Document:

Exhibit
10.3

	
  

  	
  1. THIS CONTRACT IS A RATED ORDER

  	
  RATING

  	
  PAGE

  	
  OF

  	
  PAGES

  
	
  AWARD/CONTRACT

  	
  UNDER DPAS (15
  CFR 350)

  	
  

  	
   

  	
  1

  	
  31

  
	
  2.  CONTRACT (Proc. Inst. Ident.)  NO.

  	
  3.  EFFECTIVE
  DATE

  	
  4.  REQUISITION/PURCHASE REQUEST/PROJECT NO.

  
	
  DTFH61-06-D-00030  

  	
  October 1, 2006

  	
  21-21-6071 &
  21-21-6271

  
	
  5.  ISSUED BY

  	
  CODE

  	
   

  	
  HAAM 30-D

  	
  6. 
  ADMINISTERED BY (If other than Item
  6)

  	
  CODE

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Department of
  Transportation

  Federal Highway Administration

  Office of Acquisition Management

  400 7th St., S.W., Room 4410, Washington, DC
  20590-0001

  	
  Same as Block #5

  	
   

  	
   

  	
   

  
	
  7.  NAME AND ADDRESS OF CONTRACTOR (No. street, county, state and ZIP Code)

  	
  8.  DELIVERY

  	
   

  	
   

  	
   

  
	
  Iteris, Inc.

  	
  o 
  FOB ORIGIN

  	
  x 
  OTHER (See below)

  
	
  1515 South
  Manchester Avenue

  	
  9.  DISCOUNT
  FOR PROMPT PAYMENT

  
	
  Anaheim, CA 92802

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  10. SUBMIT INVOICES

  	
   

  	
  ITEM

  
	
   

  	
   

  	
  (4 copies unless other-

  wise specified)   TO THE

  	
   

  	
  

  
	
  CODE

  	
  FACILITY CODE

  	
  ADDRESS SHOWN IN:

  	
   

  	
  See Block #5

  
	
  11.  SHIP TO/MARK
  FOR

  	
  CODE

  	
   

  	
   

  	
  12.  PAYMENT
  WILL BE MADE BY

  	
  CODE

  	
  HABF24

  
	
  See Part I,
  Section F

  	
   

  	
  Federal Highway
  Administration, Finance Division,

  Room 4314, 400 7th St., S.W.,

  Washington, DC 20590-0001

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.  AUTHORITY
  FOR USING OTHER THAN FULL AND OPEN COMPETITION:

  	
  14.  ACCOUNTING
  AND APPROPRIATION DATA

  	
   

  	
   

  	
   

  
	
  o  10 U.S.C. 2304(c)(     )

  	
  o  41 U.S.C. 253(c)(     )

  	
  15X0439060-0000-021J600600-2101000000-25305-61006600  = $200,000

  
	
  15A.  ITEM NO.

  	
  15B. 
  SUPPLIES/SERVICES

  	
  15C.  QUANTITY

  	
  15D.  UNIT

  	
  15E.  UNIT
  PRICE

  	
  15F.  AMOUNT

  
	
   

  	
  “National Intelligent Transportation Systems (ITS)
  Architecture Evolution and Support”

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Total Potential Amount (Including Options):

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  $24,529,659

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  

  	
   

  	
  15G. 
  TOTAL AMOUNT OF CONTRACT

  	
  

  	
  $24,529,659

  
	
  16.  TABLE OF CONTENTS

  
	
  (ü)

  	
  SEC.

  	
  DESCRIPTION

  	
  PAGE(S)

  	
  (ü)

  	
  SEC.

  	
  DESCRIPTION

  	
  PAGE(S)

  	 

	
  PART I - THE
  SCHEDULE

  	
  PART II -
  CONTRACT CLAUSES

  	 

	
  X

  	
  A

  	
  SOLICITATION/CONTRACT FORM

  	
  1

  	
  x

  	
  I

  	
  CONTRACT CLAUSES

  	
  28-30

  	 

	
  X

  	
  B

  	
  SUPPLIES OR SERVICES AND PRICE/COST

  	
  2

  	
  PART III - LIST
  OF DOCUMENTS, EXHIBITS AND OTHER ATTACH.

  	 

	
  X

  	
  C

  	
  DESCRIPTION/SPECS./WORK STATEMENT

  	
  3-8

  	
  x

  	
  J

  	
  LIST OF ATTACHMENTS

  	
  31

  	 

	
  X

  	
  D

  	
  PACKAGING AND MARKING

  	
  8-9

  	
  PART IV -
  REPRESENTATIONS AND INSTRUCTIONS

  	 

	
  X

  	
  E

  	
  INSPECTION AND ACCEPTANCE

  	
  9

  	
   

  	
  K

  	
  REPRESENTATIONS, CERTIFICATIONS

  	
   

  	 

	
  X

  	
  F

  	
  DELIVERIES OR PERFORMANCE

  	
  9-12

  	
   

  	
   

  	
  AND OTHER STATEMENTS OF OFFERORS

  	
   

  	 

	
  X

  	
  G

  	
  CONTRACT ADMINISTRATION DATA

  	
  12-19

  	
   

  	
  L

  	
  INSTRS., CONDS., AND NOTICES TO OFFERORS

  	
   

  	 

	
  x

  	
  H

  	
  SPECIAL CONTRACT REQUIREMENTS

  	
  20-27

  	
   

  	
  M

  	
  EVALUATION FACTORS FOR AWARD

  	
   

  	 

	
  CONTRACTING
  OFFICER WILL COMPLETE ITEM 17 OR 18 AS APPLICABLE

  	 

	
  17.  o 
  CONTRACTOR’S NEGOTIATED AGREEMENT 
  (Contractor is required to sign
  this document and return __9__ copies to issuing office.)  Contractor agrees to furnish and
  deliver all items or perform all the services set forth or otherwise
  identified above and on any continuation sheets for the consideration stated
  herein.  The rights and obligations of
  the parties to this contract shall be subject to and governed by the
  following documents:  (a) this
  award/contract, (b) the solicitation, if any, and (c) such provisions,
  representations, certifications, and specifications, as are attached or
  incorporated by reference herein.  (Attachments are listed herein.)

  	
  18.  o 
  AWARD  (Contractor is not required to sign this document.)  Your offer on Solicitation Number
  _________________________________________, including the additions or changes
  made by you which additions or changes are set forth in full above, is hereby
  accepted as to the items listed above and on any continuation sheets.  This award consummates the contract which
  consists of the following documents: 
  (a) the Government’s solicitation and your offer, and (b) this
  award/contract.  No further contractual
  document is necessary.

  
	
   

  	
   

  
	
  19A.  NAME AND TITLE OF SIGNER   (Type or print)

  	
  20A.  NAME OF
  CONTRACTING OFFICER

  
	
  Iteris, Inc. [***]

  	
  [***]

  
	
   

  	
   

  
	
  19B.  NAME OF
  CONTRACTOR

  	
  19C.  DATE
  SIGNED

  	
  20B.  UNITED
  STATES OF AMERICA

  	
  20C.  DATE
  SIGNED

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8/29/2006

  	
   

  	
  9/1/06

  
	
   

  	
  [***]

  	
   

  	
   

  	
  BY

  	
  [***]

  	
   

  	
   

  
	
   

  	
  (Signature of person authorized to
  sign)

  	
   

  	
   

  	
   

  	
  (Signature
  of Contracting Officer)

  	
   

  	
   

  
	
  NSN
  7540-01-152-8069

  	
  26-107

  	
   

  	
  STANDARD FORM 26

  
	
  (REV. 4-85)

  	
   

  	
   

  	
   

  
	
  PREVIOUS EDITION
  UNUSABLE

  	
  Computer
  Generated

  	
   

  	
  Prescribed by GSA

  
	
   

  	
   

  	
   

  	
  FAR (48 CFR) 53.214(a)

  
																																													

[***]      Confidential treatment has been requested
for the bracketed portions.  The
confidential redacted portion has been omitted and filed separately with the
Securities and Exchange Commission.

 

 1

P A R
T  I

SECTION B - SUPPLIES OR SERVICES AND
PRICES/COSTS

The Contractor shall
furnish all the necessary facilities, materials, and personnel and shall
perform technical non-personal services and program support necessary under
this contract entitled “National Intelligent
Transportation Systems (ITS) Architecture Evolution and Support”.  Such services and program support shall be
rendered to the Federal Highway Administration (FHWA) through the issuance of
cost-plus-fixed-fee task orders under this Indefinite Delivery/Indefinite
Quantity (IDIQ) contract.

The total
estimated amount (maximum) for the performance of this indefinite
delivery/indefinite quantity contract (Base Period, plus three option years) is
$24,529,659. That amount consists of an estimated total aggregate cost of [***]
plus an aggregate fee of [***].

The estimated
amount for the performance of the Base Period (two years) of this contract is $9,841,693,
consisting of an estimated cost of [***] plus an aggregate fee of [***].

The estimated amount
for the performance of the First Option Year (one year) of this contract is $4,884,756,
consisting of an estimated cost of [***] plus an aggregate fee of [***].

The estimated
amount for the performance of the Second Option Year (one year) of this contract
is $4,887,264, consisting of an estimated cost of [***] plus an aggregate fee
of [***].

The estimated
amount for the performance of the Third Option Year (one year) of this contract
is $4,915,947, consisting of an estimated cost of [***] plus an aggregate fee
of [***].

All travel shall
be reimbursed at cost in accordance with the travel and per diem clause
(reference Section G).  Travel and per
diem shall not exceed [***] for the entire period of performance (Base plus all
Option Years).

See “LEVEL OF EFFORT
REQUIRED TO ACCOMPLISH WORK”, ON PAGE 10, for Minimum Order Amount.

 

 

[***]                 Confidential
treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.

 2
 

SECTION C -
DESCRIPTION/SPECIFICATIONS/WORK STATEMENT 

BACKGROUND

A
consensus National ITS Architecture was developed in June 1996 to serve as the
framework for Intelligent Transportation Systems deployment.  It culminated nearly three years of effort by
four teams, each representing the private sector, the public sector, and
academia.  The effort was led by the U.S.
DOT, with each team tasked to engage and involve stakeholders from around the
country to help shape this national effort.

Following development,
the U.S. DOT recognized the need for subsequent ongoing tasks to be
accomplished to maximize the return on the investment.  The first task is the evolution of the
National ITS Architecture – to maintain it in a current status and to integrate
new user services as needs are identified and articulated.  Modifications have been made based upon input
received from deployment programs throughout the country as well as from
emerging ITS standards.  Version 5.0 of
the National ITS Architecture, incorporating the new security additions and
other changes, was distributed on CD ROM in December 2003.  The next version will likely incorporate
other new user services, as well as focus on dedicated short range
communications needs and updates in other areas of the Architecture.  The National ITS Architecture thus continues
to be the definitive and accurate reference for ITS deployment planning.

The second major
follow-on task is deployment support. 
Several levels of workshops were initiated in late 1999 to support
Metropolitan Planning Organizations (MPOs) and statewide development of
regional and project architectures.  More
than 100 of these workshops were conducted between CY 2000 and CY 2006.  A software tool, Turbo Architecture, was
developed and made available for distribution in 2000 to facilitate the process
of developing these architectures, using the National ITS Architecture as a
reference.  Version 3.0 was released in
May 2004 to be in synch with the National ITS Architecture Version 5.0 and
reflect the FHWA Rule and FTA Policy on Architecture and Standards.  A major training program has been
successfully executed with more than 150 presentations to over 3000 persons
throughout the country.  Outreach
programs have been supported with presentations being given at major
transportation forums throughout the country as well as internationally.  Finally, there has been an ongoing effort to
support the ITS Standards and the Systems Engineering Programs, both outgrowths
of the Architecture Development Program, and ensure that they remain linked as
that is essential for the continued deployment of ITS systems.

CONTRACT
OBJECTIVES

The objectives of
this contract are to:

1.                                       Conduct
an architecture evolution effort to include evaluating/executing changes due to
deployment experiences, changes in requirements, development of ITS standards,
and changes in U.S. DOT policy. 
Integrate new user services into the National ITS.

2.                                       Provide
ITS deployment support that enhances the transportation planning process and
uses the National ITS Architecture in the development of regional and project
architectures.

 3
 

3.                                       Maintain
and support the Turbo Architecture software application.  Update it to conform to new versions of the
National ITS Architecture.

4.                                       Participate
in outreach and training efforts to explain the use of the National ITS
Architecture to U.S. DOT resource centers and division offices and assist
efforts to explain the use of the Architecture to state and local planners,
implementers, integrators, and manufacturers.

5.                                       Assist
U.S. DOT policymakers in defining policy consistent with the National ITS
Architecture and supporting SAFETEA-LU and subsequent legislation.  Ensure that the Architecture reflects new
policies.

6.                                       Support
the ITS Standards development program and the mapping of ITS standards to the
National ITS Architecture.

7.             Support the Systems Engineering program including
education and outreach.

8.                                       Support
coordination with other ITS Joint Program Office (JPO) activities (e.g., the
major initiatives, etc.)

SCOPE

The Contractor will
provide for continued technical enhancement and evolution of the National ITS
Architecture, which was developed to serve as a framework for national ITS
deployments.  The Contractor will provide
support to the U.S. DOT by ensuring that the National ITS Architecture is
maintained and kept up-to-date and reflects all changes, additions, and
corrections necessitated by the continually evolving ITS program.  The Contractor will ensure the Architecture
remains current and inclusive through the integration of new, stakeholder
supported user services, and will support the U.S. DOT by providing technical
advice regarding policies and actions that might affect the National ITS
Architecture.  In addition, the
Contractor will support the FHWA deployment support program by conducting
training and workshops to help explain regional and project architectures to
regional/state/local implementers, and performing outreach to the various
administrations and their constituents within U.S. DOT that are affected by the
National ITS Architecture.  Finally, the
Contractor will support two programs that are related to and outgrowths of the
Architecture Program, the ITS Standards Program and the Systems Engineering
Program.

DELINEATION
OF WORK

The Contractor shall not
incur costs under the following Tasks A, B, and C except in performing Task
Orders.

In order to accomplish
the contract objectives, the following list of task areas shall be performed:

Task Area A – Architecture Program Management

The Contractor will
provide advice and recommendations to the U.S. DOT regarding issues that may
specifically impact the National ITS Architecture.  Specific activities may include:

 4
 

1.                                       Analyze
aspects of the Architecture program, attend regular ITS JPO meetings (policy,
quarterly reviews, etc.), and deliver required program status briefings and
reports to the U.S. DOT.

2.                                       Review
and provide recommendations on the necessary facilities, staff and equipment
required to effectively carry out Architecture program objectives.

3.                                       Provide
the ITS JPO Architecture Program Manager strategic advice and recommendations
concerning the current direction and near-term future of the Architecture
program.

4.                                       Consult
with and provide recommendations to the ITS JPO Architecture Program Manager on
planning issues related to the daily management of the Architecture program, to
include maintenance of the National ITS Architecture, architecture and
standards policy, and architecture related training and workshops.

5.                                   Provide the ITS JPO
Architecture Program Manager advice and consultation regarding contractual
issues.

6.                                       Develop
papers and make presentations regarding the National ITS Architecture and
deployment issues at forums that may include the ITS-America Annual Meeting,
the AASHTO Annual Meeting, and the ITE Annual Meeting.

7.                                       Provide
the ITS JPO Architecture Program Manager technical advice and reviews of ITS
standards development, testing, and deployment efforts, especially as related
to the National ITS Architecture.

Task Area B - Architecture Evolution
(Maintenance and New User Services)

Under the overall
management of the U.S. DOT, the Contractor will provide administrative and
technical support in maintaining and evolving the National ITS
Architecture.  Specific activities may
include:

1.                                       Maintain
architecture configuration control while addressing major and minor updates to
the National ITS Architecture documentation.

2.                                       Keep
abreast of other ITS developments and deployments that may require changes to
the National ITS Architecture and propose such changes when they are
identified.

3.                                       Evaluate
proposed changes to the National ITS Architecture to determine their impact on
the Architecture itself and to other on-going U.S. DOT activities, and
integrate them into the National ITS Architecture following ITS JPO approval.

4.                                       Maintain
the integrity of the National ITS Architecture documentation set, especially
the architecture definition.  Provide CD
ROM versions of the National ITS Architecture following all major updates.  Provide web-based changes to reflect all
updates, both major and minor.

5.                                       Integrate
new user services into the Architecture in response to the stakeholders’
articulating emerging needs and following ITS JPO approval of the new user
service.

 5
 

6.                                       Maintain
the Turbo Architecture software tool as required to fully utilize upgrades to
the National ITS Architecture definition and to respond to the FHWA Rule and
FTA Policy on Architecture and Standards.

7.                                       Participate
in architecture related activities within the major U.S. DOT initiatives and
integrate relevant elements into the National ITS Architecture.

8.                                       Maintain
the National ITS Architecture website and all appropriate documentation, to
include the latest versions, major (also on CD ROM) and minor (web based only).

Task Area C – Deployment Support

The Contractor will
provide overall support to the U.S. DOT in ensuring that the National ITS
Architecture is considered in all local and national ITS deployments.  The Contractor will provide limited training
support to public sector (federal) personnel and others as may be subsequently
tasked.  The Contractor will support
architecture outreach efforts to U.S. DOT resource centers and division
offices, state and local implementers, the various administrations within the
U.S. DOT, and other stakeholders as required. 
Specific activities may include:

1.                                       Provide
technical assistance to the Architecture Field Support Team (AFST), other
Federal employees, and FHWA contractors as needed on the National ITS
Architecture and regional ITS architecture development, deployment, use, and
maintenance.  This may be in the context
of achieving consistency with the requirements addressed in the FHWA Rule and
FTA Policy on Architecture and Standards.

2.                                       Provide
regional and project ITS architecture reviews and assessments, including those
done on-site.

3.                                       Provide
software support for the Turbo Architecture software tool.  Provide technical support to Turbo
Architecture users.

4.                                       Support
development and maintenance of ITS architecture guidance documentation.  Coordinate with U.S. DOT and other U.S. DOT
contractors in any architecture guidance document development.

5.                                       Develop
materials for regional architecture workshops that may involve various aspects
of the architecture process to include the regional planning process and the
development, use, and maintenance of regional architectures and project
architectures.

6.                                       Present
architecture workshops (2-day or more) and seminars (1-day) at sites around the
country, hosting from one to four different regions, using detailed knowledge
of the National ITS Architecture and experience and lessons learned with
regional ITS architectures.

7.                                       Support
the NHI training courses “Deploying the National ITS Architecture” and “Turbo
Architecture Software Training”.

8.                                       Develop
issue papers encompassing a wide range of architecture topics including
relationship with the transportation planning process, regional and project
architectures, security issues, and other current topics involving the National
ITS Architecture.

 6
 

9.             Develop and conduct systems engineer process workshops
and seminars.

10.                                 Provide
systems engineering process technical assistance to the FHWA Division Offices
and Resource Centers.

11.                                 Develop
white papers and issue papers, as tasked, to address systems engineering and
its relationship to the transportation planning process.

HARD
COPY PUBLICATIONS

Publications
for All FHWA Offices

All applicable
reports shall be prepared in accordance with the “Guidelines for Preparing
Federal Highway Administration Publications” (FHWA-AD-88-001), dated January
1988, and as amended by Change 1 dated May 20, 1994.  Specifically, the contractor shall provide
the government with the following for each report developed under this
contract:

A completed
Technical Report Documentation Page, Form DOT 1700.7 (8-72), which is located
via the Internet at http://www.bts.gov/itc/1770-7.pdf.  This form is necessary to ensure all reports
are entered into the National Technical Information Service database.

A printed version
of the report:  A camera-ready copy (a
publication term used to define the finished manuscript), including all artwork
(illustrations or photographs) ready for printing by photographic or other
means.

An electronic
version of the report:  An electronic
version of the report is necessary to upload into the clearinghouse library
(otherwise, scanning in the report is required and this is a time-consuming
labor-intensive exercise.)) All photographs and negatives used within the
report are property of DOT.

ELECTRONIC
MEDIA

 HTML
Coding

For documents
(generally under 50 pages) to be coded by DOT staff: To submit electronic files
to be coded by DOT staff the document should be sent in Word 2000 or above,
with graphic files sent separately in either jpeg or gif format.

For documents over
50 pages to be coded by external sources: All web-enabled documents should be
coded in HTML 3.2 or above, to be viewed in Netscape or Internet Explorer
browser versions 3.0 or better.  Design
and function need to be pre-approved by the COTR.

Any scripting
beyond HTML needs to be pre-approved by the COTR.  Documents should be broken down into
manageable files and graphics should either be jpeg or tif and as small as
possible (less than 50k).  The usage of
frames is permissible.  Commented code should
be used 

 7
 

to support future
revisions.  Color codes should be
hexadecimal, not word codes.  These tags
should be used: <b>not<strong>, <I>not<em>.  Furthermore, <u>(underlining) should
not be used.  End paragraph
tags</p> are not necessary. 
Animated graphics should not loop endlessly.

Graphics

Request for
artwork to be designed for the web should be accompanied by originals (photos,
slides, existing artwork, etc.) if possible. 
These will then be used as reference to check color.  Electronic files submitted for inclusion in
the graphic should be saved in a jpeg or tif format with a resolution of 300
pixels/inch.

If there is an
existing design that the graphic needs to tie into, or if there is a
possibility that variations of this graphic may be used in the future, this
should be discussed upon submitting graphic request.

PRESENTATION  MATERIALS

Presentation
materials that are prepared for conferences, briefings, courses, workshops,
etc., and developed in electronic format shall be submitted in hard copy format
as well as in the program of origin that is acceptable to DOT.  Art must be produced in a program that can
export an interchange file format that can be imported into other files, such
as reports.  Photos must be in tif or
jpeg format, with on-screen preview and with line screen appropriate for
printing.

COMPLIANCE WITH REHABILITATION
ACT AND ACCESS BOARD STANDARDS

In
compliance with FAR 39.2 and TAM NOTE 01-03/Section 508 of the Rehabilitation
Act, please note the following requirement:

The Contractor
must ensure that any and all electronic documents which it prepares will meet
the requirements of Section 508 of the Rehabilitation Act.  The Rehabilitation Act requires that all
electronic products prepared for the Federal Government be accessible to
persons with disabilities, including those with vision, hearing, cognitive, and
mobility impairments.  The Contractor can view Section 508 of the
Rehabilitation Act (http://www.accessboard.gov/508.htm) and the Federal IT
Accessibility Initiative (Home Page) (http://section508.gov/) for detailed
information.

