Document:

Exhibit
10.11

 

WARRANT
PURCHASE AGREEMENT

 

THIS WARRANT PURCHASE AGREEMENT (this “Agreement”)  is
made and entered into as of August 30, 2010, by and among EMRISE
Corporation, a Delaware corporation (the “Company”), and
Private Equity Management Group, LLC (“Holder”).

 

RECITALS

 

WHEREAS, Holder owns
and holds two Second Amended and Restated Warrants, numbered PEM-1A and PEM-lB,
each representing the right to purchase 387,879 shares of common stock of the
Company, and each originally issued by the Company on November 30, 2007
and amended and restated on February 12, 2009 (the “Warrants”); and

 

WHEREAS, the Company
desires to purchase the Warrants for an agreed purchase price of $100,000 and
Holder desires to sell the Warrants for such purchase price.

 

NOW THEREFORE, in
consideration of the foregoing recitals and the mutual promises hereinafter set
forth, the parties hereto agree as follows:

 

1.             PURCHASE
AND SALE OF WARRANTS.

 

1.1          Purchase and Sale of Warrants. Subject to the
terms and conditions hereof, Holder hereby agrees to sell and the Company
hereby agrees to purchase the Warrants at a purchase price of $100,000.

 

1.2          Delivery; Payment. On the later
of August 31, 2010 and the date that Holder can physically deliver the
Warrants to the Company, but not later than September 3, 2010, the Company
shall pay to Holder the purchase price of $100,000 in immediately available
funds and Holder shall deliver the original Warrants to the Company.

 

2.             REPRESENTATIONS
AND WARRANTIES.

 

2.1          Of Holder. Holder hereby
represents and warrants to the Company as follows:

 

(a)   All limited liability
company action on the part of Holder necessary for the authorization of this
Agreement and the transactions contemplated hereby has been taken. The
execution of this Agreement and the sale of the Warrants pursuant hereto, will
not, with or without the passage of time or giving of notice, result in any
violation, or be in conflict with or constitute a default under any contract or
instrument to which Holder is a party.

 

(b)   Holder has good and
marketable title to the Warrants, free of any liens or encumbrances.

 

2.2          Of Company. Company hereby
represents and warrants to Holder as follows:

 

(a)   All corporate action on the
part of the Company necessary for the authorization of this Agreement and the
transaction contemplated hereby has been taken. The

 

 

execution of this Agreement
and the purchase of the Warrants pursuant hereto, will not, with or without the
passage of time or giving of notice, result in any violation, or be in conflict
with or constitute a default under any contract or instrument to which the
Company is a party.

 

3.             CONDITIONS
PRECEDENT.

 

3.1          The obligation to consummate
the sale and purchase of the Warrants in accordance with the terms hereof is
subject to the satisfaction of the following conditions:

 

(a)   Representations and
Warranties. The representations and warranties made by each
party shall have been true and correct in all material respects on the date of
closing.

 

(b)   Tenders. Holder shall
have tendered delivery of the Warrants and Company shall have tendered the
purchase price of $100,000 in immediately available funds.

 

(c)   Closing of Sale of ACC. The closing
of the sale of Advanced Controlled Components, Inc., the Company’s
subsidiary shall be complete.

 

4.             MISCELLANEOUS.

 

4.1          Governing Law. This
Agreement shall be governed, construed and interpreted in accordance with the
laws of the State of Delaware, without giving effect to principles of conflicts
of law or choice of law that would cause the substantive laws of any other
jurisdiction to apply. Each party irrevocably submits and consents to the
jurisdiction of any Delaware state court or federal court sitting in Delaware
over any action or proceeding arising out of or relating to this Agreement, and
each party hereby irrevocably agrees that all claims in respect of any such
action or proceeding may be heard and determined in such courts.

 

4.2          Entire Agreement. This
Agreement constitutes the entire agreement among the parties relative to the
specific subject matter hereof and thereof.

 

4.3          Broker’s Fees. Each party
represents and warrants that no agent, broker, investment banker, person or
firm acting on behalf of or under the authority of such party is or will be
entitled to any broker’s or finder’s fee or any other commission directly or
indirectly in connection with the transactions contemplated herein.

 

IN WITNESS WHEREOF, the
undersigned have hereunto set their hands to this Warrant Purchase Agreement as
of the day and year first above written.

 

	
  EMRISE corporation

  	
   

  	
  PRIVATE EQUITY MANAGEMENT
  GROUP, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Carmine T. Oliva

  	
   

  	
   

  
	
  Name: Carmine T. Oliva

  	
   

  	
  By: 

  	
  /s/ Jim LeSieur

  
	
  Title: Chief Executive
  Officer

  	
   

  	
  Name: Jim LeSieur

  
	
   

  	
   

  	
  Title: Chief Operating
  OfficerExhibit 10.12

 

SEPARATION AND RELEASE AGREEMENT

 

This
Separation and Release Agreement (hereinafter, this “Agreement”) is made and
entered into on the 31st day of August, 2010, by and between EMRISE
Corporation (“EMRISE” or the “Company”) and D. John Donovan (“Donovan”).  EMRISE and Donovan are referred to jointly
herein as “the Parties.”  The “Effective
Date” of this Agreement shall be September 1, 2010.

 

RECITALS

 

A.            Donovan is currently an
employee of EMRISE and was serving in the offices of Chief Financial Officer,
Secretary and Treasurer, and is a party with EMRISE to that certain Executive
Employment Agreement, effective as of November 1, 2007 (the “Employment
Agreement”).

