Edgar Filing: Emrise CORP

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A
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EXCHANGE ACT OF 1934

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EMRISE CORPORATION
________________________________________________________________________________
(Name of Registrant as Specified In Its Charter)

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EMRISE CORPORATION
9485 HAVEN AVENUE, SUITE 100
RANCHO CUCAMONGA, CALIFORNIA 91730

November 16, 2005

Dear Stockholders:

You are cordially invited to attend the Emrise Corporation 2005 annual
meeting of stockholders that will be held on December 21, 2005 at 10:00 a.m.
local time, at our headquarters located at 9485 Haven Avenue, Suite 100, Rancho
Cucamonga, California 91730. All holders of our outstanding common stock as of
the close of business on November 9, 2005 are entitled to vote at the 2005
annual meeting.

Enclosed are a copy of the notice of annual meeting of stockholders, a
proxy statement, a proxy card and our latest annual report. A current report on
our business operations and future plans will be presented at the meeting, and
stockholders will have an opportunity to ask questions.

We hope you will be able to attend the 2005 annual meeting. Whether or
not you expect to attend, it is important that you complete, sign, date and
return the proxy card in the enclosed envelope in order to make certain that
your shares will be represented at the 2005 annual meeting.

Sincerely,

/s/ Randolph D. Foote

Randolph D. Foote,
Secretary

EMRISE CORPORATION
9485 HAVEN AVENUE, SUITE 100
RANCHO CUCAMONGA, CALIFORNIA 91730
______________________

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 21, 2005
______________________

NOTICE IS HEREBY GIVEN that the 2005 annual meeting of stockholders of
Emrise Corporation, a Delaware corporation, will be held at our headquarters
located at 9485 Haven Avenue, Suite 100, Rancho Cucamonga, California, on
December 21, 2005 at 10:00 a.m. local time, for the following purposes:

1. To elect Carmine T. Oliva as a Class III director to serve a
three-year term.

2. To consider and vote upon a proposal to ratify the selection of
our independent registered public accountants to audit our
consolidated financial statements for 2005.

3. To transact such other business as may properly come before the
meeting or any adjournments and postponements thereof.

Our board of directors has fixed the close of business on November 9,
2005 as the record date for determining those stockholders who will be entitled
to notice of and to vote at the meeting. Only holders of our common stock at the
close of business on the record date are entitled to vote at the meeting.
Stockholders whose shares are held in the name of a broker or other nominee and
who desire to vote in person at the meeting should bring with them a legal
proxy.

By Order of the Board of Directors,

/s/ Randolph D. Foote

Randolph D. Foote, Secretary
Rancho Cucamonga, California
November 16, 2005

YOUR VOTE IS IMPORTANT

WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN AND
DATE THE ACCOMPANYING PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. Returning a signed proxy card will help us secure a quorum and avoid
the expense of additional proxy solicitation. If you later desire to revoke your
proxy for any reason, you may do so in the manner described in the attached
proxy statement.

TABLE OF CONTENTS
Page
----

VOTING AND PROXY....................................................................................1

DIRECTORS, DIRECTOR NOMINEE AND EXECUTIVE OFFICERS..................................................3

EXECUTIVE COMPENSATION AND RELATED INFORMATION......................................................5

INFORMATION ABOUT OUR BOARD OF DIRECTORS, BOARD COMMITTEES AND RELATED MATTERS.....................11

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.....................................19

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.....................................................21

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE............................................22

PROPOSAL 1 ELECTION OF CLASS III DIRECTOR..........................................................23

PROPOSAL 2 RATIFICATION OF SELECTION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS..................24

OTHER MATTERS......................................................................................25

STOCKHOLDER PROPOSALS..............................................................................25

AVAILABLE INFORMATION..............................................................................26

ANNUAL REPORT......................................................................................26

APPENDIX A - AMENDED AND RESTATED AUDIT COMMITTEE CHARTER.........................................A-1

APPENDIX B - AMENDED AND RESTATED COMPENSATION COMMITTEE CHARTER.................................B-1

APPENDIX C - AMENDED AND RESTATED NOMINATING COMMITTEE CHARTER...................................C-1

EMRISE CORPORATION
9485 HAVEN AVENUE, SUITE 100
RANCHO CUCAMONGA, CALIFORNIA 91730
______________________

PROXY STATEMENT

ANNUAL MEETING OF STOCKHOLDERS
DECEMBER 21, 2005
______________________

VOTING AND PROXY

We are furnishing this proxy statement in connection with the
solicitation of proxies by our board of directors for use at the 2005 annual
meeting of stockholders to be held at 10:00 a.m. local time on December 21,
2005, at our offices at 9485 Haven Avenue, Suite 100, Rancho Cucamonga,
California 91730, and at any and all adjournments and postponements of the
meeting. This proxy statement and the accompanying notice of annual meeting and
proxy card are first being mailed to stockholders on or about November 22, 2005.

Our annual report to stockholders is being mailed to stockholders
concurrently with this proxy statement. The annual report is not to be regarded
as proxy soliciting material or as a communication through which any
solicitation of proxies is made. A proxy card is enclosed for your use. The
shares represented by each properly executed unrevoked proxy card will be voted
as directed by the stockholder with respect to the matters described in the
proxy card. If no direction is made, the shares represented by each properly
executed proxy card will be voted "for" each of the proposals listed on the
proxy card. Any proxy given may be revoked at any time prior to its exercise by
filing with our secretary an instrument revoking the proxy or by filing a duly
executed proxy card bearing a later date. Any stockholder present at the meeting
who has given a proxy may withdraw it and vote his or her shares in person if he
or she so desires. However, a stockholder who holds shares through a broker or
other nominee must bring a legal proxy to the meeting if that stockholder
desires to vote at the meeting.

At the close of business on November 9, 2005, the record date for
determining the stockholders entitled to notice of and to vote at the 2005
annual meeting, we had issued and outstanding 37,497,750 shares of common stock.
Only holders of record of our common stock at the close of business on the
record date are entitled to notice of and to vote at the annual meeting or at
any adjournments and postponements of the meeting.

Each share of our common stock issued and outstanding on the record
date entitles the holder of that share to one vote at the 2005 annual meeting
for all matters to be voted on at the meeting. The holders of a majority of our
shares of common stock issued and outstanding and entitled to vote at the
meeting, present in person or represented by proxy, shall constitute a quorum
for purposes of voting on the proposals. Votes cast at the 2005 annual meeting
will be tabulated by the person or persons appointed by us to act as inspectors
of election for the meeting. Shares of our common stock represented in person or
by proxy (regardless of whether the proxy has authority to vote on all matters),
as well as abstentions and broker non-votes, will be counted for purposes of
determining whether a quorum is present at the meeting.

An "abstention" is the voluntary act of not voting by a stockholder who
is present at a meeting and entitled to vote. "Broker non-votes" are shares of
voting stock held in record name by brokers and nominees concerning which: (i)

instructions have not been received from the beneficial owners or persons
entitled to vote; (ii) the broker or nominee does not have discretionary voting
power under applicable rules or the instrument under which it serves in such
capacity; or (iii) the record holder has indicated on the proxy or has executed
a proxy and otherwise notified us that it does not have authority to vote such
shares on that matter.

Directors are elected by a plurality. Therefore, for proposal 1, the
election of one Class III director to our board of directors, the nominee
receiving the highest number of votes will be elected. Abstentions and broker
non-votes will have no effect on proposal 1.

Approval of proposal 2, the ratification of the selection of our
independent registered public accountants, is not required. However, the
affirmative vote of a majority of the shares of our common stock entitled to
vote at and present in person or represented by proxy at the meeting will
constitute stockholder ratification of the selection.

We will pay the expenses of soliciting proxies for the 2005 annual
meeting, including the cost of preparing, assembling and mailing the proxy
solicitation materials. Proxies may be solicited personally, by mail or by
telephone, or by our directors, officers and regular employees who will not be
additionally compensated. We have no present plans to hire special employees or
paid solicitors to assist in obtaining proxies, but we reserve the option to do
so if it appears that a quorum otherwise might not be obtained. The matters to
be considered and acted upon at the 2005 annual meeting are referred to in the
preceding notice and are discussed below more fully.

DIRECTORS, DIRECTOR NOMINEE AND EXECUTIVE OFFICERS

The names, ages and positions held by our directors, director nominee
and executive officers as of November 9, 2005 and their business experience are
as follows:

NAME AGE TITLES
---- --- ------

Carmine T. Oliva 63 Chairman of the Board, President, Chief Executive Officer,
Director and Director Nominee

Graham Jefferies 48 Executive Vice President, Chief Operating Officer and
Managing Director of various subsidiaries

Randolph D. Foote 57 Senior Vice President, Chief Financial Officer and
Secretary

Robert B. Runyon (1)(2)(3) 80 Director

Laurence P. Finnegan, Jr. (1)(3) 68 Director

Otis W. Baskin(3) 60 Director

-----------
(1) Member of the compensation committee.
(2) Member of the nominating committee.
(3) Member of the audit committee.

CARMINE T. OLIVA has been Chairman of the Board, President and Chief
Executive Officer and a Class III director of Emrise since March 26, 1997 and of
our subsidiary, Emrise Electronics, since he founded Emrise Electronics in 1983.
Mr. Oliva served as our Acting Chief Financial Officer from April to July 2005.
Mr. Oliva has been Chairman of the Board of Emrise Electronics Ltd. since 1985,
and Chairman and Chief Executive Officer of CXR Larus since March 1997. In 2002,
Mr. Oliva obtained a French government working permit and assumed responsibility
as President of our CXR Anderson Jacobson ("CXR-AJ") subsidiary. From January
1999 to January 2000, Mr. Oliva served as a director of Digital Transmission
Systems Inc. (DTSX), a publicly held company based in Norcross, Georgia. From
1980 to 1983, Mr. Oliva was Senior Vice President and General Manager, ITT Asia
Pacific Inc. Prior to holding that position, Mr. Oliva held a number of
executive positions with ITT Corporation and its subsidiaries over an
eleven-year period. Mr. Oliva attained the rank of Captain in the United States
Army and is a veteran of the Vietnam War. Mr. Oliva earned a B.A. degree in
Social Studies/Business from Seton Hall University and an M.B.A. degree in
Business from The Ohio State University.

GRAHAM JEFFERIES was appointed Executive Vice President on October 21,
1999. Mr. Jefferies was also appointed as our Chief Operating Officer on January
3, 2005, after having served as Chief Operating Officer of our
Telecommunications Group since October 21, 1999. Mr. Jefferies served as
Executive Vice President of Emrise from April 1999 through October 1999. Mr.
Jefferies has served CXR-AJ as a director since March 1997 and as General
Manager since July 2002, has served as Managing Director of Belix Power
Conversions Ltd., Belix Wound Components Ltd. and Belix Company Ltd. since our
acquisition of those companies in April 2000, as Managing Director of XCEL Power
Systems, Ltd. since September 1996 and as Managing Director of Emrise
Electronics Ltd. since March 1992. Prior to joining us in 1992, he was Sales and
Marketing Director of Jasmin Electronics PLC, a major public United Kingdom
software and systems provider, from 1987 to 1992. Mr. Jefferies held a variety
of project management positions at GEC Marconi from 1978 to 1987. Mr. Jefferies
earned a B.S. degree in Engineering from Leicester University, and has
experience in mergers and acquisitions. Mr. Jefferies is a citizen and resident
of the United Kingdom.