The FHWA has
determined that the accessibility requirements contained in the Electronic and
Information Technology Accessibility Standards, Section 1194.22, “Web-based
intranet and internet information and applications”, apply to this work.  The
standards are available at www.access-board.gov/sec508/508standards.htm.

 8
 

SECTION
D - PACKAGING AND MARKING 

PACKAGING

Preservation, packing,
and packaging of items for shipment shall be in accordance with commercial
practice and adequate for acceptance by common carrier for safe transportation
at the most economical rates.

SHIPMENT AND MARKING

Shipment of deliverable
items shall be as follows:

Ship to:                                           Federal
Highway Administration

ITS Joint Program Office

Room 3416

400 Seventh Street, S.W.

Washington, DC  20590

ATTN:  Lee Simmons, HOIT-1

F.O.B. POINT

The F.O.B. point for all
items under this contract is:

Federal Highway Administration

400 Seventh Street, S.W.

Washington, DC  20590

All
items shall be shipped F.O.B. Destination.

SECTION
E - INSPECTION AND ACCEPTANCE 

All work hereunder shall be subject to review and acceptance by the
Government.

52.252-2                Clauses
Incorporated By Reference (Feb 1998)

This contract
incorporates one or more clauses by reference, with the same force and effect
as if they were given in full text.  Upon
request, the Contracting Officer will make their full text available.  Also, the full text of a clause may be accessed
electronically at this address:  http://www.arnet.gov/far/  (the Official GSA Site of the Federal
Acquisition Regulations (FAR))

52.246-5    
Inspection of Services - Cost-Reimbursement.     APR 1984

 9
 

SECTION
F - DELIVERIES OR PERFORMANCE 

PERIOD OF PERFORMANCE

The period of performance
for this contract is twenty-four (24) months from on the effective date of the
contract.  The period of performance for
each specific task order will be determined prior to the effective date of that
task order.  All work and services
hereunder, including preparation and submission of the final report, shall be
completed on or before the completion date of this contract, or the date
specified on a given task order, whichever is later.  Task Orders may be issued up to the final day
of this contract, and the contract will remain in force to allow for completion
of all Task Orders issued.  However, the
Government shall not issue, and the Contractor shall not accept, any new task
orders issued subsequent to the performance period of this contract.

52.217-9
Option to Extend the Term of the Contract. (MAR 2000)

(a) The Government may extend the term of this
contract by written notice to the Contractor within 30 days before the contract’s
Base Period ends, provided that the Government gives the Contractor a
preliminary written notice of its intent to extend at least 60 days before the
contract expires.  The preliminary notice
does not commit the Government to an extension.

(b) If the Government exercises this option, the
extended contract shall be considered to include this option clause.

(c) The total duration of this contract, including the
exercise of any options under this clause, shall not exceed 60 months (5
years).

LEVEL OF EFFORT REQUIRED TO ACCOMPLISH WORK

MAXIMUM:

In the performance
of cost-plus-fixed-fee task orders issued during the base period of
performance of 24 months (two years) pursuant to this contract, the contractor
shall provide a maximum of 65,400 direct productive labor hours of technical
effort.  Direct productive labor hours
are defined as actual work hours exclusive of vacation, holiday, sick leave,
and all other absences.

MINIMUM:

The Government
shall order a minimum of $200,000 for fully burdened effort during the two-year
base period.

DELIVERABLES/SCHEDULE
OF WORK

The schedule of work and
requirements for deliverables shall be performed in accordance with the
individual task orders, as negotiated in each Task Order.

 10
 

PLACE OF DELIVERY

A.                                    Invoices

To
Contracts Office

Submit original
and 1 copy of each invoice to:

Federal Highway
Administration

Office of Acquisition Management, HAAM-30D

400 Seventh Street, S.W., Room 4410

Washington, D.C.  20590

Attn:       Adams JeanPierre

E-mail:     adams.jeanpierre@dot.gov

To
Contracting Officer’s Technical Representative (COTR)

The contractor
shall submit to the COTR one copy of each invoice.

B.                                    Regularly
Recurring Reports

(1)  QUARTERLY PROGRESS REPORTS

To Contracting Officer’s Technical Representative (COTR)

The
contractor shall submit to the COTR two hard
copies of a Quarterly Progress Report.

To Contracting Officer

Submit
one hard copy of each Quarterly
Progress Report to:

Federal Highway
Administration

Office of Acquisition Management, HAAM-30D

400 Seventh Street, S.W., Room 4410

Washington, D.C.  20590

Attn:       Adams JeanPierre

E-mail:     adams.jeanpierre@dot.gov

52.242-15             STOP-WORK
ORDER (AUG 1989) – ALTERNATE I (APR 1984)

(a)                                  The
Contracting Officer may, at any time, by written order to the Contractor,
require the Contractor to stop all, or any part, of the work called for by this
contract for a period of 90 days after the order is delivered to the Contractor,
and for any further period to which the parties may agree.  The order shall be specifically identified as
a stop-work order issued under this clause.  Upon receipt of the order, the Contractor
shall immediately 

 11
 

comply with its
terms and take all reasonable steps to minimize the incurrence of costs
allocable to the work covered by the order during the period of work
stoppage.  Within a period of 90 days
after a stop-work order is delivered to the Contractor, or within any
extension of that period to which the parties shall have agreed, the
Contracting Officer shall either-

(1)           Cancel the stop-work order; or

(2)                                  Terminate
the work covered by the order as provided in the Termination clause of this
contract.

(b)                                 If
a stop-work order issued under this clause is canceled or the period of
the order or any extension thereof expires, the Contractor shall resume
work.  The Contracting Officer shall make
an equitable adjustment in the delivery schedule, the estimated cost, the fee,
or a combination thereof, and in any other terms of the contract that may be
affected, and the contract shall be modified, in writing, accordingly, if -

(1)                                  The
stop-work order results in an increase in the time required for, or in
the Contractor’s cost properly allocable to, the performance of any part of
this contract; and

(2)                                  The
Contractor asserts its right to the adjustment within 30 days after the end of
the period of work stoppage; provided, that, if the Contracting Officer decides
the facts justify the action, the Contracting Officer may receive and act upon
a proposal submitted at any time before final payment under this contract.

(c)                                  If
a stop-work order is not canceled and the work covered by the order is
terminated for the convenience of the Government, the Contracting Officer shall
allow reasonable costs resulting from the stop-work order in arriving at
the termination settlement.

(d)                                 If
a stop-work order is not canceled and the work covered by the order is
terminated for default, the Contracting Officer shall allow, by equitable
adjustment or otherwise, reasonable costs resulting from the stop-work
order.

(End of clause)

52.252-2                                               CLAUSES
INCORPORATED BY REFERENCE  (FEB 1998)

This
contract incorporates one or more clauses by reference, with the same force and
effect as if they were given in full text. 
Upon request, the Contracting Officer will make their full text
available.

(End of Clause)

52.247-34             F.O.B.  Destination   (NOV 1991)

 12
 

SECTION
G - CONTRACT ADMINISTRATION DATA 

TASK
ORDER PROCEDURE

All funds expended
under this contract shall be incurred and accounted for under individual Task
Orders.

(1)                      Within the
Direct Productive labor hours specified in the LEVEL OF EFFORT REQUIRED TO ACCOMPLISH WORK clause of this
contract, the Contractor shall incur costs under this contract in the
performance of task orders and task order modifications issued in accordance
with this ordering procedure.  No other
costs are authorized without the express written consent of the Contracting
Officer.

(2)                      The work
will be conducted by the Contractor on an as-needed basis, within the scope of
the contract. The exact nature and extent of the Contractor’s work under this
contract will be based on written Requests For Task Order Proposals (RFTOP)
developed or reviewed by the Contracting Officer’s Technical Representative
(COTR), who will forward a copy of each written RFTOP to the contractor.  Each RFTOP will include, as a minimum, the
following:

(a)                    Name of the
COTR and Contracting Officer’s Task Manager (COTM);

(b)                   Contract Number,
due date and time for Government’s receipt of proposal(s), and number of
required copies of each proposal;

(c)                    Description of
the work required;

(d)                   The COTM’s
estimated maximum number of labor hours or maximum price not-to-exceed, and
other resources required;

(e)                    Documentation
requirements;

(f)                      The COTM’s
desired delivery/performance schedule;

(g)                   Quality
assurance standards, as appropriate; and

(h)                   Travel
authorized

(3)                      Within 14
calendar days after receipt of an e-mailed RFTOP from the Government, or within
any earlier or later deadline specified in the RFTOP, the Contractor shall
submit to the COTR and to the Contracting Officer a Task Order Proposal.  (See addresses for COTR and Contracting
Officer in Section F of this contract). 
Each such Task Order Proposal must clearly reference on the outside
of the submission envelope, and
in a cover letter the contract
number and the particular RFTOP on which the Contractor is proposing. Each such
Task Order Proposal shall, at a minimum, contain all of the following:

 13
 

(a)          Thorough
discussion of the technical approach for performing the work, as required by
the RFTOP.

(b)         Period
of Performance and Schedule of Work, including an estimated date of
commencement of the work.

(c)          Estimated
level of effort, types of staffing and number of hours by sub-task, including
those in (e) below.

(d)         Travel,
equipment and materials estimates.

(e)          An
estimate for subcontractors and consultants, including direct labor hours and
cost information, if applicable.

(f)            Estimated
cost information broken down by cost element, including any estimated computer
usage time, if applicable; and estimated indirect costs and inter-divisional
transfer costs.

(g)         Subject
to the restrictions stated below,
the contractor may include, in any Task Order Proposal, an allowance for
managerial and administrative costs estimated to be incurred in connection with
that particular Task Order, plus an allowance for any bid and proposal costs
estimated to be incurred in submitting a proposal for that particular Task Order.  Such allowances, in the aggregate, shall not
exceed 5% of all other costs
being proposed for that particular Task Order without
the prior written consent of the Contracting Officer.  Further,
the contractor shall never propose,
and shall never accept, a double or a multiple recovery of any cost.  Thus, for example, costs billed as direct
costs under a Task Order shall not also
be placed in any of the contractor’s indirect
cost pools.  Notwithstanding the
permissibility of an estimate for managerial, administrative, and bid &
proposal costs under a Task Order, costs shall be reimbursed only to the extent that they are actually,
allocably, reasonably and allowably incurred.

(h)         Total
estimated cost and fixed fee for completion of the Task Order.

(4)                      Based on
mutual agreement of the estimates, the FHWA will issue a Task Order and the
Contractor shall proceed with the conduct of the work.

(5)                      Task Orders
will contain, as a minimum, the following information:

(a)          Name and signature of
the Contracting Officer.

(b)         Contract Number, Task
Order Number, and effective date.

(c)          Description of task(s)
including deliverables.

(d)         Maximum number of
contract labor hours or price not to exceed, and other resources       authorized.

(e)          Dollar amount of
negotiated fixed fee.

 14

(f)            Travel authorized.

(g)         Documentation and
reporting requirements.

(h)         Delivery/performance
schedule.

(i)             Accounting and
appropriation data.

(j)             Any other necessary
information.

(6)       The Contracting Officer may modify Task
Orders in the same manner as they are issued.

(7)                    If the
Contractor at any time during work assignment performance has reason to believe
that the total incurred cost or number of labor hours will exceed 75% the total
estimate set forth in the Task Order, the contractor will immediately notify
the Contracting Officer, COTR, and COTM in writing and suggest a revised
estimate for completion of the work required there under.  The Contracting Officer will make the final
determination of the approved cost for each Task Order.  The
contractor’s cost incurred shall not exceed the total estimated cost specified
in each Task Order.  Costs incurred that
exceed the total estimated cost of a Task Order will not be reimbursed, unless
authorized in advance by the Contracting Officer.

(8)                    Any unresolved
Task Order terms or conditions should be subject to the DISPUTES clause.

(9)                    In the event
that Task Orders extend beyond the contract’s period of performance, the
contract will remain in effect to accommodate the completion of the Task
Order(s).

(10)                In the event that
there is a conflict between the requirements of the contract, the Task Order,
or the Contractor’s work plan, the contract shall prevail followed in order of precedence
by the Task Order and finally, the Contractor’s work plan.

QUARTERLY PROGRESS REPORT

The Contractor
shall furnish two (2) hard copies of a quarterly letter-type progress report to
the Contracting Officer’s Technical Representative and one (1) to the
Contracting Officer (CO), on or before the 15th of
the month following the calendar quarter being reported.  Each report shall contain concise statements
covering the research activities relevant to the study, including:

1.         A
brief description of the Task Order objective.

2.                         Budget
and scheduling information including the date the Task Order was initiated, the
estimated completion date, original hours and cost estimate, and a tabulation
of hours and cost expended this quarter, cumulative total to date, and needed
to complete the work.

3.                           A
brief description of the activities conducted under the Task Order during the
reporting period.

 15
 

4.                       A discussion of any problems
encountered or anticipated that might affect successful completion of the Task
Order, together with recommended solutions to such problems.

5.                       Any other pertinent information,
including an analysis and explanation of any cost over-runs.  Each quarterly progress report shall also
contain a budget summary showing planned, actual and cumulative hours and costs
for each active Task Order.

ANNUAL PROGRESS REVIEW

The applicable
quarterly reports will be used as part of the annual performance review
conducted by the CORT with the contractor. 
The Contractor shall revise staffing, work assignments, and financial
controls, as needed, based on annual performance reviews.

TRAVEL AND PER DIEM

Travel
and Per Diem authorized under this contract shall be reimbursed in accordance
with the Government Travel Regulations currently in effect, up to the limit
stated in SECTION B.  Current per diem
rates are listed at:

http://policyworks.gov/org/main/mt/homepage/mtt/perdiem/travel.shtml

Travel
requirements under this contract shall be met using the most economical form of
transportation available.  If economy
class transportation is not available, higher class transportation shall be
approved in advance by the Contracting Officer, and the request for payment
voucher must be submitted with justification for use of higher class travel
indicating dates, times, and flight numbers. 
All travel shall be scheduled sufficiently in advance to take advantage
of offered discount rates, unless authorized by the Contracting Officer.

The amount of
reimbursement shall not exceed the maximum limit authorized in any Task
Order.  Specific conditions and
limitation applicable to travel under this contract are as follows:

1.                                       Local Travel - Reimbursement will not be allowed for travel to or
from the primary place of performance (i.e., Turner-Fairbank Highway Research
Center (TFHRC) or DOT Headquarters) for those employees assigned to work under
this contract, or to and from the Contractor’s local and headquarters office
sites, or to and from the employee’s residence.

2.                                       Temporary Assignments - Any Task Order
requiring assignment of Contractor personnel at locations outside the primary
place of performance (i.e., TFHRC or DOT Headquarters) for less than 6 months
will be considered a temporary assignment. 
Travel and per diem expenses as allowable, incurred in performing
temporary assignments may be billed in accordance with Government Travel
Regulations.

CONTRACTING
OFFICER’S TECHNICAL REPRESENTATIVE (COTR)

The Contracting
Officer (CO) has designated Lee Simmons as Technical Representative (COTR) to
assist in monitoring the work under this contract.  The COTR is responsible for the technical
administration of the contract and technical liaison with the Contractor.  The COTR is NOT 

 16
 

authorized to
change the scope of work or specifications as stated in the contract, to make
any commitments, to otherwise obligate the Government, or to authorize any
changes which affect the contract price, delivery schedule, period of
performance, or other terms or conditions.

The
Contracting Officer is the only individual who can legally commit or obligate
the Government for the expenditure of public funds.  The technical administration of the contract
shall not be construed to authorize the revision of the terms and conditions of
this contract.  The Contracting Officer
shall authorize any such revisions in writing.

FUNDS
AVAILABLE

The
clause entitled “LIMITATION OF FUNDS” applies to this contract.  Any notification required on the part of the
Contractor shall be made in writing to the Contracting Officer with a copy to
the COTR.  In the event that the contract
is not funded beyond the estimated cost set forth in the schedule, the
Contractor shall deliver to the Contracting Officer the data collected and the
material produced or in process or acquired in connection with the performance
of the project provided herein together with a summary report in five copies of
its progress and accomplishments to date.

a.                                       Currently,
funds in the amount of two hundred thousand dollars ($200,000) are obligated to
this contract.

b.                                      Subject
to the availability of funds and an executed document by the Contracting
Officer, an additional [***] may be obligated to this contract.

PAYMENT

a.                                       The
Contractor may be reimbursed for direct and indirect costs incurred in the
performance hereof as are allowable under the provisions of Subpart 31.2, 31.3,
31.6, or 31.7 (as applicable) of the Federal Acquisition Regulations in the
not-to-exceed amount of [***] subject to the Limitations of Funds Clause.

b.                                      The
Contractor may request monthly interim payments for costs incurred during the
performance of this contract.  Each
monthly interim payment request shall be supported by a statement of costs
incurred by the Contractor in the performance of this contract and claimed to
constitute allowable costs.  Each monthly
interim payment request shall be submitted in accordance with Attachment No. 3,
“The FHWA Billing Instructions for Cost Reimbursement Contracts” to be
considered proper for payment.  Prior
approval of the Contracting Officer is required if the contractor wishes to use
a different payment request form.

c.                                       In
accordance with clause 52.232-25, “Prompt Payment”, monthly interim payments
will be made by the 30th day following receipt of proper request for
payment by the designated billing office, unless audit or other review is
considered necessary to ensure compliance with the terms and conditions of the
contract.  All interim payments hereunder
will be made upon further determination by the Contracting Officer that the
contractor is making adequate progress toward successful contract completion.

 

 

[***]                   Confidential
treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.

 17
 

d.                                      Final
invoice payment shall be made upon the Contracting Officer’s determination that
all contract requirements have been completed. 
The payment due date for the final invoice shall be established in
accordance with the clause 52.232-25.

e.                                       In
addition to reimbursing the Contractor for allowable costs, the Government
shall pay the Contractor the fee negotiated for each particular Task Order – to
the extent that the Task Order is being satisfactorily performed.  The Contractor may claim the allocable
portion of the fee for any given Task Order, as a part of each applicable
monthly interim payment request.

The Contractor shall furnish an original and one (1)
copy of each voucher for payment to the Contracting Officer and one (1) copy to
the Contracting Officer’s Technical Representative.

INDIRECT COSTS

Pending the
establishment of final indirect cost rates which shall be negotiated based on
audit of actual costs as provided in Subpart 42.7 of the Federal Acquisition
Regulation, the Contractor shall be reimbursed for allowable indirect costs
based on negotiated, provisional indirect rates as identified below:

	
  Indirect Cost
  Element:  

  	
   

  	
  Rate:

  	
   

  	
  Type:

  	
   

  	
  Base (applied
  to):

  
	
  Overhead

  	
   

  	
  [***]

  	
   

  	
  [***]

  	
   

  	
     [***]

  

 

This INDIRECT COST
provision does not operate to waive the LIMITATION OF FUNDS Clause.  The Contractor’s audited final indirect costs
are allowable only insofar as they do not cause the Contractor to exceed the
total estimated costs for performance of the contract listed on page 2 (SECTION
B) and under the PAYMENT provision above.

BILLING
RATES

The provisional
labor and indirect rates negotiated under this contract for billing purposes
shall remain in effect until revised rates have been approved in writing by the
Contracting Officer. The Contractor shall request new provisional billing rates
in writing, no more frequently than annually. Such request shall delineate the
current and proposed rates to be used, along with the proposed effective date
of new rates.

 

 

[***]                 Confidential
treatment has been requested for the bracketed portions.  The confidential redacted portion has been omitted
and filed separately with the Securities and Exchange Commission.

 18
 

SUBCONTRACTS
- ADVANCE NOTIFICATION AND CONSENT

Under this
contract, the requirements of FAR 44.2, CONSENT TO SUBCONTRACTS, have been
fulfilled for the following subcontracts:

	
  Subcontractor’s Name

  	
   

  	
  Estimated Price for Base Period

  
	
   

  	
   

  	
   

  
	
  Lockheed Martin Corporation

  	
   

  	
  [***]

  
	
  Consystec Corporation

  	
   

  	
  [***]

  
	
  Ice & Associates

  	
   

  	
  [***]

  
	
  Booz Allen Hamilton, Inc.

  	
   

  	
  [***]

  

 

Any future change
or revision to the Statement of Work or other applicable aspects of this
contract shall include the subcontract(s) only to the extent that performance
of the subcontract(s) is directly affected by the change or revision.

KEY
PERSONNEL

1252.237-73
Key Personnel (APR 2005)

KEY
PERSONNEL

(APR 2005)

(a) The personnel as
specified below are considered essential to the work being performed under this
contract and may, with the consent of the contracting parties, be changed from
time to time during the course of the contract by adding or deleting personnel,
as appropriate.

(b) Before removing,
replacing, or diverting any of the specified individuals, the Contractor shall
notify the contracting officer, in writing, before the change becomes
effective.  The Contractor shall submit
information to support the proposed action to enable the contracting officer to
evaluate the potential impact of the change on the contract.  The Contractor shall not remove or replace
personnel under this contract until the Contracting Officer approves the
change.

The Key Personnel under
this Contract are listed below.

(End of Clause)

The Contractor has
designated [***] as the Program Manager (PM) and [***] the Principal
Investigator (PI).  In the event that
either the Program Manager or the Principal Investigator or both is (are)
unable to continue performance under this contract, the appointment of a
replacement or replacements of equal caliber shall be subject to the prior
written approval of the Contracting Officer.

 

 

[***]                 Confidential
treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.

