptcy or reorganization of any Borrower or otherwise,
the Guarantor’s obligations hereunder with respect to such payment shall be
reinstated as though such payment has been due but not made at such time.

 

Section 5.13.          Survival.
Notwithstanding anything to the contrary contained in this Guaranty or in any
other Loan Document, this Guaranty shall continue in full force and effect
until full indefeasible payment of the Guaranteed Obligations.

 

Section 5.14.          Choice
of Law and Venue; Judicial Reference; Waiver of Jury Trial; Service of Process.

 

11

 

(a)           THE
VALIDITY OF THIS GUARANTY, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT
HEREOF, AND THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS
ARISING HEREUNDER OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA WITHOUT REGARD
TO ITS CONFLICTS OF LAWS PRINCIPLES.

 

(b)           THE
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND ITS
PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
CALIFORNIA LOCATED IN LOS ANGELES COUNTY AND OF THE FEDERAL COURTS LOCATED IN
THE CENTRAL DISTRICT OF CALIFORNIA, AND ANY APPELLATE COURT FROM ANY THEREOF,
IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR ANY
OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND THE
GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL CLAIMS IN
RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH
CALIFORNIA STATE OR, TO THE EXTENT PERMITTED BY LAW, IN SUCH FEDERAL COURT. THE
GUARANTOR HEREBY AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING
SHALL BE CONCLUSIVE AND BINDING UPON IT AND MAY BE ENFORCED IN OTHER
JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. NOTHING
IN THIS GUARANTY SHALL AFFECT ANY RIGHT THAT THE AGENT OR ANY LENDER MAY
OTHERWISE HAVE TO BRING ANY ACTION OR PROCEEDING RELATING TO OR ARISING OUT OF
THIS GUARANTY OR ANY LOAN DOCUMENT AGAINST THE GUARANTOR OR ITS ASSETS OR
PROPERTIES IN THE COURTS OF ANY JURISDICTION WHERE THE GUARANTOR OR ITS ASSETS
OR PROPERTIES MAY BE LOCATED OR IN WHICH IT OTHERWISE MAY BE SUBJECT TO
JURISDICTION.

 

(c)           THE GUARANTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVES, TO THE FULLEST EXTENT IT MAY LEGALLY AND EFFECTIVELY DO SO (i) ANY OBJECTION
WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE LOAN DOCUMENTS
IN ANY COURT REFERRED TO IN PARAGRAPH (B) OF THIS SECTION; (ii) THE
DEFENSE OF AN INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR
PROCEEDING IN ANY SUCH COURT; AND (iii) ANY RIGHT IT MAY HAVE, HOWEVER ARISING,
TO REMOVE OR TRANSFER ANY SUIT, ACTION OR PROCEEDING BROUGHT AGAINST IT IN
CONNECTION WITH OR ARISING OUT OF THIS GUARANTY OR ANY LOAN DOCUMENT IN A STATE
COURT OF THE UNITED STATES OF AMERICA TO ANY FEDERAL COURT OF THE UNITED STATES
OF AMERICA IF SUCH FEDERAL COURT OF THE UNITED STATES OF AMERICA WOULD NOT HAVE
OR ACCEPT JURISDICTION THEREOF.

 

(d)           ALL
CLAIMS, CAUSES OF ACTION OR OTHER DISPUTES CONCERNING THIS GUARANTY AND THE
MATTERS CONTEMPLATED HEREBY (EACH A “CLAIM”), ARISING IN A PROCEEDING IN
CALIFORNIA STATE COURT INCLUDING

 

12

 

ANY AND ALL QUESTIONS OF LAW OR FACT RELATING THERETO,
SHALL, AT THE WRITTEN REQUEST OF THE AGENT, BE DETERMINED BY JUDICIAL REFERENCE
PURSUANT TO THE CALIFORNIA CODE OF CIVIL PROCEDURE (“REFERENCE”). THE
PARTIES SHALL SELECT A SINGLE NEUTRAL REFEREE, WHO SHALL BE A RETIRED STATE OR
FEDERAL JUDGE. IN THE EVENT THAT THE PARTIES CANNOT AGREE UPON A REFEREE, THE
REFEREE SHALL BE APPOINTED BY THE COURT. THE REFEREE SHALL REPORT A STATEMENT
OF DECISION TO THE COURT. NOTHING IN THIS PARAGRAPH SHALL LIMIT THE RIGHT OF
ANY PARTY AT ANY TIME TO EXERCISE SELF-HELP REMEDIES, FORECLOSE AGAINST
COLLATERAL OR OBTAIN PROVISIONAL REMEDIES. THE PARTIES SHALL BEAR THE FEES AND
EXPENSES OF THE REFEREE EQUALLY UNLESS THE REFEREE ORDERS OTHERWISE. THE
REFEREE SHALL ALSO DETERMINE ALL ISSUES RELATING TO THE APPLICABILITY, INTERPRETATION,
AND ENFORCEABILITY OF THIS PARAGRAPH. THE PARTIES ACKNOWLEDGE THAT THE CLAIMS
WILL NOT BE ADJUDICATED BY A JURY.