RANDOLPH D. FOOTE was appointed as our Senior Vice President and Chief
Financial Officer on October 4, 1999 and as our Assistant Secretary on February
12, 2001. Mr. Foote has been our Secretary since September 2004 and the Vice
President and Chief Financial Officer of CXR Larus and Emrise Electronics since
March 2000. Mr. Foote was the Corporate Controller of Unit Instruments, Inc., a
publicly traded semiconductor equipment manufacturer, from October 1995 to May
1999. From March 1985 to October 1995, Mr. Foote was the Director of Tax and
Financial Reporting at Optical Radiation Corporation, a publicly traded company
that designed and manufactured products using advanced optical technology. Prior
to 1985, Mr. Foote held positions with Western Gear Corporation and Bucyrus Erie
Company, which were both publicly traded companies. Mr. Foote earned a B.S.
degree in Business Management from California State Polytechnic University,
Pomona and an M.B.A. degree in Tax/Business from Golden Gate University.

ROBERT B. RUNYON has served as a Class III director since March 26,
1997 and also served as our Secretary from that date through August 2004. He has
been the owner and principal of Runyon and Associates, a human resources and
business advisory firm, since 1987. He has acted as Senior Vice President of Sub
Hydro Dynamics Inc., a privately held marine services company based in Hilton
Head, South Carolina, since September 1995. Prior to our merger with Emrise
Electronics, Mr. Runyon served Emrise Electronics both as a director since
August 1983 and as a consultant in the areas of strategy development and
business planning, organization, human resources and administrative systems. He
also consults for companies in environmental products, marine propulsion systems
and architectural services sectors in these same areas. From 1970 to 1978, Mr.
Runyon held various executive positions with ITT Corporation, including Vice
President, Administration of ITT Grinnell, a manufacturing subsidiary of ITT.
From 1963 to 1970, Mr. Runyon held executive positions at BP Oil including Vice
President, Corporate Planning and Administration of BP Oil Corporation, and
Director, Organization and Personnel for its predecessor, Sinclair Oil
Corporation. Mr. Runyon was Executive Vice President, Human Resources at the
Great Atlantic & Pacific Tea Company from 1978 to 1980. Mr. Runyon earned a B.S.
degree in Economics/Industrial Management from University of Pennsylvania.

LAURENCE P. FINNEGAN, JR. has served as a Class II director since March
26, 1997. In addition to being a director of Emrise Electronics from 1985 to
March 1997, Mr. Finnegan was Emrise Electronics' Chief Financial Officer from
1994 to 1997. Mr. Finnegan has held positions with ITT (1970-1974) as controller
of several divisions, Narco Scientific (1974-1983) as Vice President, Finance,
Chief Financial Officer, Executive Vice President and Chief Operating Officer,
and Fischer & Porter (1986-1994) as Senior Vice President, Chief Financial
Officer and Treasurer. Since August 1995, he has been a principal of GwynnAllen
Partners, Bethlehem, Pennsylvania, an executive management consulting firm.
Since December 1996, Mr. Finnegan has been a director and the President of GA
Pipe, Inc., a manufacturing company based in Langhorne, Pennsylvania. From
September 1997 to January 2001, Mr. Finnegan served as Vice President Finance
and Chief Financial Officer of QuestOne Decision Sciences, an efficiency
consulting firm based in Pennsylvania. Since August 2001, Mr. Finnegan has
served as a director and the Vice President and Chief Financial Officer of
VerdaSee Solutions, Inc., a consulting and software company based in
Pennsylvania. Mr. Finnegan earned a B.S. degree in Accounting from St. Joseph's
University.

OTIS W. BASKIN has served as a Class I director since February 6, 2004.
He has been a Professor of Management at The George L. Graziadio School of
Business and Management at Pepperdine University in Malibu, California since
June 1995 and also served as dean from 1995 to 2001. He has been a member of the
full-time faculty of the University of Houston - Clear Lake (1975-87), where he
served as Coordinator of the Management Faculty and Director of the Center for
Advanced Management Programs. He has also been Professor of Management at
Arizona State University, West Campus (1987-91) and The University of Memphis
(1991-95), in addition to serving as dean at both universities. Dr. Baskin has
worked with AACSB International (Association for the Advancement of Collegiate

Schools of Business) as Special Advisor to the President and as Chief Executive
Officer from July 2002 to June 2004. He is an Associate with the Family Business
Consulting Group, where he advises family-owned and closely-held businesses. He
has served as an advisor to Exxon/Mobile Research and Engineering Corporation,
NASA and the United States Air Force. He earned a Ph.D. in Management, Public
Relations and Communication Theory from The University of Texas at Austin, an
M.A. degree in Speech Communication from the University of Houston, and a B.A.
degree in Religion from Oklahoma Christian University.

TERM OF OFFICE AND FAMILY RELATIONSHIPS

Our officers are appointed by, and serve at the discretion of, our
board of directors. There are no family relationships among our executive
officers, directors and director nominee.

EXECUTIVE COMPENSATION AND RELATED INFORMATION

COMPENSATION OF EXECUTIVE OFFICERS

The following table provides information concerning the annual and
long-term compensation for the years ended December 31, 2004, 2003 and 2002
earned for services in all capacities as an employee by our Chief Executive
Officer and each of our other executive officers who received an annual salary
and bonus of more than $100,000 for services rendered to us during 2004
(collectively, the "named executive officers"):

SUMMARY COMPENSATION TABLE

LONG-TERM
COMPENSATION AWARD
ANNUAL COMPENSATION ------------------
----------------------- SECURITIES ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS UNDERLYING OPTIONS COMPENSATION
--------------------------- ---- ------ ----- ------------------ ------------

Carmine T. Oliva ........................ 2004 $309,000 $94,000 26,000 $4,821(1)
President and Chief Executive Officer
2003 $271,510 $70,000 53,000 $4,821(1)
2002 $257,010 -- -- $4,821(1)
Graham Jefferies ........................ 2004 $237,017 $71,000 40,000 $10,924(3)
Executive Vice President and Chief
Operating Officer (2)
2003 $210,295 $55,000 54,000 $10,320(3)
2002 $156,923 -- -- $9,000(3)
Randolph D. Foote........................ 2004 $173,867 $40,000 25,000 $1,965(4)
Senior Vice President, Chief Financial
Officer and Assistant Secretary(4)
2003 $157,230 $30,000 35,000 $1,886(4)
2002 $151,368 -- -- $1,604(4)

---------------
(1) Represents the dollar value of insurance premiums we paid with respect to a
$1,000,000 term life insurance policy for the benefit of Mr. Oliva's
spouse.
(2) Mr. Jefferies is based in the United Kingdom and receives his remuneration
in British pounds sterling. The compensation amounts listed for Mr.
Jefferies are shown in United States dollars, converted from British pounds
sterling using the average conversion rates in effect during the time
periods of compensation. Mr. Jefferies served as Chief Operating Officer of
our Telecommunications Group until he was appointed Chief Operating Officer
of Emrise in January 2005.
(3) Represents company contributions to Mr. Jefferies' retirement account.
(4) Represents company contributions to Mr. Foote's 401(k) retirement account.

RETIREMENT ACCOUNT MATCHING CONTRIBUTIONS

We match up to the lesser of $2,000 and 20% of Mr. Foote's
contributions to his 401(k) account. During 2004, our matching contribution
amounted to $1,965. This matching arrangement was generally made available to
all employees of Emrise and provides for the same method of allocation of
benefits between management and non-management participants.

Also, XCEL Power Systems Ltd. makes matching contributions of up to 6%
of Mr. Jefferies' salary to an executives' defined contribution plan. Other
employees of XCEL Power Systems Ltd. may receive matching contributions to a
defined contribution plan of up to 4% of their salary. Amounts contributed to
the defined contribution plans are intended to be used to purchase annuities
upon retirement. During 2004, 2003 and 2002, Mr. Jefferies received matching
contributions of $10,924, $10,320 and $9,000, respectively.

OPTION GRANTS IN LAST FISCAL YEAR

The following table provides information regarding options granted in
the year ended December 31, 2004 to the executive officers named in the summary
compensation table. We did not grant any stock appreciation rights during 2004.
This information includes hypothetical potential gains from stock options
granted in 2004. These hypothetical gains are based entirely on assumed annual
growth rates of 5% and 10% in the value of our common stock price over the
ten-year life of the stock options granted in 2003. These assumed rates of
growth were selected by the Securities and Exchange Commission for illustrative
purposes only and are not intended to predict future stock prices, which will
depend upon market conditions and our future performance and prospects.

POTENTIAL
REALIZABLE VALUE
PERCENTAGE OF AT ASSUMED RATES
NUMBER OF TOTAL OF STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(3)
GRANT OPTIONS EMPLOYEES IN PRICE EXPIRATION ------------------
NAMED OFFICER DATE GRANTED(1) FISCAL YEAR(2) PER SHARE DATE 5% 10%
------------- ---- ----------- -------------- --------- ------------ ---- -----

Carmine T. Oliva........ 2/24/04 26,000 8.3% $1.00 2/24/14 $16,351 $41,437
Graham Jefferies........ 2/24/04 40,000 12.7% $1.00 2/24/14 $25,156 $63,750
Randolph D. Foote....... 2/24/04 25,000 7.9% $1.00 2/24/14 $15,722 $39,844

-------------------------
(1) Options vest in two equal annual installments commencing February 24, 2005.
(2) Based on options to purchase 314,698 shares granted to our employees during
2004.
(3) Calculated using the potential realizable value of each grant.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES

The following table provides information regarding the value of
unexercised options held by the named executive officers as of December 31,
2004. None of the named executives officers acquired shares through the exercise
of options during 2004.

NUMBER OF
SECURITIES UNDERLYING VALUE ($) OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS AT
DECEMBER 31, 2004 DECEMBER 31, 2004 (1)
------------------------------------ ----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------------------------------- ---------------- ----------------- --------------- ----------------

Carmine T. Oliva................... 283,663 26,000 179,360 16,120
Graham Jefferies................... 180,287 40,000 168,480 24,800
Randolph D. Foote.................. 85,000 25,000 115,450 15,500

--------------
(1) Based on the last reported sale price of our common stock of $1.62 on
December 30, 2004 (the last trading day during 2004) as reported on the OTC
Bulletin Board, less the exercise price of the options.

EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS

CARMINE T. OLIVA

As of January 1, 2001, we entered into an employment agreement with
Carmine T. Oliva, our Chairman of the Board, President and Chief Executive
Officer. The agreement is subject to automatic renewal for two consecutive
two-year terms beginning on January 1, 2006, unless, during the required notice
periods (which run from September 1 to November 1 of the second year preceding
the year in which a two-year renewal period is to begin), either party gives
written notice of its desire not to renew. The agreement provides for an initial
base salary of $250,000 per year and states that Mr. Oliva is eligible to
receive merit or promotional increases and to participate in other benefit and
incentive programs we may offer. For 2004, Mr. Oliva's salary and car allowance
totaled $309,000 and his bonus was $94,000.

If the board of directors makes a substantial addition to or reduction
of Mr. Oliva's duties, Mr. Oliva may resign upon written notice given within 30
days of the change in duties. Within 30 days after the effective date of a
resignation under these circumstances, we will be obligated to pay to Mr. Oliva
the value of three years of his annual salary or the value of his annual salary
that would have been due through January 1, 2006, whichever is greater.