 19
 

The Key Personnel and/or
Facilities under this Contract: specify key personnel and/or facilities

	
  Key Personnel Name:

  	
   

  	
  Discipline:

  
	
  [***]

  	
   

  	
    Transportation
  Engineer

  
	
  [***]

  	
   

  	
  Systems Engineer

  
	
  [***]

  	
   

  	
    Systems
  Engineer

  
	
  [***]

  	
   

  	
  Systems Engineer

  
	
  [***]

  	
   

  	
  Systems Engineer

  
	
  [***]

  	
   

  	
   Transportation
  Engineer

  
	
  [***]

  	
   

  	
  Software Engineer

  

 

SECTION
H - SPECIAL CONTRACT REQUIREMENTS 

QUALIFICATIONS
OF CONTRACTOR EMPLOYEES (DEVIATION) (MAY 2005) – 

Alternate I (October 2005)

a. Definitions.  As used in this clause-  “Sensitive Information” is any information
that, if subject to unauthorized access, modification, loss, or misuse, or is
proprietary data, could adversely affect the national interest, the conduct of
Federal programs, or the privacy of individuals specified in The Privacy Act, 5
U.S.C. 552a, but has not been specifically authorized under criteria
established by an Executive Order or an Act of Congress to be kept secret in
the interest of national defense or foreign policy.

b. Work under this
contract may involve access to DOT facilities, sensitive information, or
resources (e.g., computer systems). To protect sensitive information, which
shall not be disclosed by the contractor unless authorized in writing by the
contracting officer, the contractor shall provide training to any contractor
employees authorized to access sensitive information, and upon request of the
Government, provide information to assist the Government in determining an
individual’s suitability to have authorization.

c. The Contracting
Officer may require dismissal from work under this contract those employees
deemed incompetent, careless, insubordinate, unsuitable, or otherwise
objectionable, or whose continued employment is deemed contrary to the public
interest or inconsistent with the best interest of national security.

d. Contractor employees
working on this contract must complete such forms, as may be necessary for
security or other reasons, including the conduct of background investigations
to determine suitability. Completed forms shall be submitted as directed by the
Contracting Officer. Upon the Contracting Officer’s Technical Representative
(COTR) or Project/Program Manager (PM) request, the Contractor’s employees
shall be fingerprinted, or subject to other investigations as required.

e. The Contractor shall
ensure that contractor employees are citizens of the United States of America
or an alien who has been lawfully admitted for permanent residence or
employment

 

 

[***]                 Confidential
treatment has been requested for the bracketed portions.  The confidential redacted portion has been
omitted and filed separately with the Securities and Exchange Commission.

 20
 

(indicated by immigration
status) as evidenced Bureau of Citizenship and Immigration Services
documentation; and

f. The Contractor shall
immediately notify the COTR or PM when an employee’s status changes (e.g.,
employee’s transfer, completion of a project, retirement or termination of
employment) that may affect the employee’s eligibility for access to the
facility, sensitive information, or resources.

g. To ensure the
requirements of FIPS 201, Personal Identity Verification (PIV) of Federal
Employees and Contractors, are met, the Contractor shall:

1.             Provide a listing
of personnel from whom an identification (ID) card is requested to the COTR or
PM who will provide a copy of the listing to the card issuing office.  This may include Contractor and subcontractor
personnel.  Following issuing office
directions for submittal of an application package.

2.             While
visiting or performing work on a DOT facility, as specified by the issuing
office, PM or COTR, ensure that contractor employees prominently display their
identification card.

3.             Promptly
deliver to the issuing office: (1) all ID cards assigned to an employee who no
longer requires access to the facility; and (2) all expired ID cards within
five (5) days of their expiration or all cards at time of contract termination,
whichever occurs first.

4.             Immediately
report any lost or stolen ID cards to the issuing office and follow their
instructions.

h.  The
Contractor shall include the substance of this clause in all subcontracts at
any tier where the subcontractor may have access to Government facilities,
sensitive information, or resources.

i. 
Failure to comply with these requirements may result in withholding of
final payment.

(End of
clause)

 

52.232-33 Payment by Electronic Funds Transfer -
Central Contractor Registration (OCT 2003)

(a) Method of payment. (1) All payments by the
Government under this contract shall be made by electronic funds transfer
(EFT), except as provided in paragraph (a)(2) of this clause. As used in this
clause, the term “EFT” refers to the funds transfer and may also include the
payment information transfer.

(2) In
the event the Government is unable to release one or more payments by EFT, the
Contractor agrees to either -

 21
 

(i) Accept
payment by check or some other mutually agreeable method of payment; or

(ii)
Request the Government to extend the payment due date until such time as the
Government can make payment by EFT (but see paragraph (d) of this clause).

(b) Contractor’s EFT information. The
Government shall make payment to the Contractor using the EFT information
contained in the Central Contractor Registration (CCR) database. In the event
that the EFT information changes, the Contractor shall be responsible for
providing the updated information to the CCR database.

(c) Mechanisms for EFT payment. The Government
may make payment by EFT through either the Automated Clearing House (ACH)
network, subject to the rules of the National Automated Clearing House
Association, or the Fedwire Transfer System. The rules governing Federal
payments through the ACH are contained in 31 CFR part 210.

(d) Suspension of payment. If the Contractor’s
EFT information in the CCR database is incorrect, then the Government need not
make payment to the Contractor under this contract until correct EFT
information is entered into the CCR database; and any invoice or contract
financing request shall be deemed not to be a proper invoice for the purpose of
prompt payment under this contract. The prompt payment terms of the contract
regarding notice of an improper invoice and delays in accrual of interest
penalties apply.

(e) Liability for uncompleted or erroneous transfers.
(1) If an uncompleted or erroneous transfer occurs because the Government used
the Contractor’s EFT information incorrectly, the Government remains
responsible for -

(i)
Making a correct payment;

(ii)
Paying any prompt payment penalty due; and

(iii)
Recovering any erroneously directed funds.

(2) If
an uncompleted or erroneous transfer occurs because the Contractor’s EFT
information was incorrect, or was revised within 30 days of Government release
of the EFT payment transaction instruction to the Federal Reserve System, and -

(i) If
the funds are no longer under the control of the payment office, the Government
is deemed to have made payment and the Contractor is responsible for recovery
of any erroneously directed funds; or

(ii)
If the funds remain under the control of the payment office, the Government
shall not make payment, and the provisions of paragraph (d) of this clause
shall apply.

(f) EFT and prompt payment. A payment shall be
deemed to have been made in a timely manner in accordance with the prompt
payment terms of this contract if, in the EFT payment transaction instruction
released to the Federal Reserve System, the date specified for settlement of
the payment is on or before the prompt payment due date, 

 22
 

provided
the specified payment date is a valid date under the rules of the Federal
Reserve System.

(g)
EFT and assignment of claims. If the Contractor assigns the proceeds of this
contract as provided for in the assignment of claims terms of this contract,
the Contractor shall require as a condition of any such assignment, that the
assignee shall register separately in the CCR database and shall be paid by EFT
in accordance with the terms of this clause. 
Notwithstanding any other requirement of this contract, payment to an
ultimate recipient other than the Contractor, or a financial institution
properly recognized under an assignment of claims pursuant to subpart 32.8, is
not permitted. In all respects, the requirements of this clause shall apply to
the assignee as if it were the Contractor. EFT information that shows the
ultimate recipient of the transfer to be other than the Contractor, in the
absence of a proper assignment of claims acceptable to the Government, is
incorrect EFT information within the meaning of paragraph (d) of this clause.

(h)
Liability for change of EFT information by financial agent. The Government is
not liable for errors resulting from changes to EFT information made by the
Contractor’s financial agent.

(i) Payment information. The payment or
disbursing office shall forward to the Contractor available payment information
that is suitable for transmission as of the date of release of the EFT
instruction to the Federal Reserve System. The Government may request the
Contractor to designate a desired format and method(s) for delivery of payment
information from a list of formats and methods the payment office is capable of
executing. However, the Government does not guarantee that any particular
format or method of delivery is available at any particular payment office and
retains the latitude to use the format and delivery method most convenient to
the Government. If the Government makes payment by check in accordance with
paragraph  (a) of this clause, the
Government shall mail the payment information to the remittance address
contained in the CCR database.

(End
of clause)

NONPERSONAL
SERVICES CONTRACT

This contract is a
“nonpersonal” services contract” as defined in the FAR at subpart 37.101.  It is understood and agreed that the
contractor and/or contractor’s employees and subcontractors:   (1) shall perform the services specified
herein as independent contractors, not as employees of the government;  (2) shall be responsible for their own
management and administration of the work required and bear sole responsibility
for complying with any and all technical, schedule, or financial requirements
or constraints attendant to the performance of this contract;  (3) shall be free from supervision or control
by any government employee with respect to the manner or method of performance
of the services specified; but 
(4) shall, pursuant to the government’s right and obligation to inspect,
accept or reject the work, comply with such general direction of the
contracting officer, or the duly authorized representative of the contracting
officer as is necessary to ensure accomplishment of the contract objectives.

 23
 

LIABILITY

The Government
cannot indemnify the Contractor or its subcontractor(s) from liability as a
result of the performance of work under this contract. Therefore, the
Contractor is required to obtain adequate property, vehicle and liability
insurance during the entire period of performance, as appropriate, in
accordance with the provisions of the clause at FAR 52.228-5, which is
incorporated into this contract in Section I. 
Evidence of such insurance must be
submitted to the Contracting Officer as a condition of award.

GOVERNMENT
FURNISHED OR ACQUIRED PROPERTY

Any Government
furnished or contractor acquired property provided or obtained under the
performance of this contract shall be accounted for as provided in
Transportation Acquisition Regulation (TAR) Subpart 1245.5, and by complying
with the following provision:

1252.245-70         GOVERNMENT PROPERTY REPORTS (OCT 1994)

(a)                                  The
contractor shall prepare an annual report of Government property in its
possession and the possession of its subcontractors.

(b)                                 The
report shall be submitted to the Contracting Officer not later than September
15 of each calendar year on Form DOT F 4220.43, Contractor Report of Government
Property.

QUALITY
ASSURANCE STATEMENT

The Federal
Highway Administration (FHWA) provides high-quality information to serve
Government, industry, and the public in a manner that promotes public
understanding.  Standards and policies
are used to ensure and maximize the quality, objectivity, utility, and
integrity of its information.  FHWA
periodically reviews quality issues and adjusts its programs and processes to
ensure continuous quality improvement.

REPRINTS
OF PUBLICATIONS

At such time that
any article resulting from work under this contract is published, two reprints
of the publication shall be sent to the COTR, clearly referencing this contract
number and any other appropriate handling information.  Written notification shall also be provided
to the Contracting Officer.

SITE
VISITS

The
FHWA, through its authorized representative, has the right at all reasonable
times, to make site visits for the purpose of reviewing the project
accomplishments and management control systems, and to provide technical
assistance and guidance as may be required. 
If any site visit is made by the FHWA on the premises of the Contractor,
a team member, or a subcontractor performing work under the contract, same will
provide and will require their subcontractor(s) to provide all reasonable
facilities and assistance for the safety and convenience of the FHWA and 

 24
 

other
Government representatives, in the performance of their duties.  Such visits may be either announced or
unannounced.

POST-AWARD
EVALUATION OF CONTRACTOR PERFORMANCE

a.       Contractor Performance
Evaluations

Annual and final
evaluations of contractor performance will be prepared on this contract in
accordance with FAR 42.15 (or FAR 36.201 for construction, or FAR 36.604 for
Architect-Engineering).  The final
performance evaluations will be prepared at the time of completion of work.  Annual and final evaluations will be provided
to the contractor as soon as practicable after completion of the
evaluation.  The contractor can elect to
review the evaluation and submit additional information or a rebuttal
statement.  The contractor will be
permitted thirty days to respond. 
Contractor response is voluntary and is not mandatory.  Any disagreement between the parties
regarding an evaluation will be referred to an individual at a level above the
Contracting Officer, whose decision is final.

Copies of the
evaluations, contractor responses, and review comments, if any, will be
retained as part of the contract file, and may be used to support future award
decisions.

b.      Electronic Access to
Contractor Performance Evaluations

FAR
42.15 requires agencies to prepare annual and final evaluations of contractor
performance.  The U. S. Department of
Transportation utilizes the National Institutes of Health (NIH) Contractor
Performance System (CPS) to record and maintain past performance information.  The CPS module for architect-engineer
contracts is not yet available. 
Therefore, the following information regarding electronic access does
not apply to architect-engineer contracts. 
Contractors that have Internet capability may access evaluations through
a secure Web site for review and comment by completing the registration form
that can be obtained at the following URL: 
https://www.cpscontractor.nih.gov/.

The registration
process requires the contractor to identify an individual who will serve as a
primary contact and who will be authorized access to the evaluation for review
and comment.  In addition, the contractor
will be required to identify a secondary contact who will be responsible for
notifying the cognizant contracting official in the event the primary contact
is unavailable to process the evaluation within the required 30-day time
period.  Once the contractor is
registered and a performance evaluation has been prepared and is ready for
comment, the CPS will send an e-mail to the contractor representative notifying
that individual that a performance evaluation is electronically available for
review and comment.

END
OF CLAUSE

PROTECTION
OF INFORMATION AND LIMITATION OF FUTURE CONTRACTING

a.               It is anticipated
that in performance of this contract, the Contractor may require access to or
receipt of information and data relating to FHWA’s plans, programs, technical
requirements, and budgetary matters, and such other information, the disclosure
of which 

 25
 

may give
competitive advantage to recipients or would be adverse to the interest of the
Government.

b.              The Contractor shall
not disclose such information acquired to anyone, other than those Contractor,
subcontractor, or consultant personnel performing work under this contract,
without the prior written consent of the Contracting Officer, until such time
as the Government may have authorized the release of such information and data
to the public.

c.               To the extent that
the work under this contract requires access to proprietary, business
confidential, or financial data of other companies, and as long as such data
remains proprietary or confidential, the Contractor shall protect such data
from unauthorized use and disclosure and agrees not to use it to compete
against such companies.

d.              It is anticipated
that during performance of this contract, the Contractor may be issued Task
Orders involving technical evaluation of other Contractor’s offers or
products.  FAR 9.505-3 provides that
contracts shall not generally be award to a Contractor that would evaluate or
advise the Government concerning its own products or activities or those of a
competitor without proper safeguards to ensure objectivity and protect the
Government’s interests.  These safeguards
will be accomplished by restricting future contracting with the Government as
delineated below.

e.               FHWA will not
unilaterally disclose to the Contractor any proprietary information furnished
by domestic or foreign participants in FHWA’s programs.  If the Contractor requires access to such
information in performance of this contract, an agreement concerning release
and restrictions on the use of such data must be sought by the Contractor with
the source of the data.

f.                  It is agreed by
the parties of this contract that the Contractor will be restricted in its
future contracting with Government in the manner described below in this
sub-section f.  Except as specifically
provided below in the sub-section f, the Contractor shall be free to compete
for FHWA business on an equal basis with other companies.  If the Contractor, under the terms of this
contract, acquires or obtains information specified in paragraphs a or c of
this section and if that information is not publicly available and could give
the Contractor a competitive advantage in subsequent procurements or would be
adverse to the interests of the Government, then the Contractor shall be
ineligible to perform as a prime contractor, subcontractor or consultant, or in
any capacity to any supplier under an ensuing Government contract.  Further, if the Contractor, under the terms
of this contract, is required to develop specifications or a statement of work,
or to develop materials leading directly, predictably or without delay to a
statement of work to be used in the competitive procurement of a system or
services, the Contractor shall be ineligible to perform the work described
within that solicitation as a prime contractor, subcontractor, consultant, or
in any capacity to any supplier under an ensuing FHWA contract.  Any questions on this matter shall be
immediately addressed to the Contracting Officer.

g.               These restrictions
do not limit the Contractor’s right to use and disclose any information and
data obtained from another source without restriction.

h.              The Contractor
agrees to train its employees who will have access to such sensitive
information in all necessary security procedures and require them to sign
non-disclosure 

 26
 

statements and
certificates attesting to their understanding of the requirements for
safeguarding such information.

i.                  In the event
that the Contractor fails to comply with this provision of the contract, the
Government may terminate the contract for default.

j.                  The Contractor
shall include this provision, including this paragraph, in all subcontracts and
consultant agreements for performance of work under this contract unless
excused in writing by the Contracting Officer.

COMPUTER
RELATED SERVICES

The primary
purpose of this contract is not
to perform ADP services or computer services. (The mere use of personal
computers and common off-the-shelf programs – for word-processing, desk-top publishing,
spreadsheets, e-mails, and the creation and manipulation of graphics – is not considered “computer related services”).

However,
in the performance of one or more task orders, there is a possibility that the Contractor might be
required to create or to modify a web site, or might be required to create or
modify a database, or might provide other technical collaboration/support using
computers.  If any technical work of the type described in this
paragraph were ever required, it would be specified
in the applicable task order(s).  Any
such technical work shall be carefully coordinated with the COTR to ensure that
the work complies with any FHWA ADP standards applicable at that time.

All requirements
for compliance with the accessibility standards of Section 508 of the
Rehabilitation Act will be specified in the applicable Task Orders.

SOURCE
CODE FOR SOFTWARE

In the event that
source code is first produced under this contract, delivery of all source code
for all software developed hereunder shall be in both electronic and paper
format.

52.224-1
Privacy Act Notification (APR 1984)

The Contractor
will be required to design, develop, or operate a system of records on
individuals, to accomplish an agency function subject to the Privacy Act of
1974, Public Law 93-579, December 31, 1974 (5 U.S.C. 552a) and applicable
agency regulations.  Violation of the Act
may involve the imposition of criminal penalties.

 27
 

PART II

SECTION
I - CONTRACT CLAUSES

52.237-3                       CONTINUITY
OF SERVICES (JAN 1991)

[In accordance with Iteris’
request, subparagraph “c” of the CONTINUITY OF SERVICES clause is hereby modified so as to read as follows:]

“(c)                The
Contractor shall allow as many personnel as practicable to remain on the job to
help the successor maintain the continuity and consistency of the services
required by this contract.  Personnel
records will only be released to the successor with employee permission.  If selected employees are agreeable to the change,
the Contractor shall release them at a mutually agreeable date.”

52.252-2
Clauses Incorporated by Reference. (FEB 1998)

This contract
incorporates one or more clauses by reference, with the same force and effect
as if they were given in full text. Upon request, the Contracting Officer will
make their full text available. Also, the full text of a clause may be accessed
electronically at this/these address(es): http://www.arnet.gov/far/  (the Official General Services Administration
(GSA) Site of the Federal Acquisition Regulations (FAR));  http://www.dot.gov/ost/m60/tamtar/tar.htm
(the Official DOT Site of the Transportation Acquisition Regulations (TAR)).

I.      FEDERAL ACQUISITION REGULATION (48 CFR CHAPTER 1) CLAUSES

	
   

  	
  1.

  	
   

  	
  52.202-1

  	
   

  	
  Definitions (JUL 2004)

  
	
   

  	
  2.

  	
   

  	
  52.203-3

  	
   

  	
  Gratuities (APR 1984)

  
	
   

  	
  3.

  	
   

  	
  52.203-5

  	
   

  	
  Covenant Against Contingent Fees (APR 1984)

  
	
   

  	
  4.

  	
   

  	
  52.203-6

  	
   

  	
  Restrictions on Sub-Contractor Sales to the
  Government (JUL 1995)

  
	
   

  	
  5.

  	
   

  	
  52.203-7

  	
   

  	
  Anti-Kickback Procedures (JUL 1995)

  
	
   

  	
  6.

  	
   

  	
  52.203-8

  	
   

  	
  Cancellation, Rescission, and Recovery of Funds for
  Illegal or Improper Activity (JAN 1997)

  
	
   

  	
  7.

  	
   

  	
  52.203-10

  	
   

  	
  Price or Fee Adjustment for Illegal or Improper
  Activity (JAN 1997)

  
	
   

  	
  8.

  	
   

  	
  52.203-12

  	
   

  	
  Limitations on Payments to Influence Certain Federal
  Transactions (SEP 2005)

  
	
   

  	
  9.

  	
   

  	
  52.204-4

  	
   

  	
  Printing/Copying Double-sided on Recycled Paper (AUG
  2000)

  
	
   

  	
  10.

  	
   

  	
  52.204-7

  	
   

  	
  Central Contractor Registration (JULY 2006)

  
	
   

  	
  11.

  	
   

  	
  52.209-6

  	
   

  	
  Protecting the Government’s Interest When
  Subcontracting With Contractors Debarred, Suspended, or Proposed for
  Debarment (JAN 2005)

  
	
   

  	
  12.

  	
   

  	
  52.215-2

  	
   

  	
  Audit and Records – Negotiation (JUN 1999)

  
	
   

  	
  13.

  	
   

  	
  52.215-8

  	
   

  	
  Order of Precedence – Uniform Contract Format (OCT
  1997)

  
	
   

  	
  14.

  	
   

  	
  52.215-10

  	
   

  	
  Price Reduction for Defective Cost or Pricing Data
  (OCT 1997)

  
	
   

  	
  15.

  	
   

  	
  52.215-11

  	
   

  	
  Price Reduction for Defective Cost or Pricing Data –
  Modifications (OCT 1997)

  
	
   

  	
  16.

  	
   

  	
  52.215-12

  	
   

  	
  Sub-Contractor Cost or Pricing Data (OCT 1997)

  
	
   

  	
  17.

  	
   

  	
  52.215-13

  	
   

  	
  Sub-Contractor Cost or Pricing Data – Modifications
  (OCT 1997)

  
	
   

  	
  18.

  	
   

  	
  52.215-15

  	
   

  	
  Pension Adjustments and Asset Reversions (OCT 2004)

  

 

 28
 

 

	
   

  	
  19.

  	
   

  	
  52.215-17

  	
   

  	
  Waiver of Facilities Capital Cost of Money (OCT
  1997)

  
	
   

  	
  20.

  	
   

  	
  52.215-18

  	
   

  	
  Reversion or Adjustment of Plans for Post Retirement
  Benefits (PRB) Other than Pensions (JUL 2005)

  
	
   

  	
  21.

  	
   

  	
  52.215-19

  	
   

  	
  Notifications of Ownership Changes (OCT 1997)

  
	
   

  	
  22.

  	
   

  	
  52.215-21

  	
   

  	
  Requirements for Cost or Pricing Data or Information
  Other Than Cost or Pricing Data – Modifications (OCT 1997)

  
	
   

  	
  23.

  	
   

  	
  52.216-7

  	
   

  	
  Allowable Cost and Payment (DEC 2002)

  
	
   

  	
  24.

  	
   

  	
  52.216-8

  	
   

  	
  Fixed Fee (MAR 1997)

  
	
   

  	
  25.

  	
   

  	
  52.216-18

  	
   

  	
  Ordering (OCT 1995)

  
	
   

  	
  26.

  	
   

  	
  52.216-22

  	
   

  	
  Indefinite Quantity (OCT 1995)

  
	
   

  	
  27.

  	
   

  	
  52.219-4

  	
   

  	
  Notice Of Price Evaluation For HUBZone Small
  Business Concerns (JAN 1999)

  
	
   

  	
  28.

  	
   

  	
  52.219-8

  	
   

  	
  Utilization Of Small Business Concerns (MAY 2004)

  
	
   

  	
  29.

  	
   

  	
  52.219-9

  	
   

  	
  Small Business Subcontracting Plan (JULY 2005)

  
	
   

  	
  30.

  	
   

  	
  52.219-16

  	
   

  	
  Liquidated Damages – Subcontracting Plan (JAN 1999)

  
	
   

  	
  31.

  	
   

  	
  52.222-3

  	
   

  	
  Convict Labor (JUN 2003)

  
	
   

  	
  32.