 

B.            On June 7, 2010,
Aeroflex Incorporated and Emrise Electronics Corporation, a wholly owned
subsidiary of the Company, entered into a Stock Purchase Agreement relating to
the sale of all of the issued and outstanding shares of common stock of
Advanced Control Components, Inc. (“ACC”) and all of the issued and
outstanding shares of common stock of Custom Components, Inc. (“CCI”) (the
“Transaction”).

 

C.            The Parties desire to
resolve amicably all issues between them regarding or relating to Donovan’s
employment with, and service as an officer of, EMRISE and the termination
thereof, and to memorialize the terms of such agreements in this Agreement.

 

NOW
THEREFORE, in consideration of the following covenants and promises and for
other valuable consideration as described below, and without admitting any
fault or liability on the part of any of the Parties, their officers,
directors, or affiliates, the Parties hereby agree as follows:

 

AGREEMENT

 

1.             Termination of Employment.  The employment of Donovan by EMRISE hereby
terminates effective as of midnight August 31, 2010.  In connection with such employment
termination, Donovan will also no longer serve as an officer, in any capacity,
of the Company.  In connection with such
termination, the Parties hereby agree and acknowledge that the Employment
Agreement is terminated, and that, except as expressly set forth herein, no
wages, or any form of remuneration or compensation or any other obligation are
due and owing to Donovan under the Employment Agreement, and that any and all
obligations of either Party under that Agreement have been satisfied in full.

 

2.             Payments/Benefits to Donovan.  In consideration for this Agreement, as
payment and satisfaction in full of any obligations due to Donovan as a result
of a “Constructive Termination” as defined in the Employment Agreement as
provided in Sections 6(d) and 7(c) of the Employment Agreement, and
for the release of all claims and other promises by Donovan set forth herein,
EMRISE agrees to the following:

 

1

 

a.     On September 1, 2010,
EMRISE shall pay to Donovan an amount equal to $417,311 (the “Severance Payment”).  The Severance Payment consists of $245,000
representing the one times base salary amount and $172,311 representing the “gross
up”.  The “gross up” amount will be
submitted to the appropriate taxing authorities based on the report by JH
Cohn.  Such payment shall be paid to
Donovan by wire transfer according to the following wire instructions:

 

 

 

 

 

 

 

 

b.     Donovan shall be paid 100%
of his current compensation through August 31, 2010, plus all unused
vacation days and any unused floating holidays accrued through August 31,
2010, and all payroll taxes withheld and remitted on behalf of Donovan
consistent with past practices.  Such
payments shall be made to Donovan in accordance with EMRISE’s normal payroll
practices and EMRISE will deduct all normal withholdings from such
payments.  Company will remit 401K
withholding and matching to 401K Investment Company within 10 calendar days of
the final payment being made to Donovan and provide a copy of the contribution
report sent to John Hancock as written confirmation to Donovan that such
payments have been made on his behalf. 
Donovan will be eligible to continue to participate in benefit plans of
EMRISE to which he is participating through August 31, 2010.

 

c.     EMRISE shall reimburse
Donovan for all business related expenses that are expenses properly incurred
on behalf of EMRISE through August 31, 2010 in accordance with EMRISE’s
normal expense reimbursement policy. 
EMRISE shall also reimburse Donovan for any business related expenses
that are properly the expenses of the Company, but are incurred after August 31,
2010, and are billed to Donovan; provided that Donovan complies with Paragraph
3(g) below and only in accordance with EMRISE’s normal expense reimbursement
policy.

 

d.     In addition to the payment
under Paragraph 2(a), EMRISE shall pay to Donovan the sum of $21,650 in four
equal monthly installments of $5,412.50 each on September 1, October 1,
November 1 and December 1, 2010, as payment in full of all
obligations of the Company to Donovan with regard to health, dental, and life
insurance coverages as set forth in Sections 7(c)(iv) and 7(c)(v) of
the Employment Agreement.  In addition,
at its expense, EMRISE shall provide continuing health and dental insurance
coverage through and including September 30, 2010, for Donovan and his
family.

 

2

 

e.     The Parties agree to make
all necessary and usual reports to the Internal Revenue Service, state taxing
authorities and any similar agencies and to perform all withholdings applicable
by law to the types and amounts of payments and other consideration Donovan is
to receive as a result of this Agreement.

 

3.             Donovan’s Acknowledgements,
Representations and Agreements.

 

a.             Donovan
acknowledges that certain of the benefits described in Section 2 are
substantial benefits and are valuable consideration for his obligations and
agreements hereunder.

 

b.             Donovan hereby
waives any right to receipt of any payment pursuant to Section 8 of the
Employment Agreement (Payment Upon Change in Control) that may be due based on
the Transaction or any other transaction.

 

c.             Donovan and the
Company have agreed that Donovan will purchase the equipment described on Schedule
B from EMRISE for a purchase price of $300.00 to be deducted from the
payment owed by EMRISE to Donovan.

 

d.             Donovan has
returned, or will by September 1, 2010 return, all of the property of, and
information pertaining to, EMRISE, and its affiliates, in his possession and control,
except for that property described on Schedule B and certain
miscellaneous used office furniture, equipment and supplies currently in his
possession.  Donovan represents to EMRISE
that he does not have any complete or partial copies of any of this property,
either written or on tape, disk, diskette or other storage media.  Donovan acknowledges that if he later learns
that he has any property that belongs to EMRISE, he is obliged to notify EMRISE
and to make arrangements to return all such property or information.

