Document:

Exhibit 10.81 Note Purchase Agreement

    
      

      

    

     

    

     

    Nestor
      Traffic Systems, Inc.

     

    

     

    $3,000,000

     

    

     

    Variable
      Rate Senior Notes due May 25, 2011

     

    

     

     

     

    

     

    Note
      Purchase Agreement

     

    

     

    

     

    

     

    

     

    

     

    Dated:
      April
      1, 2007

     

    

     

     

     

     

     

    

    
      

      

    

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
TABLE
      OF CONTENTS

    

    
      	
              Section     

            	 	 	
               Page

            
	
              1.

            	 	
              AUTHORIZATION
                OF NOTES

            	 	
              1

            
	
              2.

            	 	
              SALE
                AND PURCHASE OF NOTES

            	 	
              1

            
	
              3.

            	 	
              CLOSINGS;
                EARLY TERMINATION

            	 	
              1

            
	
              3.1.

            	 	
              Closings.

            	 	
              1

            
	
              3.2.

            	 	
              Early
                Termination.

            	 	
              2

            
	
              4.

            	 	
              CONDITIONS
                TO CLOSING

            	 	
              2

            
	
              4.1.

            	 	
              Representations
                and Warranties

            	 	
              2

            
	
              4.2.

            	 	
              Performance;
                No Default

            	 	
              2

            
	
              4.3.

            	 	
              Compliance
                Certificates

            	 	
              2

            
	
              4.4.

            	 	
              Purchase
                Permitted By Applicable Law, etc.

            	 	
              2

            
	
              4.5.

            	 	
              Sale
                of Other Notes

            	 	
              3

            
	
              4.6.

            	 	
              Payment
                of Special Counsel, Organizational, Research, Administration to Speed
                I,
                LLC Fees

            	 	
              3

            
	
              4.7.

            	 	
              Proceedings
                and Documents

            	 	
              3

            
	
              5.

            	 	
              REPRESENTATIONS
                AND WARRANTIES OF THE COMPANY

            	 	
              3

            
	
              5.1.

            	 	
              Organization;
                Power and Authority

            	 	
              3

            
	
              5.2.

            	 	
              Authorization,
                etc.

            	 	
              4

            
	
              5.3.

            	 	
              Disclosure

            	 	
              4

            
	
              5.4.

            	 	
              Organization
                and Ownership of Shares of Subsidiaries; Affiliates

            	 	
              4

            
	
              5.5.

            	 	
              Financial
                Statements

            	 	
              4

            
	
              5.6.

            	 	
              Compliance
                with Laws, Other Instruments, etc.

            	 	
              5

            
	
              5.7.

            	 	
              Governmental
                Authorizations, etc.

            	 	
              5

            
	
              5.8.

            	 	
              Litigation;
                Observance of Agreements, Statutes and Orders

            	 	
              5

            
	
              5.9.

            	 	
              Taxes

            	 	
              5

            
	
              5.10.

            	 	
              Title
                to Property; Leases

            	 	
              6

            
	
              5.11.

            	 	
              Licenses,
                Permits, etc.

            	 	
              6

            
	
              5.12.

            	 	
              Private
                Offering by the Company

            	 	
              6

            
	
              5.13.

            	 	
              Existing
                Indebtedness; Future Liens

            	 	
              6

            
	
              5.14.

            	 	
              Foreign
                Assets Control Regulations, etc.

            	 	
              7

            
	
              6.

            	 	
              REPRESENTATIONS
                OF THE PURCHASER

            	 	
              7

            
	
              6.1.

            	 	
              Purchase
                for Investment

            	 	
              7

            
	
              6.2.

            	 	
              Accredited
                Investor, etc.

            	 	
              7

            
	
              7.

            	 	
              PAYMENTS
                ON NOTES

            	 	
              8

            
	
              7.1.

            	 	
              Place
                of Payment

            	 	
              8

            
	
              7.2.

            	 	
              Calculation
                and Timing of Payment.

            	 	
              8

            
	
              7.3.

            	 	
              Payment
                at Maturity.

            	 	
              9

            
	
              7.4.

            	 	
              Minimum
                Return.

            	 	
              9

            
	
              8.

            	 	
              INFORMATION
                AS TO COMPANY

            	 	
              9

            
	
              8.1.

            	 	
              Financial
                and Business Information

            	 	
              9

            
	
              8.2.

            	 	
              Inspection

            	 	
              10

            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     TABLE
      OF CONTENTS (Cont'd)

     

     

    
      	
              Section 

            	 	 	
               Page

            
	
              9.

            	 	
              PREPAYMENT
                OF THE NOTES

            	 	
              10

            
	
              9.1.

            	 	
              Optional
                Prepayments

            	 	
              10

            
	
              9.2.

            	 	
              Maturity;
                Surrender, etc.

            	 	
              10

            
	
              10.

            	 	
              AFFIRMATIVE
                COVENANTS

            	 	
              11

            
	
              10.1.

            	 	
              Compliance
                with Law

            	 	
              11

            
	
              10.2.

            	 	
              Insurance

            	 	
              11

            
	
              10.3.

            	 	
              Maintenance
                of Properties

            	 	
              11

            
	
              10.4.

            	 	
              Payment
                of Taxes and Claims

            	 	
              11

            
	
              10.5.

            	 	
              Corporate
                Existence, etc.

            	 	
              12

            
	
              10.6.

            	 	
              Keeping
                of Records and Books of Account

            	 	
              12

            
	
              10.7.

            	 	
              Additional
                Assurances

            	 	
              12

            
	
              10.8.

            	 	
              Obtaining
                and Maintaining Speed Units.

            	 	
              12

            
	
              11.

            	 	
              NEGATIVE
                COVENANTS

            	 	
              13

            
	
              11.1.

            	 	
              Liens

            	 	
              13

            
	
              12.

            	 	
              EVENTS
                OF DEFAULT

            	 	
              13

            
	
              13.

            	 	
              REMEDIES
                ON DEFAULT, ETC.

            	 	
              15

            
	
              13.1.

            	 	
              Acceleration

            	 	
              15

            
	
              13.2.

            	 	
              Other
                Remedies

            	 	
              15

            
	
              13.3.

            	 	
              Rescission

            	 	
              15

            
	
              13.4.

            	 	
              No
                Waivers or Election of Remedies, Expenses, etc.

            	 	
              16

            
	
              14.

            	 	
              EXCHANGE;
                SUBSTITUTION OF NOTES

            	 	
              16

            
	
              14.1.

            	 	
              Transfer
                and Exchange of Notes

            	 	
              16

            
	
              14.2.

            	 	
              Replacement
                of Notes

            	 	
              17

            
	
              15.

            	 	
              EXPENSES,
                ETC.

            	 	
              17

            
	
              15.1.

            	 	
              Transaction
                Expenses

            	 	
              17

            
	
              15.2.

            	 	
              Survival

            	 	
              17

            
	
              16.

            	 	
              SURVIVAL
                OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT

            	 	
              18

            
	
              17.

            	 	
              AMENDMENT
                AND WAIVER.

            	 	
              18

            
	
              17.1.

            	 	
              Requirements

            	 	
              18

            
	
              17.2.

            	 	
              Solicitation
                of Holders of Notes

            	 	
              18

            
	
              17.3.

            	 	
              Binding
                Effect, etc.

            	 	
              19

            
	
              17.4.

            	 	
              Notes
                held by Company, etc.

            	 	
              19

            
	
              18.

            	 	
              NOTICES

            	 	
              19

            
	
              19.

            	 	
              REPRODUCTION
                OF DOCUMENTS

            	 	
              20

            
	
              20.

            	 	
              CONFIDENTIAL
                INFORMATION

            	 	
              20

            

    

     

     

    
      
        
        

      

      
        ii

        
          

        

      

      
        
        

      

    

     

    TABLE
      OF CONTENTS
      (Cont'd)

     

     

     

    
      	
              Section 

            	 	 	
               Page

            
	
              21.

            	 	
              SUBSTITUTION
                OF PURCHASER

            	 	
              21

            
	
              22.

            	 	
              MISCELLANEOUS

            	 	
              21

            
	
              22.1.

            	 	
              Successors
                and Assigns

            	 	
              21

            
	
              22.2.

            	 	
              Payments
                Due on Non-Business Days

            	 	
              21

            
	
              22.3.

            	 	
              Severability

            	 	
              21

            
	
              22.4.

            	 	
              Construction

            	 	
              22

            
	
              22.5.

            	 	
              Counterparts

            	 	
              22

            
	
              22.6.

            	 	
              Governing
                Law

            	 	
              22

            
	
              22.7.

            	 	
              Headings

            	 	
              22

            
	
              22.8.

            	 	
              Integration

            	 	
              22

            
	
              22.9.

            	 	
              Waiver
                of Jury Trial

            	 	
              22

            

    

     

    
      
        
        

      

      
        iii

        
          

        

      

      
        
        

      

    

    
      TABLE
        OF SCHEDULES AND EXHIBITS

       

       

       

      SCHEDULE A -- Purchaser
        Information

       

      SCHEDULE B -- Defined
        Terms

       

      SCHEDULE
        5.10
        - Title
        to Assets

       

      EXHIBIT 1 -- Form
        of
Variable
        Rate Senior Notes due May 25, 2011

    

    

     

    
      
        
        

      

      
        iv

        
          

        

      

      
        
        

      

    

    

     

    Variable
      Rate Senior Notes due May 25, 2011

     

    April
      1,
      2007

     

    
      	
              TO:

            	
              Note
                Purchaser

            

    

     

    Ladies
      and Gentlemen:

     

    Nestor
      Traffic Systems, Inc.,
      a
Delaware
      corporation (the “Company”),
      a
      wholly owned subsidiary of Nestor, Inc. (“Nestor”)
      agrees
      with you as follows:

     

    1.  Authorization
      of Notes

     

    The
      Company will authorize the issue and sale of $3,000,000
      aggregate principal amount of its Variable
      Rate Senior Notes due May 25, 2011
      (the
“Notes”,
      such
      term to include any such notes issued in substitution therefor pursuant to
      Section 14
      of this
      Agreement). The Notes shall be substantially in the form set out in Exhibit 1,
      with
      such changes therefrom, if any, as may be approved by you and the Company.
      Certain capitalized terms used in this Agreement are defined in Schedule B;
      references to a “Schedule”
or
      an
“Exhibit”
are,
      unless otherwise specified, to a Schedule or an Exhibit attached to
      this Agreement.

     

    2. 
Sale
      and Purchase of Notes

     

    Subject
      to the terms and conditions of this Agreement, the Company will issue and sell
      to you and you will purchase from the Company, at one or more Closings as
      provided for in Section 3,
      Notes
      in the principal amount of $3,000,000
      at the
      purchase price of 100% of the principal amount thereof.

     

    3. 
Closings;
      Early Termination

     

    3.1. Closings.

     

    3.1.1. The
      sale
      and purchase
      of the
      Notes to be purchased by you shall occur at the offices of the Company, at
      10:00
      a.m., Eastern Time, at three closings (each, a “Closing”)
      the
      first to occur on April,
      1
      2007 or
      on
      such other Business Day thereafter as may be agreed upon by the Company and
      you
      (the
“Initial
      Closing Date”);
      and

     

    3.1.2. The
      second Closing will occur, if at all, on the 10th
      day next
      after you have received notice that the Company has entered into New Contracts
      comprising at least 8 (a total of 16 actively deployed) Speed Units (the
“Second
      Closing Date”),
      or on
      such other Business Day thereafter as may be agreed upon by the Company and
      you.
      The Second Closing Date shall occur, if at all, prior to December 31,
      2007.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    3.1.3.  At
      a Closing, the Company will deliver to you the Notes to be purchased by you
      in
      the form of a single Note (or such greater number of Notes in denominations
      of
      at least $100,000 as you may request) dated the date of the Closing and
      registered in your name (or in the name of your nominee), against delivery
      by
      you to the Company or its order of immediately available funds in the amount
      of
      the purchase price therefor by wire transfer of immediately available funds
      for
      the account of the Company. If at a Closing the Company shall fail to tender
      such Notes to you as provided above in this Section 3,
      or any
      of the conditions specified in Section 4
      shall
      not have been fulfilled to your satisfaction, you shall, at your election,
      be
      relieved of all further obligations under this Agreement, without thereby
      waiving any rights you may have by reason of such failure or such
      nonfulfillment.

     

    3.2. Early
      Termination.

     

    Notwithstanding
      anything herein or elsewhere to the contrary, in the event that, prior to the
      Initial Closing, the Company is able to arrange for financing in an amount
      not
      less than $1.5 million on terms more favorable to the Company than those set
      forth herein, then the Company may, by written notice to you, terminate this
      Agreement and thereafter shall have no further liability to you except as set
      forth in Section 4.6.
      The
      Company shall have no obligation sell you Notes in a second Closing. Any such
      second Closing shall be at the election of the Company.

     

    4. 
Conditions
      to Closing

     

    Your
      obligation to purchase and pay for the Notes to be sold to you at the Closing
      is
      subject to the fulfillment to your reasonable satisfaction, prior to or at
      a
      Closing, of the following conditions:

     

    4.1. Representations
      and Warranties

     

    The
      representations and warranties of the Company in this Agreement shall be correct
      when made and at the time of the Closing.

     

    4.2. Performance;
      No Default

     

    The
      Company shall have performed and complied with all agreements and conditions
      contained in this Agreement required to be performed or complied with by it
      prior to or at a Closing and after giving effect to the issue and sale of the
      Notes, no Default or Event of Default shall have occurred and be
      continuing.

     

    4.3. Compliance
      Certificates

     

    4.3.1. Officer’s
      Certificate.
      The
      Company shall have delivered to you an Officer’s Certificate, dated the date of
      the Closing, certifying that the conditions specified in
      Sections 4.1
      and
4.2
      have
      been fulfilled.

     

    4.3.2. Secretary’s
      Certificate.
      The
      Company shall have delivered to you a certificate certifying as to the
      resolutions attached thereto and other corporate proceedings relating to the
      authorization, execution and delivery of the Notes and the
      Agreements.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    4.4. Purchase
      Permitted By Applicable Law, etc.

     

    On
      the
      date of the Closing, your purchase of Notes shall (i) be permitted by the
      laws and regulations of each jurisdiction to which you are subject, without
      recourse to provisions (such as Section 1405(a)(8) of the New York
      Insurance Law) permitting limited investments by insurance companies without
      restriction as to the character of the particular investment, (ii) not
      violate any applicable law or regulation (including, without limitation,
      Regulation U, T or X of the Board of Governors of the Federal Reserve System)
      and (iii) not subject you to any tax, penalty or liability under or
      pursuant to any applicable law or regulation, which law or regulation was not
      in
      effect on the date hereof. If requested by you, you shall have received an
      Officer’s Certificate certifying as to such matters of fact as you may
      reasonably specify to enable you to determine whether such purchase is so
      permitted.

     

    4.5. Sale
      of
      Other Notes

     

    Contemporaneously
      with a Closing, the Company shall sell to the purchasers specified in
Schedule A
      (the
“Purchasers”)
      and
      such other Purchasers shall purchase the Notes to be purchased by them at the
      Closing as specified in Schedule A.

     

    4.6. Payment
      of Special Counsel, Organizational, Research, Administration to Speed I, LLC
      Fees

     

    Without
      limiting the provisions of Section 15.1,
      the
      Company shall have paid on or before the Closing the organizational, research,
      legal and administration fees, charges and disbursements to the extent reflected
      in a statement to Purchasers and Speed I, LLC rendered to the Company at least
      one Business Day prior to the first Closing, which amount shall not exceed
      $12,000.00. For subsequent Closings, the Company will not be asked to reimburse
      Speed I, LLC more than $5,000 for expenses incurred related to each subsequent
      Closing.

     

    4.7. Proceedings
      and Documents

     

    All
      corporate and other proceedings in connection with the transactions contemplated
      by this Agreement and all documents and instruments incident to such
      transactions shall be satisfactory to you and your special counsel, and you
      and
      your special counsel shall have received all such counterpart originals or
      certified or other copies of such documents as you or they may reasonably
      request.