  	
   

  	
  52.222-21

  	
   

  	
  Prohibition of Segregated Facilities (FEB 1999)

  
	
   

  	
  33.

  	
   

  	
  52.222-26

  	
   

  	
  Equal Opportunity (APR 2002)

  
	
   

  	
  34.

  	
   

  	
  52.222-35

  	
   

  	
  Equal Opportunity for Special Disabled Veterans,
  Veterans of the Vietnam Era, and Other Eligible Veterans (DEC 2001)

  
	
   

  	
  35.

  	
   

  	
  52.222-36

  	
   

  	
  Affirmative Action for Workers with Disabilities
  (JUN 1998)

  
	
   

  	
  36.

  	
   

  	
  52.222-37

  	
   

  	
  Employment Reports on Special Disabled Veterans and
  Veterans of the Vietnam Era (DEC 2001)

  
	
   

  	
  37.

  	
   

  	
  52.223-5

  	
   

  	
  Pollution Prevention and Right-to-Know Information
  (APR 1998)

  
	
   

  	
  38.

  	
   

  	
  52.223-6

  	
   

  	
  Drug-Free Workplace (MAY 2001)

  
	
   

  	
  39.

  	
   

  	
  52.223-14

  	
   

  	
  Toxic Chemical Release Reporting (AUG 2003)

  
	
   

  	
  40.

  	
   

  	
  52.224-2

  	
   

  	
  Privacy Act (APR 1984)

  
	
   

  	
  41.

  	
   

  	
  52.225-13

  	
   

  	
  Restrictions on Certain Foreign Purchases (FEB 2006)

  
	
   

  	
  42.

  	
   

  	
  52.225-14

  	
   

  	
  Inconsistency between English Version and
  Translation of Contract (FEB 2000)

  
	
   

  	
  43.

  	
   

  	
  52.226-1

  	
   

  	
  Utilization of Indian Organizations and Indian Owned
  Economic Enterprises (JUN 2000)

  
	
   

  	
  44.

  	
   

  	
  52.227-1

  	
   

  	
  Authorization and Consent (JUL 1995)

  
	
   

  	
  45.

  	
   

  	
  52.227-2

  	
   

  	
  Notice and Assistance Regarding Patent and Copyright
  Infringement (AUG 1996)

  
	
   

  	
  46.

  	
   

  	
  52.227-11

  	
   

  	
  Patent Rights – Retention by the Contractor (Short
  Form) (JUN 1997)

  
	
   

  	
  47.

  	
   

  	
  52.227-14

  	
   

  	
  Rights in Data – General (JUN 1987)

  
	
   

  	
  48.

  	
   

  	
  52.227-19

  	
   

  	
  Commercial Computer Software – Restricted Rights
  (JUN 1987)

  
	
   

  	
  49.

  	
   

  	
  52.228-7

  	
   

  	
  Insurance – Liability to Third Persons (MAR 1996)

  
	
   

  	
  50.

  	
   

  	
  52.230-2

  	
   

  	
  Cost Accounting Standards (APR 1998)

  
	
   

  	
  51.

  	
   

  	
  52.230-3

  	
   

  	
  Disclosure and Consistency of Cost Accounting
  Practices (APR 1998)

  
	
   

  	
  52.

  	
   

  	
  52.230-6

  	
   

  	
  Administration of Cost Accounting Standards (APR
  2005)

  
	
   

  	
  53.

  	
   

  	
  52.232-9

  	
   

  	
  Limitation on Withholding of Payments (APR 1984)

  
	
   

  	
  54.

  	
   

  	
  52.232-17

  	
   

  	
  Interest (JUN 1996)

  
	
   

  	
  55.

  	
   

  	
  52.232-22

  	
   

  	
  Limitation of Funds (APR 1984)

  
	
   

  	
  56.

  	
   

  	
  52.232-23

  	
   

  	
  Assignment of Claims (JAN 1986)

  
	
   

  	
  57.

  	
   

  	
  52.232-25

  	
   

  	
  Prompt Payment (OCT 2003)

  
	
   

  	
  58.

  	
   

  	
  52.233-1

  	
   

  	
  Disputes (JUL 2002)

  
	
   

  	
  59.

  	
   

  	
  52.233-3

  	
   

  	
  Protest After Award (AUG 1996) – Alternate I (JUN
  1985)

  
	
   

  	
  60.

  	
   

  	
  52.233-4

  	
   

  	
  Applicable Law for Breach of Contract Claim (OCT
  2004)

  

 

 29
 

 

	
   

  	
  61.

  	
   

  	
  52.237-2

  	
   

  	
  Protection of Government Buildings, Equipment, and
  Vegetation (APR 1984)

  
	
   

  	
  62.

  	
   

  	
  52.237-3

  	
   

  	
  Continuity of Services (JAN 1991)

  
	
   

  	
  63.

  	
   

  	
  52.237-10

  	
   

  	
  Identification of Uncompensated Overtime (OCT 1997)

  
	
   

  	
  64.

  	
   

  	
  52.242-1

  	
   

  	
  Notice of Intent to Disallow Costs (APR 1984)

  
	
   

  	
  65.

  	
   

  	
  52.242-3

  	
   

  	
  Penalties for Unallowable Costs (MAY 2001)

  
	
   

  	
  66.

  	
   

  	
  52.242-4

  	
   

  	
  Certification of Final Indirect Costs (JAN 1997)

  
	
   

  	
  67.

  	
   

  	
  52.242-13

  	
   

  	
  Bankruptcy (JUL 1995)

  
	
   

  	
  68.

  	
   

  	
  52.243-2

  	
   

  	
  Changes – Cost-Reimbursement (AUG 1987) – Alternate
  I (APR 1984)

  
	
   

  	
  69.

  	
   

  	
  52.244-2

  	
   

  	
  Subcontracts (AUG 1998) – Alternate I (JAN 2006)

  
	
   

  	
  70.

  	
   

  	
  52.244-6

  	
   

  	
  Subcontracts for Commercial Items (FEB 2006)

  
	
   

  	
  71.

  	
   

  	
  52.244-5

  	
   

  	
  Competition in Subcontracting (DEC 1996)

  
	
   

  	
  72.

  	
   

  	
  52.245-1

  	
   

  	
  Property Records (APR 1984)

  
	
   

  	
  73.

  	
   

  	
  52.245-5

  	
   

  	
  Government Property (Cost-Reimbursement,
  Time-and-Material, or Labor-Hour Contracts) (MAY 2004)

  
	
   

  	
  74.

  	
   

  	
  52.245-19

  	
   

  	
  Government Property Furnished “As Is” (APR 1984)

  
	
   

  	
  75.

  	
   

  	
  52.246-25

  	
   

  	
  Limitation of Liability – Services (FEB 1997)

  
	
   

  	
  76.

  	
   

  	
  52.247-34

  	
   

  	
  FOB Destination (NOV 1991)

  
	
   

  	
  77.

  	
   

  	
  52.249-6

  	
   

  	
  Termination (Cost-Reimbursement) (MAY 2004)

  
	
   

  	
  78.

  	
   

  	
  52.249-14

  	
   

  	
  Excusable Delays (APR 1984)

  
	
   

  	
  79.

  	
   

  	
  52.253-1

  	
   

  	
  Computer Generated Forms (JAN 1991)

  

 

II. 
DEPARTMENT OF TRANSPORTATION ACQUISITION REGULATIONS (48 CHAPTER 12)
CLAUSES

 

	
   

  	
  80.

  	
   

  	
  1252.223-73

  	
   

  	
  Seat Belt Use Policies and Programs (MAY 2005)

  
	
   

  	
  81.

  	
   

  	
  1252.237-71

  	
   

  	
  Certification of Data (APR 2005)

  
	
   

  	
  82.

  	
   

  	
  1252.242-71

  	
   

  	
  Contract Testimony (OCT 1994)

  
	
   

  	
  83.

  	
   

  	
  1252.242-72

  	
   

  	
  Dissemination of Contract Information (OCT 1994)

  
	
   

  	
  84.

  	
   

  	
  1252.242-73

  	
   

  	
  Contracting Officer’s Technical Representative (OCT
  1994)

  

 

52.252-4 Alterations in Contract.
(APR 1984)

 Portions of this contract are altered as
follows: None

 30
 

P A R T  III

SECTION
J - LIST OF ATTACHMENTS

1.                                       Standard
Form LLL, Disclosure of Lobbying Activities - 2 pages

2.             FHWA Billing Instructions for Cost
Reimbursement Contracts - 4 pages

 31Exhibit 10.4

 

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT
(this “Agreement”) dated as of the Effective
Date between SILICON VALLEY BANK, a California
corporation (“Bank”), and ITERIS, INC.,
a Delaware corporation (“Borrower”),
provides the terms on which Bank shall lend to Borrower and Borrower shall
repay Bank.  The parties agree as
follows:

1              ACCOUNTING AND OTHER TERMS

Accounting terms not defined in this Agreement shall
be construed following GAAP. 
Calculations and determinations must be made following GAAP.  Capitalized terms not otherwise defined in
this Agreement shall have the meanings set forth in Section 13.  All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the extent
such terms are defined therein.

2              LOAN AND TERMS OF PAYMENT

2.1          Promise
to Pay. 
Borrower hereby unconditionally promises to pay Bank the outstanding
principal amount of all Credit Extensions and accrued and unpaid interest
thereon as and when due in accordance with this Agreement.

2.1.1       Revolving Advances.

(a)           Availability.  Subject to the terms and conditions of this
Agreement and to deduction of Reserves, Bank will make Advances to Borrower up
to an amount (“Net Borrowing Availability”)
not to exceed the lesser of:  (a) the Revolving Line; or (b)
the amounts available under the Borrowing Base.

(b)           Streamline Period.  [omitted]

(c)           Termination; Repayment.  The Revolving Line terminates on the
Revolving Line Maturity Date, when the principal amount of all Advances, the
unpaid interest thereon, and all other Obligations relating to the Revolving
Line shall be immediately due and payable.

2.1.2       Letters of Credit Sublimit.

(a)   As part of the Revolving Line, Bank shall
issue or have issued Letters of Credit for Borrower’s account.  The face amount of outstanding Letters of
Credit (including drawn but unreimbursed Letters of Credit and any Letter of
Credit Reserve) may not exceed the Availability Amount.  Such aggregate amounts utilized hereunder
shall at all times reduce the amount otherwise available for Advances under the
Revolving Line.  If, on the Revolving
Line Maturity Date, there are any outstanding Letters of Credit, then on such
date Borrower shall provide to Bank cash collateral in an amount equal to 105%
of the face amount of all such Letters of Credit plus all interest, fees, and
costs due or to become due in connection therewith (as estimated by Bank in its
good faith business judgment), to secure all of the Obligations relating to
said Letters of Credit.  All Letters of
Credit shall be in form and substance acceptable to Bank in its sole discretion
and shall be subject to the terms and conditions of Bank’s standard Application
and Letter of Credit Agreement (the “Letter of Credit
Application”).  Borrower
agrees to execute any further documentation in connection with the Letters of
Credit as Bank may reasonably request. 
Borrower further agrees to be bound by the regulations and
interpretations of the issuer of any Letters of Credit guarantied by Bank and
opened for Borrower’s account or by Bank’s interpretations of any Letter of
Credit issued by Bank for Borrower’s account, and Borrower understands and
agrees that Bank shall not be liable for any error, negligence, or mistake,
whether of omission or commission, in following Borrower’s instructions or
those contained in the Letters of Credit or any modifications, amendments, or
supplements thereto; but nothing herein shall relieve Bank from liability for
its own gross negligence or willful misconduct.

(b)           The obligation of Borrower to
immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of this Agreement, such Letters of Credit, and the
Letter of Credit Application.

(c)           Borrower may request that Bank issue
a Letter of Credit payable in a Foreign Currency.  If a demand for payment is made under any
such Letter of Credit, Bank shall treat such demand as an Advance to Borrower of
the equivalent of the amount thereof (plus fees and charges in connection
therewith such as wire, cable,

 

SWIFT or similar charges) in Dollars at the
then-prevailing rate of exchange in San Francisco, California, for sales of the
Foreign Currency for transfer to the country issuing such Foreign Currency.

(d)           To guard against fluctuations in
currency exchange rates, upon the issuance of any Letter of Credit payable in a
Foreign Currency, Bank shall create a reserve (the “Letter of Credit Reserve”) under the Revolving Line in an
amount equal to ten percent (10%) of the face amount of such Letter of
Credit.  The amount of the Letter of
Credit Reserve may be adjusted by Bank from time to time to account for
fluctuations in the exchange rate.  The
availability of funds under the Revolving Line shall be reduced by the amount
of such Letter of Credit Reserve for as long as such Letter of Credit remains
outstanding.

2.1.3       Foreign
Exchange Sublimit. 
As part of the Revolving Line, Borrower may enter into foreign exchange
contracts with Bank under which Borrower commits to purchase from or sell to
Bank a specific amount of Foreign Currency (each, a “FX Forward Contract”) on a specified date (the “Settlement Date”).  FX Forward Contracts shall have a Settlement
Date of at least one (1) FX Business Day after the contract date and shall be
subject to a reserve of ten percent (10%) of each outstanding FX Forward
Contract in a maximum aggregate amount equal to $1,000,000 (the “FX Reserve”).  The aggregate amount of FX Forward Contracts
at any one time may not exceed ten (10) times the amount of the FX Reserve.

2.1.4       Cash
Management Services Sublimit.  Borrower may use up to $1,000,000 (the “Cash Management Services Sublimit”) of the Revolving Line for
Bank’s cash management services which may include merchant services, direct
deposit of payroll, business credit card, and check cashing services identified
in Bank’s various cash management services agreements (collectively, the “Cash Management Services”).  Any amounts Bank pays on behalf of Borrower
or any amounts that are not paid by Borrower for any Cash Management Services
will be treated as Advances under the Revolving Line and will accrue interest
at the interest rate applicable to Advances.

2.1.5       Overall
Aggregate Sublimit. 
In no event shall the total amount of (i) outstanding Letters of Credit
(including drawn but unreimbursed Letters of Credit and any Letter of Credit
Reserve), and (ii) the FX Reserve, and (iii) the amount of the Revolving Line
utilized for Cash Management Services, at any time exceed $1,000,000 in the aggregate.

2.1.6       Term
Loan.

(a)           Availability.  Bank shall make one (1) term loan available
to Borrower in an amount up to the Term Loan Amount on the Effective Date
subject to the satisfaction of the terms and conditions of this Agreement.

(b)           Repayment.  Borrower shall repay the Term Loan in (i)
twenty (20) equal installments of principal in the amount of not less than
$104,600 each (the actual amount of the installments shall be determined based
upon the actual amount of the Term Loan Amount), plus (ii) monthly payments of
accrued interest (the “Term Loan Payment”).  Beginning on the last day of the month in
which the Funding Date occurs, each Term Loan Payment shall be payable on the
last day of each month.  Borrower’s final
Term Loan Payment, due on the earlier of (a) the date the Loan Agreement is
terminated or (b) the Term Loan Maturity Date, shall include all outstanding
principal and accrued and unpaid interest under the Term Loan.

(c)           Term
Loan Reserve. Notwithstanding the foregoing, an amount equal to the
currently outstanding principal amount of the Term Loan shall be reserved
against the Revolving Line which would otherwise be available to Borrower as
set forth above.

2.2          Overadvances.  If at any time or for any reason the total of
all outstanding Advances and all other monetary Obligations exceeds Net
Borrowing Availability (an “Overadvance”),
Borrower shall immediately pay the amount of the excess to Bank, without notice
or demand.  Without limiting Borrower’s
obligation to repay to Bank the amount of any Overadvance, Borrower agrees to
pay Bank interest on the outstanding amount of any Overadvance, on demand, at
the Default Rate.

 2
 

 

2.3          Payment
of Interest on the Credit Extensions.

(a)           Interest Rate.

(i)            Advances.  Subject to Section 2.3(b), the principal
amount outstanding under the Revolving Line shall accrue interest at a floating
per annum rate equal to 1.25% percentage points above the Prime Rate, provided
that the interest rate in effect on any given day shall not be less than 8.50%
per annum, which interest shall be payable monthly.

(ii)           Term Loan.  Subject to Section 2.3(b), the principal
amount outstanding under the Term Loan shall accrue interest at a floating per
annum rate equal to 1.25% percentage points above the Prime Rate, provided that
the interest rate in effect on any given day shall not be less than 8.50% per
annum, which interest shall be payable monthly.

(b)           Default Rate. Immediately upon
the occurrence and during the continuance of an Event of Default, Obligations
shall bear interest at a rate per annum which is five percentage points above
the rate effective immediately before the Event of Default (the “Default Rate”).  Payment or acceptance of the increased
interest rate provided in this Section 2.3(b) is not a permitted
alternative to timely payment and shall not constitute a waiver of any Event of
Default or otherwise prejudice or limit any rights or remedies of Bank.

(c)           Adjustment to Interest Rate.
Changes to the interest rate of any Credit Extension based on changes to the
Prime Rate shall be effective on the effective date of any change to the Prime
Rate and to the extent of any such change.

(d)           360-Day Year.  Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.

(e)           Debit of Accounts.  Bank may debit any of Borrower’s deposit
accounts, including the Designated Deposit Account, for principal and interest
payments or any other amounts Borrower owes Bank when due.  These debits shall not constitute a set-off.

(f)            Minimum Monthly Interest.  [omitted].

(g)           Payment; Interest Computation;
Float Charge.  Interest is payable
monthly on the last calendar day of each month. 
In computing interest on the Obligations, all payments received after 12:00
p.m. Pacific time on any day shall be deemed received on the next Business
Day.  In addition, so long as any
principal or interest with respect to any Credit Extension remains outstanding,
Bank shall be entitled to charge Borrower a “float” charge in an amount equal
to three (3) Business Days interest, at the interest rate applicable to the
Advances, on all payments received by Bank. 
Said float charge is not included in interest for purposes of computing
Minimum Monthly Interest (if any) under this Agreement.  The float charge for each month shall be
payable on the last day of the month. 
Bank shall not, however, be required to credit Borrower’s account for
the amount of any item of payment which is unsatisfactory to Bank in its good
faith business judgment, and Bank may charge Borrower’s Designated Deposit
Account for the amount of any item of payment which is returned to Bank unpaid.

2.4          Fees.  Borrower shall pay to Bank:

(a)           Commitment
Fee.  A fully earned, non-refundable
commitment fee of $40,000, on the Effective Date (less the amount of $13,608
which Bank acknowledges it has already been received from Borrower); and

(b)           Letter of Credit Fee.  Bank’s customary fees and expenses for the
issuance or renewal of Letters of Credit upon the issuance or renewal of such
Letter of Credit by Bank; and

(c)           Termination Fee.  Subject to the terms of Section 4.1, a
termination fee as set forth in Section 4.1; and

(d)           Unused Revolving Line Facility Fee.  A fee (the “Unused
Revolving Line Facility Fee”), which fee shall be paid monthly, in
arrears, on a calendar year basis, in an amount equal to 0.25% per annum of the
average unused portion of the Revolving Line, as determined by Bank.  Borrower shall not be entitled to any credit,
rebate or repayment of any Unused Revolving Line Facility Fee previously earned
by Bank pursuant to this Section notwithstanding any termination of the
Agreement, or suspension or termination of Bank’s obligation to make loans and
advances hereunder, including during any Streamline Period; and

 3
 

 

(e)           Collateral Monitoring Fee.  A monthly collateral monitoring fee of
$2,000, payable in arrears on the last day of each month (prorated for any
partial month at the beginning and upon termination of this Agreement); and

(f)            Bank Expenses.  All Bank Expenses (including reasonable
attorneys’ fees and expenses, and expenses for documentation and negotiation of
this Agreement) incurred through and after the Effective Date, when due; and

(g)           Anniversary Fee.  A fully earned, non-refundable anniversary fee
of $40,000, on the first anniversary of the Effective Date.

3              CONDITIONS OF LOANS

3.1          Conditions
Precedent to Initial Credit Extension.  Bank’s obligation to make the initial Credit
Extension is subject to the condition precedent that Bank shall have received,
in form and substance satisfactory to Bank, such documents, and completion of
such other matters, as Bank may reasonably deem necessary or appropriate,
including, without limitation:

(a)           Borrower shall have delivered duly
executed original signatures to the Loan Documents to which it is a party;

(b)           Borrower shall have delivered duly
executed original signatures to the Control Agreements;

(c)           Borrower shall have delivered its
Operating Documents and a good standing certificate of Borrower certified by
the Secretary of State of the State of Delaware as of a date no earlier than
thirty (30) days prior to the Effective Date;

(d)           Borrower shall have delivered duly
executed original signatures to the completed Borrowing Resolutions for
Borrower;

(e)           Borrower shall have delivered a
Payment Agreement from Wells Fargo Bank;

(f)            Borrower shall have delivered
evidence that (i) the Liens securing Indebtedness owed by Borrower to Wells
Fargo Bank will be terminated and (ii) the documents and/or filings evidencing the
perfection of such Liens, including without limitation any financing statements
and/or control agreements, have or will, concurrently with the initial Credit
Extension, be terminated.

(g)           Bank shall have received certified
copies, dated as of a recent date, of financing statement searches, as Bank
shall request, accompanied by written evidence (including any UCC termination
statements) that the Liens indicated in any such financing statements either
constitute Permitted Liens or have been or, in connection with the initial
Credit Extension, will be terminated or released;

(h)           Borrower shall have delivered the
Perfection Certificate(s) executed by Borrower;

(i)            [omitted];

(j)            Borrower shall have delivered the
insurance policies and/or endorsements required pursuant to Section 6.5 hereof;
and

(k)           Borrower shall have paid the fees and
Bank Expenses then due as specified in Section 2.4 hereof.

3.2          Conditions
Precedent to all Credit Extensions.  Bank’s obligations to make each Credit
Extension, including the initial Credit Extension, is subject to the following:

(a)           except as otherwise provided in
Section 3.4(a), timely receipt of an executed Payment/Advance Form or
Transaction Report, as applicable;

 4
 

 

(b)           the representations and warranties in
Section 5 shall be true in all material respects on the date of the
Payment/Advance Form or Transaction Report, as applicable, and on the Funding
Date of each Credit Extension; provided, however, that such materiality
qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring
to a specific date shall be true, accurate and complete in all material respects
as of such date, and no Default or Event of Default shall have occurred and be
continuing or result from the Credit Extension. 
Each Credit Extension is Borrower’s representation and warranty on that
date that the representations and warranties in Section 5 remain true in all
material respects; provided, however, that such materiality qualifier shall not
be applicable to any representations and warranties that already are qualified
or modified by materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date; and

(c)           in Bank’s sole discretion, there has
not been a Material Adverse Change.