 

e.             Donovan shall
not disparage EMRISE or any of its officers, directors, employees, affiliates,
or agents during or after the term of his employment with the Company.  Donovan acknowledges that, to the extent he
has received confidential or non-public information regarding EMRISE, he will
keep such information confidential and comply with all legal obligations with
respect thereto.  Failure to comply with
the provisions of this paragraph may, in addition to any other remedies
available under applicable law and at EMRISE’s option, result in a termination
of any payments and benefits which have not been made.  The obligations under this paragraph shall
survive indefinitely.

 

f.              EMRISE and
Donovan will enter into a Consulting Agreement, in substantially the form
attached hereto as Schedule A.

 

g.             Donovan will
work with EMRISE expeditiously and in good faith to terminate or transition any
and all contracts or arrangements which are properly the contracts or
arrangement of EMRISE that Donovan is billed for personally or directly, 

 

3

 

including
all contracts and arrangements for which Donovan will seek reimbursement under
Paragraph 2(c).

 

4.             General Release by Donovan.

 

a.             Severance.  The Severance Payment represents a full and
final settlement of any and all claims Donovan has made or could have made
against the Company, its affiliates and each of their respective current or
former administrators, fiduciaries, attorneys, parents, heirs, trustees, subsidiaries,
affiliates, divisions, predecessors, successors, stockholders, assignees,
agents, spouses, officers, directors, employees, members, partners, limited
partners, co-joint venturers, or any of them, and all persons or entities,
acting by, through, under or in concert with each or any of them (hereafter,
collectively, the “Releasees”).  The
Severance Payment shall constitute the Company’s sole and exclusive financial
obligation to Donovan under this Agreement, under the Employment Agreement, or
in connection with the end of Donovan’s employment with the Company or any
other asserted or unasserted liability including, but not limited to, with
respect to any change in control payment to Donovan resulting from the close of
the Transaction.  It is further expressly
understood and agreed that Donovan has not relied whatsoever upon any advice
from any of the Releasees or their attorneys as to the taxability, whether
pursuant to federal, state or local income tax statutes or regulations or
otherwise, of the Severance Payment made and consideration transferred
hereunder.  Donovan shall hold the
Releasees harmless and indemnify and defend the Releasees, and each of them,
against any liability, costs and expenses, including attorneys’ fees, incurred
by the Releasees, or any of them, as a result of any claim or action taken by
any tax authority relating in any way to the tax treatment of the Severance
Payment made to Donovan.

 

b.             Known and
Unknown Claims.  Donovan
hereby knowingly and voluntarily expressly releases, remits, acquits and
forever discharges each of the Releasees of and from any and all manner of
action or actions, cause or causes of action, in law or in equity, suits,
debts, liens, contracts, agreements, promises, liability, claims, demands,
damages, charges, losses, costs, or attorneys’ fees or expenses, of any nature
whatsoever, known or unknown, fixed or contingent, choate or inchoate
including, but not limited to, for any change of control payment in connection
with the close of the Transaction which Donovan now has or may hereafter have
against the Releasees, or any of them, by reason of any matter, cause, act or
thing whatsoever from the beginning of time through the date Donovan executes
this Agreement (hereafter collectively “D Claims”).  The D Claims released herein include, without
limiting the generality of the foregoing, any D Claims in any way arising out
of or based upon Donovan’s employment, including all claims under Title VII of
the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Civil Rights
Act of 1866; the Civil Rights Act of 1870; the Consolidated Omnibus Budget
Reconciliation Act; the National Labor Relations Act; the Labor Management
Relations Act; the Equal Pay Act; the Americans with Disabilities Act; the
California Fair Employment and Housing Act; the California Unruh Act; the
Employee Retirement Income Security Act; the Age Discrimination in Employment
Act; the Rehabilitation Act; the California Family Rights Act; the Family and
Medical Leave 

 

4

 

Act;
the Older Workers’ Benefit Protection Act; the Fair Labor Standards Act and/or
any federal, state or local statute or law prohibiting employment
discrimination, retaliation, or violation of public policy.  Donovan expressly agrees that he will not
institute, allow to be instituted on his behalf, and/or continue any legal,
administrative, or grievance proceeding against Releasees, or any of them,
before any court, administrative or governmental agency, arbitrator, or any
other tribunal whatsoever, by reason of any D Claims, whether known or unknown,
released in this Agreement.  Provided,
however, that Donovan’s release does not include a release for any liability or
obligation arising under this Agreement, or a breach of this Agreement.

 

c.             DONOVAN
ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE
PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS
FOLLOWS:

 

“A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.”

 

DONOVAN,
BEING AWARE OF SAID CODE SECTION AND HAVING THE OPPORTUNITY TO CONSULT
WITH LEGAL COUNSEL, HEREBY EXPRESSLY WAIVES ANY RIGHTS DONOVAN MAY HAVE
THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF
SIMILAR EFFECT.

 

d.             Donovan
represents and warrants that there has been no assignment or other transfer of
any interest in any D Claims he may have against the Releasees, or any of them,
and Donovan agrees to hold harmless and to indemnify and defend the Releasees,
and each of them, from and against any liability, claims, demands, damages,
costs, expenses, and attorneys’ fees incurred by the Releasees, or any of them,
as a result of any such assignment or transfer. 
It is the intention of each of the Parties that this indemnity does not
require payment as a condition precedent to recovery by any of the Releasees
against Donovan under this indemnity.

 

5.             Agreements of EMRISE,
General Release by EMRISE.

 

a.             EMRISE shall
not disparage Donovan during or after the term of his employment with EMRISE.

 

b.             EMRISE will
provide Donovan with advance draft copies of any press release or public filing
of EMRISE that includes any reference to Donovan by name or title before any
public release or filing.  Donovan shall
timely review all such drafts and will not unreasonably withhold or delay sign
off on such releases and filings.

