“ Holder ” shall mean the Person specified in the introductory paragraph of this Note or any Person who shall at the time be the registered holder of this Note.

“ Issuance Date ” shall mean August 20, 2008.

“ Maturity Date ” shall mean the date five Business Days after the Payment Statement for the Second Measurement Period becomes final and binding.

“ Note ” shall mean this Subordinated Contingent Secured Promissory Note.

“ Obligations ” shall mean and include all loans, advances, debts, liabilities and obligations, howsoever arising, owed by the Company to Holder of every kind and description (whether or not evidenced by any note or instrument and whether or not for the payment of money), now existing or hereafter arising under or pursuant to the terms of this Note and the other Subordinated Contingent Notes, including, all interest, fees, charges, expenses, attorneys’ fees and costs and accountants’ fees and costs chargeable to and payable by the Company hereunder and thereunder.

“ Parent ” shall mean EMRISE Corporation, a Delaware corporation and parent of the Company.

“ Person ” shall mean and include an individual, a partnership, a corporation (including a business trust), a joint stock company, a limited liability company, an unincorporated association, a joint venture or other entity or a governmental authority.

“ Security Agreement ” shall mean the Security Agreement dated as of the date hereof executed by the Company, ACC, Charles S. Brand, Thomas P. M. Couse, Joanne Couse and Michael Gaffney.

“ Senior Indebtedness ” shall mean the principal of and unpaid interest on all indebtedness of Parent or any Subsidiary regardless of whether incurred on, before or after the date of this Note (i) for money borrowed from any bank, savings and loan or other financial institution (including without limitation money borrowed from GVEC Resource IV Inc. and its participants, successors and assigns), and is evidenced by notes, bonds, debentures or other written obligations in an amount not to exceed (a) during the Restricted Period, Thirty Million Dollars ($30,000,000) (as defined in the Stock Purchase Agreement), and (b) after the Pay Down Date, an amount equal to the difference of the maximum Senior Indebtedness during the Restricted Period minus Three Million Dollars ($3,000,000); and (ii) any renewals or extensions of any indebtedness described in (i) above; provided , however , that the term shall not include (w) any lease financing arrangement involving Parent or any Subsidiary, (x) trade debt of Parent or any Subsidiary, (y) indebtedness which by the terms of the instrument creating or evidencing it is subordinated to or on a parity with this Note, and (z) money borrowed from Noel C. McDermott, as Trustee of the Noel C. McDermott Revocable Living Trust dated December 18, 1995, or Warren P. Yost and Gail A. Yost, as Co-Trustees Under Declaration of Trust dated March 9, 1988 relating to the purchase by Parent of all of the capital stock of Larus Corporation.

“ Stock Purchase Agreement ” shall have the meaning set forth in the introductory paragraph of this Note.

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“ Subordinated Contingent Notes ” shall have the meaning set forth in the Stock Purchase Agreement.

“ Subsidiary ” shall mean any Person (i) the shares of stock, membership interests, partnership interests or other forms of equity of which having ordinary voting power to elect a majority of the directors, managers or partners, as the case may be, of that Person are owned, directly or indirectly, by Parent or a Subsidiary of Parent or (ii) which is controlled, directly or indirectly, by Parent or any Subsidiary of Parent.

“ Transfer ” shall have the meaning set forth in Section 8.2(a) .

2.              Principal Balance .

2.1                                  Initial Principal Balance .  The initial principal balance (the “ Initial Principal Balance ”) of this Note shall be an amount up to [             ], as determined in accordance with the terms of Sections 2.6(d) and (e) of the Stock Purchase Agreement.  Regardless of the date of determination of the Initial Principal Balance, interest shall accrue on the Initial Principal Balance from and after the Issuance Date (i.e., interest on the Initial Principal Balance will be computed retroactively to the Issuance Date after determination of the Initial Principal Balance in accordance with the terms of Section 2.6 of the Stock Purchase Agreement).

2.2                                  Adjustment of Principal Balance .  The Initial Principal Balance shall be increased or decreased in accordance with the terms of Section 2.5(b) of the Stock Purchase Agreement.

2.3                                  First Measurement Period Principal Balance .  Solely for the purpose of calculating the interest only payments to be made by the Company pursuant to Section 3.2 , the “ First Measurement Period Principal Balance ” shall equal the Initial Principal Balance as determined pursuant to Section 2.6(d) of the Stock Purchase Agreement as increased or decreased in accordance with the terms of Section 2.5(b) of the Stock Purchase Agreement.  Nothing in this Section 2.3 shall alter or modify the terms of Section 2.1 .

3.              Payments of Principal and Interest . Beginning on the Issuance Date, the outstanding principal balance of this Note shall bear interest at the Applicable Interest Rate.  Interest shall be determined and calculated on the first day of each quarter during the term hereof.  Subject to Section 2.6(i) of the Stock Purchase Agreement with respect to acceleration of payment of the principal and interest of this Note, payments of principal and interest shall be payable in cash as follows:

3.1                                  The Company shall make no principal or interest payments during the period commencing on the Issuance Date and ending on the first anniversary of the Issuance Date.  During such period, interest will accrue on a quarterly basis pursuant to the terms of this Section 3 .

3.2                                  Commencing on the date the Payment Statement for the First Measurement Period becomes final and binding, and continuing to the Maturity Date, the

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Company shall make quarterly payments of interest on the First Measurement Period Initial Principal Balance during each quarter.

3.3                                  The principal amount, as determined pursuant to Section 2 , together with all accrued and unpaid interest, of this Note shall be due and payable on the Maturity Date or at such earlier time as provided herein.

4.              Payment on Non-Business Days . Whenever any payment to be made shall be due on a Saturday, Sunday or a public holiday under the laws of the State of California, such payment may be due on the next succeeding business day and such next succeeding day shall be included in the calculation of the amount of accrued interest payable on such date.

5.              Prepayment .  Upon five (5) days prior written notice to Holder, the Company may prepay this Note in whole or in part; provided , however , that: (i) any prepayment of this Note may only be made in connection with the prepayment of all Subordinated Contingent Notes issued under the Stock Purchase Agreement on a pro rata basis, based on the respective aggregate outstanding principal amounts of each such Subordinated Contingent Note, and (ii) any such prepayment will be applied first to the payment of expenses due under this Note, second to interest accrued on this Note and third, if the amount of prepayment exceeds the amount of all such expenses and accrued interest, to the payment of principal of this Note.

6.              Security .  The Obligations of the Company und