     

    5. 
Representations
      and Warranties of the Company

     

    The
      Company represents and warrants to you that:

     

    5.1. Organization;
      Power and Authority

     

    Each
      of
      the Company and Nestor is a corporation duly organized, validly existing and
      in
      good standing under the laws of Delaware,
      and is
      duly qualified as a foreign corporation and is in good standing in each
      jurisdiction in which such qualification is required by law, other than those
      jurisdictions as to which the failure to be so qualified or in good standing
      could not, individually or in the aggregate, reasonably be expected to have
      a
      Material Adverse Effect. The Company has all requisite corporate power and
      authority to own or hold under lease the properties it purports to own or hold
      under lease, to transact the business it transacts and proposes to transact,
      to
      execute and deliver this Agreement and the Notes and to perform the provisions
      hereof and thereof.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    5.2. Authorization,
      etc.

     

    This
      Agreement and the Notes have been duly authorized by all necessary corporate
      action on the part of the Company, and this Agreement constitutes, and upon
      execution and delivery thereof each Note will constitute, the legal, valid
      and
      binding obligation of the Company enforceable against the Company in accordance
      with its terms, except as such enforceability may be limited by (i) applicable
      bankruptcy, insolvency, reorganization, moratorium or other similar laws
      affecting the enforcement of creditors’ rights generally and (ii) general
      principles of equity (regardless of whether such enforceability is considered
      in
      a proceeding in equity or at law).

     

    5.3. Disclosure

     

    Nestor
      makes consolidated financial and business disclosure in its Reports. The Current
      Report fairly describes, in all material respects, the general nature of the
      business and principal properties of the Company and Nestor. Except as disclosed
      in Schedule 5.3,
      this
      Agreement, the Current Report, the documents, certificates or other writings
      delivered to you by or on behalf of the Company in connection with the
      transactions contemplated hereby, taken as a whole, do not contain any untrue
      statement of a material fact or omit to state any material fact necessary to
      make the statements therein not misleading in light of the circumstances under
      which they were made. Except as disclosed in the Current Report or as expressly
      described in Schedule 5.3,
      or in
      one of the documents, certificates or other writings identified therein, since
      the last day of the period covered by the Current Report, there has been no
      change in the financial condition, operations, business, properties or prospects
      of the Company or Nestor except changes that individually or in the aggregate
      could not reasonably be expected to have a Material Adverse Effect. There is
      no
      fact known to the Company that could reasonably be expected to have a Material
      Adverse Effect that has not been set forth in the Current Report or in the
      other
      documents, certificates and other writings delivered to you by or on behalf
      of
      the Company specifically for use in connection with the transactions
      contemplated hereby.

     

    5.4. Organization
      and Ownership of Shares of Subsidiaries; Affiliates

     

    The
      Company is a wholly owned Subsidiary of Nestor. The Company has one Subsidary,
      CrossingGuard, Inc., which is wholly owned by the Company, is inactive, owns
      no
      assets and conducts no operations.

     

    5.5. Financial
      Statements

     

    Nestor’s
      Reports contain the consolidated financial statements of Nestor and the Company.
      The financial statements in the Current Report (including in each case the
      related schedules and notes) fairly present in all material respects the
      consolidated financial position of Nestor and the Company as of the respective
      dates specified in such financial statements and the consolidated results
      of their operations and cash flows for the respective periods so specified
      and
      have been prepared in accordance with GAAP consistently applied throughout
      the
      periods involved except as set forth in the notes thereto (subject, in the
      case
      of any interim financial statements, to normal year-end adjustments) for the
      respective periods presented.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    5.6. Compliance
      with Laws, Other Instruments, etc.

     

    The
      execution, delivery and performance by the Company of this Agreement and the
      Notes will not (a) contravene, result in any breach of, or constitute a
      default under, or result in the creation of any Lien in respect of any property
      of Nestor or the Company under any indenture, mortgage, deed of trust, loan,
      purchase or credit agreement, lease, corporate charter or by-laws, or any other
      agreement or instrument to which Nestor or the Company is bound or by which
      Nestor or the Company or any of their respective properties may be bound or
      affected, (b) conflict with or result in a breach of any of the terms,
      conditions or provisions of any order, judgment, decree, or ruling of any court,
      arbitrator or Governmental Authority applicable to Nestor or the Company or
      (c)
      violate any provision of any statute or other rule or regulation of any
      Governmental Authority applicable to Nestor or the Company.

     

    5.7. Governmental
      Authorizations, etc.

     

    Except
      for a Form D to be filed with the SEC and copies thereof to be filed with all
      applicable state securities regulators (together with the applicable filing
      fees), no consent, approval or authorization of, or registration, filing or
      declaration with, any Governmental Authority is required in connection with
      the
      execution, delivery or performance by the Company of this Agreement or the
      Notes.

     

    5.8. Litigation;
      Observance of Agreements, Statutes and Orders

     

    5.8.1. Except
      as
      set forth in the Current Report, there are no actions, suits or proceedings
      pending or, to the knowledge of the Company, threatened against or affecting
      Nestor or the Company or any property of Nestor or the Company in any court
      or
      before any arbitrator of any kind or before or by any Governmental Authority
      that, individually or in the aggregate, could reasonably be expected to have
      a
      Material Adverse Effect. 

     

    5.8.2. Neither
      Nestor nor the Company is in default under any term of any agreement or
      instrument to which it is a party or by which it is bound, or any order,
      judgment, decree or ruling of any court, arbitrator or Governmental Authority
      or
      is in violation of any applicable law, ordinance, rule or regulation (including,
      without limitation, Environmental Laws) of any Governmental Authority, which
      default or violation, individually or in the aggregate, could reasonably be
      expected to have a Material Adverse Effect.

     

    5.9. Taxes

     

    Nestor
      and the Company have filed all tax returns that are required to have been filed
      in any jurisdiction, and have paid all taxes shown to be due and payable on
      such
      returns and all other taxes and assessments levied upon them or their
      properties, assets, income or franchises, to the extent such taxes and
      assessments have become due and payable and before they have become delinquent,
      except for any taxes and assessments (i) the amount of which is not
      individually or in the aggregate Material or (ii) the amount, applicability
      or validity of which is currently being contested in good faith by appropriate
      proceedings and with respect to which Nestor or the Company, as the case may
      be,
      has established adequate reserves in accordance with GAAP. The Company knows
      of
      no basis for any other tax or assessment that could reasonably be expected
      to
      have a Material Adverse Effect. The charges, accruals and reserves on the books
      of Nestor and the Company in respect of Federal, state or other taxes for all
      fiscal periods are adequate.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    5.10. Title
      to
      Property; Leases

     

    Except
      as
      set forth on Schedule
      5.10,
      Nestor
      and the Company have good and sufficient title to their respective properties
      that individually or in the aggregate are Material, including all such
      properties reflected in the most recent audited balance sheet referred to in
      the
      Current Report or purported to have been acquired by Nestor or the Company
      after
      the last day of the period covered by the Current Report (except as sold or
      otherwise disposed of in the ordinary course of business), in each case free
      and
      clear of Liens prohibited by this Agreement. All leases that individually or
      in
      the aggregate are Material are valid and subsisting and are in full force and
      effect in all material respects. 

     

    5.11. Licenses,
      Permits, etc.

     

    Except
      as
      disclosed in the Current Report,

     

    5.11.1. Nestor
      and the Company own or possess all licenses, permits, franchises,
      authorizations, patents, copyrights, service marks, trademarks and trade names,
      or rights thereto, that individually or in the aggregate are Material, without
      known conflict with the rights of others;

     

    5.11.2. to
      the
      best knowledge of the Company, no product of Nestor or the Company infringes
      in
      any material respect any license, permit, franchise, authorization, patent,
      copyright, service mark, trademark, trade name or other right owned by any
      other
      Person; and

     

    5.11.3. to
      the
      best knowledge of the Company, there is no Material violation by any Person
      of
      any right of Nestor or the Company with respect to any patent, copyright,
      service mark, trademark, trade name or other right owned or used by Nestor
      or
      the Company.

     

    5.12. Private
      Offering by the Company

     

    None
      of
      Nestor, the Company nor anyone acting on their respective behalf has offered
      the
      Notes or any similar securities for sale to, or solicited any offer to buy
      any
      of the same from, or otherwise approached or negotiated in respect thereof
      with,
      any person other than you and accredited investors (as such term is defined
      in
      Section 501(a) of Regulation D), each of which has been offered the Notes at
      a
      private sale for investment. None of Nestor, the Company nor anyone acting
      on
      their respective behalf has taken, or will take, any action that would subject
      the issuance or sale of the Notes to the registration requirements of
      Section 5 of the Securities Act or the qualification requirements of any
      state securities laws.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    5.13. Existing
      Indebtedness; Future Liens

     

    5.13.1. The
      Current Report sets forth a complete and correct list of all outstanding
      Indebtedness of Nestor and the Company as of the last date covered by the
      Current Report, since which date there has been no Material change in the
      amounts, interest rates, sinking funds, installment payments or maturities
      of
      the Indebtedness of Nestor or the Company. Neither Nestor nor the Company is
      in
      default and no waiver of default is currently in effect, in the payment of
      any
      principal or interest on any Indebtedness of Nestor or the Company and no event
      or condition exists with respect to any Indebtedness of Nestor or the Company
      that would permit (or that with notice or the lapse of time, or both, would
      permit) one or more Persons to cause such Indebtedness to become due and payable
      before its stated maturity or before its regularly scheduled dates of
      payment.

     

    5.13.2. Neither
      Nestor nor the Company has agreed or consented to cause or permit in the future
      (upon the happening of a contingency or otherwise) any of its property, whether
      now owned or hereafter acquired, to be subject to a Lien not permitted by
      Section 11.1.

     

    5.14. Foreign
      Assets Control Regulations, etc.

     

    Neither
      the sale of the Notes by the Company hereunder nor its use of the proceeds
      thereof will violate the Trading with the Enemy Act, as amended, or any of
      the
      foreign assets control regulations of the United States Treasury Department
      (31
      CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
      order relating thereto.

     

    6. 
Representations
      of the Purchaser

     

    6.1. Purchase
      for Investment

     

    You
      represent that you are purchasing the Notes for your own account or for one
      or
      more separate accounts maintained by you or for the account of one or more
      pension or trust funds and not with a view to the distribution thereof, provided
      that the disposition of your or their property shall at all times be within
      your
      or their control. You understand that the Notes have not been registered under
      the Securities Act and may be resold only if registered pursuant to the
      provisions of the Securities Act or if an exemption from registration is
      available, except under circumstances where neither such registration nor such
      an exemption is required by law, and that the Company is not required to
      register the Notes.

     

    6.2. Accredited
      Investor, etc.

     

    You
      represent and warrant that:

     

    6.2.1. other
      than a finders fee due to Danzell Investment Management, Ltd in the amount
      of
      6.0% of the aggregate proceeds to the Company, you know of no valid claims
      for
      brokerage commissions, finder's fees or similar compensation in connection
      with
      the transactions contemplated by this Agreement based upon any arrangement
      or
      agreement made by you or on your behalf and you agree to indemnify and hold
      harmless Nestor and the Company against any liability or expense to it arising
      out of such a claim to the extent that such claim arises out of your actions
      or
      alleged actions;

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    6.2.2. 
      (i) you
      have received such information with respect to your purchase of the Notes as
      you
      have requested in connection with your investment decision, have had an
      opportunity to ask questions about the Company and his investment to officers
      of
      the Company, and have received answers to such questions as were asked; and
      (ii)
      the officers of the Company have made available to you any and all written
      information which you have requested and have answered to your satisfaction
      all
      inquiries made by you;

     

    6.2.3. you
      have
      adequate net worth and means of providing for you current needs so that you
      can
      afford to sustain a complete loss of your investment in the Notes. Your overall
      commitment to investments which are not readily marketable is not
      disproportionate to your net worth and your investment in the Notes will not
      cause such overall commitment to become excessive. You are an “accredited
      investor” within the definition set forth in Rule 501(a) of Regulation D
      promulgated under the Securities Act.

     

    7. 
Payments
      on Notes

     

    7.1. Place
      of
      Payment

     

    7.1.1. So
      long
      as you or your nominee shall be the holder of any Note, and notwithstanding
      anything contained in such Note to the contrary, the Company will pay all sums
      becoming due on such Note for principal and interest by the method and at the
      address specified for such purpose opposite your name in Schedule A,
      or by
      such other method or at such other address as you shall have from time to time
      specified to the Company in writing for such purpose, without the presentation
      or surrender of such Note or the making of any notation thereon, except that
      upon written request of the Company made concurrently with or reasonably
      promptly after payment or prepayment in full of any Note, you shall surrender
      such Note for cancellation, reasonably promptly after any such request, to
      the
      Company at its principal executive office. All payments and prepayments of
      principal, fees, interest and any other amounts owed from time to time under
      this Agreement and/or under the Notes shall be received by you prior to 2:00
      o’clock P.M. local time on the Business Day that such payment is due. Any such
      payment or prepayment which is received by Lender in Dollars and in immediately
      available funds after 2:00 o’clock P.M. on a Business Day shall be deemed
      received for all purposes of this Agreement, on the next succeeding Business
      Day.

     

    7.1.2. Prior
      to
      any sale or other disposition of any Note held by you or your nominee you will,
      at your election, either endorse thereon the amount of principal paid thereon
      and the last date to which interest has been paid thereon or surrender such
      Note
      to the Company in exchange for a new Note or Notes pursuant to
      Section 14.1.
      The
      Company will afford the benefits of this Section 7.1
      to any
      direct or indirect transferee of any Note purchased by you under this Agreement
      and that has made the same agreement relating to such Note as you have made
      in
      this Section 7.1.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    7.2. Calculation
      and Timing of Payment.

     

    7.2.1. Payment
      after Initial Closing.
      After
      the first Closing, but prior to the Second Closing, if any, if any, Payments
      on
      the Notes will be made quarterly in arrears based on the number of citations
      issued pursuant to any Contract or New Contract comprising, at any time, not
      more than 16 Speed Units for which the Company has received payment during
      the
      immediately preceding quarter (a “Qualifying
      Citation”).
      You
      will receive the Citation Payment for each Qualifying Citation. The Company
      will
      compile the number of Qualifying Citations in each quarter within 45 days after
      the end of such quarter and shall make Citation Payment to you based on the
      number of such Qualifying Citations. In the event the Company is operating
      more
      than 16 Speed Units at any time prior to the Maturity Date or earlier prepayment
      of the Notes, Qualifying Citations shall be issued only from the 16 Speed Units
      that have been in operation the longest.

     

    7.2.2. Payment
      after the Second Closing.
      After
      the Second Closing, Payments on the Notes will be made quarterly in arrears
      based on the number of Qualifying Citations issued pursuant to any Contract
      or
      New Contract comprising, at any time, not more than 32 Speed Units. You will
      receive the Citation Payment for each Qualifying Citation. The Company will
      compile the number of Qualifying Citations in each quarter within 45 days after
      the end of such quarter and shall make Citation Payment to you based on the
      number of such Qualifying Citations. In the event the Company is operating
      more
      than 32 Speed Units at any time prior to the Maturity Date or earlier prepayment
      of the Notes, Qualifying Citations shall be issued only from the 32 Speed Units
      that have been in operation the longest.

     

    7.3. Payment
      at Maturity.

     

    At
      the
      Maturity Date, the Company will pay you all outstanding principal together
      with
      all accumulated but unpaid Citation Payments (plus any amount required to make
      your minimum annual return equal to 10.0%, if required pursuant to Section
      7.4)
      and all
      unpaid costs, fees, penalties or other amounts due pursuant to this Agreement,
      the Notes or the Security Documents.

     

    7.4. Minimum
      Return.

     

    At
      the
      end of each Note Year, with respect to each Note, the Company will determine
      whether the annual rate of return on such Note was equal to or greater than
      10.0% per annum. In the event that your annual rate of return for the
      immediately preceding year was less than 10.0%, the Company will, within 45
      days
      following the end of such year, make an interest payment to you in an amount
      sufficient to make the annual rate of return for such prior year equal to
      10.0%.