 

5

 

c.             Effective at or
before midnight on August 31, 2010, EMRISE will sever and terminate its
ability to remotely access Donovan’s computer.

 

d.             Known and
Unknown Claims.  In
consideration for Donovan’s releases and agreements contained in this Agreement
and upon its receipt of a fully executed copy of this Agreement, EMRISE and
each of EMRISE’s officers, directors, employees, and agents, and for anyone who
has or obtains rights or claims from EMRISE, hereby knowingly and voluntarily
expressly releases, remits, acquits and forever discharges Donovan and each of
Donovan’s heirs, beneficiaries, executors, administrators, and representatives
of and from any and all manner of action or actions, cause or causes of action,
in law or in equity, suits, debts, liens, contracts, agreements, promises,
liability, claims, demands, damages, charges, losses, costs, or attorneys’ fees
or expenses, of any nature whatsoever, known or unknown, fixed or contingent,
choate or inchoate and including, but not limited to, all claims arising out of
Donovan’s employment with EMRISE or arising out of any act or omission Donovan
made in good faith as an officer of EMRISE, which the Company now has or may
hereafter have against Donovan by reason of any matter, cause, act or thing
whatsoever from the beginning of time through the date EMRISE executes this
Agreement (hereafter, collectively, the “E Claims” and together with the D
Claims, the “Claims”); provided, however, EMRISE’s release does not include a
release for any liability or obligation arising under this Agreement, or a
breach of this Agreement.

 

e.             EMRISE
expressly agrees that it will not institute, allow to be instituted on its
behalf, and/or continue any legal, administrative, or grievance proceeding
against Donovan, Donovan’s heirs, beneficiaries, executors, administrators, or
representatives or any of them, before any court, administrative or
governmental agency, arbitrator, or any other tribunal whatsoever, by reason of
any E Claims, whether known or unknown, released in this Agreement.

 

f.              EMRISE
ACKNOWLEDGES THAT IT HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE
PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS
FOLLOWS:

 

“A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE,
WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER
SETTLEMENT WITH THE DEBTOR.”

 

EMRISE,
BEING AWARE OF SAID CODE SECTION AND HAVING THE OPPORTUNITY TO CONSULT
WITH LEGAL COUNSEL, HEREBY EXPRESSLY WAIVES ANY RIGHTS EMRISE MAY HAVE
THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF
SIMILAR EFFECT.

 

6

 

g.             EMRISE
represents and warrants that there has been no assignment or other transfer of
any interest in any E Claims it may have against Donovan, Donovan’s heirs,
beneficiaries, executors, administrators, or representatives or any of them, and
EMRISE agrees to hold harmless and to indemnify and defend Donovan, Donovan’s
heirs, beneficiaries, executors, administrators, representatives, and each of
them, from and against any liability, claims, demands, damages, costs,
expenses, and attorneys’ fees incurred by Donovan, Donovan’s heirs,
beneficiaries, executors, administrators, or representatives or any of them, as
a result of any such assignment or transfer. 
It is the intention of each of the Parties that this indemnity does not
require payment as a condition precedent to recovery by any of Donovan, Donovan’s
heirs, beneficiaries, executors, administrators, or representatives or any of
them against EMRISE under this indemnity.

 

6.             Assumption of Risk; Carve
Outs

 

a.             Each of the
Parties fully understands that if any fact with respect to any matter covered
by this Agreement is found hereafter to be other than, or different from, the
facts now believed by any of the Parties to be true, each of the Parties
expressly accepts and assumes the risk of such possible difference in fact and
agrees that the release remains effective notwithstanding any such difference
in fact.

 

b.             This Agreement
shall not be subject to attack on the ground that any or all of the legal
theories or factual assumptions used for negotiating purposes are for any
reason inaccurate or inappropriate.

 

c.             The language of
all parts of this Agreement shall in all cases be construed as a whole,
according to its fair meaning, and not strictly for or against any of the
Parties, and without regard to the party that drafted the same or caused its
legal representative to draft the same.

 

d.             Donovan
currently holds certain outstanding and vested options to purchase shares of
Common Stock of EMRISE that were previously awarded to Donovan.  Nothing in this Agreement is intended to
terminate, diminish, change, modify or extinguish in any way such stock options
or the rights of Donovan granted thereunder; provided that Donovan acknowledges
and understands that, pursuant to the terms thereof, such stock options will
expire if they are not exercised in the time frames provided for in the
respective stock option grants, the applicable stock option plan and stock
option agreements.

 

e.             EMRISE shall
indemnify and defend Donovan as provided for and permitted by the Company’s
Certificate of Incorporation, as amended, bylaws, as amended, and the General
Corporation Law of the State of Delaware with regard to actions in which
Donovan, as an officer of EMRISE, is named a defendant in any future lawsuits
against EMRISE, and any such indemnity is excluded from the release of E Claims
provided for in this Agreement.

 

7

 

7.             Taxes.  All payments to Donovan that are described in
this Agreement are subject to applicable withholding taxes.

 

8.             Entire Agreement; Amendment;
Enforceability.  This
Agreement expresses the entire understanding between the Parties about its
subject matter and is the only agreement, promise or understanding on which the
Parties are relying in connection with the subject matter hereof.  This Agreement may only be amended, changed
or waived through a written document signed by both Parties.  This Agreement is enforceable by and against
each Party and anyone else who has or who obtains rights under this Agreement
from either Party.  This Agreement will
be interpreted and enforced under California law.  Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by
arbitration in Orange County, California in accordance with Paragraph 8
hereof.  Except as provided herein,
Donovan and the Company shall each bear its or his own attorneys’ fees and
costs in connection with this Agreement.