If we terminate Mr. Oliva for cause, our obligation to pay any further
compensation, severance allowance, or other amounts payable under the agreement
terminates on the date of termination. If we terminate Mr. Oliva without cause
(including by ceasing our operations due to bankruptcy or by our general
inability to meet our obligations as they become due), we must provide him with
60 days' prior written notice. If the termination without cause occurs prior to
the expiration of the initial term of the agreement on December 31, 2005, Mr.
Oliva will be entitled to be paid his annual salary for three years following
the termination. If the termination occurs during a renewal period, Mr. Oliva
will be entitled to be paid his annual salary through the expiration of the
particular renewal period or for two years, whichever is the longer period, and
to be paid all other amounts payable under the agreement.

We may terminate the agreement upon 30 days' written notice in the
event of a merger or reorganization in which our stockholders immediately prior
to the merger or reorganization receive less than 50% of the outstanding voting
shares of the successor corporation and in the event of a sale of all or
substantially all of our assets or a sale, exchange or other disposition of
two-thirds or more of our outstanding capital stock. If Mr. Oliva is terminated
without cause within two years following a change of control, then:

o if the termination occurs prior to the expiration of the
initial term of the agreement on December 31, 2005, Mr. Oliva
will be entitled to be paid his annual salary and all other
amounts payable under the agreement for three years following
the termination, which amounts shall be payable at his
election in a lump sum within 30 days after the termination or
in installments;

o if the termination occurs during a renewal period, Mr. Oliva
will be entitled to be paid his annual salary through the
period ending two years after the expiration of the particular
renewal period, and to be paid all other amounts payable under
the agreement;

o Mr. Oliva will be entitled to receive the average of his
annual executive bonuses awarded to him in the three years
preceding his termination, over the same time span and under
the same conditions as his annual salary;

o Mr. Oliva will be entitled to receive any executive bonus
awarded but not yet paid;

o Mr. Oliva will be entitled to receive a gross up of all
compensatory payments listed above so that he receives those
payments substantially free of federal and state income taxes;
and

o Mr. Oliva will continue to receive coverage in all benefit
programs in which he was participating on the date of his
termination until the earlier of the end of the initial term
or renewal term in which the termination occurred and the date
he receives equivalent coverage and benefits under plans and
programs of a subsequent employer.

If Mr. Oliva dies during the term of the agreement, amounts payable
under the agreement to or for the benefit of Mr. Oliva will continue to be
payable to Mr. Oliva's designee or legal representatives for two years following
his death. If Mr. Oliva is unable to substantially perform his duties under the
agreement for an aggregate of 180 days in any 18-month period, we may terminate
the agreement by ten days' prior written notice to Mr. Oliva following the 180th
day of disability. However, we must continue to pay amounts payable under the
agreement to or for the benefit of Mr. Oliva for two years following the
effective date of the termination.

If the agreement is terminated for any reason and unless otherwise
agreed to by Mr. Oliva and us, then in addition to any other severance payments
to which Mr. Oliva is entitled, we must continue to pay Mr. Oliva's annual
salary until:

o all obligations incurred by Mr. Oliva on our behalf, including
any lease obligations signed by Mr. Oliva related to the
performance of his duties under the agreement, have been
voided or fully assumed by us or our successor;

o all loan collateral pledged by Mr. Oliva has been returned to
Mr. Oliva; and

o all personal guarantees given by Mr. Oliva or his family on
our behalf are voided.

The agreement provides that we will furnish a life insurance policy on
Mr. Oliva's life, in the amount of $1 million, payable to Mr. Oliva's estate in
the event of his death during the term of the agreement and any renewals of the
agreement. This benefit is in return for, and is intended to protect Mr. Oliva's
estate from financial loss arising from any and all personal guarantees that Mr.
Oliva provided in favor of us, as required by various corporate lenders. This
benefit is also intended to enable Mr. Oliva's estate to exercise all warrants
and options to purchase shares of our common stock.

The agreement contains non-competition provisions that prohibit Mr.
Oliva from engaging or participating in a competitive business or soliciting our
customers or employees during the initial term and any renewal terms and for two
years afterward if termination is for cause or for one year afterward if
termination is without cause or following a change of control. The agreement
also contains provisions that restrict disclosure by Mr. Oliva of our
confidential information and assign ownership to us of inventions created by Mr.
Oliva in connection with his employment.

RANDOLPH D. FOOTE

On July 2, 2001, we entered into an employment agreement with Randolph
D. Foote at an initial annual salary of $130,000 and with an initial term of
three years. For 2004, Mr. Foote's salary and car allowance totaled $174,000,
and his bonus was $40,000. The agreement automatically renewed for two
additional one-year terms on July 2, 2004 and July 2, 2005. Mr. Foote is to act
as Senior Vice President and Chief Financial Officer and is to perform
additional services as may be approved by our board of directors.

If the board of directors makes a substantial addition to or reduction
of Mr. Foote's duties, Mr. Foote may resign upon written notice given within 30
days of the change in duties. Within 30 days after the effective date of a
resignation under these circumstances, we will be obligated to pay to Mr. Foote
the value of one year of his annual salary within 30 days after the effective
date of the resignation.

If we terminate Mr. Foote for cause, our obligation to pay any further
compensation, severance allowance, or other amounts payable under the agreement
terminates on the date of termination. If we terminate Mr. Foote without cause
(including by ceasing our operations due to bankruptcy or by our general
inability to meet our obligations as they become due), we must provide him with
60 days' prior written notice. Mr. Foote will be entitled to be paid his annual
salary through the expiration of the then current renewal period, and to be paid
all other amounts payable under the agreement.

We may terminate the agreement upon 30 days' written notice in the
event of a merger or reorganization in which our stockholders immediately prior
to the merger or reorganization receive less than 50% of the outstanding voting
shares of the successor corporation and in the event of a sale of all or
substantially all of our assets or a sale, exchange or other disposition of
two-thirds or more of our outstanding capital stock. If Mr. Foote is terminated
without cause within two years following a change of control, then:

o Mr. Foote will be entitled to be paid in installments or, at
his election in a lump sum within 30 days after termination,
his annual salary and other amounts payable under the
agreement through the expiration of the then current renewal
period plus one additional year;

o Mr. Foote will be entitled to receive the average of his
annual executive bonuses awarded to him in the three years
preceding his termination, over the same time span and under
the same conditions as his annual salary;

o Mr. Foote will be entitled to receive any executive bonus
awarded but not yet paid; and

o Mr. Foote will continue to receive coverage in all benefit
programs in which he was participating on the date of his
termination until the earlier of the end of the initial or
current renewal term and the date he receives equivalent
coverage and benefits under plans and programs of a subsequent
employer.

If Mr. Foote dies during the term of the agreement, amounts payable
under the agreement to or for the benefit of Mr. Foote will continue to be
payable to Mr. Foote's designee or legal representatives for one year following
his death. If Mr. Foote is unable to substantially perform his duties under the
agreement for an aggregate of 180 days in any 18-month period, we may terminate
the agreement by ten days' prior written notice to Mr. Foote following the 180th
day of disability; provided, however, that we must continue to pay amounts
payable under the agreement to or for the benefit of Mr. Foote for one year
following the effective date of the termination.

The agreement contains non-competition provisions that prohibit Mr.
Foote from engaging or participating in a competitive business or soliciting our
customers or employees during the initial term and any renewal terms and for one
year afterward. The agreement also contains provisions that restrict disclosure
by Mr. Foote of our confidential information and assign ownership to us of
inventions created by Mr. Foote in connection with his employment.

GRAHAM JEFFERIES

On July 2, 2001, we entered into an employment agreement with Graham
Jefferies at an initial annual salary of 100,000 British pounds (approximately
$141,000 at the then current exchange rates) and with an initial term of three
years. For 2004, Mr. Jefferies' salary and car allowance totaled approximately
130,000 British pounds sterling (approximately $237,000 at the exchange rates
applicable during 2004) and his bonus was 37,000 British pounds sterling
(approximately $71,000 at the exchange rate in effect at December 31, 2004). The
agreement automatically renewed for a one-year term on July 2, 2004 and is
scheduled to automatically renew for one additional one-year term on July 2,
2005. Mr. Jefferies is to act as Managing Director of Emrise Electronics Ltd.
and as Executive Vice President and Chief Operating Officer of our Telecom Group
and is to perform additional services as may be approved by our board of
directors. This agreement replaced a substantially similar agreement that had
been effective since May 1, 1998. Mr. Jefferies currently serves as our
Executive Vice President and Chief Operating Officer and as Managing Director of
various subsidiaries.

If the board of directors makes a substantial addition to or reduction
of Mr. Jefferies' duties, Mr. Jefferies may resign upon written notice given
within 30 days of the change in duties. Within 30 days after the effective date
of a resignation under these circumstances, we will be obligated to pay to Mr.
Jefferies the value of one year of his annual salary within 30 days after the
effective date of the resignation.

If we terminate Mr. Jefferies for cause, our obligation to pay any
further compensation, severance allowance, or other amounts payable under the
agreement terminates on the date of termination. If we terminate Mr. Jefferies
without cause (including by ceasing our operations due to bankruptcy or by our
general inability to meet our obligations as they become due), we must provide
him with 60 days' prior written notice. Mr. Jefferies will be entitled to be
paid his annual salary through the expiration of the then current renewal period
plus one additional year, and to be paid all other amounts payable under the
agreement.

We may terminate the agreement upon 30 days' written notice in the
event of a merger or reorganization in which our stockholders immediately prior
to the merger or reorganization receive less than 50% of the outstanding voting
shares of the successor corporation and in the event of a sale of all or
substantially all of our assets or a sale, exchange or other disposition of
two-thirds or more of our outstanding capital stock. If Mr. Jefferies is
terminated without cause within two years following a change of control, then:

o Mr. Jefferies will be entitled to be paid in installments or,
at his election in a lump sum within 30 days after
termination, his annual salary and other amounts payable under
the agreement through the expiration of the current renewal
period plus one additional year;

o Mr. Jefferies will be entitled to receive the average of his
annual executive bonuses awarded to him in the three years
preceding his termination, over the same time span and under
the same conditions as his annual salary;

o Mr. Jefferies will be entitled to receive any executive bonus
awarded but not yet paid; and

o Mr. Jefferies will continue to receive coverage in all benefit
programs in which he was participating on the date of his
termination until the earlier of the end of the initial or
current renewal term and the date he receives equivalent
coverage and benefits under plans and programs of a subsequent
employer.

If Mr. Jefferies dies during the term of the agreement, amounts payable
under the agreement to or for the benefit of Mr. Jefferies will continue to be
payable to Mr. Jefferies' designee or legal representatives for one year
following his death. If Mr. Jefferies is unable to substantially perform his
duties under the agreement for an aggregate of 180 days in any 18-month period,
we may terminate the agreement by ten days' prior written notice to Mr.
Jefferies following the 180th day of disability; provided, however, that we must
continue to pay amounts payable under the agreement to or for the benefit of Mr.
Jefferies for one year following the effective date of the termination.