     

    8. 
Information
      as to Company

     

    8.1. Financial
      and Business Information

     

    The
      Company shall deliver to each holder of Notes:

     

    8.1.1. Quarterly
      Payment Report - The Company shall provide you, within 45 days after the end
      of
      each quarter,
      a
      statement in reasonable detail setting forth the number of Qualifying Citations
      in the preceding quarter and the aggregate amount of the Citation Payments
      for
      such quarter.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    8.1.2. Notice
      of
      Default or Event of Default -- promptly, and in any event within five days
      after
      a Responsible Officer becoming aware of the existence of any Default or Event
      of
      Default or that any Person has given any notice or taken any action with respect
      to a claimed default hereunder or that any Person has given any notice or taken
      any action with respect to a claimed default of the type referred to in
      Sections 12(d)
      through
12(i),
      a
      written notice specifying the nature and period of existence thereof and what
      action the Company is taking or proposes to take with respect
      thereto;

     

    8.1.3. Notices
      from Governmental Authority -- promptly, and in any event within 30 days of
      receipt thereof, copies of any notice to the Company or any Subsidiary from
      any
      Federal or state or local Governmental Authority relating to any order, ruling,
      statute or other law or regulation that could reasonably be expected to have
      a
      Material Adverse Effect; and

     

    8.2. Inspection

     

    The
      Company shall permit the representatives of each holder of Notes, at the expense
      of such holder and upon reasonable prior notice to the Company, to visit the
      principal executive office of the Company, to discuss the affairs, finances
      and
      accounts of Nestor and the Company with the Company’s officers and to inspect
      the Company records relating to Qualifying Citations.

     

    9. 
Prepayment
      of the Notes

     

    9.1. Optional
      Prepayments

     

    The
      Company may, at its option, upon notice as provided below, prepay at any time
      all, but not less than all, the Notes, (a) if the Required Hours have been
      achieved, at 100.0% or the then outstanding principal amount or (b) if the
      Required Hours have not been achieved, at 110% of the then outstanding principal
      amount, plus, in either case, all accumulated but unpaid Citation Payments
      and
      all unpaid costs, fees, expenses or other charges due to you from the Company
      pursuant to this Agreement, the Notes or the Security Documents. The Company
      will give each holder of Notes written notice of an optional prepayment under
      this Section 9.1
      not less
      than 30 days and not more than 60 days prior to the date fixed for such
      prepayment. Such notice shall specify such date, the aggregate principal amount
      of the Notes to be prepaid on such date, the principal amount of each Note
      held
      by such holder to be prepaid, and the interest to be paid on the Citation
      Payments (to the extent known) to be paid as of such date with respect to the
      Notes, and shall be accompanied by a statement as to the estimated Citation
      Payments due in connection with such prepayment (calculated as if the date
      of
      such notice were the date of the prepayment), setting forth the details of
      such
      computation. Two Business Days prior to such prepayment, the Company shall
      deliver to each holder of Notes a certificate specifying the calculation of
      such
      Citation Payments as of the specified prepayment date.

     

    9.2. Maturity;
      Surrender, etc.

     

    The
      Company shall make payment in full on the Notes on the Maturity Date and from
      and after such date, unless the Company shall fail to pay such principal amount
      when so due and payable, together with due but unpaid Citation Payments or
      minimum annual return payments in accordance with Section 7.4,
      if any,
      as aforesaid, all obligation on the part of the Company to make Citation
      Payments shall cease. Any Note paid or prepaid in full shall be surrendered
      to
      the Company and cancelled and shall not be reissued.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    10. Affirmative
      Covenants

     

    The
      Company covenants that from and after the date hereof and for so long as any
      of
      the Notes are outstanding:

     

    10.1. Compliance
      with Law

     

    The
      Company will comply with all laws, ordinances or governmental rules or
      regulations to which each of them is subject, including, without limitation,
      Environmental Laws, and will obtain and maintain in effect all licenses,
      certificates, permits, franchises and other governmental authorizations
      necessary to the ownership of their respective properties or to the conduct
      of
      their respective businesses, in each case to the extent necessary to ensure
      that
      non-compliance with such laws, ordinances or governmental rules or regulations
      or failures to obtain or maintain in effect such licenses, certificates,
      permits, franchises and other governmental authorizations could not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    10.2. Insurance

     

    The
      Company will maintain, with financially sound and reputable insurers, insurance
      with respect to their respective properties and businesses against such
      casualties and contingencies, of such types, on such terms and in such amounts
      (including deductibles, co-insurance and self-insurance, if adequate reserves
      are maintained with respect thereto) as is customary in the case of entities
      of
      established reputations engaged in the same or a similar business and similarly
      situated.

     

    10.3. Maintenance
      of Properties

     

    The
      Company will maintain and keep, or cause to be maintained and kept, its
      properties in good repair, working order and condition (other than ordinary
      wear
      and tear), so that the business carried on in connection therewith may be
      properly conducted at all times, provided that this Section 10.3
      shall
      not prevent the Company from discontinuing the operation and the maintenance
      of
      any of its properties if such discontinuance is desirable in the conduct of
      its
      business and the Company has concluded that such discontinuance could not,
      individually or in the aggregate, reasonably be expected to have a Material
      Adverse Effect.

     

    10.4. Payment
      of Taxes and Claims

     

    The
      Company will file all tax returns required to be filed in any jurisdiction
      and
      to pay and discharge all taxes shown to be due and payable on such returns
      and
      all other taxes, assessments, governmental charges, or levies imposed on them
      or
      any of their properties, assets, income or franchises, to the extent such taxes
      and assessments have become due and payable and before they have become
      delinquent and all claims for which sums have become due and payable that have
      or might become a Lien on properties or assets of the Company, provided that
      the
      Company need not pay any such tax or assessment or claims if (i) the
      amount, applicability or validity thereof is contested by the Company on a
      timely basis in good faith and in appropriate proceedings, and the Company
      has
      established adequate reserves therefor in accordance with GAAP on the books
      of
      the Company or (ii) the nonpayment of all such taxes and assessments in the
      aggregate could not reasonably be expected to have a Material Adverse
      Effect.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    10.5. Corporate
      Existence, etc.

     

    The
      Company will at all times preserve and keep in full force and effect its
      corporate existence. The Company will at all times preserve and keep in full
      force and effect the corporate existence of each of its Subsidiaries (unless
      merged into the Company or a Subsidiary) and all rights and franchises of the
      Company and its Subsidiaries unless, in the good faith judgment of the Company,
      the termination of or failure to preserve and keep in full force and effect
      such
      corporate existence, right or franchise could not, individually or in the
      aggregate, have a Material Adverse Effect.

     

    10.6. Keeping
      of Records and Books of Account

     

    The
      Company will keep adequate records and books of account with respect to the
      Contracts, the New Contracts and the Speed Units, reflecting all financial
      transactions related thereto.

     

    10.7. Additional
      Assurances

     

    The
      Company shall from time to time hereafter, execute and deliver or cause to
      be
      executed and delivered, such additional instruments, certificates and documents,
      and take all such actions, as you shall reasonably request for the purpose
      of
      implementing or effectuating the provisions of this Agreement, and upon the
      exercise by you of any power, right, privilege or remedy pursuant to this
      Agreement which requires any consent, approval, registration, qualification
      or
      authorization of any Governmental Authority or instrumentality, exercise and
      deliver all applications, certifications, instruments and other documents and
      papers that you may be so required to obtain.

     

    10.8. Obtaining
      and Maintaining Speed Units.

     

    The
      Company shall use commercially reasonable best efforts to preserve Contracts
      and
      obtain New Contracts such that the Company shall operate (a) after the initial
      Closing but prior to the Second Closing Date, 16 Speed Units, and (b) after
      the
      Second Closing 32 Speed Units, until the Maturity Date or until the Notes have
      been prepaid in accordance with Section 9.
      In the
      event that any Contract or New Contract is terminated or expires, and as a
      result thereof, the number of Speed Units operated by the Company is less than
      the number specified above in this Section 10.8,
      then
      the Company shall use commercially reasonable best efforts to obtain one or
      more
      New Contracts or enhance any then existing Contract or New Contract such that
      the number of operating Speed Units is as specified above in this Section
10.8.
      Notwithstanding the foregoing, if the number of Speed Units operated by the
      Company falls below the number specified above in this Section 10.8,
      the
      Company shall not be obliged to replace the existing shortfall with any then
      existing New Contracts.

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    11. 
Negative
      Covenants

     

    The
      Company covenants that from and after the date hereof and for so long as any
      of
      the Notes are outstanding:

     

    11.1. Liens

     

    The
      Company will not create, incur, assume or suffer to exist any Lien upon any
      of
      the assets constituting Collateral (as such term is defined in the Security
      Agreement) except as follows (collectively, “Permitted
      Liens”):

     

    11.1.1. Liens
      to
      secure taxes, assessments and other government charges in respect of obligations
      not overdue or Liens on properties to secure claims for labor, material or
      supplies in respect of obligations not overdue, or which are being contested
      in
      good faith by appropriate proceedings diligently conducted and with respect
      to
      which adequate reserves are being maintained in accordance with GAAP so long
      as
      such Liens are not being foreclosed;

     

    11.1.2. Liens
      made in connection with, or to secure payment of, worker’s compensation,
      unemployment insurance, old age pension or other social security
      obligations;

     

    11.1.3. Liens
      of
      carriers, warehousemen, mechanics and materialmen, and other like liens on
      properties, in existence less than 120 days from the date of creation thereof
      in
      respect of obligations not overdue, or which are being contested in goof faith
      by appropriate proceedings diligently conducted and with respect to which
      adequate reserves are being maintained in accordance with GAAP so long as such
      Liens are not being foreclosed;

     

    11.1.4. Liens
      resulting from legal proceedings being contested in good faith by appropriate
      legal or administrative proceedings by the Company, and as to which the Company
      shall have established an adequate reserve on its books;

     

    11.1.5. any
      Liens
      in favor of any state of the United States or any political subdivision of
      any
      such state, or any agency of any such state or political subdivisions, or
      trustee acting on behalf of holders of obligations issued by any of the
      foregoing or any financial institutions lending to or purchasing obligations
      of
      any of the foregoing, which Lien is created or assumed for the purpose of
      financing all or part of the cost of acquiring or constructing the property
      subject thereto; and

     

    11.1.6. Liens
      resulting from conditional sale agreements, capital leases or other title
      retention agreements.

     

    12. 
Events
      of Default

     

    An
      “Event
      of Default”
shall
      exist if any of the following conditions or events shall occur and be
      continuing:

     

    (a) the
      Company defaults in the payment of any principal on any Note when the same
      becomes due and payable, whether at maturity or at a date fixed for prepayment
      or by declaration or otherwise; or

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    (b) the
      Company defaults in the payment of any Citation Payment for more than five
      Business Days after the same becomes due and payable; or

     

    (c) the
      Company fails to make a payment required by Section 7.4
      for more
      than five Business Days after the same becomes due and payable.

     

    (d) the
      Company defaults in the performance of or compliance with any term
      contained herein (other than those referred to in paragraphs (a), (b), (c)
      and (d) of this Section 12)
      and
      such default is not remedied within 30 days after the earlier of (i) a
      Responsible Officer obtaining actual knowledge of such default and (ii) the
      Company receiving written notice of such default from any holder of a Note
      (any
      such written notice to be identified as a “notice of default” and to refer
      specifically to this paragraph (e) of Section 12);
      or

     

    (e) any
      representation or warranty made in writing by or on behalf of the Company or
      by
      any officer of the Company in this Agreement or in any writing furnished in
      connection with the transactions contemplated hereby proves to have been false
      or incorrect in any Material respect on the date as of which made;
      or

     

    (f) (i) the
      Company or Nestor is in default (as principal or as guarantor or other surety)
      in the payment of any principal of or premium or make whole amount or interest
      on any Indebtedness that is outstanding in an aggregate principal amount of
      at
      least $10,000,000 beyond any period of grace provided with respect thereto,
      or
      (ii) the Company or Nestor is in default in the performance of or compliance
      with any term of any evidence of any Indebtedness in an aggregate outstanding
      principal amount of at least $10,000,000 or of any mortgage, indenture or other
      agreement relating thereto or any other condition exists, and as a consequence
      of such default or condition such Indebtedness has become, or has been declared
      (or one or more Persons are entitled to declare such Indebtedness to be), due
      and payable before its stated maturity or before its regularly scheduled dates
      of payment, or (iii) as a consequence of the occurrence or continuation of
      any
      event or condition (other than the passage of time or the right of the holder
      of
      Indebtedness to convert such Indebtedness into equity interests);
      or

     

    (g) the
      Company or Nestor (i) is generally not paying, or admits in writing its
      inability to pay, its debts as they become due, (ii) files, or consents by
      answer or otherwise to the filing against it of, a petition for relief or
      reorganization or arrangement or any other petition in bankruptcy, for
      liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
      moratorium or other similar law of any jurisdiction, (iii) makes an
      assignment for the benefit of its creditors, (iv) consents to the
      appointment of a custodian, receiver, trustee or other officer with similar
      powers with respect to it or with respect to any substantial part of its
      property, (v) is adjudicated as insolvent or to be liquidated, or
      (vi) takes corporate action for the purpose of any of the foregoing;
      or

     

    (h) a
      court
      or governmental authority of competent jurisdiction enters an order appointing,
      without consent by the Company, a custodian, receiver, trustee or other officer
      with similar powers with respect to it or with respect to any substantial part
      of its property, or constituting an order for relief or approving a petition
      for
      relief or reorganization or any other petition in bankruptcy or for liquidation
      or to take advantage of any bankruptcy or insolvency law of any jurisdiction,
      or
      ordering the dissolution, winding-up or liquidation of the Company or Nestor,
      or
      any such petition shall be filed against the Company or Nestor and such petition
      shall not be dismissed within 60 days; or

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    (i) a
      final
      judgment or judgments for the payment of money aggregating in excess of
      $5,000,000 are rendered against one or more of the Company and Nestor and which
      judgments are not, within 60 days after entry thereof, bonded, discharged or
      stayed pending appeal, or are not discharged within 60 days after the expiration
      of such stay; or

     

    13. 
Remedies
      on Default, Etc.

     

    13.1. Acceleration

     

    13.1.1. If
      an
      Event of Default with respect to the Company described in
      paragraph 12(g)
      or
12(h)
      (other
      than an Event of Default described in clause (i) of paragraph 12(g)
      or
      described in clause (vi) of paragraph 12(g)
      by
      virtue of the fact that such clause encompasses clause (i) of
      paragraph 12(g))
      has
      occurred, all the Notes then outstanding shall automatically become immediately
      due and payable.

     

    13.1.2. If
      any
      other Event of Default has occurred and is continuing, any holder or holders
      of
      more than a majority in principal amount of the Notes at the time outstanding
      may at any time at its or their option, by notice or notices to the Company,
      declare all the Notes then outstanding to be immediately due and
      payable.

     

    13.1.3. If
      any
      Event of Default described in paragraph 12(a)
      or
12(b)
      has
      occurred and is continuing, any holder or holders of Notes at the time
      outstanding affected by such Event of Default may at any time, at its or their
      option, by notice or notices to the Company, declare all the Notes held by
      it or
      them to be immediately due and payable.

     

    Upon
      any
      Notes becoming due and payable under this Section 13.1,
      whether
      automatically or by declaration, such Notes will forthwith mature and the entire
      unpaid principal amount of such Notes, plus all accrued and unpaid Citation
      Payments thereon, shall all be immediately due and payable, in each and every
      case without presentment, demand, protest or further notice, all of which are
      hereby waived.

     

    13.2. Other
      Remedies

     

    If
      any
      Default or Event of Default has occurred and is continuing, and irrespective
      of
      whether any Notes have become or have been declared immediately due and payable
      under Section 13.1,
      the
      holder of any Note at the time outstanding may proceed to protect and enforce
      the rights of such holder by an action at law, suit in equity or other
      appropriate proceeding, whether for the specific performance of any agreement
      contained herein or in any Note, or for an injunction against a violation of
      any
      of the terms hereof or thereof, or in aid of the exercise of any power granted
      hereby or thereby or by law or otherwise.