 

9.             Arbitration.  The Parties agree that should any of them
allege a violation of the terms of this Agreement, or should any other
disagreements or disputes arise in connection herewith, any such dispute shall
be settled exclusively by arbitration in the County of Orange, California,
before one experienced labor and employment law arbitrator licensed to practice
law in California, or a retired judge, selected in accordance with the
Commercial Arbitration Rules of the American Arbitration Association.  The Arbitrator shall not have the power to
modify any of the provisions of this Agreement. 
The Arbitrator’s decision shall be final and binding upon the Parties
and judgment upon the award rendered by the Arbitrator may be entered in any
court having jurisdiction.  The Parties
shall share equally the cost of the Arbitrator. 
In the event of any arbitration between the Parties pursuant to this
paragraph, the prevailing party shall be entitled to his or its reasonable
attorneys’ fees and costs.  Should either
party to this Agreement hereafter pursue any dispute by any method other than
as set forth herein, the responding party shall be entitled to recover from the
initiating party all damages, costs, expenses and attorneys’ fees incurred as a
result of defending such action.

 

10.           Notices; Process.  Any notice this Agreement requires must be in
writing and will be effective only if hand-delivered or sent via electronic
mail or facsimile, AND sent by certified U.S. mail, return receipt requested,
or via a nationally recognized overnight courier, prepaid, to the Party
entitled to receive the notice at the Party’s address stated below, or at such
other address as that Party may later provide to the other Party.  The Parties agree to waive service of process
in any arbitration brought to enforce or to interpret this Agreement, and agree
that “service” of any document or pleading in any such arbitration that would
otherwise have to be served by personal service will be deemed served three
days after being sent to the other Party and that Party’s attorney, as
applicable, by certified U.S. mail as provided below:

 

8

 

to Donovan:

John Donovan

 

 

Fax:

Email:  

 

With a copy to:

Michael Zinn, Esq.

Law Offices of Zinn & Lorand

8141 E. Kaiser Blvd., Suite 130

Anaheim Hills, CA 
92808

Telephone: (714) 998-6668

Fax: (714) 998-3525

Email: 
Michael@zinnlorand.com

 

to
EMRISE at:                       EMRISE
Corporation

Attn:
Chief Executive Officer

2530
Meridien Parkway

2nd & 3rd Floors

Durham,
NC  27713

Fax:  (252)
330 2560

Email: ctoliva@emrise.com

 

with
a copy to:                      Jennifer Miller, Esq.

Ballard
Spahr LLP

1735
Market Street

51st
Floor

Philadelphia,
PA 19103-7599

Fax:
215-864-8999

Email:
millerje@ballardspahr.com

 

11.           Signatory’s Authority; All
Necessary Consents.  Each Party
expressly represents that such Party does not require any third party’s consent
to enter into this Agreement, including the consent of any spouse, insurer,
assignee, licensee, secured lender, or regulatory agency.

 

12.           SPECIFIC ACKNOWLEDGEMENTS.  DONOVAN ACKNOWLEDGES THAT HE HAS READ THIS
AGREEMENT, THAT HE HAS BEEN ADVISED THAT HE SHOULD CONSULT WITH AN ATTORNEY
BEFORE HE EXECUTES THIS AGREEMENT, AND THAT HE UNDERSTANDS ALL OF ITS TERMS AND
EXECUTES IT KNOWINGLY AND VOLUNTARILY WITH FULL KNOWLEDGE OF ITS SIGNIFICANCE
AND THE CONSEQUENCES THEREOF.

 

13.           No Admission.  This Agreement, and compliance with this
Agreement, shall not be construed as an admission of liability on the part of
the Parties, such liability being hereby 

 

9

 

expressly
denied.  The Parties’ intent in this
Agreement is to provide a complete, total, irrevocable and binding release of
all matters arising before the date of this Agreement (except those matters
reserved or carved out herein), which might result in a dispute and avoid any
further differences or conflicts. Each Party hereby represents to the other
Party that he or it has not filed nor caused to be filed any pending charges,
suits, claims, grievances or other action which in any way arise from or relate
to the subject matter covered by this Agreement.  Each Party further represents to the other
Party that he or it has not directly or indirectly assigned any Claim related
to the subject matter hereof or released hereby to any other person.

 

14.           Full and Complete Defense.  This Agreement and the releases contained
herein, may be pled as a full and complete defense, counterclaim or cross-claim
to, and may be used as a basis for an injunction against, any action, suit, or
other proceeding which may be instituted, prosecuted or attempted in breach of
this Agreement or the releases contained herein.  In the event of any action by any Party
hereto to enforce this Agreement, the releases contained herein, or any other
agreement delivered pursuant hereto, the prevailing party shall be entitled to
recover reasonable attorneys’ fees and costs.

 

15.           No Reliance.  The Parties warrant to each other that in
agreeing to the terms of this Agreement, they have not relied in any way upon
any representations or statements of the other party regarding the subject
matter hereof for the basis or effect of this Agreement other than those
representations or statements expressly contained herein.  In entering into this Agreement, each Party
represents that in entering into this Agreement and completing the transactions
hereunder, he or it has done so after completing such investigation as he or it
has determined to be necessary or appropriate in the circumstances, and after
having consulted with and taken advice from such Party’s legal, financial, tax,
investment, and other advisors to the extent such Party has determined such
consultation to be necessary or appropriate in the circumstances.