The agreement contains non-competition provisions that prohibit Mr.
Jefferies from engaging or participating in a competitive business or soliciting
our customers or employees during the initial term and any renewal terms and for
two years afterward if termination is for cause or for one year afterward if
termination is without cause or following a change of control. The agreement
also contains provisions that restrict disclosure by Mr. Jefferies of our
confidential information and assign ownership to us of inventions created by Mr.
Jefferies in connection with his employment.

INFORMATION ABOUT OUR BOARD OF DIRECTORS,
BOARD COMMITTEES AND RELATED MATTERS

BOARD OF DIRECTORS

Our business, property and affairs are managed under the direction of
our board. Directors are kept informed of our business through discussions with
our executive officers, by reviewing materials provided to them and by
participating in meetings of our board and its committees.

Our bylaws provide that our board of directors shall consist of at
least four directors. Our board is divided into three classes of directors:
Class I, Class II and Class III. The term of office of each class of directors
is three years, with one class expiring each year at our annual meeting of
stockholders. Our current board consists of one Class I director whose term
expires at our 2006 annual meeting, one Class II director whose term expires at
our 2007 annual meeting and two Class III directors whose term expires at our
2005 annual meeting. As discussed below under Proposal 1, one of our Class III
directors is retiring from our board effective as of the 2005 annual meeting,
and we will therefore have one vacancy to be filled when we are able to locate a
suitable candidate.

During 2004, our board held three meetings and took action by unanimous
written consent on eleven occasions. During 2004, no incumbent director attended
fewer than 75% of the aggregate of: (1) the total number of meetings of the
board of directors (held during the period for which he has been a director);
and (2) the total number of meetings held by all committees of the board on
which he served (during the periods that he served).

BOARD COMMITTEES

Our board of directors currently has an audit committee, a compensation
committee and a nominating committee.

The audit committee selects our independent auditors, reviews the
results and scope of the audit and other services provided by our independent
auditors, reviews our financial statements for each interim period and for our
year end and our internal financial and accounting controls, and recommends,
establishes and monitors our disclosure controls and procedures. From June 26,
1999 to March 21, 2004, this committee consisted of Laurence Finnegan. From
March 22, 2004 to May 24, 2005, the audit committee consisted of Messrs.
Finnegan and Baskin. Since May 25, 2005, the audit committee has consisted of
Mr. Finnegan, who serves as chairman, and Messrs. Baskin and Runyon. Following

Mr. Runyon's departure from our board of directors at our 2005 annual meeting,
the audit committee will consist of Messrs. Finnegan and Baskin, with Mr.
Finnegan continuing as chairman. The audit committee held four meetings during
2004. Our board of directors has determined that Mr. Finnegan is an audit
committee financial expert. The audit committee operates pursuant to a charter
approved by our board of directors and audit committee, according to the rules
and regulations of the Securities and Exchange Commission. A copy of the charter
is attached as Appendix A to this proxy statement.

The compensation committee is responsible for establishing and
administering our policies involving the compensation of all of our executive
officers and establishing and recommending to our board of directors the terms
and conditions of all employee and consultant compensation and benefit plans.
Our entire board of directors also may perform these functions with respect to
our employee stock option plans. Since June 26, 1999, this committee has
consisted of Messrs. Runyon and Finnegan. The compensation committee held five
meetings and took action by written consent on two occasions during 2004.
Following Mr. Runyon's departure from our board of directors at our 2005 annual
meeting, the compensation committee will consist of Messrs. Finnegan and Mr.
Baskin. The compensation committee operates pursuant to a charter approved by
our board of directors and compensation committee. A copy of the charter is
attached as APPENDIX B to this proxy statement.

The nominating committee recommends nominees to the board of directors
and committees of the board of directors, develops and recommends to the board
of directors corporate governance principles, and oversees the evaluation of the
board of directors and management. Beginning in and since 2000, the nominating
committee has consisted of Mr. Runyon. There is one vacancy on the nominating
committee. Following Mr. Runyon's departure from our board of directors at our
2005 annual meeting, the nominating committee will consist of Mr. Finnegan and
Mr. Baskin, with Mr. Finnegan serving as chairman. The nominating committee held
two meetings and took action by written consent on one occasion during 2004. The
nominating committee utilizes a variety of methods for identifying and
evaluating nominees for director, including candidates that may be referred by
stockholders.

The nominating committee shall consider candidates for director
recommended by any stockholder that is the beneficial owner of shares
representing more than 1.0% of the then-outstanding shares of our common stock
and that has beneficially owned those shares for at least one year. The
nominating committee will evaluate those recommendations by applying its regular
nominee criteria and considering the additional information described in the
nominating committee's below-referenced charter. Stockholders that desire to
recommend candidates for the board for evaluation may do so by contacting Emrise
in writing, identifying the potential candidate and providing background and
other information in the manner described in the nominating committee's charter.
Candidates may also come to the attention of the nominating committee through
current board members, professional search firms and other persons. In
evaluating potential candidates, the nominating committee will take into account
a number of factors, including, among others, the following:

o independence from management;

o depth of understanding of technology, manufacturing, sales and
marketing, finance and/or other elements directly relevant to
the technology and business of our company;

o education and professional background;

o judgment, skill, integrity and reputation;

o existing commitments to other businesses as a director,
executive or owner;

o personal conflicts of interest, if any; and

o the size and composition of the board of directors

In addition, prior to nominating a sitting director for re-election at
an annual meeting of stockholders, the nominating committee considers the
director's past attendance at, and participation in, meetings of the board of
directors and its committees and the director's formal and informal
contributions to their respective activities.

The nominating committee operates pursuant to a charter approved by our
board of directors and nominating committee. A copy of the charter is attached
as Appendix C to this proxy statement. The nominee named in our proxy card for
the 2005 annual meeting was selected by our nominating committee and ratified by
our full board of directors by unanimous written consent.

Our board of directors has determined that each of Messrs. Runyon,
Baskin and Finnegan is independent under Rule 5.3(k) of the Pacific Exchange
because none of those directors has, or during the past three years has had, a
material relationship with us, either directly or as a partner, stockholder or
officer of an organization that has a relationship with us, and none of those
directors is disqualified from being deemed independent under any of
subparagraphs (A)-(F) of Rule 5.3(k)(1) of the Pacific Exchange. Our board of
directors has also determined that each of member of the audit committee is
independent under Rule 5.3(k)(5)(A)(i) of the Pacific Exchange and Rule
10A-3(b)(1) of the Securities and Exchange Commission.

Under the rules of the Pacific Exchange, the independent members of our
board of directors must meet at regularly scheduled executive sessions without
management, with an independent director presiding over each executive session.
A presiding director for each session is to be selected by the board members in
attendance at the session based upon the topics to be discussed at the session.

SECURITY HOLDER COMMUNICATIONS WITH THE BOARD OF DIRECTORS

The board of directors has established a process to receive
communications from security holders. Security holders and other interested
parties may contact any member (or all members) of the board of directors, or
the independent directors as a group, any committee of the board of directors or
any chair of any such committee, by mail or electronically. To communicate with
the board of directors, any individual directors or any group or committee of
directors, correspondence should be addressed to the board of directors or any
such individual directors or group or committee of directors by either name or
title. All such correspondence should be sent "c/o Corporate Secretary" at 9485
Haven Avenue, Suite 100, Rancho Cucamonga, California 91730. To communicate with
any of our directors electronically, security holders should send an email to
our Corporate Secretary at: rfoote@emrise.com.

All communications received as set forth in the preceding paragraph
will be opened by the Corporate Secretary for the sole purpose of determining
whether the contents represent a message to our directors. Any contents that are
not in the nature of advertising, promotions of a product or service, patently
offensive material or matters deemed inappropriate for the board of directors
will be forwarded promptly to the addressee. In the case of communications to
the board of directors or any group or committee of directors, our Corporate
Secretary will make sufficient copies (or forward such information in the case
of e-mail) of the contents to send to each director who is a member of the group
or committee to which the envelope or e-mail is addressed.

POLICY WITH REGARD TO BOARD MEMBERS' ATTENDANCE AT ANNUAL MEETINGS

It is our policy that our directors are invited and encouraged to
attend all of our annual meetings. At the date of our 2004 annual meeting, we
had four members on our board of directors, one of whom was in attendance at our
2004 annual meeting.

COMPENSATION OF DIRECTORS

During 2004, each non-employee director was entitled to receive $1,000
per month as compensation for his services. In addition, since November 1, 2002,
each board member chairing a standing committee has been entitled to receive
$500 per month as compensation for his services. We reimburse all directors for
out-of-pocket expenses incurred in connection with attendance at board and
committee meetings. We may periodically award options or warrants to our
directors under our existing option and incentive plans. On February 24, 2004,
we granted to each of Messrs. Runyon and Finnegan an option to purchase up to
30,000 shares of our common stock at an exercise price of $1.00 per share. The
options vest in two equal installments on February 24, 2005 and February 24,
2006. In addition, we granted to Mr. Baskin, our newly-appointed non-employee
director, an option to purchase up to 50,000 shares of our common stock upon the
same terms as the options granted to the other two non-employee directors.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the board of directors has a relationship that would
constitute an interlocking relationship with executive officers and directors of
another entity. During 2004, Mr. Oliva made salary recommendations to our
compensation committee regarding salary increases for key executives.

BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

This report is provided by the compensation committee of Emrise's board
of directors to assist stockholders in understanding Emrise's objectives,
policies and procedures in establishing its executive compensation structure and
system. The compensation committee is responsible for reviewing and approving
base salaries, bonuses and incentive awards for all executive officers,
reviewing and establishing the base salary, bonuses and incentive awards for the
chief executive officer, and reviewing, approving and recommending to the board
of directors the content, terms and conditions of all employee compensation and
benefit plans, or changes to those plans.

The compensation philosophy and policy of Emrise is based upon four
central objectives:

o To provide an executive compensation structure and system that
is both competitive in the outside industrial marketplace and
also internally equitable based upon the weight and level of
responsibilities in the respective executive positions.

o To attract, retain and motivate qualified executives within
this structure, and reward them for outstanding
performance-to-objectives and business results through
financial and other appropriate management incentives.

o To align Emrise's financial results and the compensation paid
to our executive officers with the enhancement of stockholder
value.

o To structure Emrise's compensation policy so that executive
officers' compensation is dependent, in one part, on the
achievement of its current year business plan objectives, and
in another part, on the long-term increase in company net
worth and the resultant improvement in stockholder value, and
to maintain an appropriate balance between short- and
long-range performance objectives over time.

Emrise's compensation programs consist of base salary, an annual
incentive bonus, and the award of stock options and other equity-based
incentives. Base salary is targeted to recognize each executive officer's unique
value and historical contributions to the success of Emrise in light of industry
salary norms. The compensation committee reviews the compensation of the chief
executive officer, and with the chief executive officer, the base compensation
of all other executive officers, on an annual basis to assure that a competitive
position is maintained.

Any annual incentive bonus is based upon a comparison of actual
performance against pre-established quantitative and qualitative performance
objectives derived from Emrise's business plan and operating budgets, which may
include company, operating subsidiary/division and individual components.

To further align the financial interests of our executive officers with
those of Emrise and its stockholders, our long-range executive incentive
programs are primarily equity-based and provide the opportunity for our
executive officers to earn stock options and consequently benefit, along with
all stockholders, from performance-driven increases in share value. The
compensation committee and/or the board of directors act as the manager of our
option plans and perform functions that include selecting option recipients,
determining the timing of option grant and whether options are incentive or
non-qualified, and assigning the number of shares subject to each option, fixing
the time and manner in which options are exercisable, setting option exercise
prices and vesting and expiration dates, and from time to time adopting rules
and regulations for carrying out the purposes of our plans.