 

(e)           OTHER THAN WITH RESPECT TO ANY PROCEEDING IN THE
STATE COURTS OF CALIFORNIA, THE GUARANTOR HEREBY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON CONTRACT, TORT OR ANY OTHER THEORY). THE GUARANTOR
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER.

 

(f)            THE
GUARANTOR HEREBY IRREVOCABLY DESIGNATES, APPOINTS AND EMPOWERS THE
ADMINISTRATIVE BORROWER, AS ITS DESIGNEE, APPOINTEE AND AGENT TO RECEIVE,
ACCEPT AND ACKNOWLEDGE FOR AND ON ITS BEHALF, AND IN RESPECT OF ITS PROPERTY,
SERVICE OF ANY AND ALL LEGAL PROCESS, SUMMONS, NOTICES AND DOCUMENTS WHICH MAY
BE SERVED IN ANY ACTION OR PROCEEDING RELATING TO OR ARISING OUT OF THIS
GUARANTY OR THE LOAN DOCUMENTS. IF FOR ANY REASON SUCH DESIGNEE, APPOINTEE AND
AGENT SHALL CEASE TO BE AVAILABLE TO ACT AS SUCH, THE GUARANTOR AGREES TO
DESIGNATE A NEW DESIGNEE, APPOINTEE AND AGENT ON THE TERMS AND FOR THE PURPOSES
OF THIS PROVISION SATISFACTORY TO THE AGENT. THE GUARANTOR WAIVES PERSONAL
SERVICE OF ANY AND ALL PROCESS UPON IT AND CONSENTS THAT ALL SUCH SERVICE OF
PROCESS MAY BE MADE BY HAND DELIVERY TO THE ADMINISTRATIVE BORROWER AT ITS
ADDRESS SET FORTH IN THE CREDIT AGREEMENT. THE GUARANTOR SHALL TAKE SUCH
ACTIONS AS ARE REASONABLE, INCLUDING THE EXECUTION AND FILING OF ANY AND ALL
FURTHER AGREEMENTS, INSTRUMENTS AND OTHER DOCUMENTS AS MAY BE NECESSARY, TO
FULLY IMPLEMENT AND EFFECT SUCH APPOINTMENTS AND TO CONTINUE THEM IN FULL FORCE
AND EFFECT. THE GUARANTOR HEREBY CONSENTS TO SERVICE OF PROCESS AS AFORESAID. NOTHING IN THIS GUARANTY WILL AFFECT THE
RIGHT OF ANY PARTY TO THIS

 

13

 

GUARANTY TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW. THE GUARANTOR IRREVOCABLY AGREES AND
UNDERTAKES TO ENTER ITS UNCONDITIONAL APPEARANCE WITHIN FORTY-FIVE (45) DAYS
AFTER THE COMPLETION OF SERVICE ON THE AUTHORIZED AGENT AS PROVIDED IN THIS
SECTION.

 

Section 5.15.          Notices.
All notices and other communications hereunder to Agent shall be in writing and
shall be mailed, sent or delivered in accordance with the Credit Agreement. All
notices and other communications hereunder to the Guarantor shall be in writing
and shall be (a) personally
delivered, (b) sent by overnight courier of international reputation,
(c) transmitted by telecopy, or (d) sent as electronic mail, to the
following (or at such other business address, telecopier number, or e-mail
address as the Guarantor may hereafter designate in writing to the other
parties hereto):

 

	
   

  	
  XCEL
  Japan Ltd.

  
	
   

  	
  KEC
  Bldg, 9F

  
	
   

  	
  25-18,
  Higashi, Gitanda 5-Chome

  
	
   

  	
  Shinagawa-ku,
  Tokyo 141-0022

  
	
   

  	
  Japan

  
	
   

  	
   

  
	
  With a copy to:

  	
  Emrise Corporation

  
	
   

  	
  9485 Haven Avenue, Suite 100

  
	
   

  	
  Rancho Cucamonga, CA 91730

  
	
   

  	
  Attn: D. John Donovan

  
	
   

  	
   

  
	
   

  	
  Rutan
  & Tucker, LLP

  
	
   

  	
  611
  Anton Blvd., Suite 1400

  
	
   

  	
  Costa
  Mesa, CA 92626

  
	
   

  	
  Attn:
  Larry A. Cerutti, Esq.

  
	
   

  	
  Fax
  No.: (714) 546-9035

  

 

Section 5.16.          Severability.
Any provision of this Guaranty which is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
portions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.

 

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

14

 

IN WITNESS WHEREOF, the Guarantor has executed this
Guaranty as of the date first set forth above.

 

	
   

  	
   

  	
  GUARANTOR:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  XCEL JAPAN LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /S/ SHIGEO FUJII

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Shigeo Fujii

  	
   

  
	
   

  	
   

  	
  Title:

  	
   Managing
  Director and Director

  	
   

  
	
   

  	
   

  	
   

  
							

 

15

 

	
  Acknowledged and
  agreed:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  AGENT
  AND ARRANGER:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  GVEC RESOURCE IV
  INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /S/ ROBERT J.
  ANDERSON

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Robert J.
  Anderson

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Authorized
  Signatory

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /S/ PETER PAUL
  MENDEL

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Peter Paul
  Mendel

  	
   

  	
   

  	
   

  
	
  Title:

  	
  Authorized
  Signatory

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00133-of-00352.parquet"}]]