 

16.           No Mistake; Final Settlement.  In connection with this Agreement, the
Parties hereby acknowledge that they are aware that they may hereafter discover
facts in addition to or different from those which they now know or believe to
be true with respect to this Agreement, but that it is their intention hereby
to settle, fully, finally and forever, and to release all matters, issues and
differences, known or unknown, suspected or unsuspected, which now exist, which
may exist, or which heretofore have existed against any and all releasees under
this Agreement.

 

17.           Severability.  If any part of this Agreement shall be
determined to be illegal, invalid or unenforceable, the remaining part shall
not be affected thereby, and the illegal, unenforceable or invalid parts shall
be deemed not to be a part of this Agreement, although this Agreement will be
rewritten by the court or person making such finding to reflect the intention
of the Parties to the maximum extent permitted by law.  EMRISE represents and warrants that it has
full authority to enter into this Agreement and release the E Claims.  Donovan represents and warrants that he has
full capacity and authority to settle, compromise, and release the D Claims and
to enter into this Agreement.  Each Party
represents and warrants to the other Party that no other person or entity has
acquired, or will in the future acquire or have any right to assert, against
any person or entity released by this Agreement any portion of the Claims
released herein.

 

10

 

18.           Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

19.           Survival.  The Parties agree that the obligations,
representations and warranties contained herein shall indefinitely survive the
execution of this Agreement, the delivery of all documents hereunder.

 

IN WITNESS WHEREOF, the Parties, intending to
be legally bound hereby, have caused this Agreement to be duly executed as of
the date first written above.

 

 

	
  EMRISE
  CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By:
  

  	
   

  	
   

  	
   

  
	
  Name:
  Carmine T. Oliva

  	
   

  	
  D.
  John Donovan

  
	
  Title:
  Chief Executive Officer

  	
   

  	
   

  

 

11

 

Schedule A

 

Form of

CONSULTING AGREEMENT

 

This Consulting Agreement (the “Agreement”), dated
                                    by
and between EMRISE CORPORATION (“EMRISE”) and D. John Donovan (the “Consultant”).

 

Now, therefore, in consideration of the mutual
promises made herein and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties
hereto agree as follows:

 

1.                                      CONSULTANCY. EMRISE
shall use the services of the Consultant, and the Consultant shall provide services
to EMRISE upon the terms and conditions hereinafter set forth.

 

2.                                      SERVICES.  During the period or periods of use,
Consultant shall serve EMRISE upon request by a Supervisor (as defined below)
and shall perform finance and accounting related consulting hereafter referred
to as Services.

 

a.               “Services”
shall be broadly defined as those services that are related to accounting and
financial related activities and shall include but shall not be limited to the
following types of general services for and on behalf of EMRISE

 

·                  Assisting with
transition of previous CFO duties to designated person(s) at EMRISE;

·                  Press release review
and distribution;

·                  Assisting with the
development of and/or commenting on public filings, external communications
and/or other EMRISE written communications;

·                  Assisting with the
development of and/or commenting on forecasting models or other materials to
support financing efforts on behalf of EMRISE;

·                  Other financial or
accounting related projects, as requested.

 

b.              Within the limitations provided herein, the Consultant will render such
other advisory services in connection with such services to EMRISE as may be
requested from time to time by the specified officers of EMRISE or their
designees, without further compensation other than that for which provision is
made in this Agreement.  The Consultant
shall render Services in accordance with his/her independent and professional
judgment.  The Consultant shall perform
his/her services in a good and workmanlike manner and in accordance with
generally accepted industry practices.

 

3.                                      PRE-APPROVAL OF ALL SERVICES AND EXPENSES

 

a.               In order to be compensated for any Services, Consultant MUST seek and
obtain pre-approval, in writing, from Carmine Oliva or Graham Jefferies, (“Supervisors”),
prior  

 

 

to
beginning any work.  Such approval is to
be requested by Consultant by providing a brief summary, in writing, of the
nature of the work to be performed, the objective of the work, an estimate of
the hours to be incurred to achieve the objective and the approximate timeframe
in which the work is to be completed (each referred to herein as a “Work Plan”).

 

b.              In the event that travel, lodging, long distance telephone or other “out
of pocket” costs are to be incurred by Consultant while rendering Services
under a Work Plan pursuant to this Agreement,
such costs shall be reimbursed provided, however, that such costs or expenses
in excess of $100 incurred by Consultant must be pre-approved, in writing, by
one of the designated Supervisors prior to being incurred, following the same
procedure outlined above for pre approval of Work Plans.

 

4.                                      TERM AND TERMINATION. The term of
this Agreement shall be from September 1, 2010 through August 31,
2011, unless sooner terminated in accordance with the terms hereof.  Consultant or EMRISE may terminate the
consulting arrangements under this Agreement at any time upon thirty (30) days’
prior written notice.

 

5.                                      TIME REQUIREMENTS — Minimum and Maximum Effort.

 

a.               Consultant is expected to dedicate time necessary to complete each
approved Work Plan in timeframes agreed to by Consultant and one of the two
Supervisors.  There is no minimum time
commitment associated with the Services as described in this agreement, however
Consultant is expected to not unreasonably reject any reasonable request by the
Company to perform Services provided that the Company is not more than five
business days past due on any previously submitted invoices from
Consultant.  Both Consultant and EMRISE acknowledge
that Consultant may or may not be available during normal business hours to
work on Work Plans.  Consultant agrees,
however, to dedicate necessary time in evenings or on weekends to complete Work
Plans in agreed upon timeframes.  During
the term of this Agreement, total services billed under this Agreement may not
exceed 160 hours without modification of this Agreement.