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

    13.3. Rescission

     

    At
      any
      time after any Notes have been declared due and payable pursuant to clause
      13.1.2
      or
13.1.3,
      the
      holders of not less than a majority in principal amount of the Notes then
      outstanding, by written notice to the Company, may rescind and annul any such
      declaration and its consequences if (a) the Company has paid all overdue
      Citation Payments on the Notes, all principal on any Notes that is due and
      payable and are unpaid other than by reason of such declaration, and all
      interest on such overdue principal and Citation Payments, if any, and (to the
      extent permitted by applicable law) any overdue interest in respect of the
      Notes, (b) all Events of Default and Defaults, other than non-payment of
      amounts that have become due solely by reason of such declaration, have been
      cured or have been waived pursuant to Section 17,
      and
      (c) no judgment or decree has been entered for the payment of any monies
      due pursuant hereto or to the Notes. No rescission and annulment under this
      Section 13.3
      will
      extend to or affect any subsequent Event of Default or Default or impair any
      right consequent thereon.

     

    13.4. No
      Waivers or Election of Remedies, Expenses, etc.

     

    No
      course
      of dealing and no delay on the part of any holder of any Note in exercising
      any
      right, power or remedy shall operate as a waiver thereof or otherwise prejudice
      such holder’s rights, powers or remedies. No right, power or remedy conferred by
      this Agreement or by any Note upon any holder thereof shall be exclusive of
      any
      other right, power or remedy referred to herein or therein or now or hereafter
      available at law, in equity, by statute or otherwise. Without limiting the
      obligations of the Company under Section 15,
      the
      Company will pay to the holder of each Note on demand such further amount as
      shall be sufficient to cover all costs and expenses of such holder incurred
      in
      any enforcement or collection under this Section 13,
      including, without limitation, reasonable attorneys’ fees, expenses and
      disbursements.

     

    14. 
Exchange;
      Substitution of Notes

     

    14.1. Transfer
      and Exchange of Notes

     

    Upon
      surrender of any Note at the principal executive office of the Company for
      transfer or exchange (and in the case of a surrender for transfer, duly endorsed
      or accompanied by a written instrument of transfer duly executed by the
      registered holder of such Note or his attorney duly authorized in writing and
      accompanied by the address for notices of each transferee of such Note or part
      thereof), the Company shall execute and deliver, at the Company’s expense
      (except as provided below), one or more new Notes (as requested by the holder
      thereof) in exchange therefor, in an aggregate principal amount equal to the
      unpaid principal amount of the surrendered Note. Each such new Note shall be
      payable to such Person as such holder may request and shall be substantially
      in
      the form of Exhibit 1.
      Each
      such new Note shall be dated and bear interest from the date to which interest
      shall have been paid on the surrendered Note or dated the date of the
      surrendered Note if no interest shall have been paid thereon. The Company may
      require payment of a sum sufficient to cover any stamp tax or governmental
      charge imposed in respect of any such transfer of Notes. Notes shall not be
      transferred in denominations of less than $100,000, provided that if necessary
      to enable the transfer by a holder of its entire holding of Notes, one Note
      may
      be in a denomination of less than $100,000. Any transferee, by its acceptance
      of
      a Note registered in its name (or the name of its nominee), shall be deemed
      to
      have made the representation set forth in Section 6.

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    14.2. Replacement
      of Notes

     

    Upon
      receipt by the Company of evidence reasonably satisfactory to it of the
      ownership of and the loss, theft, destruction or mutilation of any Note,
      and

     

    14.2.1. in
      the
      case of loss, theft or destruction, of indemnity reasonably satisfactory to
      it
      (provided that if the holder of such Note is, or is a nominee for, an original
      Purchaser or another holder of a Note with a minimum net worth of at least
      $10,000,000, such Person’s own unsecured agreement of indemnity shall be deemed
      to be satisfactory), or

     

    14.2.2. in
      the
      case of mutilation, upon surrender and cancellation thereof,the Company at
      its
      own expense shall execute and deliver, in lieu thereof, a new Note, dated and
      bearing interest from the date to which interest shall have been paid on such
      lost, stolen, destroyed or mutilated Note or dated the date of such lost,
      stolen, destroyed or mutilated Note if no interest shall have been paid
      thereon.

     

    15. 
Expenses,
      Etc.

     

    15.1. Transaction
      Expenses

     

    Whether
      the transactions contemplated hereby are consummated, the Company will pay
      all
      costs and expenses (including Danzell Investment Management, Ltd.
      administrative, printing, research, mailing and other related costs to the
      formation of Speed I, LLC and reasonable attorneys’ fees of a special counsel
      and, if reasonably required, local or other counsel) incurred by you or any
      holder of a Note in connection with such transactions and in connection with
      any
      amendments, waivers or consents under or in respect of this Agreement or the
      Notes (whether or not such amendment, waiver or consent becomes effective),
      including, without limitation: (a) the costs and expenses incurred in enforcing
      or defending (or determining whether or how to enforce or defend) any rights
      under this Agreement or the Notes or in responding to any subpoena or other
      legal process or informal investigative demand issued in connection with this
      Agreement or the Notes, or by reason of being a holder of any Note, and (b)
      the
      costs and expenses, including financial advisors’ fees, incurred in connection
      with the insolvency or bankruptcy of the Company or in connection with any
      work-out or restructuring of the transactions contemplated hereby and by the
      Notes. The Company will pay, and will save you and each other holder of a Note
      harmless from, all claims in respect of any fees, costs or expenses if any,
      of
      brokers and finders (other than those retained by Speed I, LLC or Danzell
      Investment Management, Ltd). The Company’s aggregate obligation pursuant to this
      Section 15.1
      shall
      not exceed $12,000.00 for identified expenses for the first Closing and $5,000
      for the Second Closing; as well as, 6% of the face value of the Notes payable
      to
      Danzell Investment Management, Ltd., paid within 10 business days after each
      Closing, paid as a Finder’s Fee to Danzell Investment Management, Ltd. In no
      event will the Company be obligated to pay a finder or similar fee to any Person
      in an aggregate amount greater than 6% of the principal actually
      received.

     

    15.2. Survival

     

    The
      obligations of the Company under this Section 15
      will
      survive the payment or transfer of any Note, the enforcement, amendment or
      waiver of any provision of this Agreement or the Notes, and the termination
      of
      this Agreement.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

    16. 
Survival
      of Representations and Warranties; Entire Agreement

     

    All
      representations and warranties contained herein shall survive the execution
      and
      delivery of this Agreement and the Notes, the purchase or transfer by you of
      any
      Note or portion thereof or interest therein and the payment of any Note, and
      may
      be relied upon by any subsequent holder of a Note, regardless of any
      investigation made at any time by or on behalf of you or any other holder of
      a
      Note. All statements contained in any certificate or other instrument delivered
      by or on behalf of the Company pursuant to this Agreement shall be deemed
      representations and warranties of the Company under this Agreement. Subject
      to
      the preceding sentence, this Agreement and the Notes embody the entire agreement
      and understanding between you and the Company and supersede all prior agreements
      and understandings relating to the subject matter hereof. The Company may update
      any representation or warranty prior to any Closing.

     

    17. 
Amendment
      and Waiver.

     

    17.1. Requirements

     

    This
      Agreement and the Notes may be amended, and the observance of any term hereof
      or
      of the Notes may be waived (either retroactively or prospectively), with (and
      only with) the written consent of the Company and the Required Holders, except
      that (a) no amendment or waiver of any of the provisions of
      Section 1
      through
6
      or
21
      hereof,
      or any defined term (as it is used therein), will be effective as to you unless
      consented to by you in writing, and (b) no such amendment or waiver may, without
      the written consent of the holder of each Note at the time outstanding affected
      thereby, (i) subject to the provisions of Section 13
      relating
      to acceleration or rescission, change the amount or time of any prepayment
      or
      payment of principal of, or reduce the rate or change the time of payment or
      method of computation of interest or of the Citation Payment on, the Notes,
      (ii) change the percentage of the principal amount of the Notes the holders
      of which are required to consent to any such amendment or waiver, or
      (iii) amend any of Sections 9,
      12(a),
      12(b),
      13,
      17
      or
20.

     

    17.2. Solicitation
      of Holders of Notes

     

    17.2.1. Solicitation.
      The Company will provide each holder of the Notes (irrespective of the amount
      of
      Notes then owned by it) with sufficient information, sufficiently far in advance
      of the date a decision is required, to enable such holder to make an informed
      and considered decision with respect to any proposed amendment, waiver or
      consent in respect of any of the provisions hereof or of the Notes. The Company
      will deliver executed or true and correct copies of each amendment, waiver
      or
      consent effected pursuant to the provisions of this Section 17
      to each
      holder of outstanding Notes promptly following the date on which it is executed
      and delivered by, or receives the consent or approval of, the requisite holders
      of Notes.

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

    17.2.2. Payment.
      The Company will not directly or indirectly pay or cause to be paid any
      remuneration, whether by way of supplemental or additional interest, fee or
      otherwise, or grant any security, to any holder of Notes as consideration for
      or
      as an inducement to the entering into by any holder of Notes or any waiver
      or
      amendment of any of the terms and provisions hereof unless such remuneration
      is
      concurrently paid, or security is concurrently granted, on the same terms,
      ratably to each holder of Notes then outstanding even if such holder did not
      consent to such waiver or amendment.

     

    17.3. Binding
      Effect, etc.

     

    Any
      amendment or waiver consented to as provided in this Section 17
      applies
      equally to all holders of Notes and is binding upon them and upon each future
      holder of any Note and upon the Company without regard to whether such Note
      has
      been marked to indicate such amendment or waiver. No such amendment or waiver
      will extend to or affect any obligation, covenant, agreement, Default or Event
      of Default not expressly amended or waived or impair any right consequent
      thereon. No course of dealing between the Company and the holder of any Note
      nor
      any delay in exercising any rights hereunder or under any Note shall operate
      as
      a waiver of any rights of any holder of such Note. As used herein, the term
      “this Agreement” and references thereto shall mean this Agreement as it may from
      time to time be amended or supplemented in accordance with the terms
      hereof.

     

    17.4. Notes
      held by Company, etc.

     

    Solely
      for the purpose of determining whether the holders of the requisite percentage
      of the aggregate principal amount of Notes then outstanding approved or
      consented to any amendment, waiver or consent to be given under this Agreement
      or the Notes, or have directed the taking of any action provided herein or
      in
      the Notes to be taken upon the direction of the holders of a specified
      percentage of the aggregate principal amount of Notes then outstanding, Notes
      directly or indirectly owned by the Company or any of its Affiliates shall
      be
      deemed not to be outstanding.

     

    18. Notices

     

    All
      notices and communications provided for hereunder shall be in writing and sent
      (a) by telecopy if the sender on the same day sends a confirming copy of
      such notice by a recognized overnight delivery service (charges prepaid), or
      (b) by registered or certified mail with return receipt requested (postage
      prepaid), or (c) by a recognized overnight delivery service (with charges
      prepaid). Any such notice must be sent:

     

    (i) if
      to you
      or your nominee, to you or it at the address specified for such communications
      in Schedule A,
      or at
      such other address as you or it shall have specified to the Company in
      writing,

     

    (ii) if
      to any
      other holder of any Note, to such holder at such address as such other holder
      shall have specified to the Company in writing, or

     

    (iii) if
      to the
      Company, to the Company at its address set forth at the beginning hereof to
      the
      attention of the Chief Financial Officer, or at such other address as the
      Company shall have specified to the holder of each Note in writing.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

    Notices
      under this Section 18
      will be
      deemed given only when actually received.

     

    19. 
Reproduction
      of Documents

     

    This
      Agreement and all documents relating thereto, including, without limitation,
      (a) consents, waivers and modifications that may hereafter be executed,
      (b) documents received by you at the Closing (except the Notes themselves),
      and (c) financial statements, certificates and other information previously
      or hereafter furnished to you, may be reproduced by you by any photographic,
      photostatic, microfilm, microcard, miniature photographic or other similar
      process and you may destroy any original document so reproduced. The Company
      agrees and stipulates that, to the extent permitted by applicable law, any
      such
      reproduction shall be admissible in evidence as the original itself in any
      judicial or administrative proceeding (whether or not the original is in
      existence and whether or not such reproduction was made by you in the regular
      course of business) and any enlargement, facsimile or further reproduction
      of
      such reproduction shall likewise be admissible in evidence. This
      Section 19
      shall
      not prohibit the Company or any other holder of Notes from contesting any such
      reproduction to the same extent that it could contest the original, or from
      introducing evidence to demonstrate the inaccuracy of any such
      reproduction.

     

    20. 
Confidential
      Information

     

    For
      the
      purposes of this Section 20,
      “Confidential Information” means information delivered to you by or on behalf of
      the Company or any Subsidiary in connection with the transactions contemplated
      by or otherwise pursuant to this Agreement that is proprietary in nature and
      that was clearly marked or labeled or otherwise adequately identified when
      received by you as being confidential information of the Company or such
      Subsidiary, provided that such term does not include information that
      (a) was publicly known or otherwise known to you prior to the time of such
      disclosure, (b) subsequently becomes publicly known through no act or
      omission by you or any person acting on your behalf, (c) otherwise becomes
      known to you other than through disclosure by the Company or any Subsidiary
      or
      (d) constitutes financial statements delivered to you under
      Section 8.1
      that are
      otherwise publicly available. You will maintain the confidentiality of such
      Confidential Information in accordance with procedures adopted by you in good
      faith to protect confidential information of third parties delivered to you,
      provided that you may deliver or disclose Confidential Information to
      (i) your directors, officers, employees, agents, attorneys and affiliates
      (to the extent such disclosure reasonably relates to the administration of
      the
      investment represented by your Notes), (ii) your financial advisors and other
      professional advisors who agree to hold confidential the Confidential
      Information substantially in accordance with the terms of this
      Section 20,
      (iii) any other holder of any Note, (iv) any Person to which you sell
      or offer to sell such Note or any part thereof or any participation therein
      (if
      such Person has agreed in writing prior to its receipt of such Confidential
      Information to be bound by the provisions of this Section 20),
      (v) any Person from which you offer to purchase any security of the Company
      (if such Person has agreed in writing prior to its receipt of such Confidential
      Information to be bound by the provisions of this Section 20),
      (vi) any federal or state regulatory authority having jurisdiction over
      you, (vii) the National Association of Insurance Commissioners or any
      similar organization, or any nationally recognized rating agency that requires
      access to information about your investment portfolio or (viii) any other
      Person to which such delivery or disclosure may be necessary or appropriate
      (w) to effect compliance with any law, rule, regulation or order applicable
      to you, (x) in response to any subpoena or other legal process, (y) in
      connection with any litigation to which you are a party or (z) if an Event
      of Default has occurred and is continuing, to the extent you may reasonably
      determine such delivery and disclosure to be necessary or appropriate in the
      enforcement or for the protection of the rights and remedies under your Notes
      and this Agreement. Each holder of a Note, by its acceptance of a Note, will
      be
      deemed to have agreed to be bound by and to be entitled to the benefits of
      this
      Section 20
      as
      though it were a party to this Agreement. On reasonable request by the Company
      in connection with the delivery to any holder of a Note of information required
      to be delivered to such holder under this Agreement or requested by such holder
      (other than a holder that is a party to this Agreement or its nominee), such
      holder will enter into an agreement with the Company embodying the provisions
      of
      this Section 20.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

    21. Substitution
      of Purchaser

     

    You
      shall
      have the right to substitute any one of your Affiliates as the purchaser of
      the
      Notes that you have agreed to purchase hereunder, by written notice to the
      Company, which notice shall be signed by both you and such Affiliate, shall
      contain such Affiliate’s agreement to be bound by this Agreement and shall
      contain a confirmation by such Affiliate of the accuracy with respect to it
      of
      the representations set forth in Section 6.
      Upon
      receipt of such notice, wherever the word “you” is used in this Agreement (other
      than in this Section 21),
      such
      word shall be deemed to refer to such Affiliate in lieu of you. In the event
      that such Affiliate is so substituted as a purchaser hereunder and such
      Affiliate thereafter transfers to you all of the Notes then held by such
      Affiliate, upon receipt by the Company of notice of such transfer, wherever
      the
      word “you” is used in this Agreement (other than in this
      Section 21),
      such
      word shall no longer be deemed to refer to such Affiliate, but shall refer
      to
      you, and you shall have all the rights of an original holder of the Notes under
      this Agreement.