Emrise also maintains other executive benefits that we consider
necessary in order to offer fully competitive opportunities to its executive
officers. These include, without limitation, 401(k) retirement savings plans,
car allowances and employment agreements. The compensation committee continues
to monitor and evaluate Emrise's executive compensation system and its
application throughout Emrise's organization to assure that it continues to
reflect Emrise's compensation philosophy and objectives.

Emrise's employment contract with Carmine T. Oliva, Chairman and Chief
Executive Officer, was renegotiated as of January 1, 2001. The agreement is
based upon a five-year commitment, with three successive two-year automatic
renewals, predicated upon a mutual agreement between Emrise and Mr. Oliva at
those times. Mr. Oliva's base salary is targeted to fairly recognize his unique
leadership skills and management responsibilities compared to similarly
positioned executives in the industry and general marketplace. The criteria for
measurement include data available from objective, professionally-conducted
market studies, integrated with additional competitive intelligence secured from
a range of industry and general market sources.

On July 1, 2003, the compensation committee awarded Mr. Oliva the first
$25,000 of a total $50,000 increase in salary based on his performance and
leadership in leading Emrise to profitability after the impact of the
telecommunications downturn. The compensation committee made effective the
second $25,000 increase as of January 1, 2004 based on Emrise having met certain
profitability goals.

In order to assure strength and continuity in two critical executive
positions other than Emrise's chief executive officer position, the employment
contract of Graham Jefferies, Executive Vice President and Chief Operating
Officer, was renegotiated, and an initial contract was awarded to Randolph
Foote, Senior Vice President and Chief Financial Officer. Both contracts became
effective on July 2, 2001, and are based upon a three-year commitment with two
successive one-year renewals, predicated upon mutual agreements between Emrise
and the individual executives at those times.

Compensation Committee
Emrise Corporation
Robert B. Runyon, Chairman
Laurence P. Finnegan, Jr., Member

AUDIT COMMITTEE REPORT

The audit committee of the board of directors of Emrise Corporation
discussed with Emrise's independent auditors all matters required to be
discussed by generally accepted auditing standards, including those described in
Statement on Auditing Standards No. 61, as amended, "Communication with Audit
Committees." Prior to the inclusion and filing with the Securities and Exchange
Commission of the audited consolidated financial statements in Emrise's Annual
Report on Form 10-K for the year ended December 31, 2004, the audit committee
discussed with management and reviewed Emrise's audited consolidated financial
statements. In addition, the audit committee obtained from the independent
auditors a formal written statement describing all relationships between the
auditors and Emrise that might bear on the auditors' independence consistent
with Independence Standards Board Standard No. 1, "Independent Discussions with
Audit Committees," and discussed with the auditors any relationships that may
impact their objectivity and independence and satisfied itself as to the
auditors' independence. Prior to the filing of the Form 10-K with the Securities
and Exchange Commission, and based on the review and discussions referenced
above, the audit committee recommended to the board of directors that the
audited consolidated financial statements be included in the Form 10-K. The
audit committee also recommended reappointment, subject to stockholder approval,
of the independent auditors, and the board of directors concurred in such
recommendation.

Respectfully submitted,

Audit Committee
Emrise Corporation
Laurence P. Finnegan, Jr., Chairman
Otis W. Baskin, Member
Robert B. Runyon, Member

PRINCIPAL ACCOUNTANT FEES AND SERVICES

We anticipate that a representative of Grant Thornton LLP, our
independent registered public accountants for 2004 and for the current year,
will be present at our 2005 annual meeting, will have an opportunity to make a
statement if he or she desires to do so, and will be available to respond to
appropriate questions.

The following table sets forth the aggregate fees billed to us by Grant
Thornton LLP for professional services rendered for the years ended December 31,
2004 and 2003:

Fee Category 2004 2003
------------ ---- ----
Audit Fees $ 449,000 $ 232,000
Audit-Related Fees 4,000 --
Tax Fees 106,000 57,000
All Other Fees -- 5,000
----------- -----------
Total $ 559,000 $ 294,000

AUDIT FEES. Consists of fees billed for professional services rendered
for the audit of our consolidated financial statements and review of the interim
consolidated financial statements included in quarterly reports and services
that are normally provided by Grant Thornton LLP in connection with statutory
and regulatory filings or engagements. Audit fees increased due to the audit
work required to provide assurance on the Larus Corporation financial
statements, to expand audit work required on internal controls, and the higher
value of the British pounds sterling and the euro when those expenses were
converted to United States dollars in 2004 as compared to 2003.

AUDIT-RELATED FEES. Audit-related fees during 2004 relate to due
diligence procedures in connection with the Larus Corporation acquisition. There
were no audit-related fees during 2003.

TAX FEES. Consists of fees billed for professional services for tax
compliance, tax advice and tax planning. These services include assistance
regarding federal, state and international tax compliance, tax audit defense,
customs and duties, mergers and acquisitions, and international tax planning.

ALL OTHER FEES. Consists of fees for products and services other than
the services reported above. In fiscal 2004, no such other fees were incurred.
In fiscal 2003, these services include assistance regarding the change in the
name of CXR, S.A. to CXR-AJ and other miscellaneous services.

POLICY ON AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND NON-AUDIT SERVICES OF
PRINCIPAL ACCOUNTANTS

Our audit committee pre-approves all services provided by Grant
Thornton LLP.

PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative total
stockholder return on our common stock, based on its market price, with the
cumulative total return on companies on the Nasdaq Stock Market (U.S.) and the
Nasdaq Electronic Components Index, assuming reinvestment of dividends for the
period beginning December 31, 1999 and ending December 31, 2004. This graph
assumes that the value of the investment in our common stock and each of the
comparison groups was $100 on December 31, 1999.

CUMULATIVE TOTAL RETURN

[GRAPH APPEARS HERE]

Cumulative Total Return ($)
------------------------------------------------------------------
12/99 12/00 12/01 12/02 12/03 12/04
------------------------------------------------------------------

EMRISE CORPORATION 100.00 68.49 70.78 45.66 256.85 385.84
NASDAQ STOCK MARKET (U.S.) 100.00 60.30 45.49 26.40 38.36 40.51
NASDAQ ELECTRONIC COMPONENTS 100.00 81.80 70.04 34.99 67.83 53.30

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

BENEFICIAL OWNERSHIP TABLE

As of November 9, 2005, a total of 37,497,750 shares of our common
stock were outstanding. The following table sets forth information as of that
date regarding the beneficial ownership of our common stock by:

o each person known by us to own beneficially more than five
percent, in the aggregate, of the outstanding shares of our
common stock as of the date of the table;

o each of our directors and director nominee;

o each named executive officer listed in the Summary
Compensation Table contained elsewhere in this proxy
statement; and

o all of our directors, director nominee and executive officers
as a group.

Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. Except as indicated in the footnotes to the
table, we believe each stockholder possesses sole voting and investment power
with respect to all of the shares of common stock owned by that stockholder,
subject to community property laws where applicable.

In computing the number of shares beneficially owned by a stockholder
and the percentage ownership of that stockholder, shares of common stock subject
to options or warrants held by that person that are currently exercisable or
convertible or are exercisable or convertible within 60 days after the date of
the table are deemed outstanding. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person or group. Unless otherwise indicated, the address of each person in this
table is c/o Emrise Corporation, 9485 Haven Avenue, Suite 100, Rancho Cucamonga,
CA 91730. Messrs. Oliva, Jefferies and Foote are executive officers of Emrise.
Messrs. Oliva, Runyon, Finnegan and Baskin are directors of Emrise.

AMOUNT AND NATURE PERCENT
NAME OF BENEFICIAL OWNER TITLE OF CLASS OF BENEFICIAL OWNERSHIP OF CLASS
------------------------ -------------- ----------------------- --------

Carmine T. Oliva................................... Common 1,320,305 (1) 3.51%
Robert B. Runyon................................... Common 346,146 (2) *
Laurence P. Finnegan, Jr........................... Common 210,171 (2) *
Otis W. Baskin..................................... Common 25,000 (3) *
Graham T. Jefferies................................ Common 167,276 (4) *
Randolph D. Foote.................................. Common 102,500 (5) *
The Pinnacle Fund, L.P. and Barry M. Kitt.......... Common 4,868,210 (6) 12.77%
JLF Asset Management, LLC and Jeffrey L. Feinberg.. Common 3,000,629 (7) 7.85%
Marathon Capital Management, LLC................... Common 2,057,100 (8) 5.49%
All executive officers and directors as a group (6
persons)........................................ Common 2,171,398 (9) 5.67%

-------------------
* Less than 1.00%
(1) Includes 81,889 shares held individually by Mr. Oliva's spouse, and
166,000 shares underlying options.
(2) Includes 166,000 shares underlying options.
(3) Represents shares underlying options.
(4) Includes 164,000 shares underlying options.
(5) Includes 97,500 shares underlying options.
(6) Based on information included by The Pinnacle Fund, L.P. in a Schedule
13G/A No. 1 for October 7, 2005. Includes 625,000 shares underlying a
warrant, all of which shares exceeded a contractual 9.999% beneficial
ownership limitation that applied as of the date of the information and
therefore are not considered by The Pinnacle Fund, LP. to be beneficially
owned by it as of that date. Power to vote or dispose of the shares is
held by Barry M. Kitt, as sole member of Pinnacle Fund Management, LLC,
which entity is the general partner of Pinnacle Advisers, L.P., which
entity is the general partner of The Pinnacle Fund, L.P. The address for
Mr. Kitt is c/o The Pinnacle Fund, L.P., 4965 Preston Park, Blvd., Suite
240, Plano, TX 75093.
(7) Based on information provided to us as of October 4, 2005. Includes an
aggregate of 2,300,269 outstanding shares held by JLF Offshore Fund, Ltd.,
JLF Partners I, L.P. and JLF Partners II, L.P., and an aggregate of
700,000 shares underlying warrants held by those three entities. Power to
vote or dispose of the shares beneficially owned is held by Mr. Feinberg,
as managing member of JLF Asset Management, LLC, which entity is
investment manager of the three entities named in the first sentence of
this footnote. The address for Mr. Feinberg is c/o JLF Asset Management,
LLC, 2775 Via de la Valle, Suite 204, Del Mar, CA 92014.
(8) Based on information included by Marathon Capital Management, LLC
("Marathon") in a Schedule 13G for January 13, 2005. Marathon reported
that it holds sole voting power over 125,000 shares and sole disposal
power over 2,057,100 shares. The Schedule 13G was executed by James G.
Kennedy, as President of Marathon. The address for Marathon is P.O. Box
771, Hunt Valley, MD 21030.
(9) Includes 784,500 shares underlying options and 81,889 outstanding shares
held individually by Mr. Oliva's wife.

EQUITY COMPENSATION PLAN INFORMATION

The following table gives information about our common stock that may
be issued upon the exercise of options, warrants and rights under all of our
existing equity compensation plans as of December 31, 2004.

NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
FUTURE ISSUANCE UNDER
NUMBER OF SECURITIES TO WEIGHTED-AVERAGE EQUITY COMPENSATION
BE ISSUED UPON EXERCISE EXERCISE PRICE OF PLANS (EXCLUDING
OF OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS IN COLUMN (A))
------------- ------------------- ------------------- --------------------
(a) (b) (c)

Equity compensation plans approved
by security holders 2,133,256(1) $0.97 1,131,302(2)
Equity compensation plans not
approved by security holders 805,500(3) $0.87 --
Total 2,938,756 1,131,302

-----------
(1) Represents shares of common stock underlying options that are outstanding
under our 1993 Stock Option Plan, our Employee Stock and Stock Option Plan,
our 1997 Stock Incentive Plan and our Amended and Restated 2000 Stock
Option Plan. The material features of these plans are described in Note 8
to our consolidated financial statements for the years ended December 31,
2004, 2003 and 2002.
(2) Represents shares of common stock available for issuance under options that
may be issued under our Amended and Restated 2000 Stock Option Plan.
(3) Represents shares of common stock underlying warrants that are described in
note 8 to our consolidated financial statements for the years ended
December 31, 2004, 2003 and 2002.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We are or have been a party to employment and compensation arrangements
with related parties, as more particularly described above under the headings
"Compensation of Executive Officers," "Employment Contracts and Termination of
Employment and Change-in-Control Arrangements" and "Compensation of Directors."

We have entered into an indemnification agreement with each of our
directors and executive officers. The indemnification agreements and our
certificate of incorporation and bylaws require us to indemnify our directors
and officers to the fullest extent permitted by Delaware law.

On January 5, 2005, we issued to 17 accredited record holders in a
private offering an aggregate of 12,503,500 shares of our common stock at a
purchase price of $1.44 per share and five-year investor warrants to purchase up
to an additional 3,125,875 shares of our common stock at an exercise price of
$1.73 per share. Each of The Pinnacle Fund, L.P., JLF Offshore Fund, Ltd., JLF
Asset Management, LLC (which entity is investment manager of four of the
investors, including JLF Offshore Fund, Ltd.) and Jeffrey L. Feinberg (the
managing member of JLF Asset Management, LLC), became a beneficial owner of more
than 5% of our outstanding common stock at the closing of the offering.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Securities Exchange Act of 1934, as amended
("Exchange Act"), requires our executive officers and directors, and persons who
beneficially own more than 10% of a registered class of our common stock, to
file initial reports of ownership and reports of changes in ownership with the
Securities and Exchange Commission. These officers, directors and stockholders
are required by Securities and Exchange Commission regulations to furnish Emrise
with copies of all reports that they file.

Based solely upon a review of copies of the reports furnished to us
during the year ended December 31, 2004 and thereafter, or any written
representations received by us from directors, officers and beneficial owners of
more than 10% of our common stock ("reporting persons") that no other reports
were required, we believe that, during 2004, all Section 16(a) filing
requirements applicable to our reporting persons were met, except that Otis
Baskin filed a late Form 3 to report his becoming a reporting person.

PROPOSAL 1
ELECTION OF CLASS III DIRECTOR

Our current board consists of one Class I director, Otis W. Baskin,
whose term expires at our 2006 annual meeting, one Class II director, Laurence
P. Finnegan, whose term expires at our 2007 annual meeting, and two Class III
directors, Carmine T. Oliva and Robert B. Runyon, whose terms expire at our 2005
annual meeting. Mr. Oliva is named as a nominee for election to serve a
three-year term expiring at our 2007 annual meeting or until he is succeeded by
another qualified director who has been duly elected. Mr. Runyon has chosen to
retire from our board, effective at the 2005 annual meeting. Therefore, we will
have one vacancy on our board, which we intend to fill when we locate a suitable
candidate.

The proxy holders intend to vote all proxies received by them in favor
of the election of Mr. Oliva unless instructions to the contrary are marked on
the proxy card. If Mr. Oliva is unable or declines to serve as a director at the
time of the annual meeting, an event not now anticipated, the proxies will be
voted for any nominee designated by our present board. However, the proxy
holders may not vote proxies for a greater number of persons than the number of
nominees named on the proxy card.

REQUIRED VOTE OF STOCKHOLDERS AND BOARD RECOMMENDATION

Directors are elected by a plurality vote of shares present in person
or represented by proxy at the meeting. This means that the director nominee
with the most votes for a particular slot on the board is elected for that slot.
In an uncontested election for directors, the plurality requirement is not a
factor.

OUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION
OF CARMINE T. OLIVA AS A CLASS III DIRECTOR.

PROPOSAL 2
RATIFICATION OF SELECTION OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTANTS

Our audit committee has selected Grant Thornton LLP, independent
registered public accountants, to audit our consolidated financial statements
for 2005, and our board of directors has concurred in this selection. Additional
information regarding our relationship with our independent public accountants
is contained in this proxy statement under the headings "Audit Committee
Report," "Principal Accountant Fees and Services," and "Policy on Audit
Committee Pre-Approval of Audit and Non-Audit Services of Principal
Accountants."

REQUIRED VOTE OF STOCKHOLDERS AND BOARD RECOMMENDATION

Although stockholder ratification is not required, our board of
directors has directed that this selection be submitted to our stockholders for
ratification at our 2005 annual meeting. The affirmative vote of a majority of
the shares of our common stock entitled to vote at and present in person or
represented by proxy at the meeting will constitute stockholder ratification of
the selection. If stockholder approval of this proposal is not obtained, our
audit committee and board of directors may reconsider our appointment of Grant
Thornton LLP as our independent registered public accountants.

OUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THIS PROPOSAL.

OTHER MATTERS

The board knows of no matter to come before the annual meeting other
than as specified in this proxy statement. If other business should, however, be
properly brought before the meeting, the persons voting the proxies will vote
them in accordance with their best judgment.

STOCKHOLDER PROPOSALS

Pursuant to Rule 14a-8 under the Exchange Act, proposals by
stockholders that are intended for inclusion in our proxy statement and proxy
card and to be presented at our next annual meeting must be received by us no
later than 120 calendar days in advance of the one-year anniversary of the date
of this proxy statement in order to be considered for inclusion in our proxy
materials relating to the next annual meeting. Such proposals shall be addressed
to our secretary at our corporate headquarters and may be included in next
year's annual meeting proxy materials if they comply with rules and regulations
of the Securities and Exchange Commission governing stockholder proposals.

Proposals by stockholders that are not intended for inclusion in our
proxy materials may be made by any stockholder who timely and completely
complies with the notice procedures contained in our bylaws, was a stockholder
of record at the time of giving of notice and is entitled to vote at the
meeting, so long as the proposal is a proper matter for stockholder action and
the stockholder otherwise complies with the provisions of our bylaws and
applicable law. However, stockholder nominations of persons for election to our
board of directors at a special meeting may only be made if our board of
directors has determined that directors are to be elected at the special
meeting.

To be timely, a stockholder's notice regarding a proposal not intended
for inclusion in our proxy materials must be delivered to our secretary at our
corporate headquarters not later than:

o In the case of an annual meeting, the close of business on the
45th day before the first anniversary of the date on which we
first mailed our proxy materials for the prior year's annual
meeting of stockholders. However, if the date of the meeting
has changed more than 30 days from the date of the prior
year's meeting, then in order for the stockholder's notice to
be timely it must be delivered to our secretary a reasonable
time before we mail our proxy materials for the current year's
meeting. For purposes of the preceding sentence, a "reasonable
time" coincides with any adjusted deadline we publicly
announce.

o In the case of a special meeting, the close of business on the
7th day following the day on which we first publicly announce
the date of the special meeting.

Except as otherwise provided by law, if the chairperson of the meeting
determines that a nomination or any business proposed to be brought before a
meeting was not made or proposed in accordance with the procedures set forth in
our bylaws and summarized above, the chairperson may prohibit the nomination or
proposal from being presented at the meeting.

ANNUAL REPORT AND AVAILABLE INFORMATION

We are subject to the informational requirements of the Exchange Act.
In accordance with that act, we file reports, proxy statements and other
information with the Securities and Exchange Commission. These materials can be
inspected and copied at the Public Reference Room maintained by the Securities
and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. The
public may obtain information on the operation of the Public Reference Room by
calling the Securities and Exchange Commission at 1-800-SEC-0330. Our common
stock trades on the Archipelago ExchangeSM , a facility of the Pacific
Exchange(R), under the symbol "ERI."

A copy of our annual report for the year ended December 31, 2004
accompanies this proxy statement. The annual report is not incorporated by
reference into this proxy statement and is not deemed to be a part of our proxy
solicitation materials.

Copies of our annual report on Form 10-K (without exhibits) will be
furnished by first class mail, without charge to any person from whom the
accompanying proxy is solicited upon written or oral request to Emrise
Corporation, 9485 Haven Avenue, Suite 100, Rancho Cucamonga, California 91730,
Attention: Chief Financial Officer, telephone (909) 987-9220. If exhibit copies
are requested, a copying charge of $0.20 per page will be made. In addition, all
of our public filings, including our annual report, can be found free of charge
on the Securities and Exchange Commission's website at http://www.sec.gov.

ALL STOCKHOLDERS ARE URGED TO COMPLETE, SIGN AND RETURN PROMPTLY THE
ACCOMPANYING PROXY CARD IN THE ENCLOSED ENVELOPE.

APPENDIX A

July 11, 2005

AMENDED AND RESTATED
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
EMRISE CORPORATION

PURPOSE AND SCOPE

The primary function of the Audit Committee (the "Committee") of the
Board of Directors (the "Board") of Emrise Corporation (the "Company") is to (a)
assist the Board in fulfilling its responsibilities by reviewing: (i) the
financial reports provided by the Company to the Securities and Exchange
Commission ("SEC"), the Company's shareholders or to the general public, (ii)
the Company's internal financial and accounting controls, including the
performance of the Company's internal audit function, (iii) the qualifications
and independence of the independent public accountants engaged by the Company,
and (iv) the Company's compliance with legal and regulatory requirements, (b)
oversee the appointment, compensation, retention and oversight of the work
performed by any independent public accountants engaged by the Company, (c)
recommend, establish and monitor procedures designed to improve the quality and
reliability of the disclosure of the Company's financial condition and results
of operations, and (d) prepare the report that Securities and Exchange
Commission rules require be included in the Company's annual Proxy Statement.

COMPOSITION

The Committee shall be comprised of a minimum of one director as
appointed by the Board of Directors, who shall meet the independence, audit
committee composition requirements promulgated by the SEC, the National
Association of Securities Dealers, any exchange upon which securities of the
Company are traded, or any governmental or regulatory body exercising authority
over the Company (each a "Regulatory Body" and collectively, the "Regulatory
Bodies"), as in effect from time to time, and each member of the Committee shall
be free from any relationship that, in the opinion of the Board of Directors,
would interfere with the exercise of his or her independent judgment as a member
of the Committee.

At the time of his or her appointment to the Committee, each member of
the Committee shall be able to read and understand fundamental financial
statements, including a balance sheet, cash flow statement and income statement.
At least one member of the Committee shall have employment experience in finance
or accounting, requisite professional certification in accounting, or other
comparable experience or background which results in the individual's financial
sophistication, including being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. Further, at least one member of the Committee shall qualify as
an "audit committee financial expert" as such term is defined by Item 401(h) of
Regulation S-K of the Securities Act of 1933, as amended.