 

b.              When asked to provide Services, Consultant is expected to devote his/her
time, energy, and skill to the duties of obligation hereunder as described in a
Work Plan and shall periodically, or at any time upon the request of EMRISE,
submit data as to the time performed. 
Consultant will be available to respond to inquires or requests from
EMRISE within 8 business hours of initial contact by phone                        
or by e-mail at                                 .

 

6.                                      COMPENSATION.

 

a.               In
exchange for Services, EMRISE shall pay to the Consultant $130 per hour which
shall be payable within fifteen (15) calendar days following receipt by EMRISE
of invoices delivered by Consultant. 
Invoices shall be issued upon the earlier of (i) completion of each
Work Plan and (ii) the end of each month, but in no event will 

 

 

invoices
be issued more frequently than two times per month.  Such invoices shall be sent to the attention
of Brandi Festa (via e-mail) and shall denote (at a minimum) the period
covered, a general description of the duties performed with reference to the
applicable approved Work Plan, time incurred on each specific task, total hours
incurred, the remittance address, and the Consultant’s federal tax ID number.  Such invoices will also include appropriate
information, with proper evidence attached, regarding any out of pocket
expenses for which Consultant is seeking reimbursement under Paragraph 3 above,
referencing the applicable Work Plan to which such expenses relate.  Upon request, Consultant shall also provide
proof of “Pre-Approval” for any or all tasks or expenses as specified in
Paragraph 3 of this agreement.

 

7.                                      INDEMNIFICATION AND HOLD HARMLESS.  The Consultant hereby agrees to
indemnify and hold harmless EMRISE from any and all claims by the Consultant
which may arise out of and in the course of the performance of his/her duties
hereunder including but not limited to any claim arising out of this Agreement
for unpaid taxes which may be made by any state or federal agency for any
taxes, interest, fines or penalties.  Any and all claims for unemployment benefits
and or claims for workers’ compensation benefits are hereby expressly waived by
the Consultant who agrees to maintain separate policies of liability, health,
and accident insurance as may be necessary or required by EMRISE in connection
with the performance of its duties herein.

 

8.                                      TRADE SECRETS; CONFIDENTIAL INFORMATION.  Consultant agrees that:

 

(a)          all of the trade secrets of
EMRISE, its affiliates or in any way related to a “Work Plan” (which include
product specifications, past, current and planned research and development,
current and planned manufacturing or distribution methods and processes,
customer lists, current and anticipated customer requirements, price
lists, market studies, business plans computer software and
programs (including object code and source code), computer software and
database technologies, systems, structures and architectures (and related
processes, composition, improvements, devices, inventions, discoveries,
designs, methods and information), and any other information or materials that
constitutes a trade secret under California law, and

 

(b)         all of the confidential information
of EMRISE, its affiliates or in any way related to a “Work Plan” (including
historical financial statements, financial projections and budgets, historical
and projected sales, capital spending budgets and plans, the names and
backgrounds of key personnel, personnel training techniques and materials, and
other information that EMRISE, its affiliates has provided, or will be, to
Consultant or that has been obtained or observed, or will be, by Consultant
while performing Services, by Consultant in connection with his/her involvement
with EMRISE or its affiliates or from his/her examination of the facilities,
records and personnel of EMRISE, its affiliates or is related to a “Work Plan”
or that has been developed, or will be developed, by Consultant from any such
information or materials (such trade secrets and confidential or other
information being referred to collectively as the “Information”)

 

 

is proprietary information of EMRISE that is the
sole, exclusive and valuable property of EMRISE (and Consultant acknowledges
and agrees that he has, and will acquire, no right, title or interest in such
property).  Thus, Consultant agrees that
he will: (i) not use the Information to the detriment of EMRISE or any of
its affiliates; (ii) hold the Information in strict confidence; (iii) use
the Information only in connection with performing Services; and (iv) not
disclose the Information to any person or entity (other than an employee of
EMRISE with need to know) unless EMRISE directs otherwise indefinitely in the
case of trade secrets and until twelve (12) months after the termination of
his/her employment with EMRISE in the case of confidential information.

 

The
agreements in clause (b) shall not apply to the extent that Consultant
demonstrates either:

 

(i)                   that the same information is
currently publicly available or becomes publicly available and that such
public availability does not result from the misappropriation of such
information by Consultant or the obtaining of such information by improper
means of Consultant or from acts or omissions of another person that Consultant
knows, or should have reason to know, misappropriated such information or
utilized improper means to acquire it or acquired it under circumstances giving
rise to a duty to maintain its secrecy or limit its use or by accident or
mistake; or

 

(ii)                that the Information is
required by applicable law to be disclosed, but then only to the extent
disclosure is required.

 

Immediately
after termination of this Agreement or the Services being provided hereunder,
Consultant shall deliver to EMRISE all materials in his/her possession
involving the Information.  Any trade
secrets of EMRISE shall also be entitled to all of the protections and benefits
under applicable California law and any other applicable law.  If any information obtained in relation to
any “Work Plan” which EMRISE deems to be a trade secret is found by a court of
competent jurisdiction not to be a trade secret for purposes of this section
(b), then the Information shall be considered confidential information for
purposes of this section (b). In the case of trade secrets, Consultant hereby
waives any requirement that EMRISE submit proof of the economic value of any
trade secret or post any bond or other security with respect to them.

 

9.                                      WORK PRODUCT. All final work product and work papers directly
relating thereto prepared or developed by Consultant shall be the property of
EMRISE whether or not in the possession of Consultant.