     

    22. Miscellaneous

     

    22.1. Successors
      and Assigns

     

    All
      covenants and other agreements contained in this Agreement by or on behalf
      of
      any of the parties hereto bind and inure to the benefit of their respective
      successors and assigns (including, without limitation, any subsequent holder
      of
      a Note) whether so expressed or not.

     

    22.2. Payments
      Due on Non-Business Days

     

    Anything
      in this Agreement or the Notes to the contrary notwithstanding, any payment
      of
      principal of or Citation Payment or interest on any Note that is due on a date
      other than a Business Day shall be made on the next succeeding Business Day
      and
      shall include the additional days elapsed in the computation of the interest
      payable on such next succeeding Business Day.

     

    22.3. Severability

     

    Any
      provision of this Agreement that is prohibited or unenforceable in any
      jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
      such prohibition or unenforceability without invalidating the remaining
      provisions hereof, and any such prohibition or unenforceability in any
      jurisdiction shall (to the full extent permitted by law) not invalidate or
      render unenforceable such provision in any other jurisdiction.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

    22.4. Construction

     

    Each
      covenant contained herein shall be construed (absent express provision to the
      contrary) as being independent of each other covenant contained herein, so
      that
      compliance with any one covenant shall not (absent such an express contrary
      provision) be deemed to excuse compliance with any other covenant. Where any
      provision herein refers to action to be taken by any Person, or which such
      Person is prohibited from taking, such provision shall be applicable whether
      such action is taken directly or indirectly by such Person.

     

    22.5. Counterparts

     

    This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      an original but all of which together shall constitute one instrument. Each
      counterpart may consist of a number of copies hereof, each signed by less than
      all, but together signed by all, of the parties hereto.

     

    22.6. Governing
      Law

     

    This
      Agreement shall be construed and enforced in accordance with, and the rights
      of
      the parties shall be governed by, the law of the State of Delaware
      excluding choice-of-law principles of the law of such State that would require
      the application of the laws of a jurisdiction other than such
      State.

     

    22.7. Headings

     

    Section headings
      in this Agreement are included herein for convenience of reference only and
      shall not constitute a part of this Agreement for any other
      purpose.

     

    22.8. Integration

     

    This
      Agreement is intended by the parties as the final, complete and exclusive
      statement of the transactions evidenced by this Agreement. All prior or
      contemporaneous promises, agreements and understandings, whether oral or
      written, are deemed to be superceded by this Agreement, and no party is relying
      on any promise, agreement or understanding with respect to the matters covered
      by this Agreement which is not set forth in this Agreement.

     

    22.9. Waiver
      of
      Jury Trial

     

    THE
      PARTIES HERETO MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
      THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
      OUT
      OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY NOTE CONTEMPLATED TO BE
      EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
      STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER
      CONSTITUTES A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS
      AGREEMENT AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY.

     

    [Remainder
      of Page Intentionally Blank]

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

    If
      you
      are in agreement with the foregoing, please sign the form of agreement on the
      accompanying counterpart of this Agreement and return it to the Company,
      whereupon the foregoing shall become a binding agreement between you and the
      Company.

     

    Nestor
      Traffic Systems, Inc.

     

    

     

    By: /s/
      Nigel Hebborn 

     

    Name: Nigel
      P.Hebborn

     

    Title: President

     

    The
      foregoing is hereby

    agreed
      to
      as of the

    date
      thereof.

    

     

    Note
      Purchasers

     

    

     

    HG
      Investments, LLC

     

    By:
      /s/
      Gary Hewitt

     

    Name:
      Gary Hewitt

     

    Title:
      Authorized Member 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    If
      you
      are in agreement with the foregoing, please sign the form of agreement on the
      accompanying counterpart of this Agreement and return it to the Company,
      whereupon the foregoing shall become a binding agreement between you and the
      Company.

     

    Nestor
      Traffic Systems, Inc.

     

    

     

    By:
      /s/
      Nigel  Hebborn

     

    Name: Nigel
      Hebborn

     

    Title: President

     

    The
      foregoing is hereby

    agreed
      to
      as of the

    date
      thereof.

    

     

    Note
      Purchasers

     

    

     

    Foundation
      Partners I, LLC

     

    By: /s/William 
      Danzell 

     

    Name: William
      Danzell

     

    Title: Authorized
      Member

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    If
      you
      are in agreement with the foregoing, please sign the form of agreement on the
      accompanying counterpart of this Agreement and return it to the Company,
      whereupon the foregoing shall become a binding agreement between you and the
      Company.

     

    Nestor
      Traffic Systems, Inc.

     

    

     

    By: 
      /s/ Nigel P. Hebborn

     

    Name: Nigel
      Hebborn

     

    Title: President

     

    The
      foregoing is hereby

    agreed
      to
      as of the

    date
      thereof.

    

     

    Note
      Purchasers

     

    

     

    Silver
      Star Partners I, LLC

     

    By: /s/
      William Danzell 

     

    Name: William
      Danzell

     

    Title: Authorized
      Member

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      If
        you
        are in agreement with the foregoing, please sign the form of agreement on
        the
        accompanying counterpart of this Agreement and return it to the Company,
        whereupon the foregoing shall become a binding agreement between you and
        the
        Company.

       

      Nestor
        Traffic Systems, Inc.

       

      

       

      By: 
        /s/ Nigel Hebborn

       

      Name: Nigel
        Hebborn

       

      Title: President

       

      The
        foregoing is hereby

      agreed
        to
        as of the

      date
        thereof.

      

       

      Note
        Purchasers

       

      

       

      Kuekenhof
        Equity Fund, L.P.

       

      By: /s/
        Michael C. James

       

      Name: Michael
        C. James

       

      Title: General
        Partner

       

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    SCHEDULE
      A

    

    
      	
               

              Name
                of Purchaser

            	
               

              Principal
                Amount of Notes to be Purchased

            	
               

              Payment
                Wire Transfer Instructions

            	
               

              Notice
                of Payment and Confirmation of Wire Transfer
                Address

            	
               

              All
                Other Notices

            
	
              HG
                Investments, LLC

            	
              $250,000

            	 	
              Mr.
                Gary Hewitt

              7030
                Hayvenhurst Avenue

              Van
                Nuys, CA 91406

            	
              Mr.
                Gary Hewitt

              7030
                Hayvenhurst Avenue

              Van
                Nuys, CA 91406

            
	
              Foundation
                Partners I, LLC

            	
              $750,000

            	 	
              c/o
                Danzell Investment Management, Ltd.

              2
                Corpus Christi

              The
                Professional Building; Suite 300

              Hilton
                Head, SC 29928

            	
              c/o
                Danzell Investment Management, Ltd.

              2
                Corpus Christi

              The
                Professional Building; Suite 300

              Hilton
                Head, SC 29928

            
	
              Silver
                Star Partners I, LLC

            	
              $250,000

            	 	
              c/o
                Danzell Investment Management, Ltd.

              2
                Corpus Christi

              The
                Professional Building; Suite 300

              Hilton
                Head, SC 29928

            	
              c/o
                Danzell Investment Management, Ltd.

              2
                Corpus Christi

              The
                Professional Building; Suite 300

              Hilton
                Head, SC 29928

            
	
              Kuekenhof
                Equity Fund, L.P.

            	
              $250,000

            	 	
              c/o
                Kuekenhof Capital Management, LLC

              22
                Church Street, Suite 5

              Ramsey,
                NY 07446

            	
              c/o
                Kuekenhof Capital Management, LLC

              22
                Church Street, Suite 5

              Ramsey,
                NY 07446

            

    

    

    
      
        Schedule
          A

        A-1

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    SCHEDULE
      B

    

    DEFINED
      TERMS

    As
      used
      herein, the following terms have the respective meanings set forth below or
      set
      forth in the Section hereof following such term:

     

    “Affiliate”
means,
      at any time, and with respect to any Person, (a) any other Person that at such
      time directly or indirectly through one or more intermediaries Controls, or
      is
      Controlled by, or is under common Control with, such first Person, and (b)
      any
      Person beneficially owning or holding, directly or indirectly, 10% or more
      of
      any class of voting or equity interests of the Company or any Subsidiary or
      any
      corporation of which the Company and its Subsidiaries beneficially own or hold,
      in the aggregate, directly or indirectly, 10% or more of any class of voting
      or
      equity interests. As used in this definition, “Control” means the possession,
      directly or indirectly, of the power to direct or cause the direction of the
      management and policies of a Person, whether through the ownership of voting
      securities, by contract or otherwise. Unless the context otherwise clearly
      requires, any reference to an “Affiliate” is a reference to an Affiliate of the
      Company.

     

    “Applicable
      Laws”
means
      any law, rule, regulation, order, decree or other requirement having the force
      of law, and, where applicable, any interpretation thereof by any authority
      having jurisdiction with respect thereto or charged with the administration
      thereof.

     

    “Business
      Day”
means
      any day other than a Saturday, a Sunday or a day on which commercial banks
      in
      New York, New York are required or authorized to be closed.

     

    “Capital
      Lease”
means,
      at any time, a lease with respect to which the lessee is required concurrently
      to recognize the acquisition of an asset and the incurrence of a liability
      in
      accordance with GAAP.

     

    “Citation
      Payment”
means
      to
      (a)
      $5.00 per paid citation issued with respect to Contracts or New Contracts for
      which the Company is paid on an “as issued” basis, (b) $6.00 per paid citation
      issued with respect to Contracts or New Contracts for which the Company is
      paid
      on an “as paid” basis and (c) 17% of amounts collected with respect to Contracts
      or New Contracts for which the Company is paid on a “fixed fee” basis; in each
      case, multiplied
      by a fraction, the numerator of which is the total outstanding principal on
      Notes that you own and the denominator of which is the total outstanding
      principal on all Notes.

     

    “Closing”
is
      defined in Section 3.

     

    “Closing
      Dates”
is
      defined in Section 3

     

    “Code”
means
      the Internal Revenue Code of 1986, as amended from time to time, and the rules
      and regulations promulgated thereunder from time to time.

     

    “Company”
means
      Nestor
      Traffic Systems, Inc.,
      a
      Delaware corporation.

     

    “Confidential
      Information”
is
      defined in Section 20.

     

    
      
        Schedule
          B

        
        

      

      
        B-1

        
          

        

      

      
        
        

      

    

    “Contract”
means
      any contract or agreement entered into prior to April 1, 2007 and after October
      1, 2006 between the Company and any state, municipality or other subdivision
      of
      any state for the operation of Speed Units to monitor and enforce motor vehicle
      speed laws and to issue citations to offending motor vehicle
      operators.

     

    “Current
      Report”
has
      the
      meaning provided in Section 4.2.

     

    “Default”
means
      an event or condition the occurrence or existence of which would, with the
      lapse
      of time or the giving of notice or both, become an Event of
      Default.

     

    “Event
      of Default”
is
      defined in Section 12.

     

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended.

     

    “GAAP”
means
      generally accepted accounting principles as in effect from time to time in
      the
      United States of America.

     

    “Governmental
      Authority”
      means

     

    (a) the
      government of

     

    (i) the
      United States of America or any State or other political subdivision thereof,
      or

     

    (ii) any
      jurisdiction in which the Company or any Subsidiary conducts all or any part
      of
      its business, or which asserts jurisdiction over any properties of the Company
      or any Subsidiary, or

     

    (b) any
      entity exercising executive, legislative, judicial, regulatory or administrative
      functions of, or pertaining to, any such government.

     

    “Guaranty”
means,
      with respect to any Person, any obligation (except the endorsement in the
      ordinary course of business of negotiable instruments for deposit or collection)
      of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
      or other obligation of any other Person in any manner, whether directly or
      indirectly, including (without limitation) obligations incurred through an
      agreement, contingent or otherwise, by such Person:

     

    (a) to
      purchase such indebtedness or obligation or any property constituting security
      therefor;

     

    (b) to
      advance or supply funds (i) for the purchase or payment of such indebtedness
      or
      obligation, or (ii) to maintain any working capital or other balance sheet
      condition or any income statement condition of any other Person or otherwise
      to
      advance or make available funds for the purchase or payment of such indebtedness
      or obligation;

     

    (c) to
      lease
      properties or to purchase properties or services primarily for the purpose
      of
      assuring the owner of such indebtedness or obligation of the ability of any
      other Person to make payment of the indebtedness or obligation; or

     

    
      
        Schedule
          B

        
        

      

      
        B-2

        
          

        

      

      
        
        

      

    

    (d) otherwise
      to assure the owner of such indebtedness or obligation against loss in respect
      thereof.

     

    “holder”
means,
      with respect to any Note, the Person in whose name such Note is maintained
      by
      the Company.

     

    “Indebtedness”
with
      respect to any Person means, at any time, without duplication,

     

    (a) its
      liabilities for borrowed money and its redemption obligations in respect of
      mandatorily redeemable Preferred Stock;

     

    (b) its
      liabilities for the deferred purchase price of property acquired by such Person
      (excluding accounts payable arising in the ordinary course of business but
      including all liabilities created or arising under any conditional sale or
      other
      title retention agreement with respect to any such property);

     

    (c) all
      liabilities appearing on its balance sheet in accordance with GAAP in respect
      of
      Capital Leases;

     

    (d) all
      liabilities for borrowed money secured by any Lien with respect to any property
      owned by such Person (whether or not it has assumed or otherwise become liable
      for such liabilities);

     

    (e) all
      its
      liabilities in respect of letters of credit or instruments serving a similar
      function issued or accepted for its account by banks and other financial
      institutions (whether or not representing obligations for borrowed
      money);

     

    (f) Swaps
      of
      such Person;

     

    (g) every
      obligation of such Person under any Synthetic Lease; and

     

    (h) any
      Guaranty of such Person with respect to liabilities of a type described in
      any
      of clauses (a) through (g) hereof.

     

    Indebtedness
      of any Person shall include all obligations of such Person of the character
      described in clauses (a) through (g) to the extent such Person remains legally
      liable in respect thereof notwithstanding that any such obligation is deemed
      to
      be extinguished under GAAP.

     

    “Initial
      Closing Date”
is
      defined in Section 3.

     

    “Knowledge”
of
      the
      Company, when used herein, means the actual present knowledge of the Company’s
      Chief Financial Officer.

     

    “Lien”
means,
      with respect to any Person, any mortgage, lien, pledge, charge, security
      interest or other encumbrance, or any interest or title of any vendor, lessor,
      lender or other secured party to or of such Person under any conditional sale
      or
      other title retention agreement or Capital Lease, upon or with respect to any
      property or asset of such Person (including in the case of stock, stockholder
      agreements, voting trust agreements and all similar arrangements).

     

    
      
        Schedule
          B

        
        

      

      
        B-3

        
          

        

      

      
        
        

      

    

    “Material”
means
      material in relation to the business, operations, affairs, financial condition,
      assets, properties, or prospects of the Company and Nestor taken as a
      whole.

     

    “Material
      Adverse Effect”
means
      a
      material adverse effect on (a) the business, operations, affairs, financial
      condition, assets, properties or prospects of the Company and Nestor taken
      as a
      whole, or (b) the ability of the Company to perform its obligations under this
      Agreement and the Notes, or (c) the validity or enforceability of this Agreement
      or the Notes.

     

    “Maturity
      Date”
means
      May 25, 2011.

     

    “New
      Contract”
means
      any Contract entered into after April 1, 2007.

     

    “Notes”
has
      the
      meaning provided in Section 1.

     

    “Note
      Year”
means,
      with respect to any Note, the 12 month period beginning on the month and day
      that the Note issued and ending the day before the anniversary of such
      date.

     

    “Officer’s
      Certificate”
means
      a
      certificate of a Senior Financial Officer or of any other officer of the Company
      whose responsibilities extend to the subject matter of such
      certificate.

     

    “Permitted
      Liens”
has
      the
      meaning provided in Section 11.1.