3.3          Covenant
to Deliver.

Borrower agrees to deliver to Bank each item required
to be delivered to Bank under this Agreement as a condition to any Credit
Extension.  Borrower expressly agrees
that the extension of a Credit Extension prior to the receipt by Bank of any
such item shall not constitute a waiver by Bank of Borrower’s obligation to
deliver such item, and any such extension in the absence of a required item
shall be in Bank’s sole discretion.

3.4                               Procedures
for Borrowing.

(a)           Advances.  Subject to the prior satisfaction of all
other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall
be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m.
Pacific time on the Funding Date of the Advance.  Together with such notification, Borrower
must promptly deliver to Bank by electronic mail or facsimile a completed
Transaction Report executed by a Responsible Officer or his or her designee.  Bank shall credit Advances to the Designated
Deposit Account.  Bank may make Advances
under this Agreement based on instructions from a Responsible Officer or his or
her designee or without instructions if the Advances are necessary to meet
Obligations that have become due.  Bank
may rely on any telephone notice given by a person whom Bank believes is a
Responsible Officer or designee.

(b)           Term
loan.  Subject to the prior
satisfaction of all other applicable conditions to the making of the Term Loan
set forth in this Agreement, if any portion of the proceeds of the Term Loan
shall be used to purchase or finance Equipment, Borrower shall deliver to Bank
by electronic mail or facsimile a copy of the invoice for the Equipment to be
purchased and/or refinanced and the request for the Term Loan.

4              CREATION OF SECURITY INTEREST

4.1          Grant
of Security Interest. 
Borrower hereby grants Bank, to secure the payment and performance in
full of all of the Obligations, a continuing security interest in, and pledges
to Bank, the Collateral, wherever located, whether now owned or hereafter
acquired or arising, and all proceeds and products thereof.  Borrower represents, warrants, and covenants
that the security interest granted herein is and shall at all times continue to
be a first priority perfected security interest in the Collateral (subject only
to Permitted Liens that may have superior priority to Bank’s Lien under this
Agreement).  If Borrower shall acquire a
commercial tort claim, Borrower shall promptly notify Bank in a writing signed
by Borrower of the general details thereof and grant to Bank in such writing a
security interest therein and in the proceeds thereof, all upon the terms of
this Agreement, with such writing to be in form and substance reasonably
satisfactory to Bank.

This Agreement may
be terminated prior to the Revolving Line Maturity Date by Borrower, effective
three (3) Business Days after written notice of termination is given to Bank or
if Bank’s obligation to fund Credit Extensions terminates pursuant to the terms
of Section 2.1.1(c).  Notwithstanding any
such termination, Bank’s lien and security interest in the Collateral shall
continue until Borrower fully satisfies its Obligations.  If such termination is at Borrower’s election
or at Bank’s election due to the occurrence and continuance of an Event of
Default, Borrower shall pay to Bank, in addition to the payment of any other
expenses or fees then-owing, a termination fee in an amount equal to 2.0% of
the Maximum Dollar Amount if termination occurs on or before the first anniversary
of the Effective Date, and 1.0% of the Maximum Dollar Amount if termination
occurs after the first anniversary of the Effective Date; provided that no
termination fee shall be charged if the credit facility hereunder is

 5
 

 

replaced with a new
facility from a division of Silicon Valley Bank.  Upon payment in full of the Obligations and at such time as Bank’s obligation to make Credit Extensions
has terminated, Bank shall release its liens and security interests in the
Collateral and all rights therein shall revert to Borrower.

4.2          Authorization
to File Financing Statements.  Borrower hereby authorizes Bank to file
financing statements, without notice to Borrower, with all appropriate
jurisdictions to perfect or protect Bank’s interest or rights hereunder, including
a notice that any disposition of the Collateral, by either Borrower or any
other Person, shall be deemed to violate the rights of Bank under the Code.

5              REPRESENTATIONS AND WARRANTIES

Borrower
represents and warrants as follows:

5.1          Due
Organization and Authorization.  Borrower and each of its Subsidiaries are
duly existing and in good standing in their respective jurisdictions of
formation and are qualified and licensed to do business and are in good
standing in any jurisdiction in which the conduct of their business or their
ownership of property requires that they be qualified except where the failure
to do so could not reasonably be expected to have a Material Adverse
Change.  In connection with this Agreement,
Borrower has delivered to Bank a completed certificate signed by Borrower
entitled “Perfection Certificate”. 
Borrower represents and warrants to Bank that (a) Borrower’s exact legal
name is that indicated on the Perfection Certificate and on the signature page
hereof; (b) Borrower is an organization of the type and is organized in
the jurisdiction set forth in the Perfection Certificate; (c) the Perfection
Certificate accurately sets forth Borrower’s organizational identification
number or accurately states that Borrower has none; (d) the Perfection
Certificate accurately sets forth Borrower’s place of business, or, if more
than one, its chief executive office as well as Borrower’s mailing address (if
different than its chief executive office); (e) Borrower (and each of its
predecessors) has not, in the past five (5) years, changed its jurisdiction of
formation, organizational structure or type, or any organizational number
assigned by its jurisdiction; and (f) all other information set forth on the
Perfection Certificate pertaining to Borrower and each of its Subsidiaries is
accurate and complete.  If Borrower is
not now a Registered Organization but later becomes one, Borrower shall
promptly notify Bank of such occurrence and provide Bank with Borrower’s
organizational identification number.

The execution, delivery
and performance of the Loan Documents have been duly authorized, and do not
conflict with Borrower’s organizational documents, nor constitute an event of
default under any material agreement by which Borrower is bound.  Borrower is not in default under any
agreement to which it is a party or by which it is bound in which the default
could reasonably be expected to cause a Material Adverse Change.

5.2          Collateral.  Borrower has good title to the Collateral,
free of Liens except Permitted Liens. 
Borrower has no deposit account other than the deposit accounts with
Bank and deposit accounts described in the Perfection Certificate delivered to
Bank in connection herewith.

The Collateral is not in the possession of
any third party bailee (such as a warehouse). 
Except as hereafter disclosed to Bank in writing by Borrower, none of
the components of the Collateral shall be maintained at locations other than as
provided in the Perfection Certificate. 
In the event that Borrower, after the date hereof, intends to store or
otherwise deliver any portion of the Collateral to a bailee, then Borrower will
first receive the written consent of Bank and such bailee must acknowledge in
writing that the bailee is holding such Collateral for the benefit of Bank.

All Inventory is in all material respects of
good and marketable quality, free from material defects.

Borrower is the sole owner of its
Intellectual Property, except for non-exclusive licenses granted to its
customers in the ordinary course of business. 
Each Patent is valid and enforceable and no part of the Intellectual
Property has been judged invalid or unenforceable, in whole or in part, and to
the best of Borrower’s knowledge, no claim has been made that any part of the
Intellectual Property violates the rights of any third party except to the
extent such claim could not reasonably be expected to cause a Material Adverse
Change.

Except as noted on the Perfection
Certificate, Borrower is not a party to, nor is bound by, any material license or other agreement with respect to
which Borrower is the licensee that prohibits or otherwise restricts Borrower
from granting a security interest in Borrower’s interest in such license or
agreement or any other property. 
Borrower shall provide written notice to Bank within thirty days of
entering or becoming bound by any such license or agreement which is reasonably
likely to have a material impact on Borrower’s business or financial condition

 6
 

 

(other than over-the-counter software that is commercially available to
the public).  Borrower shall take such
steps as Bank requests to obtain the consent of, or waiver by, any person whose
consent or waiver is necessary for all such licenses or contract rights to be
deemed “Collateral” and for Bank to have a security interest in it that might
otherwise be restricted or prohibited by law or by the terms of any such
license or agreement (such consent or authorization may include a licensor’s
agreement to a contingent assignment of the license to Bank if Bank determines that
is necessary in its good faith judgment), whether now existing or entered into
in the future.

5.3          Accounts
Receivable.

(a)           For each Account with respect to
which Advances are requested, on the date each Advance is requested and made,
such Account shall be an Eligible Account, set forth in Section 13 below.

(b)           All
statements made and all unpaid balances appearing in all invoices, instruments
and other documents evidencing the Accounts are and shall be true and correct
and all such invoices, instruments and other documents, and all of Borrower’s
Books are genuine and in all respects what they purport to be.  All sales and other transactions underlying
or giving rise to each Account shall comply in all material respects with all
applicable laws and governmental rules and regulations.  Borrower has and will have no knowledge of
any actual or imminent Insolvency Proceeding of any Account Debtor whose
accounts are shown as Eligible Accounts in any Transaction Report.  To the best of Borrower’s knowledge, all signatures
and endorsements on all documents, instruments, and agreements relating to all
Accounts are and will be genuine, and all such documents, instruments and
agreements are and will be legally enforceable in accordance with their terms.

5.4          Litigation.  There are no actions or proceedings pending
or, to the knowledge of the Responsible Officers, threatened in writing by or
against Borrower or any of its Subsidiaries involving more than $50,000.

5.5          No
Material Deviation in Financial Statements.  All consolidated financial statements for
Borrower and any of its Subsidiaries delivered to Bank fairly present in all
material respects Borrower’s consolidated financial condition and Borrower’s
consolidated results of operations. 
There has not been any material deterioration in Borrower’s consolidated
financial condition since the date of the most recent financial statements
submitted to Bank.

5.6          Solvency.
Borrower is able to pay its debts (including trade debts) as they mature.

5.7          Regulatory
Compliance.  Borrower
is not an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act. 
Borrower is not engaged as one of its important activities in extending
credit for margin stock (under Regulations T and U of the Federal Reserve Board
of Governors).  Borrower has complied in
all material respects with the Federal Fair Labor Standards Act.  Borrower has not violated any laws,
ordinances or rules, the violation of which could reasonably be expected to
cause a Material Adverse Change.  None of
Borrower’s or any of its Subsidiaries’ properties or assets has been used by
Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous
Persons, in disposing, producing, storing, treating, or transporting any
hazardous substance other than legally. 
Borrower and each of its Subsidiaries have obtained all consents,
approvals and authorizations of, made all declarations or filings with, and
given all notices to, all government authorities that are necessary to continue
its business as currently conducted.

5.8          Subsidiaries;
Investments. 
Borrower does not have any Subsidiaries, other than Iteris Europe GmbH
and other Subsidiaries organized with the prior written consent of Bank, and
does not own any stock, partnership interest or other equity securities in any
other Person, except for Permitted Investments.

5.9          Tax
Returns and Payments; Pension Contributions.  Borrower has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower.  Borrower may defer payment of any contested
taxes, provided that Borrower (a) in good faith contests its obligation to pay
the taxes by appropriate proceedings promptly and diligently instituted and
conducted, (b) notifies Bank in writing of the commencement of, and any
material development in, the proceedings, (c) posts bonds or takes any other
steps required to prevent the governmental authority levying such contested
taxes from obtaining a Lien upon any of the Collateral that is other than a “Permitted
Lien”.  Borrower is unaware of any claims
or adjustments proposed for any of Borrower’s prior tax years which could
result in additional taxes becoming due and payable by Borrower.  Borrower has paid all amounts necessary to
fund all present pension, profit sharing and deferred compensation plans in
accordance with their terms, and Borrower has not withdrawn from participation
in, and has not permitted partial or complete termination of, or permitted the
occurrence of any other event with respect to, any such plan which could
reasonably be expected to result in any

 7
 

 

liability of Borrower, including any liability to the Pension Benefit
Guaranty Corporation or its successors or any other governmental agency.

5.10        Use
of Proceeds. 
Borrower shall use the proceeds of the Credit Extensions solely as
working capital, and to fund its general business requirements and not for
personal, family, household or agricultural purposes.

5.11        Full
Disclosure.  No
written representation, warranty or other statement of Borrower in any
certificate or written statement given to Bank, as of the date such
representations, warranties, or other statements were made, taken together with
all such written certificates and written statements given to Bank, contains
any untrue statement of a material fact or omits to state a material fact
necessary to make the statements contained in the certificates or statements
not misleading (it being recognized by Bank that the projections and forecasts
provided by Borrower in good faith and based upon reasonable assumptions are
not viewed as facts and that actual results during the period or periods
covered by such projections and forecasts may differ from the projected or
forecasted results).

6              AFFIRMATIVE
COVENANTS

Borrower shall do all of
the following:

6.1          Government
Compliance. 
Maintain its and all its Subsidiaries’ legal existence and good standing
in their respective jurisdictions of formation and maintain qualification in
each jurisdiction in which the failure to so qualify would reasonably be
expected to cause a Material Adverse Change. 
Borrower shall comply, and have each Subsidiary comply, with all laws,
ordinances and regulations to which it is subject, noncompliance with which
could reasonably be expected to cause a Material Adverse Change.

6.2          Financial
Statements, Reports, Certificates.

(a)           Borrower shall provide Bank with the
following:

(i)            a Transaction Report weekly and at the
time of each request for an Advance;

(ii)           within
fifteen (15) days after the end of each month,

(A)                              monthly accounts receivable agings,
aged by invoice date,

(B)                                monthly accounts payable agings,
aged by invoice date, and outstanding or held check registers, if any,

(C)                                monthly reconciliations of accounts
receivable agings (aged by invoice date), transaction reports, and general
ledger,

(D)                               monthly perpetual inventory reports
for Inventory valued on a first-in, first-out basis at the lower of cost or
market (in accordance with GAAP) or such other inventory reports as are
requested by Bank in its good faith business judgment;

(iii)                               as
soon as available, and in any event within thirty (30) days after the end of
each month, monthly unaudited financial statements;

(iv)                              within
thirty (30) days after the end of each month a monthly Compliance Certificate
signed by a Responsible Officer, certifying that as of the end of such month,
Borrower was in full compliance with all of the terms and conditions of this
Agreement, and setting forth calculations showing compliance with the financial
covenants set forth in this Agreement and such other information as Bank shall
reasonably request, including, without limitation, a statement that at the end
of such month there were no held checks;

(v)                                 [omitted];

(vi)                              within
thirty (30) days prior to the end of each fiscal year of Borrower, (A) annual
operating budgets (including income statements, balance sheets and cash flow
statements, by month) for the upcoming fiscal year of Borrower, and (B)

 8
 

 

annual financial projections for the following fiscal
year (on a quarterly basis) as approved by Borrower’s board of directors,
together with any related business forecasts used in the preparation of such
annual financial projections; and

(vii)                           [omitted].

(b)           At all times that Borrower is subject
to the reporting requirements under the Securities Exchange Act of 1934, as
amended, within five (5) days after filing, all reports on Form 10-K, 10-Q and
8-K filed with the Securities and Exchange Commission or a link thereto
on Borrower’s or another website on the Internet.

(c)           Prompt written notice of (i) any
material change in the composition of the Intellectual Property, (ii) the
registration of any Copyright, including any subsequent ownership right of
Borrower in or to any Copyright, Patent or Trademark not shown in the IP
Security Agreement, or (iii) Borrower’s knowledge of an event that
materially adversely affects the value of the Intellectual Property.

6.3          Accounts
Receivable.

(a)           Schedules
and Documents Relating to Accounts.  Borrower shall deliver to Bank transaction
reports and schedules of collections, as provided in Section 6.2, on Bank’s
standard forms; provided, however, that Borrower’s failure to execute and
deliver the same shall not affect or limit Bank’s Lien and other rights in all
of Borrower’s Accounts, nor shall Bank’s failure to advance or lend against a
specific Account affect or limit Bank’s Lien and other rights therein.  If requested by Bank, Borrower shall furnish
Bank with copies (or, at Bank’s request, originals) of all contracts, orders,
invoices, and other similar documents, and all shipping instructions, delivery
receipts, bills of lading, and other evidence of delivery, for any goods the
sale or disposition of which gave rise to such Accounts.  In addition, Borrower shall deliver to Bank,
on its request, the originals of all instruments, chattel paper, security
agreements, guarantees and other documents and property evidencing or securing
any Accounts, in the same form as received, with all necessary endorsements,
and copies of all credit memos.

(b)           Disputes.  Borrower shall promptly notify Bank of all
disputes or claims in excess of $15,000 relating to Accounts.  Borrower may forgive (completely or
partially), compromise, or settle any Account for less than payment in full, or
agree to do any of the foregoing so long as (i) Borrower does so in good
faith, in a commercially reasonable manner, in the ordinary course of business,
in arm’s-length transactions, and reports the same to Bank in the regular
reports provided to Bank; and (ii) no Default or Event of Default has
occurred and is continuing; and (iii) after taking into account all such
discounts, settlements and forgiveness, the total outstanding Advances will not
exceed the lesser of the Revolving Line or the Borrowing Base.

(c)           Collection of Accounts.  Borrower shall have the right to collect all
Accounts, unless and until a Default or an Event of Default has occurred and is
continuing.  Whether or not an Event of
Default has occurred and is continuing, Borrower shall hold all payments on,
and proceeds of, Accounts in trust for Bank, and Borrower shall immediately
deliver all such payments and proceeds to Bank in their original form, duly
endorsed, to be applied to the Obligations pursuant to the terms of Section 9.4
hereof.  Bank may, in its good faith
business judgment, require that all proceeds of Accounts be deposited by
Borrower into a lockbox account, or such other “blocked account” as Bank may
specify, pursuant to a blocked account agreement in such form as Bank may
specify in its good faith business judgment.

(d)           Returns.  Provided no Event of Default has occurred and
is continuing, if any Account Debtor returns any Inventory to Borrower,
Borrower shall promptly (i) determine the reason for such return,
(ii) issue a credit memorandum to the Account Debtor in the appropriate
amount, and (iii) provide a copy of such credit memorandum to Bank, upon
request from Bank.  In the event any
attempted return occurs after the occurrence and during the continuance of any
Event of Default, Borrower shall hold the returned Inventory in trust for Bank,
and immediately notify Bank of the return of the Inventory.

(e)           Verification.  Bank may, from time
to time, upon prior notice to Borrower (via an invoice copy request or
otherwise) verify directly with the respective Account Debtors the validity,
amount and other matters relating to the Accounts, either in the name of
Borrower or Bank or such other name as Bank may choose; provided, however,
the Bank shall not incur any liability for inadvertently or negligently failing
to provide such notice.

 9
 

 

(f)            No
Liability.  Bank shall not be responsible or liable for
any shortage or discrepancy in, damage to, or loss or destruction of, any
goods, the sale or other disposition of which gives rise to an Account, or for
any error, act, omission, or delay of any kind occurring in the settlement,
failure to settle, collection or failure to collect any Account, or for
settling any Account in good faith for less than the full amount thereof, nor
shall Bank be deemed to be responsible for any of Borrower’s obligations under
any contract or agreement giving rise to an Account.  Nothing herein shall, however, relieve Bank
from liability for its own gross negligence or willful misconduct.

6.4          Remittance
of Proceeds. 
Except as otherwise provided in Section 6.3(c), deliver, in kind, all
proceeds arising from the disposition of any Collateral to Bank in the original
form in which received by Borrower not later than the following Business Day
after receipt by Borrower, to be applied to the Obligations pursuant to the
terms of Section 9.4 hereof; provided that, if no Default or Event of Default
has occurred and is continuing, Borrower shall not be obligated to remit to
Bank the proceeds of the sale of worn out or obsolete Equipment disposed of by
Borrower in good faith in an arm’s length transaction for an aggregate purchase
price of $25,000 or less (for all such transactions in any fiscal year).  Borrower agrees that it will not commingle
proceeds of Collateral with any of Borrower’s other funds or property, but will
hold such proceeds separate and apart from such other funds and property and in
an express trust for Bank.  Nothing in
this Section limits the restrictions on disposition of Collateral set forth
elsewhere in this Agreement.

6.5          Taxes;
Pensions.  Timely file all
required tax returns and reports and timely pay all foreign, federal, state and
local taxes, assessments, deposits and contributions owed by Borrower except for
deferred payment of any taxes contested pursuant to the terms of Section 5.9
hereof, and pay all amounts necessary to fund all present pension, profit
sharing and deferred compensation plans in accordance with their terms.

6.6          Access to Collateral; Books and
Records.  At
reasonable times, on one (1) Business Day’s notice (provided no notice is
required if an Event of Default has occurred and is continuing), Bank, or its
agents, shall have the right to inspect the Collateral and the right to audit
and copy Borrower’s Books.  The parties
contemplate that such audits will be performed no more frequently than three
times per calendar year, but nothing herein restricts Bank’s right to conduct
such audits more frequently if (i) Bank believes that it is advisable to do so
in Bank’s good faith business judgment, or (ii) Bank believes in good faith
that a Default or Event of Default has occurred and is continuing; provided,
however, that Borrower will not be responsible for the expense of any more than
three (3) audits in any calendar year (other than audits performed when a
Default or Event of Default has occurred and is continuing).  The foregoing inspections and audits shall be
at Borrower’s expense, and the charge therefor shall be $750 per person per day
(or such higher amount as shall represent Bank’s then-current standard charge
for the same), plus reasonable out-of-pocket expenses.  In the event Borrower and Bank schedule an
audit more than ten (10) days in advance, and Borrower cancels or seeks to
reschedules the audit with less than ten (10) days written notice to Bank, then
(without limiting any of Bank’s rights or remedies), Borrower shall pay Bank a
fee of $1,000 plus any out-of-pocket expenses incurred by Bank to compensate
Bank for the anticipated costs and expenses of the cancellation or
rescheduling.

6.7          Insurance.  Keep its business and the Collateral insured
for risks and in amounts standard for companies in Borrower’s industry and
location and as Bank may reasonably request. 
Insurance policies shall be in a form, with companies, and in amounts
that are satisfactory to Bank.  All
property policies shall have a lender’s loss payable endorsement showing Bank
as an additional lender loss payee and waive subrogation against Bank, and all
liability policies shall show, or have endorsements showing, Bank as an
additional insured.  All policies (or the
loss payable and additional insured endorsements) shall provide that the
insurer must give Bank at least twenty (20) days notice before canceling,
amending, or declining to renew its policy. 
At Bank’s request, Borrower shall deliver certified copies of policies
and evidence of all premium payments. 
Proceeds payable under any policy shall, at Bank’s option, be payable to
Bank on account of the Obligations.  Notwithstanding
the foregoing, (a) so long as no Event of Default has occurred and is
continuing, Borrower shall have the option of applying the proceeds of any
casualty policy up to $50,000, in the aggregate, toward the replacement or
repair of destroyed or damaged property; provided that any such replaced or
repaired property (i) shall be of equal or like value as the replaced or
repaired Collateral and (ii) shall be deemed Collateral in which Bank has
been granted a first priority security interest, and (b) after the occurrence
and during the continuance of an Event of Default, all proceeds payable under
such casualty policy shall, at the option of Bank, be payable to Bank on
account of the Obligations.  If Borrower
fails to obtain insurance as required under this Section 6.7 or to pay any
amount or furnish any required proof of payment to third persons and Bank, Bank
may make all or part of such payment or obtain such insurance policies required
in this Section 6.7, and take any action under the policies Bank deems prudent.