The members of the Committee shall be elected by the Board of Directors
at the meeting of the Board of Directors following each annual meeting of
stockholders and shall serve until their successors shall be duly elected and
qualified or until their earlier resignation or removal. Unless a Chair is
elected by the full Board of Directors, the members of the Committee may
designate a Chair by majority vote of the full Committee membership.

A-1

RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties, the Committee shall carry
out the following specific activities:

A. DOCUMENT REVIEW
---------------

1. Review and reassess the adequacy of this Charter
periodically as conditions dictate, but at least annually, and
recommend any proposed changes to the Board of Directors for approval.

2. Review with representatives of management and
representatives of the independent accounting firm the Company's
audited annual financial statements prior to their filing as part of
the Annual Report on Form 10-K, as well as the Company's specific
disclosure under "Management's Discussion and Analysis of Financial
Condition and Results of Operations." After such review and discussion,
the Committee shall recommend to the Board of Directors whether such
audited financial statements should be published in the Company's
annual report on Form 10-K. The Committee shall also review the
Company's quarterly financial statements prior to their inclusion in
the Company's quarterly SEC filings on Form 10-Q, as well as the
Company's specific disclosure under "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

3. Take steps designed to insure that the independent
accounting firm reviews the Company's interim financial statements
prior to their inclusion in the Company's quarterly reports on Form
10-Q.

B. INDEPENDENT ACCOUNTING FIRM
---------------------------

1. The Committee shall be directly responsible for the
appointment, compensation, retention and oversight of the work of any
independent accounting firm engaged by the Company for the purpose of
preparing or issuing an audit report or related work. The Committee
shall have the ultimate authority and responsibility to appoint,
evaluate and, when warranted, replace such independent accounting firm
(or to recommend such replacement for shareholder ratification in any
proxy statement).

2. At least annually, obtain and review a report by the
independent accounting firm describing the firm's internal quality
control procedures; any material issues raised by the most recent
internal quality-control review, or peer review, of the firm, or by any
inquiry or investigation by governmental or professional authorities,
within the preceding five years, respecting one or more independent
audits carried out by the firm, and any steps taken to deal with any
such issues; and, in order to assess the auditor's independence, all
relationships between the independent auditor and the company.

3. Resolve any disagreements between management and the
independent accounting firm as to financial reporting matters.

A-2

4. Review with the independent accounting firm any audit
problems or difficulties and management's response.

5. Instruct the independent accounting firm that it should
report directly to the Committee on matters pertaining to the work
performed during its engagement and on matters required by applicable
Regulatory Body rules and regulations.

6. On an annual basis, receive from the independent accounting
firm a formal written statement identifying all relationships between
the independent accounting firm and the Company consistent with
Independence Standards Board Standard 1. The Committee shall actively
engage in a dialogue with the independent accounting firm as to any
disclosed relationships or services that may impact its independence.
The Committee shall take appropriate action to oversee the independence
of the independent accounting firm.

7. On an annual basis, discuss with representatives of the
independent accounting firm the matters required to be discussed by
Statement on Auditing Standards 61, as it may be modified or
supplemented.

8. Meet with the independent accounting firm prior to the
audit to review the planning and staffing of the audit and consider
whether or not to approve the auditing services proposed to be
provided. In addition, meet separately, periodically, with management,
with internal auditors (or other personnel responsible for the internal
audit function) and with the independent accounting firm.

9. Evaluate the performance of the independent accounting firm
and consider the discharge of the independent accounting firm when
circumstances warrant. The independent accounting firm shall be
ultimately accountable to the Board of Directors and the Committee.

10. Consider in advance whether or not to approve any
non-audit services to be performed by the independent accounting firm
required to be approved by the Committee pursuant to the rules and
regulations of any applicable Regulatory Body.

11. The Committee shall have the authority to oversee and
determine the compensation of any independent accounting firm engaged
by the Company.

12. Ensure the rotation of the audit partners as required by
Section 10A(j) of the Securities Exchange Act of 1934, as amended, and
consider whether, in order to assure continuing auditor independence,
it is appropriate to adopt a policy of rotating the independent
auditing firm on a regular basis.

13. Set clear policies for the Company's hiring of employees
or former employees of the independent auditor consistent with Section
10A(l) of the Securities Exchange Act of 1934.

C. FINANCIAL REPORTING PROCESSES
-----------------------------

1. In consultation with the independent accounting firm and
management, review annually the adequacy of the Company's internal
financial and accounting controls. In addition, review major issues
regarding accounting principles and financial statement presentations;
including any significant changes in the Company's selection or
application of accounting principles, and major issues as to the
adequacy of the Company's internal controls and any special audit steps
adopted in light of material control deficiencies.

A-3

2. Review disclosures made to the Committee by the Company's
chief executive officer and chief financial officer in connection with
their certifications of the Company's reports on Form 10-K and Form
10-Q, including disclosures concerning (a) evaluations of the design
and operation of the Company's internal financial and accounting
controls, (b) any significant deficiencies discovered in the design and
operation of the Company's internal controls which could adversely
affect the Company's ability to record, process, summarize, and report
financial data, and (c) any fraud, whether or not material, that
involves management or other employees who have a significant role in
the Company's internal controls. The Committee shall direct the actions
to be taken and/or make recommendations to the Board of Directors of
actions to be taken to the extent such disclosures indicate the finding
of any significant deficiencies in internal controls or fraud.

3. Regularly review the Company's critical accounting policies
and accounting estimates resulting from the application of these
policies and inquire at least annually of both the Company's internal
auditors and the independent accounting firm as to whether either has
any concerns relative to the quality or aggressiveness of management's
accounting policies. In addition, review analyses prepared by
management and/or the independent accounting firm setting forth
significant financial reporting issues and judgments made in connection
with the preparation of the financial statements, including analyses of
the effects of alternative GAAP methods on the financial statements.

4. Review the effect of regulatory and accounting initiatives,
as well as off-balance sheet structures, on the financial statements of
the Company.

5. Discuss earnings press releases, as well as financial
information and earnings guidance provided to analysts and rating
agencies. In addition, review earnings press releases (paying
particular attention to any use of "pro forma," or "adjusted" non-GAAP,
information), as well as financial information and earnings guidance
provided to analysts and rating agencies.

6. Discuss policies with respect to risk assessment and risk
management.

D. COMPLIANCE
----------

1. Obtain from the independent auditor assurance that Section
10A(b) of the Securities Exchange Act of 1934, as amended, has not been
implicated.

2. Obtain reports from management and the independent auditor
that the Company and its subsidiaries and affiliated entities are in
conformity with applicable legal requirements and the Company's Code of
Business Conduct and Ethics.

3. To the extent deemed necessary by the Committee, it shall
have the authority to engage outside counsel, independent accounting
consultants and/or other experts at the Company's expense to review any
matter under its responsibility.

4. Establish written procedures for (a) the receipt,
retention, and treatment of complaints received by the Company
regarding accounting, internal accounting controls, or auditing

A-4

matters; and (b) the confidential, anonymous submission by employees of
the Company of concerns regarding questionable accounting, internal
accounting controls or auditing matters.

5. Investigate any allegations that any officer or director of
the Company, or any other person acting under the direction of any such
person, took any action to fraudulently influence, coerce, manipulate,
or mislead any independent public or certified accountant engaged in
the performance of an audit of the financial statements of the Company
for the purpose of rendering such financial statements materially
misleading and, if such allegations prove to be correct, take or
recommend to the Board of Directors appropriate disciplinary action.

6. Discuss with the Company's legal counsel matters that may
have a material impact on the financial statements or the compliance
policies.

7. Review and approve in advance any proposed related party
transactions.

E. REPORTING
---------

1. Prepare, in accordance with the rules of the SEC as
modified or supplemented from time to time, a written report of the
audit committee to be included in the Company's annual proxy statement
for each annual meeting of stockholders.

2. To the extent required by any Regulatory Body, instruct the
Company's management to disclose in its Form 10-K and Form 10-Q's the
approval by the Committee of any nonaudit services performed by the
independent accounting firm, and review the substance of any such
disclosure.

The Audit Committee shall review and evaluate its own performance on an
annual basis.

While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
audits or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.

A-5

APPENDIX B

July 11, 2005

AMENDED AND RESTATED
CHARTER OF THE COMPENSATION COMMITTEE
OF THE BOARD OF DIRECTORS
OF
EMRISE CORPORATION

PURPOSE

The purpose of the Compensation Committee of Emrise Corporation (the
"Company") established pursuant to this charter is to (i) act as Administrator
of the Company's various Stock Option Plans (collectively, the "Plans") as
described in each of the Plans, (ii) review forms of compensation to be provided
to the officers and employees of the Company, including stock compensation,
(iii) discharge the Board of Director's responsibilities relating to
compensation of the Company's executives, and to produce an annual report on
executive officer compensation for inclusion in the Company's Proxy Statement,
in accordance with applicable rules and regulations, (iv) grant options to
purchase common stock of the Company to employees and executive officers of the
Company and (v) review and make recommendations to the Board of Directors
regarding all forms of compensation to be provided to the directors of the
Company, including stock compensation. The Compensation Committee has the
authority to undertake the specific duties and responsibilities listed below and
will have the authority to undertake such other specific duties as the Board of
Directors from time to time prescribes.

MEMBERSHIP

The Compensation Committee shall consist of a minimum of two (2)
"non-employee directors" of the Company as such term is defined in Rule
16b-3(b)(3)(i) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The members of the Compensation Committee will be outside directors
within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as
amended. The members of the Compensation Committee are appointed by and serve at
the discretion of the Board of Directors.

DUTIES AND RESPONSIBILITIES

The duties and responsibilities of the Compensation Committee are set
forth below:

o Review and approve corporate goals and objectives relevant to
the compensation of the Chief Executive Officer, evaluate the
performance of the Chief Executive Officer in light of those
goals and objectives, and, either as a committee or together
with the other independent directors of the Board of Directors
(as directed by the Board of Directors), determine and approve
the compensation level of the Chief Executive Officer based on
such evaluation.

o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding the
compensation policy for non-CEO executive officers and
directors of the Company, and such other officers of the
Company as directed by the Board of Directors, including with
respect to incentive compensation and equity-based plans that
are subject to the approval of the Board of Directors.

o The Compensation Committee shall have the authority to retain
and terminate a consultant to assist in the evaluation of the

B-1

compensation of directors, the Chief Executive Officer or any
senior executive. The Compensation Committee shall have the
sole authority to approve the consultant's fees and other
retention terms.

o The Compensation Committee shall review and approve the
Company's compensation policy regarding all forms of
compensation (including, to the extent relevant, all "plan"
compensation, as such term is defined in Item 402(a)(7) of
Regulation S-K promulgated by the Securities and Exchange
Commission, and all non-plan compensation) to be provided to
the officers and employees of the Company.

o The Compensation Committee shall review recommendations from
the Chief Executive Officer of the Company regarding all forms
of compensation (including, to the extent relevant, all "plan"
compensation, as such term is defined in Item 402(a)(7) of
Regulation S-K promulgated by the Securities and Exchange
Commission, and all non-plan compensation) to be provided to
the non-employee directors of the Company.

o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding general
compensation goals and guidelines for the Company's employees
and officers and the criteria by which bonuses to the
Company's employees and officers are determined.

o The Compensation Committee shall review recommendations from
the Chief Executive Officer of the Company regarding all bonus
and stock compensation to all employees of the Company.

o The Compensation Committee shall act as Administrator (as
described in each of the Plans) of the Plans within the
authority delegated by the Board of Directors. In its
administration of the Plans, the Compensation Committee may,
(i) grant stock options to individuals eligible for such
grants (including grants to individuals subject to Section 16
of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") in compliance with Rule 16b-3 thereunder) and
(ii) amend such stock options.

o The Compensation Committee shall review and make
recommendations to the Board of Directors with respect to
amendments to the Plans and changes in the number of shares
reserved for issuance thereunder.

o The Compensation Committee shall review and make
recommendations to the Board of Directors regarding other
plans that are proposed for adoption or adopted by the Company
for the provision of compensation to employees of, directors
of and consultants to the Company.

o The Compensation Committee shall prepare a report (to be
included in the Company's proxy statement) that describes: (a)
the criteria on which compensation paid to the Chief Executive
Officer for the last completed fiscal year is based; (b) the
relationship of such compensation to the Company's
performance; and (c) the Compensation Committee's executive
compensation policies applicable to executive officers.

o The Compensation Committee shall review and evaluate its own
performance on an annual basis.

o The Compensation Committee shall review and reassess the
adequacy of this Charter annually and recommend any proposed
charges to the Board of Directors for approval.