     

    “Person”
means
      an individual, partnership, corporation, limited liability company, association,
      trust, unincorporated organization, or a government or agency or political
      subdivision thereof.

     

    “Preferred
      Stock”
means
      any class of capital stock of a corporation that is preferred over any other
      class of capital stock of such corporation as to the payment of dividends or
      the
      payment of any amount upon liquidation or dissolution of such
      corporation.

     

    “Priority
      Indebtedness”
means,
      as of the date of determination thereof, the sum of (a) all Indebtedness of
      the
      Company and its Subsidiaries secured by Permitted Liens plus, but without
      duplication, (b) all other Indebtedness of Subsidiaries (excluding, in any
      event, Indebtedness due or owing to the Company or another wholly owned
      Subsidiary).

     

    “property”
or
      “properties”
means,
      unless otherwise specifically limited, real or personal property of any kind,
      tangible or intangible, choate or inchoate.

     

    “Purchasers”
has
      the
      meaning set forth in Section 4.5.

     

    “Qualifying
      Citation”
has
      the
      meaning set forth in Section 7.2

     

    “Report”
has
      the
      meaning set forth in Section 4.2.

     

    “Required
      Holders”
means,
      at any time, the holders of at least a majority in principal amount of the
      Notes
      at the time outstanding (exclusive of Notes then owned by the Company or any
      of
      its Affiliates).

     

    
      
        Schedule
          B

        
        

      

      
        B-4

        
          

        

      

      
        
        

      

    

    “Required
      Hours”
means
      81,600 of operations of Speed Units for each $1,500,000.00 of principal
      outstanding on the Notes.

     

    “Responsible
      Officer”
means
      any Senior Financial Officer and any other officer of the Company with
      responsibility for the administration of the relevant portion of this
      agreement.

     

    “Second
      Closing Date”
is
      defined in Section 3.

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended from time to time.

     

    “Security
      Agreement”
means
      that certain Security Agreement between you and the Company pursuant to which
      the obligations of the Company pursuant to this Agreement and the Notes are
      secured by a first priority Lien on all of the Company’s assets directly related
      to the Contracts and the New Contracts, but specifically excluding any assets
      of
      the Company that are used or useful with respect to both Contracts and New
      Contracts and any other of the Company’s business or operations.

     

    “Security
      Documents”
means
      any and all documents, instruments or agreements now or hereafter providing
      security for amounts due under the Notes, including without limitation, that
      certain Security Agreement of even date herewith between you and the
      Company.

     

    “SEC”
means
      the Securities Exchange Commission of the United States.

     

    “Senior
      Financial Officer”
means
      the chief financial officer, principal accounting officer, treasurer or
      comptroller of the Company.

     

    “Speed
      Unit”
means
      any fixed or mobile device employed by the Company for the detection of speed
      violations pursuant to any Contract or New Contract which are specifically
      identified to holders of the Notes as Speed Units generating Qualifying
      Citations, provided that the number of Speed Units that are the subject of
      this
      Agreement shall never exceed 48.

     

    “Subsidiary”
means,
      as to any Person, any corporation, association or other business entity in
      which
      such Person or one or more of its Subsidiaries or such Person and one or more
      of
      its Subsidiaries owns sufficient equity or voting interests to enable it or
      them
      (as a group) ordinarily, in the absence of contingencies, to elect a majority
      of
      the directors (or Persons performing similar functions) of such entity, and
      any
      partnership or joint venture if more than a 50% interest in the profits or
      capital thereof is owned by such Person or one or more of its Subsidiaries
      or
      such Person and one or more of its Subsidiaries (unless such partnership can
      and
      does ordinarily take major business actions without the prior approval of such
      Person or one or more of its Subsidiaries). Unless the context otherwise clearly
      requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the
      Company.

     

    
      
        Schedule
          B

        
        

      

      
        B-5

        
          

        

      

      
        
        

      

    

    “Swaps”
means,
      with respect to any Person, payment obligations with respect to interest rate
      swaps, currency swaps and similar obligations obligating such Person to make
      payments, whether periodically or upon the happening of a contingency. For
      the
      purposes of this Agreement, the amount of the obligation under any Swap shall
      be
      the amount determined in respect thereof as of the end of the then most recently
      ended fiscal quarter of such Person, based on the assumption that such Swap
      had
      terminated at the end of such fiscal quarter, and in making such determination,
      if any agreement relating to such Swap provides for the netting of amounts
      payable by and to such Person thereunder or if any such agreement provides
      for
      the simultaneous payment of amounts by and to such Person, then in each such
      case, the amount of such obligation shall be the net amount so
      determined.

     

    

     

    
      
        Schedule
          B

        
        

      

      
        B-6

        
          

        

      

      
        
        

      

    

    [FORM
      OF NOTE]

     

    This
      Note
      has not been registered under the Securities Act of 1933 as amended (the
“Act”)
      or
      registered or qualified under any state securities law and may not be offered,
      sold, or otherwise transferred except in connection in compliance with the
      registration requirements of the Act and applicable state securities laws or
      pursuant to an exemption therefrom.

     

    Nestor
      Traffic Systems, Inc.

     

    Variable
      Rate Senior Notes due May 25, 2011

     

    No.
      1April
      [   ], 2007

     

    $[   ]

     

    FOR
      VALUE
      RECEIVED, the undersigned, Nestor
      Traffic Systems, Inc.
      (herein
      called the “Company”),
      a
      corporation organized and existing under the laws of the State of Delaware,
      hereby
      promises to pay to [   ], or registered assigns, the principal
      sum of $[   ]
      in
      accordance with the terms and conditions specified in the Note Purchase
      Agreement (referred to below), with interest (computed on the basis of a 360-day
      year of twelve 30-day months) (a) on the unpaid balance thereof in the
      manner specified below, payable quarterly, on the 45th
      day
      after the end of each quarter in each year until the principal hereof shall
      have
      become due and payable.

     

    Citation
      Payments (as defined in the Note Purchase Agreement) hereunder will be made
      quarterly in arrears based on the number of Qualifying Citations (as defined
      in
      the Note Purchase Agreement) issued in the immediately preceding quarter.

     

    In
      the
      event that the annual rate of return for the immediately preceding year on
      this
      Note was less than 10.0%, the Company will, within 45 days following the end
      of
      such year, make an interest payment to you in an amount sufficient to make
      the
      annual rate of return for such prior year equal 10.0%. In the event at any
      time
      during any year that the annual rate of return on this Note is equal to 80.0%,
      the Company’s obligation to make Citation Payments for that year will cease. The
      Company will be obligated to begin making Citation Payments again in the
      following year.

     

    At
      the
      Maturity Date, the Company will pay all outstanding principal together with
      all
      accumulated but unpaid Citation Payments (plus any amount required to make
      your
      cumulative annual return equal to 10.0%) and all unpaid costs, fees, penalties
      or other amounts due pursuant to this Agreement, the Notes or the Security
      Documents.

     

    Payments
      of principal and Citation Payments and any other payments due on this Note
      are
      to be made in lawful money of the United States of America at the location
      specified in Section 7
      of the
      Note Purchase Agreements referred to below or at such other place as the Company
      shall have designated by written notice to the holder of this Note as provided
      in the Note Purchase Agreements referred to below. Whenever any payment required
      to be made hereunder becomes due on a Saturday, Sunday or public holiday, such
      payment shall be due on the next succeeding business day, and such extension
      of
      time shall be included in computing interest in connection with such
      payment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    This
      Note
      is issued pursuant to a separate Note Purchase Agreement dated as of
April
      1,
      2007
      (as from
      time to time amended, the “Note
      Purchase Agreement”),
      between the Company and the purchaser named therein and is entitled to the
      benefits thereof. Each holder of this Note will be deemed, by its acceptance
      hereof, (i) to have agreed to the confidentiality provisions set forth in
      Section 20
      of the
      Note Purchase Agreement and (ii) to have made the representation set forth
      in
      Section 6
      of the
      Note Purchase Agreement. Capitalized terms used herein and not otherwise defined
      shall have the meaning ascribed to them in the Note Purchase Agreement unless
      the context clearly requires otherwise.

     

    This
      Note
      is subject to optional prepayment, in whole but not in part, at the times and
      on
      the terms specified in the Note Purchase Agreement, but not
      otherwise.

     

    If
      an
      Event of Default, as defined in the Note Purchase Agreement, occurs and is
      continuing, the principal of this Note may be declared or otherwise become
      due
      and payable in the manner, at the price, and with the effect provided in the
      Note Purchase Agreement.

     

    This
      Note
      shall be construed and enforced in accordance with, and the rights of the
      parties shall be governed by, the law of the State of Delaware excluding
      choice-of-law principles of the law of such State that would require the
      application of the laws of a jurisdiction other than such State.

     

    [The
      Remainder of this Page is Intentionally Blank.]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the
      date first written above.

     

    Nestor
      Traffic Systems, Inc.

     

    

     

    By:
      ___________________________________ 

     

    Name: Nigel
      Hebborn

     

    Title: President

     

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Schedule
      5.10

     

    Title
      to Assets

     

    The
      Company has purchase 25 Ford E Series Vans for use in Contracts and New
      Contracts. A valid title certificate has not issued for 10 of these vehicles.
      The dealerships from which the Company purchased the Vans has not issued valid
      title documents because the dealership’s agent accepted payment from the Company
      but did not forward payment to the dealerships. The Company believes that it
      has
      a valid claim to title of the vehicles and is currently pursuing legal and
      negotiated solutions to the matter. The Company does not believe that the
      failure to have valid title to each of the 10 vehicles will materially affect
      the Company’s ability to secure New Contracts or to perform its obligations
      under any such New Contracts.BNLF Exhibit 10.8

    

    

    VIRTUAL
      ITEM PROCESSING SYSTEMS, INC.

    2525
      Northwest Expressway, #105

     

    Oklahoma
      City, Oklahoma 73112

     

    OUTSOURCING
      AGREEMENT

     

    BETWEEN

     

    VIRTUAL
      ITEM PROCESSING SYSTEMS, INC.

     

    And

     

    BROKERS
      NATIONAL LIFE ASSURANCE COMPANY

    
      
        E
          -
          4

         

      

      
         

        
          

        

      

      
         

      

    

    OUTSOURCING
      AGREEMENT

     

    This
      Outsourcing Agreement (" Agreement") is executed as of this 1st
      day of
      May 2006, by and between Virtual Item Processing Systems, Inc. ("VIP"), with
      its
      principal place of office at 2525 NW Expressway, Suite 105 Oklahoma City,
      Oklahoma 73112, and Brokers National Life Assurance Company ("BNL"), with its
      principal place of office at 7010 Hwy. 71 W., Suite 100, Austin, Texas
      78735.

     

    WHEREAS,
      VIP is engaged in the business of providing Electronic Data Processing services
      ("EDP Services") and related consultation and services to insurance companies
      pursuant to computer software systems developed and owned by VIP , (the "VIP
      System");

     

    WHEREAS,
      BNL is an insurance company domiciled in the State of Arkansas and licensed
      to
      do business in numerous additional states; and

     

    WHEREAS,
      VIP desires to provide EDP Services to BNL; and

     

    WHEREAS,
      BNL desires to obtain EDP services from VIP for the processing and
      administration of its insurance policies;

     

    NOW,
      THEREFORE, in consideration of the above premises and in consideration of other
      good and valuable consideration, the receipt and sufficiency is hereby
      acknowledged, the parties agree as follows:

     

    1.
      PURCHASE
      OF EQUIPMENT.
      BNL at
      its expense shall obtain, install, maintain and upgrade as necessary any and
      all
      hardware, software, data and telephone lines, other communications equipment
      and
      any other equipment (hereinafter collectively referred to as the "Equipment")
      which it determines is necessary to allow it to use and access the VIP System
      pursuant to the terms of this Agreement. Such Equipment shall be fully
      compatible with the VIP System. VIP will provide BNL such information as is
      reasonably necessary to allow BNL to acquire all such Equipment which meets
      the
      requirements of this paragraph. If requested by BNL and at BNL's expense, VIP
      shall inspect all such Equipment and acknowledge its compatibility in writing
      prior to its use with the VIP System.

     

    2.
      VIP's EQUIPMENT AND SERVICES.

     

    A.
      During
      the term of this Agreement, VIP shall provide BNL such access as necessary
      to
      the VIP System to allow BNL to attach one data communication line and up to
      seventy (70) addressable data communications devices to said VIP System. Should
      BNL desire to attach additional communication lines or additional communication
      devices to the VIP System, BNL shall pay to VIP the additional fees set forth
      in
      paragraph 5(F) of this Agreement.

     

    B.
      VIP,
      at its sole discretion and expense, may, but is not obligated to, make
      appropriate enhancements to the VIP System. Any such enhancements shall be
      deemed to be included in the EDP Services and VIP System to be provided to
      BNL,
      whether developed by VIP before or

    during
      the time when services are to be provided by VIP pursuant to this Agreement.
      During the term of this Agreement, VIP shall be responsible at its expense
      for
      the proper maintenance and documentation of the VIP System.

     

     

    3
      .SCHEDULED
      AND UNSCHEDULED DOWN TIME. BNL
      acknowledges that there will be scheduled downtime for the routine preventive
      maintenance of VIP's System performed by either VIP or its vendors. VIP shall
      give BNL reasonable advance notice of all such scheduled downtime. BNL further
      acknowledges that there will also be unscheduled down-time that might occur
      as a
      result of electrical power failures and equipment failures and other acts
      outside of the control of VIP as contemplated in paragraph 16(J). In the event
      that any such down-time extends for more than two (2) consecutive working days,
      VIP, at its expense, will make available to BNL access to a backup facility
      designated by VIP for the continued processing of BNL's business. To ensure
      that
      a backup facility will be available in

    
      
        E
          -
          5

         

      

      
         

        
          

        

      

      
         

      

    

     

    case
      of
      such a failure, VIP will maintain disaster and/or business interruption
      insurance adequate to establish alternate site processing, as provided for
      in
      paragraph 12(A) of this Agreement.

     

    4.
      INCLUDED SERVICES IN THE VIP SYSTEM. It is agreed and understood by BNL
      that:

     

    A.
      It has
      reviewed and inspected the VIP System existing as of the Effective Date of
      this
      Agreement, which VIP System includes (i) a New Business System, (ii) a Policy
      Administration System, (iii) an Agency Administration System, (iv) a Financial
      Administration System. (v) a Claims System, (vi) a Vendor Provider System,
      (vii)
      a Transaction Tracking System and (viii) a Mail Tracking System;

     

    B.
      Such
      VIP System as identified in paragraph 4(A) is adequate to meet the needs of
      

    BNL;

     

    C.
      VIP
      shall provide EDP Services to BNL for such Initial Policies and policies
      identical thereto and renewals thereof by the use of such VIP System existing
      as
      of the Effective Date of this Agreement, except as such VIP System may be
      modified from time to time by VIP , at the discretion of VIP;

     

    D.
      BNL
      has reviewed the security system (Security System") included in the VIP System
      existing as of the Effective Date of this Agreement;

     

    E.
      BNL
      acknowledges and agrees that such Security System is adequate to protect the
      confidential information and data of BNL processed by the VIP
      System;

     

    F.
      BNL,
      throughout the term of this Agreement, shall be solely responsible for choosing,
      implementing and utilizing any or all of such of the security measures and
      protections offered by said Security System for the use of or access to the
      VIP
      System by any of its officers, directors, shareholders, employees and
      agents;

     

    G.
      VIP
      shall not have any duty to either monitor or enforce such security measures
      and
      protections chosen, implemented or utilized by BNL;

    H. 

    
      
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    BNL
      shall
      be solely responsible for any acts or omissions of any of its officers,
      directors, shareholders, employees and agents;

     

    I. Notwithstanding
      anything to the contrary in this Agreement, VIP at any time during the term
      of
      this Agreement may change the platform upon which the VIP System is operated
      and
      through which the EDP Services are provided to BNL by VIP under this Agreement.
      Before VIP shall make such platform change VIP shall give BNL prior reasonable
      written notice of such change, and VIP's warranties under this Agreement shall
      continue notwithstanding such change and VIP agrees to pay any cost created
      for
      or imposed on BNL for equipment, training or similar matters arising from such
      change.