 10

 

6.8          Operating
Accounts.

(a)           Maintain its and its Subsidiaries’
primary depository and operating accounts and securities accounts maintained in the United States with Bank and Bank’s affiliates which accounts shall represent at least
85% of the dollar value of Borrower’s and such Subsidiaries accounts at all
financial institutions.

(b)           Disclose in writing to Bank all
Collateral Accounts maintained with any bank or financial institution other
than Bank or its Affiliates.  In
addition, for each Collateral Account that Borrower maintains with any bank or
financial institution other than Bank or its Affiliates, Borrower shall cause
the deposits and/or securities maintained therein to be transferred to Bank or
its Affiliates within 90 days of the Effective Date and for any deposits and/or
securities not so transferred to Bank and its Affiliates within such time
period, Borrower shall cause such applicable bank or financial institution
(other than Bank) at or with which any Collateral Account is maintained to execute
and deliver a Control Agreement or other appropriate instrument with respect to
such Collateral Account to perfect Bank’s Lien in such Collateral Account in
accordance with the terms hereunder.  The
provisions of the previous sentence shall not apply to deposit accounts
exclusively used for payroll, payroll taxes and other employee wage and benefit
payments to or for the benefit of Borrower’s employees and identified to Bank
by Borrower as such.

6.9          Financial
Covenants.

Borrower shall
maintain at all times, to be tested as of the last day of each month, unless
otherwise noted, on a consolidated basis:

(a)           Tangible
Net Worth.  A Tangible Net Worth of
at least $4,000,000 (“Minimum Tangible Net Worth”)
plus (i) 25% of all consideration received after the date hereof for equity
securities and subordinated debt of the Borrower, plus (ii) 25% of the Borrower’s
net income in each fiscal quarter ending after the date hereof.  Increases in the Minimum Tangible Net Worth
based on consideration received for equity securities and subordinated debt of
the Borrower shall be effective as of the end of the month in which such
consideration is received, and shall continue effective thereafter. Increases
in the Minimum Tangible Net Worth based on net income shall be effective on the
last day of the fiscal quarter in which said net income is realized, and shall
continue effective thereafter. In no event shall the Minimum Tangible Net Worth
be decreased.

6.10        Intellectual
Property Rights. 
Borrower shall:  (a) protect,
defend and maintain the validity and enforceability of its intellectual
property; (b) promptly advise Bank in writing of material infringements of its
intellectual property; and (c) not allow any intellectual property material to
Borrower’s business to be abandoned, forfeited or dedicated to the public
without Bank’s written consent.  If
Borrower decides to register any copyrights or mask works in the United States
Copyright Office, Borrower shall: (x) provide Bank with at least fifteen (15)
days prior written notice of its intent to register such copyrights or mask
works together with a copy of the application it intends to file with the
United States Copyright Office (excluding exhibits thereto); (y) execute an
intellectual property security agreement or such other documents as Bank may
reasonably request to maintain the perfection and priority of Bank’s security
interest in the copyrights or mask works intended to be registered with the
United States Copyright Office; and (z) record such intellectual property security
agreement with the United States Copyright Office contemporaneously with filing
the copyright or mask work application(s) with the United States Copyright
Office.  Borrower shall promptly provide
to Bank a copy of the application(s) filed with the United States Copyright
Office together with evidence of the recording of the intellectual property
security agreement necessary for Bank to maintain the perfection and priority
of its security interest in such copyrights or mask works.  Borrower shall provide written notice to Bank
of any application filed by Borrower in the United States Patent and Trademark
Office for a patent or to register a trademark or service mark within 30 days
after any such filing.

6.11        Litigation
Cooperation. 
From the date hereof and continuing through the termination of this
Agreement, make available to Bank, without expense to Bank, Borrower and its
officers, employees and agents and Borrower’s books and records, to the extent
that Bank may deem them reasonably necessary to prosecute or defend any
third-party suit or proceeding instituted by or against Bank with respect to
any Collateral or relating to Borrower.

6.12        [omitted]

 11
 

 

6.13        Further
Assurances. 
Borrower shall execute any further instruments and take further action
as Bank reasonably requests to perfect or continue Bank’s Lien in the
Collateral or to effect the purposes of this Agreement.

7              NEGATIVE COVENANTS

Borrower shall not do any
of the following without Bank’s prior written consent:

7.1          Dispositions.  Convey, sell, lease, transfer or otherwise
dispose of (collectively, “Transfer”),
or permit any of its Subsidiaries to Transfer, all or any part of its business
or property, except for (a) Transfers of Inventory in the ordinary course
of business; (b) Transfers of worn-out or obsolete Equipment; and (c)
Transfers consisting of Permitted Liens and Permitted Investments.

7.2          Changes
in Business, Management, Ownership, or Business Locations.

(a)           Engage in or permit any of its Subsidiaries to engage in
any business other than the businesses currently engaged in by Borrower and
such Subsidiary, as applicable, or reasonably related thereto;

(b)           liquidate or dissolve; or

(c)           permit any person or
two or more persons acting in concert from acquiring beneficial ownership
(within the meaning of Rule 13(d)(3) of the Securities and Exchange Commission
under the Securities Exchange Act of 1934), directly or indirectly, of shares
of stock of the Borrower representing more than 50% of the combined voting
power of all shares of stock of the Borrower entitled to vote in the election
of directors (other than by the sale of Borrower’s equity securities in a
public offering or to venture capital investors so long as Borrower identifies
to Bank the venture capital investors prior to the closing of the transaction);
or

(d)           without at least thirty (30) days prior written notice to
Bank: (1) add any new offices or business locations, including warehouses
(unless such new offices or business locations contain assets and property of
Borrower with an aggregate value of less than $10,000), (2) change its
jurisdiction of organization, (3) change its organizational structure or
type, (4) change its legal name, or (5) change its organizational number
(if any) assigned by its jurisdiction of organization.

7.3          Mergers
or Acquisitions. 
Merge or consolidate, or permit any of its Subsidiaries to merge or
consolidate, with any other Person, or acquire, or permit any of its
Subsidiaries to acquire, all or substantially all of the capital stock or property
of another Person, except that a Subsidiary of Borrower may merge or
consolidate into another Subsidiary of Borrower or into Borrower.

7.4          Indebtedness.  Create, incur, assume, or be liable for any
Indebtedness, or permit any Subsidiary to do so, other than Permitted
Indebtedness.

7.5          Encumbrance.  Create, incur, or allow any Lien on any of
its property or assets, or assign
or convey any right to receive income, including the sale of any Accounts, or
permit any of its Subsidiaries to do so, except for Permitted Liens, or permit
any Collateral not to be subject to the first priority security interest
granted herein (except as otherwise specifically allowed in the definition of
Permitted Liens), or enter into any agreement, document, instrument or other
arrangement (except with or in favor of Bank) with any Person which directly or
indirectly prohibits or has the effect of prohibiting Borrower or any
Subsidiary from assigning, mortgaging, pledging, granting a security interest
in or upon, or encumbering any of Borrower’s or any Subsidiary’s intellectual
property, except as is otherwise permitted in Section 7.1 hereof and the
definition of “Permitted Lien” herein.

7.6          Maintenance
of Collateral Accounts.  Maintain any Collateral Account except
pursuant to the terms of Section 6.8.(b) hereof.

7.7          Investments;
Distributions. 
(a) Directly or indirectly make any Investment other than Permitted
Investments, or permit any of its Subsidiaries to do so; or (b) pay any
dividends or make any distribution or payment or redeem, retire or purchase any
capital stock, provided that (i) Borrower may convert any of its
convertible securities into other securities pursuant to the terms of such
convertible securities or otherwise in exchange thereof, (ii) Borrower may
pay dividends solely in common stock; and (iii) Borrower may repurchase the
stock of former

 12
 

 

employees or consultants pursuant to stock repurchase agreements so
long as no Default or Event of Default has occurred at the time of such
repurchase and would not exist after giving effect to such repurchase, provided
such repurchase does not exceed in the aggregate of $50,000 per fiscal year.

7.8          Transactions
with Affiliates. 
Directly or indirectly enter into or permit to exist any material
transaction with any Affiliate of Borrower, except for transactions that are in
the ordinary course of Borrower’s business, upon fair and reasonable terms that
are no less favorable to Borrower than would be obtained in an arm’s length
transaction with a non-affiliated Person.

7.9          Subordinated
Debt.  (a) Make
or permit any payment on any Subordinated Debt, except under the terms of the
subordination, intercreditor, or other similar agreement to which such
Subordinated Debt is subject, or (b) amend any provision in any document
relating to the Subordinated Debt which would increase the amount thereof or
the amount of any permitted payments thereunder or adversely affect the
subordination thereof to Obligations owed to Bank.

7.10        Compliance.  Become an “investment company” or a company
controlled by an “investment company”, under the Investment Company Act of 1940
or undertake as one of its important activities extending credit to purchase or
carry margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System), or use the proceeds of any Credit Extension for that
purpose; fail to meet the minimum funding requirements of ERISA, permit a
Reportable Event or Prohibited Transaction, as defined in ERISA, to occur; fail
to comply with the Federal Fair Labor Standards Act or violate any other law or
regulation, if the violation could reasonably be expected to cause a Material
Adverse Change, or permit any of its Subsidiaries to do so; withdraw or permit
any Subsidiary to withdraw from participation in, permit partial or complete termination
of, or permit the occurrence of any other event with respect to, any present
pension, profit sharing and deferred compensation plan which could reasonably
be expected to result in any liability of Borrower, including any liability to
the Pension Benefit Guaranty Corporation or its successors or any other
governmental agency.

8              EVENTS OF DEFAULT

Any one of the following
shall constitute an event of default (an “Event of Default”)
under this Agreement:

8.1          Payment
Default. 
Borrower fails to (a) make any payment of principal or interest on
any Credit Extension on its due date, or (b) pay any other Obligations
within three (3) Business Days after such Obligations are due and payable.  During the cure period, the failure to cure
the payment default is not an Event of Default (but no Credit Extension will be
made during the cure period);

8.2          Covenant
Default.

(a)           Borrower fails or neglects to perform
any obligation in Sections 6.2, 6.3, 6.4, 6.6, 6.8, or 6.9, or violates any
covenant in Section 7; or

(b)           Borrower fails or neglects to perform, keep, or observe
any other term, provision, condition, covenant or agreement contained in this
Agreement, any Loan Documents, and as to any default (other than those
specified in this Section 8) under such other term, provision, condition,
covenant or agreement that can be cured, has failed to cure the default within
ten (10) days after the occurrence thereof; provided, however, that if the
default cannot by its nature be cured within the ten (10) day period or cannot
after diligent attempts by Borrower be cured within such ten (10) day period,
and such default is likely to be cured within a reasonable time, then Borrower
shall have an additional period (which shall not in any case exceed thirty (30)
days) to attempt to cure such default, and within such reasonable time period
the failure to cure the default shall not be deemed an Event of Default (but no
Credit Extensions shall be made during such cure period).  Grace periods provided under this section
shall not apply, among other things, to financial covenants or any other
covenants set forth in subsection (a) above;

8.3          Material
Adverse Change. 
A Material Adverse Change occurs;

8.4          Attachment.  (a) Any material portion of Borrower’s assets
is attached, seized, levied on, or comes into possession of a trustee or
receiver and the attachment, seizure or levy is not removed in ten (10) days;
(b) the service of process upon Bank seeking to attach, by trustee or
similar process, any funds of Borrower, or any

 13
 

 

entity under control of Borrower (including a subsidiary) on deposit
with Bank; (c) Borrower is enjoined, restrained, or prevented by court order
from conducting a material part of its business; (d) a judgment or other claim
in excess of $10,000 becomes a Lien on any of Borrower’s assets; or (e) a
notice of lien, levy, or assessment is filed against any of Borrower’s assets
by any government agency and not paid within ten (10) days after Borrower
receives notice.  These are not Events of
Default if stayed or if a bond is posted pending contest by Borrower within ten
days after the date such events occur (but no Credit Extensions shall be made
during the cure period);

8.5          Insolvency.  Borrower is unable to pay its debts
(including trade debts) as they become due or otherwise becomes insolvent; (b)
Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is
begun against Borrower and not dismissed or stayed within thirty (30) days (but
no Credit Extensions shall be made while of any of the conditions described in
clause (a) exist and/or until any Insolvency Proceeding is dismissed);

8.6          Other
Agreements. 
There is a default in any agreement to which Borrower or any Guarantor
is a party with a third party or parties resulting in a right by such third
party or parties, whether or not exercised, to accelerate the maturity of any
Indebtedness in an amount in excess of $50,000 or that could result in a
Material Adverse Change with respect to Borrower’s or any Guarantor; provided,
however, that the Event of Default under this Section 8.6 caused by the
occurrence of a default under such other agreement shall be cured or waived for
purposes of this Agreement upon Bank receiving written notice from the party
asserting such default of such cure or waiver of the default under such other
agreement, if at the time of such cure or waiver under such other agreement (a)
Bank has not declared an Event of Default under this Agreement and/or exercised
any rights with respect thereto; (b) any such cure or waiver does not result in
an Event of Default under any other provision of this Agreement or any Loan
Document; and (c) in connection with any such cure or waiver under such
other agreement, the terms of any agreement with such third party are not
modified or amended in any manner which could in the good faith judgment of
Bank be materially less advantageous to Borrower or any Guarantor;

8.7          Judgments.  A judgment or judgments for the payment of
money in an amount, individually or in the aggregate, of $50,000 or more (not
covered by independent third-party insurance) shall be rendered against
Borrower and shall remain unsatisfied and unstayed for a period of ten (10)
days after the entry thereof (provided that no Credit Extensions will be made
prior to the satisfaction or stay of such judgment);

8.8          Misrepresentations.  Borrower or any Person acting for Borrower
makes any representation, warranty, or other statement now or later in this
Agreement, any Loan Document or in any writing delivered to Bank or to induce
Bank to enter this Agreement or any Loan Document, and such representation,
warranty, or other statement is incorrect in any material respect when made;

8.9          Subordinated
Debt.  A default
or breach occurs under any agreement between Borrower and any creditor of
Borrower that signed a subordination, intercreditor, or other similar agreement
with Bank, or any creditor that has signed such an agreement with Bank breaches
any terms of such agreement; or

8.10        Guaranty.  (a) Any guaranty of any Obligations
terminates or ceases for any reason to be in full force and effect; (b) any
Guarantor does not perform any obligation or covenant under any guaranty of the
Obligations; (c) any circumstance described in Sections 8.3, 8.4, 8.5, 8.7, or
8.8. occurs with respect to any Guarantor, or (d) the death, liquidation,
winding up, or termination of existence of any Guarantor; or
(e) (i) a material impairment in the perfection or priority of Bank’s
Lien in the collateral provided by Guarantor or in the value of such collateral
or (ii) a material adverse change in the general affairs, management,
results of operation, condition (financial or otherwise) or the prospect of
repayment of the Obligations occurs with respect to any Guarantor.

9              BANK’S RIGHTS AND REMEDIES

9.1          Rights
and Remedies. 
If an Event of Default has occurred and is continuing, Bank may, without
notice or demand, do any or all of the following:

(a)           declare all Obligations immediately
due and payable (but if an Event of Default described in Section 8.5 occurs all
Obligations are immediately due and payable without any action by Bank);

(b)           stop advancing money or extending
credit for Borrower’s benefit under this Agreement or under any other agreement
between Borrower and Bank;

 14
 

 

(c)           demand that Borrower (i) deposit cash
with Bank in an amount equal to the aggregate amount of any Letters of Credit
remaining undrawn, as collateral security for the repayment of any future
drawings under such Letters of Credit, and Borrower shall forthwith deposit and
pay such amounts, and (ii) pay in advance all Letter of Credit fees scheduled
to be paid or payable over the remaining term of any Letters of Credit;

(d)           terminate any FX Contracts;

(e)           demand payment of, and collect any
Accounts and General Intangibles comprising Collateral, settle or adjust disputes
and claims directly with Account Debtors for amounts, on terms, and in any
order that Bank considers advisable, notify any Account Debtor or other Person
owing Borrower money of Bank’s security interest in such funds, verify the
amount of the same and collect the same;

(f)            make any payments and do any acts it
considers necessary or reasonable to protect the Collateral and/or its security
interest in the Collateral.  Borrower
shall assemble the Collateral if Bank requests and make it available as Bank
designates.  Bank may enter premises
where the Collateral is located, take and maintain possession of any part of
the Collateral, and pay, purchase, contest, or compromise any Lien which
appears to be prior or superior to its security interest and pay all expenses
incurred. Borrower grants Bank a license to enter and occupy any of its
premises, without charge, to exercise any of Bank’s rights or remedies;

(g)           apply to the Obligations any (i)
balances and deposits of Borrower it holds, or (ii) any amount held by Bank
owing to or for the credit or the account of Borrower;

(h)           ship, reclaim, recover, store,
finish, maintain, repair, prepare for sale, advertise for sale, and sell the
Collateral.  Bank is hereby granted a
non-exclusive, royalty-free license or other right to use, without charge,
Borrower’s labels, patents, copyrights, mask works, rights of use of any name,
trade secrets, trade names, trademarks, service marks, and advertising matter,
or any similar property as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in
connection with Bank’s exercise of its rights under this Section, Borrower’s
rights under all licenses and all franchise agreements inure to Bank’s benefit;

(i)            place a “hold” on any account
maintained with Bank and/or deliver a notice of exclusive control, any
entitlement order, or other directions or instructions pursuant to any Control
Agreement or similar agreements providing control of any Collateral;

(j)            demand and receive possession of
Borrower’s Books; and

(k)           exercise all rights and remedies
available to Bank under the Loan Documents or at law or equity, including all
remedies provided under the Code (including disposal of the Collateral pursuant
to the terms thereof).

9.2          Power
of Attorney. 
Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of
an Event of Default, to:  (a) endorse Borrower’s
name on any checks or other forms of payment or security; (b) sign Borrower’s
name on any invoice or bill of lading for any Account or drafts against Account
Debtors; (c) settle and adjust disputes and claims about the Accounts directly
with Account Debtors, for amounts and on terms Bank determines reasonable; (d)
make, settle, and adjust all claims under Borrower’s insurance policies; (e)
pay, contest or settle any Lien, charge, encumbrance, security interest, and
adverse claim in or to the Collateral, or any judgment based thereon, or
otherwise take any action to terminate or discharge the same; and (f) transfer
the Collateral into the name of Bank or a third party as the Code permits.  Borrower hereby appoints Bank as its lawful
attorney-in-fact to sign Borrower’s name on any documents necessary to perfect
or continue the perfection of any security interest regardless of whether an
Event of Default has occurred until all Obligations have been satisfied in full
and Bank is under no further obligation to make Credit Extensions hereunder.  Bank’s foregoing appointment as Borrower’s
attorney in fact, and all of Bank’s rights and powers, coupled with an
interest, are irrevocable until all Obligations have been fully repaid and
performed and Bank’s obligation to provide Credit Extensions terminates.

9.3          Protective
Payments.  If
Borrower fails to obtain the insurance called for by Section 6.7 or fails to
pay any premium thereon or fails to pay any other amount which Borrower is
obligated to pay under this Agreement or any other Loan Document, Bank may
obtain such insurance or make such payment, and all amounts

 15
 

 

so paid by Bank are Bank Expenses and immediately due and payable,
bearing interest at the then highest applicable rate, and secured by the
Collateral.  Bank will make reasonable
efforts to provide Borrower with notice of Bank obtaining such insurance at the
time it is obtained or within a reasonable time thereafter.  No payments by Bank are deemed an agreement
to make similar payments in the future or Bank’s waiver of any Event of
Default.

9.4          Application
of Payments and Proceeds.  Unless an Event of Default has occurred and is
continuing, Bank shall apply any funds in its possession, whether from Borrower
account balances, payments, or proceeds realized as the result of any
collection of Accounts or other disposition of the Collateral, first, to Bank
Expenses, including without limitation, the reasonable costs, expenses,
liabilities, obligations and attorneys’ fees incurred by Bank in the exercise
of its rights under this Agreement; second, to the interest due upon any of the
Obligations; and third, to the principal of the Obligations and any applicable
fees and other charges, in such order as Bank shall determine in its sole
discretion.  Any surplus shall be paid to
Borrower or other Persons legally entitled thereto; Borrower shall remain
liable to Bank for any deficiency.  If an
Event of Default has occurred and is continuing, Bank may apply any funds in
its possession, whether from Borrower account balances, payments, proceeds
realized as the result of any collection of Accounts or other disposition of
the Collateral, or otherwise, to the Obligations in such order as Bank shall
determine in its sole discretion.  Any
surplus shall be paid to Borrower or other Persons legally entitled thereto;
Borrower shall remain liable to Bank for any deficiency.  If Bank, in its good faith business judgment,
directly or indirectly enters into a deferred payment or other credit
transaction with any purchaser at any sale of Collateral, Bank shall have the
option, exercisable at any time, of either reducing the Obligations by the
principal amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Bank of cash therefor.

9.5          Bank’s
Liability for Collateral.  So long as Bank complies with reasonable
banking practices regarding the safekeeping of the Collateral in the possession
or under the control of Bank, Bank shall not be liable or responsible for: (a)
the safekeeping of the Collateral; (b) any loss or damage to the Collateral; (c)
any diminution in the value of the Collateral; or (d) any act or default of any
carrier, warehouseman, bailee, or other Person. 
Borrower bears all risk of loss, damage or destruction of the
Collateral.

9.6          No
Waiver; Remedies Cumulative.  Bank’s failure, at any time or times, to
require strict performance by Borrower of any provision of this Agreement or
any other Loan Document shall not waive, affect, or diminish any right of Bank
thereafter to demand strict performance and compliance herewith or therewith.  No waiver hereunder shall be effective unless
signed by Bank and then is only effective for the specific instance and purpose
for which it is given.  Bank’s rights and
remedies under this Agreement and the other Loan Documents are cumulative.  Bank has all rights and remedies provided
under the Code, by law, or in equity. 
Bank’s exercise of one right or remedy is not an election, and Bank’s
waiver of any Event of Default is not a continuing waiver.  Bank’s delay in exercising any remedy is not
a waiver, election, or acquiescence.