B-2

MEETINGS

It is anticipated that the Compensation Committee will meet at least
twice each year. However, the Compensation Committee may establish its own
schedule, which it will provide to the Board of Directors in advance. At a
minimum of one of such meetings annually, the Compensation Committee will
consider stock plans, performance goals and incentive awards, and the overall
coverage and composition of the compensation package.

MINUTES

The Compensation Committee will maintain written minutes of its
meetings, which minutes will be filed with the minutes of the meetings of the
Board of Directors.

REPORTS

The Compensation Committee will provide written reports to the Board of
Directors of the Company regarding recommendations of the Compensation Committee
submitted to the Board of Directors for action, and copies of the written
minutes of its meetings.

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APPENDIX C

July 11, 2005

AMENDED AND RESTATED
CHARTER OF THE
NOMINATING COMMITTEE
OF THE BOARD OF DIRECTORS
OF
EMRISE CORPORATION

PURPOSE

The purpose of the Nominating Committee of the Board of Directors of
Emrise Corporation (the "Company") is to ensure that the Board of Directors is
properly constituted to meet its fiduciary obligations to stockholders and the
Company and that the Company has and follows appropriate governance standards.
To carry out this purpose, the Nominating Committee shall: (1) assist the Board
of Directors by identifying prospective director nominees and to recommend to
the Board of Director nominees for the next annual meeting of stockholders; (2)
develop and recommend to the Board of Directors the governance principles
applicable to the Company; (3) oversee the evaluation of the Board of Directors
and management; and (4) recommend to the Board of Directors nominees for each
committee. In addition to the matters addressed below, the Nominating Committee
shall be responsible for addressing and handling various matters as provided in
the Company's Corporate Governance Guidelines.

COMMITTEE MEMBERSHIP AND ORGANIZATION

o The Nominating Committee shall be comprised of no fewer than
two (2) members.

o The members of the Nominating Committee shall meet the
independence requirements promulgated by the SEC, the National
Association of Securities Dealers, any exchange upon which
securities of the Company are traded, or any governmental or
regulatory body exercising authority over the Company, as in
effect from time to time, and each member of the Committee
shall be free from any relationship that, in the opinion of
the Board of Directors, would interfere with the exercise of
his or her independent judgment as a member of the Committee.

o The members of the Nominating Committee shall be appointed and
replaced by the Board of Directors.

COMMITTEE RESPONSIBILITIES AND AUTHORITY

o Evaluate the current composition, organization and governance
of the Board of Directors and its committees, determine future
requirements and make recommendations to the Board of
Directors for approval.

o Determine on an annual basis desired Board of Director
qualifications, expertise and characteristics and conduct
searches for potential Board of Director members with
corresponding attributes. Evaluate and propose nominees for

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election to the Board of Directors. In performing these tasks
the Nominating Committee shall have the sole authority to
retain and terminate any search firm to be used to identify
director candidates, including the sold authority to approve
the search firm's fees and other retention terms.

o Oversee the Board of Directors performance evaluation process
including conducting surveys of director observations,
suggestions and preferences.

o Form and delegate authority to subcommittees when appropriate.

o Evaluate and make recommendations to the Board of Directors
concerning the appointment of directors to Board of Directors
committees, the selection of Board of Directors committee
chairs, and proposal of the Board of Directors slate for
election.

o Consider shareholder nominees for election to the Board of
Directors.

o Evaluate and recommend termination of membership of individual
directors in accordance with the Board of Director's
governance principles, for cause or for other appropriate
reasons.

o Conduct an annual review on succession planning, report its
findings and recommendations to the Board of Directors, and
work with the Board of Directors in evaluating potential
successors to executive management positions.

o Coordinate and approve Board of Directors and committee
meeting schedules.

o Make regular reports to the Board of Directors.

o Review and re-examine this Charter annually and make
recommendations to the Board Directors for any proposed
changes.

o Annually review and evaluate its own performance.

o In performing its responsibilities, the Nominating Committee
shall have the authority to obtain advice, reports or opinions
from internal or external counsel and expert advisors.

COMMITTEE CONSIDERATIONS

When considering a candidate for director, the Nominating Committee
shall take into account a number of factors, including the following:

o independence from management;

o depth of understanding of technology, manufacturing, sales and
marketing, finance and/or other elements directly relevant to
the technology and business of the Company;

o education and professional background;

o judgment, skill, integrity and reputation;

o existing commitments to other businesses as a director,
executive or owner;

o personal conflicts of interest, if any; and

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o the size and composition of the Board of Directors

In addition, prior to nominating a sitting director for re-election at
an annual meeting of stockholders, the Nominating Committee shall consider the
director's past attendance at, and participation in, meetings of the Board of
Directors and its committees and the director's formal and informal
contributions to their respective activities.

The Nominating Committee shall consider candidates for director
recommended by any shareholder that is the beneficial owner of shares
representing more than one percent of the then-outstanding shares of common
stock of the Company and that has beneficially owned those shares for at least
one year. The Nominating Committee will evaluate such recommendations applying
its regular nominee criteria and considering the additional information set
forth below. Eligible shareholders wishing to recommend a candidate for
nomination as a director are to send the recommendation in writing to the
Chairman of the Nominating Committee, Emrise Corporation, 9485 Haven Avenue,
Suite 100, Rancho Cucamonga, California 91730. A shareholder recommendation must
contain the following information:

o documentation supporting that the writer is a shareholder of
the Company and has been a beneficial owner of shares
representing more than one percent of the then-outstanding
shares of common stock of the Company for at least one year
and a statement that the writer is recommending a candidate
for nomination as a director;

o a resume of the candidate's business experience and
educational background that also includes the candidate's
name, business and residence addresses, and principal
occupation or employment and an explanation of how the
candidate's background and qualifications are directly
relevant to the business of the Company;

o the number of shares of common stock of the Company
beneficially owned by the candidate;

o a statement detailing any relationship, arrangement or
understanding, formal or informal, between or among the
candidate, any affiliate of the candidate, and any customer,
supplier or competitor of the Company, or any other
relationship, arrangement or understanding that might affect
the independence of the candidate as a member of our Board of
Directors;

o detailed information describing any relationship, arrangement
or understanding, formal or informal, between or among the
proposing shareholder, the candidate, and any affiliate of the
proposing shareholder or the candidate;

o any other information that would be required under SEC rules
in a proxy statement soliciting proxies for the election of
such candidate as a director; and

o a signed consent of the candidate to serve as a director, if
nominated and elected. In connection with its evaluation, the
Nominating Committee may request additional information from
the candidate or the recommending shareholder and may request
an interview with the candidate. The Nominating Committee
shall have the discretion to decide which individuals to
recommend for nomination as directors.

MEETINGS

The Nominating Committee shall meet at least once each year. However,
the Nominating Committee may establish its own schedule, which it will provide
to the Board of Directors in advance.

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MINUTES

The Nominating Committee will maintain written minutes of its meetings,
which minutes will be filed with the minutes of the meetings of the Board of
Directors.

REPORTS

The Nominating Committee will provide written reports to the Board of
Directors of the Company regarding recommendations of the Nominating Committee
submitted to the Board of Directors for action, and copies of the written
minutes of its meetings.

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APPENDIX D

PROXY - EMRISE CORPORATION

ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD DECEMBER 21, 2005

THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS

The undersigned hereby appoints Carmine T. Oliva and Randolph D. Foote,
or either of them individually, as the attorney, agent and proxy holder of the
undersigned, with the power to appoint his substitute, to represent and vote, as
designated on the reverse side, all shares of common stock of Emrise
Corporation, a Delaware corporation (the "Company"), held of record by the
undersigned at the close of business on November 9, 2005, at the 2005 annual
meeting of stockholders to be held at the Company's headquarters located at 9485
Haven Avenue, Suite 100, Rancho Cucamonga, California 91730 on December 21,
2005, at 10:00 a.m. local time, and at any and all adjournments and
postponements thereof. The Company's board of directors recommends a vote FOR
each of the proposals indicated on the reverse side.

THIS PROXY CARD, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER
DIRECTED BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
CARD WILL BE VOTED FOR THE PROPOSALS INDICATED AND IN ACCORDANCE WITH THE
DISCRETION OF THE PROXY HOLDER ON ANY OTHER BUSINESS. ALL OTHER PROXIES
HERETOFORE GIVEN BY THE UNDERSIGNED IN CONNECTION WITH THE ACTIONS PROPOSED ON
THIS PROXY CARD ARE HEREBY EXPRESSLY REVOKED. THIS PROXY CARD MAY BE REVOKED AT
ANY TIME BEFORE IT IS VOTED BY WRITTEN NOTICE TO THE SECRETARY OF THE COMPANY,
BY ISSUANCE OF A SUBSEQUENT PROXY CARD OR BY VOTING AT THE ANNUAL MEETING IN
PERSON. HOWEVER, A STOCKHOLDER WHO HOLDS SHARES THROUGH A BROKER OR OTHER
NOMINEE MUST BRING A LEGAL PROXY TO THE MEETING IF THAT STOCKHOLDER DESIRES TO
VOTE AT THE MEETING.

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Annual Meeting Proxy Card

A. ELECTION OF DIRECTORS

The Board of Directors recommends a vote FOR the listed nominee:

1. To elect a Class III director to serve a three-year term.

01 - Carmine T. Oliva [ ] FOR [ ] WITHHOLD

B. ISSUES

The Board of Directors recommends a vote FOR the following proposal:

2. To consider and vote upon a proposal to ratify the selection
of the Company's independent registered public accountants to
audit the Company's consolidated financial statements for
2005.

[ ] FOR [ ] AGAINST [ ] ABSTAIN

C. AUTHORIZED SIGNATURES - SIGN HERE - THIS SECTION MUST BE COMPLETED
FOR YOUR INSTRUCTIONS TO BE EXECUTED.

Please mark, date, sign and return this proxy card promptly in the
enclosed envelope. When shares are held by joint tenants, both should sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in
partnership name by authorized person.

Signature 1 - Please keep signature within the box

[------------------------------------------------]

Signature 2 - Please keep signature within the box

[------------------------------------------------]

Date (mm/dd/yyyy):____/____/________

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