     

    5.
      PAYMENTS TO VIP.

     

    
      	 	
              A.

            	
              For
                EDP Services provided pursuant to this Agreement, BNL will pay to
                VIP the
                charges set forth in the Payment Schedule attached hereto as Schedule
                B:
                provided however and notwithstanding anything to the contrary herein.
                The
                minimum monthly fee shall not be less than five thousand dollars
                ($5,000)
                per month (as applicable, "Minimum
                Fee").

            

    

     

    
      	 	
              B.

            	
              For
                any additional VIP Services provided hereunder, BNL will pay to VIP
                the
                charges set charges set forth in the Payment Schedule attached hereto
                as
                Schedule
                A.

            

    

     

    
      	 	
              C.

            	
              The
                fees due hereunder are subject to the following
                provisions:

            

    

     

    1. The
      fee
      for each new policy submitted into the VIP System is set forth in Schedule
      B.

     

    2. VIP
      will
      process all policies that have thirteen (13) or more months expired from their
      original policy date at the annual rates set forth in Schedule
      B. with
      a
      separate fee for each renewal base policy and each rider, for each plan,
      prorated to the actual number of months each policy is represented to be in
      force on the VIP System. Such representation of "policy status" includes the
      "grace period" and "Late payment offer" that each policy may enjoy and in which
      case exceeds a time frame not bound by each policy's actual paid for period.
      The
      payment amount for each group of policies in a rate category will be calculated
      by determining the actual number of policies and riders in force that are
      included in the rate category, as set forth in Schedule
      B at
      the
      end of each calendar month and then multiplying the number of policies by the
      base policy renewal amount and the number of riders by the rider renewal amount
      then adding the totals together and dividing the resulting amount by twelve
      (12). The amounts calculated for all rate categories are added together and
      this
      amount is the fee payable in advance at the beginning of the month.

     

    3. VIP
      shall
      not be obligated to process any amended policies or new products
      that

    
      
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    are
      written or acquired by BNL unless and until the parties hereto have mutually
      executed a written addendum to this Agreement modifying Schedule
      B to
      include the fees for any such products.

     

    
      	 	
              D.

            	
              Any
                sum due VIP hereunder for which a time for payment is not otherwise
                specified will be due and payable within ten (10) days after the
                date of
                the postmark for an invoice therefor from VIP. If BNL fails to pay
                any
                amount due within ten (10) days from the date of the postmark for
                the
                invoice, late charges of 1-1/2% per month, or the maximum amount
                allowable
                by law, whichever is less, shall also become payable by BNL to
                VIP.

            

    

     

    
      	 	
              E.

            	
              In
                addition to the communication line and devices which BNL is authorized
                to
                attach to the VIP System pursuant to paragraph 2 of this Agreement,
                BNL
                may, for the monthly fee(s) hereinafter set forth, attach additional
                communication lines or the following devices to the VIP System. The
                monthly fee(s) for such additional lines) or devices is as
                follows:

            

    

     

    1.
      each
      communication line and adapter $200,

     

    2.
      each
      visual station whether CRT, PC or similar device $25,

    3.
      each
      addressable printer under 299 lines per minute ("LPM") $25

     

    4.
      each
      addressable printer over 299 LPM $150.

     

    F.
      There
      are certain other expenses which are directly related to VIP's performance
      of
      this Agreement that are directly billable by VIP and payable by BNL. The purpose
      and intent of this provision is not to describe all contemplated charges covered
      by this provision, but rather to identify some of the charges that may fall
      into
      this category . Such charges include but are not limited to the
      following:

     

    
      	 	
              1.

            	
              Cost
                of all business forms, continuous or non-continuous used by
                BNL;

            

    

     

    
      	 	
              2.

            	
              All
                telephone calls initiated on behalf of BNL business and
                operations;

            

    

    
      	 	
              3.

            	
              All
                travel, food and lodging expenses incurred by VIP personnel related
                to the
                performance of this Agreement, subject to BNL's prior written
                approval;

            

    

    
      	 	
              4.

            	
              All
                postage and shipping expenses for materials used by
                BNL;

            

    

    
      	 	
              5.

            	
              All
                expenses incurred for computer output micro-film "COM" which is contracted
                by VIP with a service bureau independent of VIP , subject to BNL'
                s prior
                written approval;

            

    

    
      	 	
              6.

            	
              Any
                other charges directly related to BNL ' use or benefit of the VIP
                System
                pursuant to this Agreement is subject to BNL ' prior written
                approval.

            

    

     

    G.
      All
      sums due under this Agreement are payable in U.S. dollars.

     

    6.
      PROPRIETARY AND RELATED RIGHTS.

    

    A. CLIENT
      DATA.
      Any
      original documents or files provided to VIP hereunder by BNL ("BNL Data") are
      and shall remain BNL's property and, upon the termination of this Agreement
      for
      any reason, such BNL Data will be returned to BNL by VIP, subject
      to

    
      
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    the
      terms
      hereof. Subject to paragraphs 4(F) and (G), VIP agrees to make the same effort
      to safeguard such BNL Data as it does in protecting its own proprietary
      information. BNL Data will not be utilized by VIP for any purpose other than
      those purposes related to rendering EDP Services to BNL under this Agreement,
      nor will BNL Data or any part thereof be disclosed to third parties by VIP
      , its
      employees or agents except for purposes related to VIP's rendering ofEDP
      Services to BNL under this Agreement or as required by law, regulation, or
      order
      of a court or regulatory agency or other authority having jurisdiction
      thereover. Notwithstanding the foregoing, VIP shall have the right to retain
      in
      its possession all work papers and files prepared by it in performance of EDP
      Services hereunder which may include necessary copies of BNL Data. VIP shall
      have access to BNL Data, at reasonable times, during the term of this Agreement
      and thereafter for purposes related to VIP's 'rendering of EDP Services to
      BNL
      pursuant to this Agreement, or as required by law, regulation or order of a
      court or regulatory agency or other authority having jurisdiction thereover.
      Notwithstanding the foregoing, the confidentiality obligations set forth in
      this
      paragraph will not apply to any information which (i) is or becomes publicly
      available without breach of this Agreement, (ii) is independently developed
      by
      VIP outside the scope of this Agreement and without reference to the
      confidential information received under this Agreement, or (iii) is rightfully
      obtained by VIP from third parties which are not obligated to protect its
      confidentiality.

     

    7.
      TERMINATION FOR CAUSE. This
      Agreement may be terminated by the non- breaching party upon any of the
      following events:

     

    A.
      In the
      event that BNL fails to pay any sums of money due to VIP hereunder and does
      not
      cure such default within thirty (30) days after receipt of written notice of
      such nonpayment from VIP , provided that if BNL notifies VIP in writing that
      BNL
      disputes a billing and BNL pays any undisputed portion of such billing VIP
      shall
      not institute formal proceedings by arbitration or judicial review or terminate
      this Agreement with respect to such disputed billing until after VIP has
      afforded BNL an opportunity for a meeting to discuss such dispute.

     

    B.
      In the
      event that a party hereto breaches any of the material terms, covenants or
      conditions of this Agreement (other than a breach under paragraph (A) above)
      and
      fails to cure the same within thirty (30) days after receipt of written notice
      of such breach from the non-breaching party.

     

    C.
      In the
      event that a party hereto becomes or is declared insolvent or bankrupt, is
      the
      subject of any proceedings relating to its liquidation, insolvency or for the
      appointment of a receiver or similar officer for it, makes an assignment for
      the
      benefit of all or substantially all of its creditors, or enters into an
      agreement for the composition, extension, or readjustment of all or
      substantially all of its obligations or admits of its general inability to
      pay
      its debts as they become due.

     

    D.
      In the
      event of termination under this section, VIP will give BNL, at its request
      and

    
      
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    direction,
      such copies of BNL data maintained on the VIIP system in a format and in a
      manner as designated by BNL. BNL shall pay a fee to VIP for preparing such
      data.
      Such fee shall be $100 per hour for programming time and $150 per hour computer
      processing time.

     

    8.
      INDEMNIFICATION.

     

    A.
      BNL
      agrees to indemnify, defend and hold VIP and its officers, directors,
      stockholders, employees, agents and representatives harmless from any and all
      claims, actions, damages, liabilities, costs and expenses reasonable attorneys'
      fees and expenses arising out of or relating to (i) any acts or omissions of
      BNL
      pertaining to the EDP Services, including without limitation any breach of
      this
      Agreement by BNL or (ii) any information provided by or on behalf of, or any
      instruction, approval or decision by, BNL pertaining to the EDP Services relied
      upon by VIP .

     

    B.
      VIP
      shall indemnify, defend and hold BNL and its officers, directors, stockholders,
      employees, agents and representatives harmless from any and all claims, actions,
      damages, liabilities, costs and expenses, including reasonable attorneys' fees
      and expenses, arising out of any third party claims of infringement of any
      United States patents, or a trade secret, or any copyright, trademark, service
      mark, trade name or similar proprietary rights alleged to have occurred related
      to VIP's providing of EDP Services pursuant to this Agreement or relating to
      the
      VIP System used in providing such EDP Services.

     

    C.
      Subject to the limitations set forth in paragraphs 9(E), 9(F) and 9(G) of this
      Agreement and not including the claims covered by paragraph 8(B) of this
      Agreement, VIP shall indemnify, defend and hold BNL and its officers, directors,
      stockholders, employees, agents and representatives harmless from any and all
      claims, actions, damages, liabilities, costs and expenses, including reasonable
      attorneys' fees and expenses, arising out of or relating to (i) any acts or
      omissions of VIP pertaining to the EDP Services, including without limitation
      any breach of this Agreement by VIP , or (ii) any information provided by or
      on
      behalf of, or any instruction, approval or decision by, VIP pertaining to the
      EDP Services relied upon by BNL.

     

    D.
      The
      provisions of this paragraph 8 shall survive the termination of this
      Agreement.

     

    9.
      VIP
      REPRESENTATIONS AND WARRANTIES: DISCLAIMER: LIMITATIONS. In
      addition to the other obligations of VIP under this Agreement VIP represents,
      warrants and covenants to BNL both at the execution of this Agreement and at
      all
      times during the term of this Agreement that:

     

    A.
      VIP is
      and will remain duly organized and validly existing as an Oklahoma corporation
      (or another state) authorized to engage in the business of providing EDP
      Services to its customers;

    
      
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    B.
      VIP is
      not a party to or otherwise subject to any note, debenture, shareholder
      agreement or other contractual arrangement, Order, Judgment Decree or
      Adjudication which prohibits any act or conduct of VIP contemplated by this
      Agreement or which would cause VIP to be in violation of or default respect
      thereto;

     

    C.
      VIP
      owns all necessary rights and interests in and to the VIP System and related
      programs to fulfill its obligations under this Agreement. The VIP System does
      not infringe on any United States patent or any trade secret, copyright,
      trademark, service mark, trade name or similar third party proprietary right;
      and

     

    D.
      VIP
      warrants that all EDP Services shall be performed in a prompt and workmanlike
      manner. Furthermore, the VIP System contains no programming condition which
      will
      limit the VIP System's use after a period of time elapses (such as a fixed
      calendar limit) and thus thereafter prevent BNL ' s use of the VIP System
      without further maintenance.

     

    E.
      Except
      as set forth in paragraphs 9(a) through 9(d) inclusive of this agreement, with
      respect to its EDP services or other work provided under this agreement, VIP
      makes no warranties, express or implied, including, but not limited to, implied
      warranties of merchantability and fitness for a particular purpose except as
      set
      forth in paragraphs 9(a) through 9(d) inclusive of this agreement, VIP does
      not
      warrant that the services shall meet BNL's requirements or that the services
      shall be uninterrupted or error-free.

     

    F.
      Limitation of liability. VIP shall have no liability with respect to its
      obligations under this agreement or otherwise for consequential, exemplary,
      special, indirect, incidental or punitive damages even if it has been advised
      of
      the possibility of such damages in any event, other than claims covered by
      paragraph 8(b) or paragraph 6(a) of this agreement (which claims are excluded
      from this paragraph 9(f) limitation), the liability of VIP to BNL for any reason
      and upon any cause of action or claim in contract, tort or otherwise shall
      be
      limited to the amount paid by BNL to VIP in the twelve (12) month period prior
      to the accrual of the action or claim for the specific service which is the
      subject of the action or claim (or, if such accrual occurs during the first
      twelve (12) months of the initial term, then the liability shall be limited
      to
      the minimum fees payable by BNL to VIP during the first twelve (12) months
      of
      the initial term). except for the claims excluded by the preceding sentence,
      this limitation applies to all causes of action or claims in the aggregate
      including without limitation breach of contract, breach of warranty, negligence,
      strict liability, misrepresentation and other torts. BNL and VIP acknowledge
      and
      agree that the limitations and exclusions contained herein represent the
      parties' agreement as to the allocation of risk between the parties in
      connection with VIP's obligations under this agreement. the payments payable
      to
      VIP in connection herewith reflect this allocation of risk and the exclusion
      of
      consequential damages in this agreement.

     

    G.
      Notwithstanding anything to the contrary in this Agreement, VIP shall not be
      liable in

    
      
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    any
      manner to BNL for any costs, expenses, injury or damages of any kind or nature
      which are caused by any of the following:

     

    1. The
      failure of computer hardware which are not covered by the standard warranties
      and indemnification's of such manufacturers;

     

    2. Software
      designated and supplied by the computer hardware supplier; or by software
      designed and implemented by other parties at BNL' request for which the
      integrity of said software is BNL' sole responsibility;

     

    3. Erroneous
      data input or otherwise provided by BNL and/or failure of BNL to monitor and
      for
      the failure of BNL to respond to the auditing controls of the
      system;

     

    4. A
      breach
      by BNL of any of the terms, covenants, representations or conditions of this
      Agreement;

     

    5. The
      failure by BNL to report to VIP in writing an error within a reasonable time
      after BNL discovers or reasonably should have discovered such
      error.

     

    10.
      COVENANTS
      AND REPRESENTATIONS OF BNL.
      In
      addition to the other obligations of BNL under this Agreement BNL covenants
      and
      warrants to VIP both at the execution of this Agreement and at all times during
      the term of this Agreement that:

     

    A.
      It is
      and will remain a duly organized and validly existing corporation and insurance
      company under the laws of the State of Arkansas (or another state) and is
      otherwise authorized to do business in the State of Arkansas;

     

    B.
      It
      holds and will continue to hold all permits, licenses and other governmental
      authorization necessary for it to conduct its insurance business;
      and

     

    C.
      It is
      not a party to or otherwise subject to any note, debenture, shareholder
      agreement or other contractual arrangement, Order, Judgment, Decree of
      Adjudication which prohibits any act or conduct of BNL contemplated by this
      Agreement or which would cause it to be in violation of or default with respect
      thereto.

     

    BNL
      acknowledges that BNL, and not VIP, has the responsibility for compliance with
      the maintenance and environmental standards for the operation of the on-site
      user Equipment specified in paragraph 1.

     

    11.
      BNL
      LIMITATION OF LIABILITY. BNL
      shall
      have no liability with respect to its obligations under this agreement or
      otherwise for consequential, exemplary, special, indirect, incidental or
      punitive damages even if it has been advised of the possibility

    
      
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    of
      such
      damages. in any event, other than claims covered by the next sentence, the
      liability of BNL to VIP for any reason and upon any cause of action and claim
      in
      contract, tort or otherwise shall be limited to the amounts paid by BNL to
      VIP
      in the twelve (12) month period prior to the accrual of the action or claim
      for
      the specific service which is the subject of the action or claim (or, if such
      accrual occurs during the first twelve (12) months of the initial term, then
      the
      liability shall be limited to the minimum fees payable by BNL to VIP during
      the
      first twelve (12) months of the initial term) claims by VIP for the minimum
      fees
      and other fees and expenses owing by BNL under paragraphs 5, 15(a) and 15(c),
      or
      for a breach by BNL of VIP's proprietary rights as set forth in paragraph 13
      are
      excluded from this paragraph II limitation except for the claims excluded by
      the
      preceding sentence, this limitation applies to all causes of action or claims
      in
      the aggregate including without limitation breach of contract, breach of
      warranty, negligence, strict liability, misrepresentation and other torts.
      VIP
      and BNL expressly acknowledge and agree that the limitations and exclusions
      contained herein represent the parties' agreement as to the allocation of risk
      between the parties in connection with BNL's obligations under this agreement
      the payments payable to VIP in connection herewith reflect this allocation
      of
      risk and the exclusion of consequential damages in this agreement.