9.7          Demand
Waiver. 
Borrower waives demand, notice of default or dishonor, notice of payment
and nonpayment, notice of any default, nonpayment at maturity, release,
compromise, settlement, extension, or renewal of accounts, documents,
instruments, chattel paper, and guarantees held by Bank on which Borrower is
liable.

10           NOTICES

All notices, consents,
requests, approvals, demands, or other communication (collectively, “Communication”), other than Advance requests made pursuant to
Section 3.4, by any party to this Agreement or any other Loan Document must be
in writing and be delivered or sent by facsimile at the addresses or facsimile
numbers listed below.  Bank or Borrower
may change its notice address by giving the other party written notice
thereof.  Each such Communication shall
be deemed to have been validly served, given, or delivered: (a) upon the
earlier of actual receipt and three (3) Business Days after deposit in the U.S.
mail, registered or certified mail, return receipt requested, with proper
postage prepaid; (b) upon transmission, when sent by facsimile transmission
(with such facsimile promptly confirmed by delivery of a copy by personal
delivery or United States mail as otherwise provided in this Section 10); (c) one
(1) Business Day after deposit with a reputable overnight courier with all
charges prepaid; or (d) when delivered, if hand-delivered by messenger, all of
which shall be addressed to the party to be notified and sent to the address or
facsimile number indicated below. 
Advance requests made pursuant to Section 3.4 must be in writing and may
be in the form of electronic mail, delivered to Bank by Borrower at the e-mail
address of Bank provided below and shall be deemed to have been validly served,
given, or delivered when sent (with such electronic mail promptly confirmed by
delivery of a copy by personal delivery or United States mail as otherwise
provided in this Section 10).  Bank or
Borrower may change its address, facsimile number, or

 16
 

 

electronic mail address
by giving the other party written notice thereof in accordance with the terms
of this Section 10.

If to Borrower:                                                        Iteris,
Inc.

1515 South Manchester Avenue

Anaheim, CA  92802

Attn:          James S. Miele

Fax:             714-780-7246

Email:         jsm@iteris.com

If to Bank:                                                                              Silicon
Valley Bank 

38 Technology West, Suite 150

Irvine, CA  92618

Attn:          Derek
Brunelle

Fax:             949-789-1930

Email:         dbrunelle@svb.com

11           CHOICE OF LAW, VENUE, JURY TRIAL
WAIVER AND JUDICIAL REFERENCE.

California law governs the Loan Documents without regard
to principles of conflicts of law. 
Borrower and Bank each submit to the exclusive jurisdiction of the State
and Federal courts in Santa Clara County, California; provided, however, that
nothing in this Agreement shall be deemed to operate to preclude Bank from
bringing suit or taking other legal action in any other jurisdiction to realize
on the Collateral or any other security for the Obligations, or to enforce a
judgment or other court order in favor of Bank. 
Borrower expressly submits and consents in advance to such jurisdiction
in any action or suit commenced in any such court, and Borrower hereby waives
any objection that it may have based upon lack of personal jurisdiction,
improper venue, or forum non conveniens and hereby consents to the granting of
such legal or equitable relief as is deemed appropriate by such court.  Borrower hereby waives personal service of
the summons, complaints, and other process issued in such action or suit and
agrees that service of such summons, complaints, and other process may be made
by registered or certified mail addressed to Borrower at the address set forth
in Section 10 of this Agreement and that service so made shall be deemed
completed upon the earlier to occur of Borrower’s actual receipt thereof or
three (3) days after deposit in the U.S. mails, proper postage prepaid.

TO THE EXTENT PERMITTED BY APPLICABLE LAW,
BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE
OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR
ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL
OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER
INTO THIS AGREEMENT.  EACH PARTY HAS
REVIEWED THIS WAIVER WITH ITS COUNSEL.

WITHOUT
INTENDING IN ANY WAY TO LIMIT THE PARTIES’ AGREEMENT TO WAIVE THEIR RESPECTIVE
RIGHT TO A TRIAL BY JURY, if the above waiver of the right to a trial by jury
is not enforceable, the parties hereto agree that any and all disputes or
controversies of any nature between them arising at any time shall be decided
by a reference to a private judge, mutually selected by the parties (or, if
they cannot agree, by the Presiding Judge of the Santa Clara County, California
Superior Court) appointed in accordance with California Code of Civil Procedure
Section 638 (or pursuant to comparable provisions of federal law if the dispute
falls within the exclusive jurisdiction of the federal courts), sitting without
a jury, in Santa Clara County, California; and the parties hereby submit to the
jurisdiction of such court.  The
reference proceedings shall be conducted pursuant to and in accordance with the
provisions of California Code of Civil Procedure §§ 638 through 645.1,
inclusive.  The private judge shall have
the power, among others, to grant provisional relief, including without
limitation, entering temporary restraining orders, issuing preliminary and
permanent injunctions and appointing receivers. 
All such proceedings shall be closed to the public and confidential and
all records relating thereto shall be permanently sealed.  If during the course of any dispute, a party
desires to seek provisional relief, but a judge has not been appointed at that
point pursuant to the judicial reference procedures, then such party may apply
to the Santa Clara County, California Superior Court for such relief.  The proceeding before the private judge shall
be conducted in the same manner as it would be before a

 17
 

 

court
under the rules of evidence applicable to judicial proceedings.  The parties shall be entitled to discovery
which shall be conducted in the same manner as it would be before a court under
the rules of discovery applicable to judicial proceedings.  The private judge shall oversee discovery and
may enforce all discovery rules and order applicable to judicial proceedings in
the same manner as a trial court judge. 
The parties agree that the selected or appointed private judge shall
have the power to decide all issues in the action or proceeding, whether of
fact or of law, and shall report a statement of decision thereon pursuant to
the California Code of Civil Procedure § 644(a).  Nothing in this paragraph shall limit the
right of any party at any time to exercise self-help remedies, foreclose against
collateral, or obtain provisional remedies. 
The private judge shall also determine all issues relating to the
applicability, interpretation, and enforceability of this paragraph.

12           GENERAL PROVISIONS

12.1        Successors
and Assigns. 
This Agreement binds and is for the benefit of the successors and
permitted assigns of each party. 
Borrower may not assign this Agreement or any rights or obligations
under it without Bank’s prior written consent (which may be granted or withheld
in Bank’s discretion).  Bank has the
right, without the consent of or notice to Borrower, to sell, transfer,
negotiate, or grant participation in all or any part of, or any interest in,
Bank’s obligations, rights, and benefits under this Agreement and the other
Loan Documents.

12.2        Indemnification.  Borrower agrees to indemnify, defend and hold
Bank and its directors, officers, employees, agents, attorneys, or any other
Person affiliated with or representing Bank harmless against:  (a) all obligations, demands, claims,
and liabilities (collectively, “Claims”) asserted by any other party in
connection with the transactions contemplated by the Loan Documents; and (b)
all losses or Bank Expenses incurred, or paid by Bank from, following, or
arising from transactions between Bank and Borrower (including reasonable
attorneys’ fees and expenses), except for Claims and/or losses directly caused
by Bank’s gross negligence or willful misconduct.

12.3        Limitation
of Actions. Any
claim or cause of action by Borrower against Bank, its directors, officers,
employees, agents, accountants, attorneys, or any other Person affiliated with
or representing Bank based upon, arising from, or relating to this Loan
Agreement or any other Loan Document, or any other transaction contemplated
hereby or thereby or relating hereto or thereto, or any other matter, cause or
thing whatsoever, occurred, done, omitted or suffered to be done by Bank, its
directors, officers, employees, agents, accountants or attorneys, shall be
barred unless asserted by Borrower by the commencement of an action or
proceeding in a court of competent jurisdiction by (a) the filing of a
complaint within one year from the earlier of (i) the date any of Borrower’s
officers or directors had knowledge of the first act, the occurrence or
omission upon which such claim or cause of action, or any part thereof, is
based, or (ii) the date this Agreement is terminated, and (b) the service of a
summons and complaint on an officer of Bank, or on any other person authorized
to accept service on behalf of Bank, within thirty (30) days thereafter.  Borrower agrees that such one-year period is
a reasonable and sufficient time for Borrower to investigate and act upon any
such claim or cause of action.  The
one-year period provided herein shall not be waived, tolled, or extended except
by the written consent of Bank in its sole discretion.  This provision shall survive any termination
of this Loan Agreement or any other Loan Document.

12.4        Time
of Essence. 
Time is of the essence for the performance of all Obligations in this
Agreement.

12.5        Severability
of Provisions. 
Each provision of this Agreement is severable from every other provision
in determining the enforceability of any provision.

12.6        Amendments
in Writing; Integration.  All amendments to this Agreement must be in
writing signed by both Bank and Borrower. 
This Agreement and the Loan Documents represent the entire agreement
about this subject matter and supersede prior negotiations or agreements.  All prior agreements, understandings,
representations, warranties, and negotiations between the parties about the
subject matter of this Agreement and the Loan Documents merge into this
Agreement and the Loan Documents.

12.7        Counterparts.  This Agreement may be executed in any number
of counterparts and by different parties on separate counterparts, each of
which, when executed and delivered, are an original, and all taken together,
constitute one Agreement.

12.8        Survival.  All covenants, representations and warranties
made in this Agreement continue in full force until this Agreement has
terminated pursuant to its terms and all Obligations (other than inchoate
indemnity

 18
 

 

obligations and any other obligations which, by their terms, are to
survive the termination of this Agreement) have been satisfied.  The obligation of Borrower in Section 12.2 to
indemnify Bank shall survive until the statute of limitations with respect to
all claims and causes of action with respect to which indemnity is given to
Bank shall have run.

12.9        Confidentiality.  In handling any confidential information,
Bank shall exercise the same degree of care that it exercises for its own
proprietary information, but disclosure of information may be made: (a) to Bank’s
Subsidiaries or Affiliates; (b) to prospective transferees or purchasers of any
interest in the Credit Extensions (provided, however, Bank shall use
commercially reasonable efforts to obtain such prospective transferee’s or
purchaser’s agreement to the terms of this provision); (c) as required by
law, regulation, subpoena, or other order; (d) to Bank’s regulators or as
otherwise required in connection with Bank’s examination or audit; and (e) as
Bank considers appropriate in exercising remedies under this Agreement.  Confidential information does not include
information that either: (i) is in the public domain or in Bank’s possession
when disclosed to Bank, or becomes part of the public domain after disclosure
to Bank; or (ii) is disclosed to Bank by a third party, if Bank does not know
that the third party is prohibited from disclosing the information.

12.10      Attorneys’
Fees, Costs and Expenses.  In any action or proceeding between Borrower
and Bank arising out of or relating to the Loan Documents, the prevailing party
shall be entitled to recover its reasonable attorneys’ fees and other costs and
expenses incurred, in addition to any other relief to which it may be entitled.

13           DEFINITIONS

13.1        Definitions.  As used in this Agreement, the following
terms have the following meanings:

“Account” is any
“account” as defined in the Code with such additions to such term as may
hereafter be made, and includes, without limitation, all accounts receivable
and other sums owing to Borrower.

“Account Debtor”
is any “account debtor” as defined in the Code with such additions to such term
as may hereafter be made.

“Advance” or “Advances” means an advance (or advances) under the Revolving
Line.

“Affiliate” of
any Person is a Person that owns or controls directly or indirectly the Person,
any Person that controls or is controlled by or is under common control with
the Person, and each of that Person’s senior executive officers, directors,
partners and, for any Person that is a limited liability company, that Person’s
managers and members.

“Agreement” is
defined in the preamble hereof.

“Availability Amount”
is at any time (a) the lesser of (i) the Revolving Line or (ii) the Borrowing
Base minus (b) the amount of all outstanding Letters of Credit (including
drawn but unreimbursed Letters of Credit) minus (c) an amount equal to the
Letter of Credit Reserves, minus (d) the FX Reserve, and minus (e) the
outstanding principal balance of any Advances (including any amounts used for
Cash Management Services) and minus (f) the current principal amount
outstanding of the Term Loan.

“Bank” is
defined in the preamble hereof.

“Bank Expenses”
are all audit fees and expenses, costs, and expenses (including reasonable
attorneys’ fees and expenses) for preparing, negotiating, administering,
defending and enforcing the Loan Documents (including, without limitation,
those incurred in connection with appeals or Insolvency Proceedings) or
otherwise incurred with respect to Borrower.

“Bankruptcy-Related
Defaults” is defined in Section 9.1.

 “Borrower” is defined in the preamble hereof.

 19
 

 

“Borrower’s Books”
are all Borrower’s books and records including ledgers, federal and state tax
returns, records regarding Borrower’s assets or liabilities, the Collateral,
business operations or financial condition, and all computer programs or
storage or any equipment containing such information.

“Borrowing Base”
is (a) 85% of Eligible Accounts, plus (b) the
lesser of (i) 30% of the value of Borrower’s
Eligible Inventory (valued at the lower of cost or wholesale fair market
value), or (ii) 50% of the Advances made pursuant
to subclause (a) above, or (iii) $1,000,000, as
determined by Bank from Borrower’s most recent Transaction Report; provided,
however, that Bank may decrease the foregoing percentages in its good faith
business judgment based on events, conditions, contingencies, or risks which,
as determined by Bank, may adversely affect Collateral.

“Borrowing Resolutions”
are, with respect to any Person, those resolutions adopted by such Person’s
Board of Directors and delivered by such Person to Bank approving the Loan
Documents to which such Person is a party and the transactions contemplated
thereby, together with a certificate executed by its secretary on behalf of
such Person certifying that (a) such Person has the authority to execute,
deliver, and perform its obligations under each of the Loan Documents to which
it is a party, (b) sets forth the resolutions then in full force and
effect authorizing and ratifying the execution, delivery, and performance by
such Person of the Loan Documents to which it is a party, (c) the names of the
Persons authorized to execute the Loan Documents on behalf of such Person,
together with a sample of the true signatures of such Persons, and
(d) that Bank may conclusively rely on such certificate unless and until
such Person shall have delivered to Bank a further certificate canceling or
amending such prior certificate.

“Business Day”
is any day that is not a Saturday, Sunday or a day on which Bank is closed.

 “Cash
Equivalents” means (a) marketable direct obligations
issued or unconditionally guaranteed by the United States or any agency or any
State thereof having maturities of not more than one (1) year from the date of
acquisition; (b) commercial paper maturing no more than one (1) year after
its creation and having the highest rating from either Standard & Poor’s
Ratings Group or Moody’s Investors Service, Inc., (c) Bank’s certificates of
deposit issued maturing no more than one (1) year after issue; and (d) money
market funds at least ninety-five percent (95%) of the assets of which
constitute Cash Equivalents of the kinds described in clauses (a) through (c)
of this definition.

“Cash Management Services” is
defined in Section 2.1.4.

“Cash Management Services Sublimit” is
defined in Section 2.1.4.

 “Code” is the Uniform Commercial Code, as the same may, from
time to time, be enacted and in effect in the State of California; provided,
that, to the extent that the Code is used to define any term herein or in any
Loan Document and such term is defined differently in different Articles or
Divisions of the Code, the definition of such term contained in Article or
Division 9 shall govern; provided further, that in the event that, by reason of
mandatory provisions of law, any or all of the attachment, perfection, or
priority of, or remedies with respect to, Bank’s Lien on any Collateral is
governed by the Uniform Commercial Code in effect in a jurisdiction other than
the State of California, the term “Code” shall
mean the Uniform Commercial Code as enacted and in effect in such other
jurisdiction solely for purposes on the provisions thereof relating to such attachment,
perfection, priority, or remedies and for purposes of definitions relating to
such provisions.

 “Collateral” is any and all properties, rights and assets of
Borrower described on Exhibit A.

“Collateral Account”
is any Deposit Account, Securities Account, or Commodity Account.

 “Commodity Account” is any “commodity account” as defined in
the Code with such additions to such term as may hereafter be made.

“Communication”
is defined in Section 10.

“Compliance Certificate”
is that certain certificate in the form attached hereto as Exhibit E.

“Contingent Obligation”
is, for any Person, any direct or indirect liability, contingent or not, of
that Person for (a) any indebtedness, lease, dividend, letter of credit or
other obligation of another such as an obligation

 20
 

 

directly or indirectly guaranteed, endorsed, co-made,
discounted or sold with recourse by that Person, or for which that Person is
directly or indirectly liable; (b) any obligations for undrawn letters of
credit for the account of that Person; and (c) all obligations from any
interest rate, currency or commodity swap agreement, interest rate cap or
collar agreement, or other agreement or arrangement designated to protect a
Person against fluctuation in interest rates, currency exchange rates or commodity
prices; but “Contingent Obligation” does not include endorsements in the
ordinary course of business.  The amount
of a Contingent Obligation is the stated or determined amount of the primary
obligation for which the Contingent Obligation is made or, if not determinable,
the maximum reasonably anticipated liability for it determined by the Person in
good faith; but the amount may not exceed the maximum of the obligations under
any guarantee or other support arrangement.

“Control Agreement”
is any control agreement entered into among the depository institution at which
Borrower maintains a Deposit Account or the securities intermediary or
commodity intermediary at which Borrower maintains a Securities Account or a
Commodity account, Borrower, and Bank pursuant to which Bank obtains control
(within the meaning of the Code) over such Deposit Account, Securities Account,
or Commodity Account.

“Credit Extension”
is any Advance, Term Loan, Letter of Credit, FX Forward Contract, amount
utilized for Cash Management Services, or any other extension of credit by Bank
for Borrower’s benefit.

 “Default” means any event which with notice or passage of
time or both, would constitute an Event of Default.

“Default Rate”
is defined in Section 2.3(b).

“Deferred Revenue”
is all amounts received or invoiced in advance of performance under contracts
and not yet recognized as revenue.

“Deposit Account”
is any “deposit account” as defined in the Code with such additions to such
term as may hereafter be made.

“Designated Deposit Account”
is Borrower’s deposit account, account number                  ,
maintained with Bank.

“Dollars,” “dollars” and “$” each mean
lawful money of the United States.

 “Effective Date” is the date Bank executes this Agreement and
as indicated on the signature page hereof.

“Eligible Accounts”
are Accounts which arise in the ordinary course of Borrower’s business that
meet all Borrower’s representations and warranties in Section 5.3.  Bank reserves the right at any time and from
time to time after the Effective Date, to adjust any of the criteria set forth
below and to establish new criteria in its good faith business judgment.  Unless Bank agrees otherwise in writing,
Eligible Accounts shall not include:

(a)           Accounts for which the Account Debtor
has not been invoiced;

(b)           Accounts that the Account Debtor has
not paid within ninety (90) days of invoice date;

(c)           Accounts
owing from an Account Debtor, fifty percent (50%) or more of whose Accounts
have not been paid within ninety (90) days of invoice date;

(d)           Credit balances over ninety (90) days
from invoice date;

(e)           Accounts owing from an Account
Debtor, including Affiliates, whose total obligations to Borrower exceed
twenty-five (25%) of all Accounts, for the amounts that exceed that percentage,
unless Bank approves in writing;

(f)            Accounts owing from an Account
Debtor which does not have its principal place of business in the United States
(unless backed by a letter of credit sat­isfactory to Bank, or FCIA insured
satisfactory to Bank); provided, however, otherwise Eligible
Accounts owing from the following foreign Account Debtors will be deemed
Eligible Accounts up to an aggregate of $1,000,000 for all Accounts from such
Account Debtors combined:  (i)

 21
 

 

Valeo Schalter, (ii) Scania, (iii) Neoplan, (iv) Man Nutzfahrzeuge, (v)
Iveco Magirus, (vi) DAF Trucks, (vii) Mitsubishi FUSO Truck and Bus Corporation
and (viii) Iteris Europe, GmbH.

(g)           Accounts owing from an Account Debtor
which is a federal government entity or any department, agency, or
instrumentality thereof (the “Federal Government”); provided, however,
with respect to Accounts owing from the Federal Government, those Accounts will
not be deemed Eligible Accounts only to the extent such Accounts exceed five
percent (5.0%) of the total Eligible Accounts outstanding; provided, further,
that with respect to the portion of such Accounts in excess of five percent
(5.0%) of the total Eligible Accounts Outstanding, that portion may still be
considered Eligible Accounts if Borrower has assigned its payment rights to
Bank and the assignment has been acknowledged under the Federal Assignment of
Claims Act of 1940, as amended;

(h)           Accounts owing from an Account Debtor
to the extent that Borrower is indebted or obligated in any manner to the
Account Debtor (as creditor, lessor, supplier or otherwise - sometimes called “contra”
accounts, accounts payable, customer deposits or credit accounts), with the
exception of customary credits, adjustments and/or discounts given to an
Account Debtor by Borrower in the ordinary course of its business; provided,
however, that if the amount of any such indebtedness or obligation of the
Borrower is known, then only to the extent of the asserted amount of such
indebtedness or obligation;

(i)            Accounts for demonstration or
promotional equipment, or in which goods are consigned, or sold on a “sale
guaranteed”, “sale or return”, “sale on approval”, “bill and hold”, or other
terms if Account Debtor’s payment may be conditional;

(j)            Accounts for which the Account
Debtor is Borrower’s Affiliate, officer, employee, or agent;

(k)           Accounts in which the Account Debtor
disputes liability or makes any claim (but only up to the disputed or claimed
amount), or if the Account Debtor is subject to an Insolvency Proceeding, or
becomes insolvent, or goes out of business;

(l)            Accounts owing from an Account
Debtor with respect to which Borrower has received deferred revenue (but only
to the extent of such deferred revenue);

(m)          Accounts for which Bank in its good
faith business judgment determines collection to be doubtful; and

(n)           other Accounts Bank deems ineligible
in the exercise of its good faith business judgment.

 “Eligible Inventory” means, at any time, the aggregate of
Borrower’s Inventory that (a) consists of raw materials and finished goods, in good,
new, and salable condition, which is not perishable, returned, consigned,
obsolete, not sellable, damaged, or defective, and is not comprised of
demonstrative or custom inventory, works in progress, packaging or shipping
materials, or supplies; (b) meets all applicable governmental standards; (c)
has been manufactured in compliance with the Fair Labor Standards Act; (d) is
not subject to any Liens (other than Permitted Liens), except the first
priority Liens granted or in favor of Bank under this Agreement or any of the
other Loan Documents; (e) is located at Borrower’s principal place of business;
and (f) is otherwise acceptable to Bank in its good faith business
judgment.  Notwithstanding subclause (a)
above, sub-assembly processors for detection devices are considered Eligible
Inventory to the extent they satisfy subclauses (b) through (f) above.

“Equipment” is
all “equipment” as defined in the Code with such additions to such term as may
hereafter be made, and includes without limitation all machinery, fixtures,
goods, vehicles (including motor vehicles and trailers), and any interest in
any of the foregoing.