 

10.                               RELATIONSHIP BETWEEN PARTIES.  The Consultant will provide
Services to EMRISE only for the purposes and to the extent set forth in this
Agreement, and his/her relation to EMRISE shall, during the period or periods
of services hereunder, is that of an independent contractor and shall be
treated as such for all purposes, including, but not limited to, federal and
state taxation, withholding, unemployment insurance and worker’s
compensation.  The Consultant shall be
free to dispose of such portion of entire time, energy, and skill as he is not
obligated to devote hereunder to the EMRISE in such 

 

 

manner
as he sees fit and to such persons, firms, or companies as he deems
advisable.  The Consultant shall not be
considered as having an employee status or as being entitled to participate in
any plans, arrangements, or distributions by EMRISE pertaining to or in
connection with any insurance, pension, stock, bonus, profit-sharing, or
similar benefits for its regular employees.

 

11.                               ENTIRE AGREEMENT; AMENDMENT; ENFORCEABILITY.  This
Agreement expresses the entire understanding between the Parties about its subject matter and is
the only agreement, promise or understanding on which the Parties are relying
in connection with the subject matter hereof. 
This Agreement may only be amended, changed or waived through a written
document signed by both Parties.  This
Agreement is enforceable by and against each Party and anyone else who has or
who obtains rights under this Agreement from either Party.  This Agreement will be interpreted and
enforced under California law.  Any
controversy or claim arising out of or relating to this Agreement or the breach
thereof shall be settled by arbitration in Orange County, California in
accordance with Paragraph 12 hereof. 
Except as provided herein, Consultant and the Company shall each bear
its or his own attorneys’ fees and costs in connection with this Agreement.

 

12.                               ARBITRATION.  The Parties
agree that should any of them allege a violation of the terms of this
Agreement, or should any other disagreements or disputes arise in connection
herewith, any such dispute shall be settled exclusively by arbitration in the
County of Orange, California, before one experienced arbitrator licensed to
practice law in California, or a retired judge, with relevant knowledge and
experience selected in accordance with the Commercial Arbitration Rules of
the American Arbitration Association. 
The Arbitrator shall not have the power to modify any of the provisions
of this Agreement.  The Arbitrator’s
decision shall be final and binding upon the Parties and judgment upon the
award rendered by the Arbitrator may be entered in any court having
jurisdiction.  The Parties shall share
equally the cost of the Arbitrator.  In
the event of any arbitration between the Parties pursuant to this paragraph,
the prevailing party shall be entitled to his or its reasonable attorneys’ fees
and costs.  Should either party to this
Agreement hereafter pursue any dispute by any method other than as set forth
herein, the responding party shall be entitled to recover from the initiating
party all damages, costs, expenses and attorneys’ fees incurred as a result of
defending such action.

 

13.                               NOTICES; PROCESS.  Any notice
this Agreement requires must be in writing and will be effective only if
hand-delivered or sent via electronic mail or facsimile, AND sent by certified
U.S. mail, return receipt requested, or via a nationally recognized overnight
courier, prepaid, to the Party entitled to receive the notice at the Party’s
address stated below, or at such other address as that Party may later provide
to the other Party.  The Parties agree to
waive service of process in any arbitration brought to enforce or to interpret
this Agreement, and agree that “service” of any document or pleading in any
such arbitration that would otherwise have to be served by personal service
will be deemed served three days after being sent to the other Party and that
Party’s attorney, as applicable, by certified U.S. mail as provided below:

 

 

	
  to Donovan:

  	
   

  
	
   

  	
  John Donovan

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Fax:

  
	
   

  	
  Email: 

  
	
   

  	
   

  
	
  With a copy to:

  	
   

  
	
   

  	
  Michael Zinn, Esq.

  
	
   

  	
  Law Offices of
  Zinn & Lorand

  
	
   

  	
  8141 E. Kaiser Blvd.,
  Suite 130

  
	
   

  	
  Anaheim Hills, CA  92808

  
	
   

  	
  Telephone: (714) 998-6668

  
	
   

  	
  Fax: (714) 998-3525

  
	
   

  	
  Email:  Michael@zinnlorand.com

  
	
   

  	
   

  
	
  to EMRISE:

  	
  EMRISE Corporation

  
	
   

  	
  Attn: Chief Executive
  Officer

  
	
   

  	
  2530 Meridien Parkway

  
	
   

  	
  2nd & 3rd Floors

  
	
   

  	
  Durham, NC  27713

  
	
   

  	
  Fax:  (252) 330 2560

  
	
   

  	
  Email: ctoliva@emrise.com

  
	
   

  	
   

  
	
  With a copy to:

  	
  Jennifer Miller, Esq.

  
	
   

  	
  Ballard Spahr LLP

  
	
   

  	
  1735 Market Street, 51st
  Floor

  
	
   

  	
  Philadelphia, PA 19103-7599

  
	
   

  	
  Fax: 215-864-8999

  
	
   

  	
  Email:
  millerje@ballardspahr.com

  

 

IN WITNESS WHEREOF,
EMRISE has caused this Agreement to be executed in its corporate name by its
corporate officer, and the Consultant hereunder, has set his/her hand, as of
the day and year first above written.

 

EMRISE
CORPORATION

 

 

	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name:
  Carmine T. Oliva

  	
   

  	
  D. John Donovan

  
	
  Title:
  Chief Executive Officer

  	
   

  	
   

  

 

 

Schedule B

 

Equipment Purchased by Donovan from EMRISE

 

·                  Cell phone — Apple I-phone

·                  ViewSonic VA1912wb monitor

·                  Dell Latitude D830 laptop computer

·                  Dell docking station

·                  MS Windows XP Professional software

·                  MS Office software

·                  HP Officejet Pro 8500 Wireless printer

·                  Visioneer RoadWarrior 120 scanner

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