     

    12.
      VIP
      OBLIGATION.
      During
      the term of this Agreement, in addition to its other obligations set forth
      in
      this Agreement, VIP shall:

     

    A.
      Maintain property insurance in an amount sufficient to replace or reconstruct
      the hardware, software, data and facilities necessary for VIP to operate the
      VIP
      System and otherwise provide the EDP Services set forth in this Agreement and,
      upon written request, shall provide BNL with evidence of the coverage, including
      all applicable limits and conditions, and, upon written request, shall provide
      BNL with evidence of all renewals, cancellations, expirations or modifications
      of the coverage;

     

    B.
      Update
      on a daily basis, sets of back-up data files for the BNL Data in the VIP System
      at an off-site location and/or fire-proof safe that provides for its safety
      from
      destruction or theft. BNL will pay its prorata share based upon the number
      of
      the total users of the VIP System of the cost of storage and/or transportation
      of back-up data files to and from the storage facility;

     

    C.
      At
      BNL' s option and sole expense, micro-film, all reports or other records as
      so
      designated by BNL and store the same in a safe facility on or off the
      operational location of VIP;

     

    D.
      Except
      in instances beyond VIP's reasonable control under paragraph 16(J) or as
      provided in paragraph 3, ensure the availability of the VIP system for BNL
      ' use
      at least during the hours of7:00 a.m. through 5:00 p.m. (central time) each
      day
      Monday through Friday.

     

    13. OWNERSHIP
      OF THE VIP SYSTEM.
      The VIP
      System and related programs

    
      
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    (including
      software in connection herewith), are and shall at all times remain the sole
      and
      exclusive property of VIP. During the term of this Agreement or any extension
      thereof, BNL shall have a non-exclusive license to use the VIP System on-line
      as
      designated by VIP. BNL shall not use the VIP System except as authorized by
      this
      Agreement Upon the expiration or earlier termination of this Agreement, neither
      BNL nor any third party shall have any further right to use the VIP System
      after
      the retrieval of the BNL data pursuant to paragraph 6(A) of this
      Agreement.

     

    14.
      ADDITIONAL
      SERVICES.

     

    A.
      Subject to the terms of paragraph 14(C), and for the sums set forth in paragraph
      14(B) hereof, VIP , during the term of this Agreement, agrees to provide the
      following added services to BNL upon request:

     

    1.
      All
      consultation, systems development, conversion services, programming, debugging
      and testing of software, hardware, and for other services other than the VIP
      System and which are unique to BNL products and/or method of doing
      business;

     

    2.
      All
      machine time used in connection with systems development, conversion services,
      programming, debugging and testing of software, hardware and other vendor
      services which are unique to BNL products and/or method of doing
      business;

     

    3.
      Assistance of VIP in connection with the termination of either parties of its
      services under this Agreement and the implementation of EDP service
      by BNL with another data processing company;

     

    4.
      Additional processing resulting from changes in regulatory
      requirements;

     

    5.
      Special, unscheduled, and/or non-standard system application
      processing;

     

    6.
      Bank
      draft processing.

     

    B.
      VIP
      will provide BNL the above enumerated additional services at the hourly rates
      set

    forth
      in
Schedule
      A Schedule
      of Charges and Fees for Additional Services, for the initial twelve (12) months
      of this Agreement. After the initial twelve months of this Agreement, VIP may
      adjust the rates in Schedule
      A to
      VIP's
      then current standard rates for such services, provided that it provides BNL
      with notice of any such adjustment not less ~han thirty (30) days prior to
      any
      such adjustment and that such rates shall not increase by more than ten ( 10%
      )
      percent per year .

     

    C.
      VIP
      performance of such additional services for BNL is subject to availability
      of
      resources and the development of a schedule for delivery of such services which
      is agreeable to both parties. VIP agrees to make a best effort attempt to
      develop the required schedules with BNL.

    
      
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    15.
      TERM.

     

    A.
      The
      initial term ("Initial Term") of this Agreement shall be for one year commencing
      on the 1st day of May, 2006 ("Effective Date"). Payments under this Agreement
      by
      BNL shall commence as provided in paragraph 5(A) hereof.

     

    B.
      Unless
      either party gives written notice to terminate this Agreement at least six
      (6)
      months prior to the end of said Initial Term, this Agreement shall continue
      on a
      year to year basis ("Extended Term(s)") until terminated by either party by
      giving written notice of termination thereof to the other party at least six
      (6)
      months prior to the end of the then current Extended Term.

     

    C.
      However, if, after the Initial Term, BNL terminates this Agreement during an
      Extended Term by giving less than six (6) months notice, in addition to any
      other sums due VIP under this Agreement, BNL shall pay to VIP a cancellation
      fee
      equal to the greater of (i) the Minimum Fee multiplied by the remaining number
      of months in the then current term, (ii) the average of the monthly billings
      for
      the six (6) month period immediately preceding the date upon which the notice
      of
      termination is received by VIP from BNL multiplied by the remaining number
      of
      months in the then current term or (iii) thirty thousand dollars ($30,
      000).

     

    E.
      From
      and after notice of termination is received by VIP, any new reports or other
      services provided by VIP other than routine processing services which have
      been
      done for BNL under this Agreement shall be deemed to be additional services
      and
      shall be performed by VIP at VIP's then current rates for such termination
      services as specified on Schedule
      A.

     

    F.
      Upon
      termination or expiration of this Agreement, BNL shall return all software
      and
      related manuals, if any, provided by VIP to BNL during the term of this
      Agreement.

     

    16.
      MISCELLANEOUS.

     

    A.
      ADVERTISING.
      During
      the term of this Agreement BNL consents to the use of the name of BNL by VIP
      in
      identifying BNL as a client, in advertising, publicity, or similar materials
      distributed to prospective clients. Except as set forth in this paragraph 16(A),
      the terms of this Agreement shall be kept confidential.

     

    B.
      AMENDMENTS.
      No
      amendment, change, waiver, or discharge hereof shall be valid unless in writing
      and signed by an authorized representative of the party against which such
      amendment, change, waiver, or discharge is sought to be enforced. Any provision
      of BNL' purchase' order or other request for services shall not bind VIP. VIP's
      failure to object to any such provision shall not be construed as a waiver
      of
      the terms and conditions of this Agreement nor as acceptance of any such other
      provision(s).

    
      
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    C.
      ARBITRATION.
      Any
      controversy or claim arising out of or relating to this Agreement, or its
      breach, or its validity or interpretation, except claims for injunctive relief
      and claims involving necessary third parties who refuse to participate, shall
      be
      settled by binding arbitration in accordance with the then current Commercial
      Arbitration Rules of the American Arbitration Association (" AAA") subject,
      however, to the following:

     

    1.
      The
      location for the arbitration shall be at such location reasonably designated
      by
      the arbitrators.

     

    2.
      Such
      arbitration shall be heard and determined by a panel of three (3) arbitrators
      in
      accordance with the then current rules or regulations of the AAA relating to
      commercial disputes. One arbitrator shall be appointed by each party to serve
      on
      the panel. One neutral arbitrator shall be appointed by the AAA and shall serve
      as chairperson of the three arbitrator panel. Such neutral arbitrator shall
      be
      an attorney with experience in handling disputes relating to the providing
      of
      out sourced electronic data processing services.

     

    3.
      The
      arbitration award shall be binding on the parties and may be enforced in any
      court of competent jurisdiction.

     

    4.
      The
      prevailing party in such arbitration shall be entitled to recover its reasonable
      attorneys' fees and costs incurred in such arbitration proceeding.

     

    D.
      ASSIGNMENT.
      Neither
      party to this Agreement shall assign, subcontract, or otherwise conveyor
      delegate its rights or duties hereunder to any third party without the prior
      written consent of the other party hereto, such consent not to be unreasonably
      withheld.

     

    E.
      ATTORNEY
      FEES.
      In the
      event that litigation is instituted between the parties in connection with
      any
      controversy or dispute arising out of or relating to this Agreement, the
      prevailing party in such litigation shall be entitled to recover its reasonable
      attorney fees and costs.

     

    F.
      BINDING.
      This
      Agreement is binding on, and shall inure to the benefit of VIP, BNL and their
      respective successors and assigns.

     

    G.
      CHOICE
      OF LAW.
      This
      Agreement and performance hereunder shall be governed by the laws of the State
      of Oklahoma without regard to conflict of laws. Subject to the requirement
      for
      arbitration under paragraph 16(C), VIP and BNL hereby agree on behalf of
      themselves and any person claiming by or through them that jurisdiction and
      venue for any litigation arising from or relating to this Agreement shall be
      in
      the appropriate federal or state court located in Austin, Texas, or in Oklahoma
      City, Oklahoma, and that any arbitration shall be conducted in the location
      selected pursuant to paragraph 16(C)(1).

    
      
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    H.
      COUNTERPARTS.
      This
      Agreement may be executed in several counterparts, all of which taken together
      shall constitute one single agreement between the parties hereto.

     

    I.
      ENTIRE
      AGREEMENT.
      This
      Agreement, including any Schedules referred to herein or attached hereto, each
      of which is incorporated herein for all purposes, constitutes the entire
      agreement between the parties hereto with respect to the subject matter hereof
      and no prior or contemporaneous representations, inducements, promises, or
      agreements, oral or otherwise, between VIP and BNL with reference thereto shall
      be of any force or effect.

     

    J.
      FORCE
      MAJEURE. Notwithstanding
      anything to the contrary in this Agreement, but except to the extent provided
      in
      paragraph 2, VIP shall not be liable to BNL for any delay or failure to perform
      any of the EDP Services or other obligations set forth in this Agreement due
      to
      cause(s) beyond its reasonable control, including, without limiting the
      generality of the foregoing, (i) accidents, (ii) acts of God, (iii) labor
      disputes, (iv) BNL's failure to submit data or information in the prescribed
      form or in accordance with the agreed upon schedules; (v) special requests,
      outside the VIP Systems' functions routinely utilized by BNL, by BNL or any
      governmental agency authorized to regulate or supervise BNL or any authority
      having jurisdiction over BNL; (vi) BNL's failure to provide any equipment,
      software, facility or performance called for by this Agreement, and the same
      is
      necessary for VIP's performance hereunder, (vii) BNL's material breach of any
      of
      the terms, covenants, or representations set forth in this Agreement or (viii)
      the actions of any government agency or common carrier or other third party
      over
      whom VIP has no control. Performance times shall be considered extended for
      a
      period of time equivalent to the time lost because of such delay.

     

    K.
      HEADINGS.
      The
      paragraph headings used herein are for reference and convenience only and shall
      not enter into the interpretation hereof.

     

    L.
      INDEPENDENT
      CONTRACTOR.
      VIP and
      BNL are strictly independent contractors. Neither party has the right to bind
      the other in any manner, and nothing in this Agreement shall be interpreted
      to
      make either party the agent or legal representative of the other or to make
      the
      parties joint venturers or partners.

     

    M.
      LIMIT
      A TIONS OF ACTIONS.
      Any
      claim of action of any kind which one party to this Agreement may have against
      the other party relating to or arising out of this Agreement must be commenced
      within two (2) years from the date such claim or cause of action shall have
      first accrued.

    N.
      NOTICES.
      Any
      notice provided pursuant to this Agreement, if specified to be in writing,
      shall
      be in writing and shall be deemed given (i) if by hand delivery, upon receipt
      thereof (ii) if mailed, three (2) days after deposit in the United States mails,
      postage prepaid, certified mail return receipt requested, or (iii) if by next
      day delivery service, upon such delivery .All notices shall be addressed to
      a
      party at the address first set forth above or at such other address as either
      party may in the future specify in writing to the other .

    
      
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    0.
      SERVICES
      FOR OTHERS.
      BNL
      understands and agrees that VIP may perform for third. parties similar services
      using the same personnel, subject to VIP's confidentiality obligations
      hereunder, and that VIP may utilize such personnel for rendering services for
      BNL hereunder.

     

    P.
      SEVERABILITY.
      If any
      provision of this Agreement shall be invalid or unenforceable, the remaining
      provisions of this Agreement shall not be affected thereby and each remaining
      provision shall be valid and enforceable to the fullest extent permitted by
      law.

     

    Q.
      SURVIVAL.
      All
      provisions of this Agreement relating to confidentiality and indemnity shall
      survive the termination of this Agreement.

     

    R.
      NO
      THIRD PARTY BENEFICIARY.
      No third
      party is intended to be nor shall any such third party be deemed to be a third
      party beneficiary of this Agreement nor shall any third party acquire any rights
      or remedies under or through this Agreement.

     

    S.
      WAIVER,
      Any
      waiver by a party of any breach of any provision of this Agreement shall not
      be
      construed as a waiver of any continuing or succeeding breach of such provision,
      a waiver of that provision itself or a waiver of any other right(s) under this
      Agreement.

     

    The
      parties agree and acknowledge that they have read this Agreement. The persons
      signing below on behalf of the respective parties represent and warrant that
      they have the authority to bind the party on which behalf they have executed
      this Agreement. This Agreement is executed on the dates shown below and
      effective as of the Effective Date identified above.

     

    VIRTUAL
      ITEM PROCESSING SYSTEMS INC.  BROKERS
      NATIONAL LIFE ASSURANCE

    COMPANY

    

    

     

     

        /s/
      David A.
      Siekman        
      /s/
      Barry N. Shamas

    By:
      _____________________________________ By:
      _________________________________

    David
      A.
      Siekman     Barry
      N.
      Shamas

    President      Executive
      Vice President

     

        May
      17,
      2006      May
      18,
      2006

    Date:
      ___________________________________ Date:
      _______________________________

     

    

    
      
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    SCHEDULE
      A

     

    SCHEDULE
      OF CHARGES AND FEES

     

    FOR

    ADDITIONAL
      SERVICES

     

    SYSTEMS
      AND PROGRAMMING SERVICES     HOURLY
      RATE

     

    1.
      CONSULTATION         $100.00
      

     

    2.
      SYSTEMS DEVELOPMENT       
      100.00

     

    3.
      SYSTEMS REQUIREMENTS DEFINITION     
      100.00

     

    4.
      SYSTEMS ANALYSIS        
      100.00

     

    5.
      COMPUTER PROGRAMMING:

     

    SENIOR
      ANALYST        
      100.00
      JUNIONANALYST        
      85.00

     

    COMPUTER
      TIME FOR SYSTEM DEVELOPMENT

    6.
      COMPUTER CHARGED TIME       
      $150.00
TERMINATION
      SERVICES

     

    7.
      CONSULTATION         
      $100.00

     

    8.
      PROGRAMMING         
      $185.00

     

    9.
      COMPUTER CHARGED TIME       
      $250.00

     

    ADDITIONAL
      REGULATORY PROCESSING

     

    10.
      COMPUTER CHARGED TIME       
      $150.00

     

    SPECIAL
      OR NON-STANDARD APPLICATION PROCESSING

     

    11.
      COMPUTER CHARGED TIME       
      $150.00

     

    EDUCATION
      AND HELP

     

    12.
      EDUCATION: IN VIP OFFICES       $
      50.00

     

    13.
      EDUCATION: ON-SlTE        
      90.00

     

    14.
      PROCEDURAL HELP VIA TELEPHONE      
      50.00

     

    BANK
      DRAFTS         UNIT
      RATE

     

    15.
      BANK
      DRAFT PROCESSING (PER DRAFT)     
      $
      .06

    
      
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    SCHEDULE
      B

     

    SCHEDULE
      OF PROCESSING FEES

     

    PLAN
      NAME

     

    OF
      CATEGORY

     

    All
      BNL
      Plans

     

    Fee
      =
      $.305/per policy per month

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00120-of-00352.parquet"}]]