“ERISA” is the
Employment Retirement Income Security Act of 1974, and its regulations.

“Event of Default”
is defined in Section 8.

“Foreign Currency” means lawful
money of a country other than the United States.

 “Funding Date” is any date on which a Credit Extension is
made to or on account of Borrower which shall be a Business Day.

 22
 

 

“FX Business Day”
is any day when (a) Bank’s Foreign Exchange Department is conducting its normal
business and (b) the Foreign Currency being purchased or sold by Borrower is
available to Bank from the entity from which Bank shall buy or sell such
Foreign Currency.

“FX Forward Contract” is defined in Section 2.1.3.

“FX Reserve” is defined in Section 2.1.3.

“GAAP” is
generally accepted accounting principles set forth in the opinions and
pronouncements of the Accounting Principles Board of the American Institute of
Certified Public Accountants and statements and pronouncements of the Financial
Accounting Standards Board or in such other statements by such other Person as
may be approved by a significant segment of the accounting profession, which
are applicable to the circumstances as of the date of determination.

“General Intangibles”
is all “general intangibles” as defined in the Code in effect on the date
hereof with such additions to such term as may hereafter be made, and includes
without limitation, all Intellectual Property, payment intangibles, royalties,
contract rights, goodwill, franchise agreements, purchase orders, customer
lists, route lists, telephone numbers, domain names, claims, income and other
tax refunds, security and other deposits, options to purchase or sell real or
personal property, rights in all litigation presently or hereafter pending
(whether in contract, tort or otherwise), insurance policies (including without
limitation key man, property damage, and business interruption insurance),
payments of insurance and rights to payment of any kind.

“Guarantor” is any present or future guarantor of the Obligations.

“Indebtedness”
is (a) indebtedness for borrowed money or the deferred price of property or
services, such as reimbursement and other obligations for surety bonds and
letters of credit, (b) obligations evidenced by notes, bonds, debentures or
similar instruments, (c) capital lease obligations, and (d) Contingent
Obligations.

“Insolvency Proceeding”
is any proceeding by or against any Person under the United States Bankruptcy
Code, or any other bankruptcy or insolvency law, including assignments for the
benefit of creditors, compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other relief.

“Intellectual Property” means
all present and future (a) copyrights, copyright rights, copyright
applications, copyright registrations and like protections in each work of
authorship and derivative work thereof, whether published or unpublished, (b)
trade secret rights, including all rights to unpatented inventions and know-how,
and confidential information; (c) mask work or similar rights available for the
protection of semiconductor chips; (d) patents, patent applications and like
protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same; (e)
trademarks, servicemarks, trade styles, and trade names, whether or not any of
the foregoing are registered, and all applications to register and
registrations of the same and like protections, and the entire goodwill of the
business of Borrower connected with and symbolized by any such trademarks; (f)
computer software and computer software products; (g) designs and design
rights; (h) technology; (i) all claims for damages by way of past, present and
future infringement of any of the rights included above; (j) all licenses or
other rights to use any property or rights of a type described above.

 “Inventory” is all “inventory” as defined in the Code in
effect on the date hereof with such additions to such term as may hereafter be
made, and includes without limitation all merchandise, raw materials, parts,
supplies, packing and shipping materials, work in process and finished
products, including without limitation such inventory as is temporarily out of
Borrower’s custody or possession or in transit and including any returned goods
and any documents of title representing any of the above.

“Investment” is
any beneficial ownership interest in any Person (including stock, partnership interest
or other securities), and any loan, advance or capital contribution to any
Person.

 “IP Agreement” is that certain Intellectual Property Security
Agreement executed and delivered by Borrower to Bank dated as of approximately
the Effective Date hereof.

 23
 

 

“Letter of Credit”
means a standby letter of credit issued by Bank or another institution based
upon an application, guarantee, indemnity or similar agreement on the part of
Bank as set forth in Section 2.1.2.

“Letter of Credit
Application” is defined in Section 2.1.2(a).

“Letter of Credit Reserve”
has the meaning set forth in Section 2.1.2(d).

“Lien” is a
mortgage, lien, deed of trust, charge, pledge, security interest or other
encumbrance.

“Loan Documents”
are, collectively, this Agreement, the Perfection Certificate, the IP
Agreement, the Subordination Agreement, any note, or notes or guaranties
executed by Borrower or any Guarantor, and any other present or future
agreement between Borrower or any Guarantor and/or for the benefit of Bank in
connection with this Agreement, all as amended, restated, or otherwise
modified.

“Material Adverse Change” is (a)
a material impairment in the perfection or priority of Bank’s Lien in the
Collateral or in the value of such Collateral; (b) a material adverse change in
the business, operations, or condition (financial or otherwise) of Borrower; or
(c) a material impairment of the prospect of repayment of any portion of the
Obligations or (d)
Bank determines, based upon information available to it and in its good faith
judgment, that there is a reasonable likelihood that Borrower shall fail to
comply with one or more of the financial covenants in Section 6 during the next
succeeding financial reporting period.

“Maximum Dollar Amount” is
$8,000,000.

“Obligations”
are Borrower’s obligation to pay when due any debts, principal, interest, Bank
Expenses and other amounts Borrower owes Bank now or later, whether under this
Agreement, the Loan Documents, or otherwise, including, without limitation, all
obligations relating to letters of credit, cash management services, and
foreign exchange contracts, if any, and including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower
assigned to Bank, and the performance of Borrower’s duties under the Loan
Documents.

“Operating Documents” are, for
any Person, such Person’s formation documents, as certified with the Secretary
of State of such Person’s state of formation on a date that is no earlier than
30 days prior to the Effective Date, and, (a) if such Person is a corporation,
its bylaws in current form, (b) if such Person is a limited liability company,
its limited liability company agreement (or similar agreement), and (c) if such
Person is a partnership, its partnership agreement (or similar agreement), each
of the foregoing with all current amendments or modifications thereto.

“Payment/Advance Form”
is that certain form attached hereto as Exhibit B.

“Perfection Certificate”
is defined in Section 5.1.

“Permitted Indebtedness”
is:

(a)           Borrower’s Indebtedness to Bank under
this Agreement and the other Loan Documents;

(b)           Indebtedness existing on the
Effective Date and shown on the Perfection Certificate;

(c)           Subordinated Debt;

(d)           unsecured Indebtedness to trade creditors incurred in the ordinary course of
business;

(e)           Indebtedness incurred as a result of
endorsing negotiable instruments received in the ordinary course of business;

(f)            Indebtedness secured by Permitted
Liens;

 24
 

 

(g)           extensions, refinancings,
modifications, amendments and restatements of any items of Permitted
Indebtedness (a) through (g) above, provided that the principal amount thereof
is not increased or the terms thereof are not modified to impose more
burdensome terms upon Borrower or its Subsidiary, as the case may be.

“Permitted Investments”
are:

(a)           Investments shown on the Perfection
Certificate and existing on the Effective Date;

(b)           Cash Equivalents;

(c)           Investments consisting of
the endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of Borrower;

(d)           Investments
consisting of deposit accounts in which Bank has a perfected security interest;

(e)           Investments
accepted in connection with Transfers permitted by Section 7.1;

(f)            Investments of Subsidiaries in or to
other Subsidiaries or Borrower and Investments by Borrower in Subsidiaries not
to exceed $50,000 in the aggregate in any fiscal year;

(g)           Investments consisting of (i) travel
advances and employee relocation loans and other employee loans and advances in
the ordinary course of business, and (ii) loans to employees, officers or
directors relating to the purchase of equity securities of Borrower or its
Subsidiaries pursuant to employee stock purchase plans or agreements approved
by Borrower’s Board of Directors;

(h)           Investments (including debt
obligations) received in connection with the bankruptcy or reorganization of
customers or suppliers and in settlement of delinquent obligations of, and
other disputes with, customers or suppliers arising in the ordinary course of
business; and

(i)            Investments consisting of notes
receivable of, or prepaid royalties and other credit extensions, to customers
and suppliers who are not Affiliates, in the ordinary course of business;
provided that this paragraph shall not apply to Investments of Borrower in any
Subsidiary.

“Permitted Liens”
are:

(a)           Liens existing on the Effective Date
and shown on the Perfection Certificate or arising under this Agreement and the
other Loan Documents;

(b)           Liens for taxes, fees, assessments or
other government charges or levies, either not delinquent or being contested in
good faith and for which Borrower maintains adequate reserves on its Books, if
they have no priority over any of Bank’s Liens;

(c)           purchase money Liens (i) on Equipment
acquired or held by Borrower incurred for financing the acquisition of the
Equipment, or (ii) existing on Equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the Equipment;

(d)           statutory Liens securing claims or
demands of materialmen, mechanics, carriers, warehousemen, landlords and other
Persons imposed without action of such parties, provided, they have no priority
over any of Bank’s Lien and the aggregate amount of such Liens does not at any
time exceed $50,000;

(e)           Liens to secure payment of workers’
compensation, employment insurance, old-age pensions, social security and other
like obligations incurred in the ordinary course of business, provided, they
have no priority over any of Bank’s Liens and the aggregate amount of the
Indebtedness secured by such Liens does not at any time exceed $50,000;

(f)            Liens incurred in the extension,
renewal or refinancing of the indebtedness secured by Liens described in (a)
through (c), but any extension, renewal or replacement Lien must be
limited to the property encumbered by the existing Lien and the principal
amount of the indebtedness may not increase;

 25
 

 

(g)           leases or subleases of real property
granted in the ordinary course of business, and leases, subleases, non-exclusive
licenses or sublicenses of property (other than real property or intellectual
property) granted in the ordinary course of Borrower’s business, if the
leases, subleases, licenses and sublicenses do not prohibit granting Bank a
security interest;

(h)           non-exclusive license of intellectual
property granted to third parties in the ordinary course of business;

(i)            Liens arising from judgments,
decrees or attachments in circumstances not constituting an Event of Default
under Section 8.4 or 8.7;

 “Person” is any individual, sole proprietorship, partnership,
limited liability company, joint venture, company, trust, unincorporated
organization, association, corporation, institution, public benefit
corporation, firm, joint stock company, estate, entity or government agency.

“Prime Rate” is
Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.

 “Registered Organization” is any “registered organization” as
defined in the Code with such additions to such term as may hereafter be made

 “Responsible Officer” is any of the Chief Executive Officer,
President, Chief Financial Officer and Controller of Borrower.

“Revolving Line”
is an Advance or Advances in an aggregate amount of up to the Maximum Dollar Amount outstanding at any time.

 “Revolving
Line Maturity Date” is a date two years from the Effective
Date.

 “Securities Account” is any “securities account” as defined
in the Code with such additions to such term as may hereafter be made.

“Settlement Date” is defined in Section 2.1.3.

“Subordinated Debt”
is indebtedness incurred by Borrower subordinated to all of Borrower’s now or
hereafter indebtedness to Bank (pursuant to a subordination, intercreditor, or
other similar agreement in form and substance satisfactory to Bank entered into
between Bank and the other creditor), on terms acceptable to Bank.

 “Subsidiary” means, with respect to any Person, any Person of
which more than 50% of the voting stock or other equity interests is owned or
controlled, directly or indirectly, by such Person or one or more Affiliates of
such Person.

“Tangible Net Worth”
is, on any date, the consolidated total assets of Borrower and its Subsidiaries
minus (a) any amounts attributable to (i) goodwill, (ii) intangible
items including unamortized debt discount and expense, patents, trade and
service marks and names, copyrights and research and development expenses
except prepaid expenses, (iii) notes, accounts receivable and other obligations
owing to Borrower from its officers or other Affiliates, and (iv) reserves not
already deducted from assets, minus (b) Total Liabilities, plus
(c) Subordinated Debt.

“Term Loan” is a loan made by
Bank pursuant to the terms of Section 2.1.6 hereof.

“Term Loan Amount” is an
aggregate amount up to $2,200,000 but not to exceed the amount necessary to pay
Borrower’s loan obligations to Wells Fargo Bank.

“Term Loan Maturity Date”
is May 27, 2008.

“Term Loan Payment”
is defined in Section 2.1.6(b).

 26
 

 

“Total Liabilities”
is on any day, obligations that should, under GAAP, be classified as liabilities
on Borrower’s consolidated balance sheet, including all Indebtedness, and
current portion of Subordinated Debt permitted by Bank to be paid by Borrower,
but excluding all other Subordinated Debt.

“Transaction Report” is a report
in such form as Bank shall specify.

 “Transfer” is defined in Section 7.1.

 “Unused Revolving Line Facility Fee” is defined in Section
2.4(d).

[Signature
page follows.]

 27

 

IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be executed as of the Effective Date.

BORROWER:

ITERIS, INC.

	
  By

  	
   

  	
  /S/ JAMES S.
  MIELE

  	
   

  	 

	
  Name:

  	
   

  	
  James S. Miele

  	
   

  	 

	
  Title:

  	
   

  	
  CFO

  	
   

  
							

 

BANK:

SILICON VALLEY BANK

	
  By

  	
   

  	
  /S/ DEREK
  BRUNELLE

  	
   

  
	
  Name:

  	
   

  	
  Derek Brunelle

  	
   

  
	
  Title:

  	
   

  	
  Vice President

  	
   

  
	
  Effective Date:

  	
  October 16, 2006

  	
   

  
						

 

Exhibits

	
  A

  	
   

  	
  “Collateral”

  
	
  B

  	
   

  	
  Loan Payment/Advance Request Form

  
	
  C

  	
   

  	
  [intentionally omitted]

  
	
  D

  	
   

  	
  [intentionally omitted]

  
	
  E

  	
   

  	
  Compliance Certificate

  
	
  F

  	
   

  	
  Transaction Report

  

 

[Signature page to Loan and Security Agreement]

 

EXHIBIT A

The Collateral consists of all of Borrower’s right,
title and interest in and to the following personal property:

All goods, Accounts (including health-care
receivables), Equipment, Inventory, contract rights or rights to payment of
money, leases, license agreements, franchise agreements, General Intangibles,
commercial tort claims, documents, instruments (including any promissory
notes), chattel paper (whether tangible or electronic), cash, deposit accounts,
fixtures, letters of credit rights (whether or not the letter of credit is
evidenced by a writing), securities, and all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter
acquired, wherever located; and all Borrower’s Books relating to the foregoing,
and any and all claims, rights and interests in any of the above and all
substitutions for, additions, attachments, accessories, accessions and
improvements to and replacements, products, proceeds and insurance proceeds of
any or all of the foregoing.

 1

 

EXHIBIT B

Loan
Payment/Advance Request Form

DEADLINE FOR SAME DAY PROCESSING IS NOON P.S.T.*

	
  Fax To:

  	
   

  	
  Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LOAN PAYMENT:

  	
  Iteris, Inc.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  From Account #

  	
   

  	
   

  	
  To Account #

  	
   

  	
   

  
	
  (Deposit Account #)

  	
  (Loan Account #)

  
	
   

  	
   

  
	
  Principal $

  	
   

  	
   

  	
  and/or Interest $

  	
   

  	
   

  
	
   

  	
   

  
	
  Authorized Signature:

  	
   

  	
   

  	
   

  	
   

  
	
  Print Name/Title:

  	
   

  	
   

  	
  Phone Number: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LOAN ADVANCE:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Complete Outgoing Wire Request
  section below if all or a portion of the funds from this loan advance are for
  an outgoing 

  
	
  wire.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  From Account #

  	
   

  	
   

  	
  To Account #

  	
   

  	
   

  
	
  (Loan Account #)

  	
   

  	
  (Deposit Account #)

  
	
   

  	
   

  	
   

  	
   

  
	
  Amount of Advance $

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  All Borrower’s representations and warranties in the
  Loan and Security Agreement are true, correct and complete in all material
  respects on the date of the request for an advance; provided, however, that
  such materiality qualifier shall not be applicable to any representations and
  warranties that already are qualified or modified by materiality in the text
  thereof; and provided, further that those representations and warranties
  expressly referring to a specific date shall be true, accurate and complete
  in all material respects as of such date:

  
	
   

  	
   

  	
   

  	
   

  
	
  Authorized Signature:

  	
   

  	
   

  	
  Phone Number: 

  	
   

  	
   

  
	
  Print Name/Title: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  OUTGOING WIRE
  REQUEST:

  	
   

  	
   

  	
   

  
	
  Complete only if all or a portion of funds from
  the loan advance above is to be wired.

  
	
  Deadline for same day processing is noon, P.S.T.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beneficiary Name:

  	
   

  	
   

  	
   

  	
  Amount of Wire: $

  	
   

  	
   

  
	
  Beneficiary Bank:

  	
   

  	
   

  	
   

  	
  Account Number: 

  	
   

  	
   

  
	
  City and State:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Beneficiary Bank Transit (ABA) #:

  	
   

  	
   

  	
  Beneficiary Bank Code (Swift, Sort, Chip, etc.): 

  
	
   

  	
   

  	
  (For International Wire Only)

  
	
   

  	
   

  	
   

  	
   

  
	
  Intermediary Bank:

  	
   

  	
   

  	
  Transit (ABA) #:

  	
   

  	
   

  
	
  For Further Credit to:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Special Instruction:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
																																			

 

 1
 

 

 

	
  By signing below, I (we) acknowledge and agree that my (our) funds
  transfer request shall be processed in accordance with and subject to the
  terms and conditions set forth in the agreements(s) covering funds transfer
  service(s), which agreements(s) were previously received and executed by me
  (us).

  
	
   

  	
   

  	
   

  	
   

  
	
  Authorized Signature:

  	
   

  	
   

  	
  2nd Signature (if
  required):

  	
   

  	
   

  
	
  Print Name/Title:

  	
   

  	
   

  	
  Print Name/Title:

  	
   

  	
   

  
	
  Telephone #:

  	
   

  	
   

  	
  Telephone #:

  	
   

  	
   

  
												

 

 2

 

EXHIBIT E

COMPLIANCE
CERTIFICATE

	
  TO:

  	
   

  	
  SILICON VALLEY BANK

  	
  Date:

  	
                                     

  
	
  FROM:

  	
   

  	
  ITERIS, INC.

  	
   

  	
   

  

 

The undersigned authorized officer of Iteris, Inc. (“Borrower”)
certifies that under the terms and conditions of the Loan and Security
Agreement between Borrower and Bank (the “Agreement”), (1) Borrower is in
complete compliance for the period ending                                 
with all required covenants except as noted below, (2) there are no Events of Default,
(3) all representations and warranties in the Agreement are true and
correct in all material respects on this date except as noted below; provided,
however, that such materiality qualifier shall not be applicable to any
representations and warranties that already are qualified or modified by
materiality in the text thereof; and provided, further that those
representations and warranties expressly referring to a specific date shall be
true, accurate and complete in all material respects as of such date, (4)
Borrower, and each of its Subsidiaries, has timely filed all required tax
returns and reports, and Borrower has timely paid all foreign, federal, state
and local taxes, assessments, deposits and contributions owed by Borrower
except as otherwise permitted pursuant to the terms of Section 5.9 of the
Agreement, and (5) no Liens have been levied or claims made against Borrower or
any of its Subsidiaries relating to unpaid employee payroll or benefits of
which Borrower has not previously provided written notification to Bank.  Attached are the required documents
supporting the certification.  The
undersigned certifies that these are prepared in accordance with generally GAAP
consistently applied from one period to the next except as explained in an accompanying
letter or footnotes.  The undersigned
acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the
Agreement, and that compliance is determined not just at the date this
certificate is delivered.  Capitalized
terms used but not otherwise defined herein shall have the meanings given them
in the Agreement.

	
  Please
  indicate compliance status by circling Yes/No under “Complies” column.

  

 

	
  Reporting Covenant

  	
   

  	
  Required

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Monthly financial statements with Compliance
  Certificate

  	
   

  	
  Monthly within 30 days

  	
   

  	
  Yes  No

  
	
  Transaction Reports

  	
   

  	
  Weekly and with each Advance request

  	
   

  	
  Yes  No

  
	
  10-Q, 10-K and 8-K

  	
   

  	
  Within 5 days after filing with SEC

  	
   

  	
  Yes  No

  
	
  A/R & A/P Agings, Reconciliations and Inventory
  Reports

  	
   

  	
  Monthly within 15 days

  	
   

  	
  Yes  No

  
	
  Annual Projections, Budgets, etc. for upcoming
  fiscal year

  	
   

  	
  Within 30 days prior to end of current fiscal year

  	
   

  	
  Yes  No

  

 

	
  The following Intellectual Property was registered
  after the Effective Date (if no registrations, state “None”)
  ________________________________________________________

  
	
   

  

 

	
  Financial Covenant

  	
   

  	
  Required

  	
   

  	
  Actual

  	
   

  	
  Complies

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Maintain on a Monthly Basis:

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Minimum Tangible Net Worth

  	
   

  	
  $4,000,000 plus (i) 25% of all consideration for
  equity securities and subordinated debt plus (ii) 25% of quarterly net income

  	
   

  	
  $           

  	
   

  	
  Yes  No

  

 

 1
 

 

 

The
following financial covenant analysis and information set forth in Schedule 1
attached hereto are true and accurate as of the date of this Certificate.

The
following are the exceptions with respect to the certification above:  (If no exceptions exist, state “No exceptions
to note.”)

____________________________________________________________________________________________________

____________________________________________________________________________________________________

____________________________________________________________________________________________________

	
  Iteris, Inc.

  	
   

  	
  BANK USE ONLY

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Received by: 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  authorized signer

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
   

  	
  Date:

  	
   

  
	
  Title:

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Verified: 

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  authorized signer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Compliance Status:          Yes   No

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
												

 

 2
 

 

Schedule 1 to Compliance Certificate

Financial Covenants of Borrower

Dated: _____________

Tangible
Net Worth
(Section 6.9(a))

Required:                                             $4,000,000 plus (i) 25% of all consideration
received for equity securities and subordinated debt of the Borrower, plus (ii)
25% of the Borrower’s net income in each fiscal quarter

Actual:

	
  A.

  	
   

  	
  Aggregate value of total assets of Borrower and its
  Subsidiaries

  	
   

  	
  $_____

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  B.

  	
   

  	
  Aggregate value of goodwill of Borrower and its
  Subsidiaries

  	
   

  	
  $_____

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  C.

  	
   

  	
  Aggregate value of intangible assets of Borrower and
  its Subsidiaries

  	
   

  	
  $_____

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  D.

  	
   

  	
  Aggregate value of investments of Borrower and its
  Subsidiaries consisting of minority investments in companies which
  investments are not publicly-traded

  	
   

  	
  $_____

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  E.

  	
   

  	
  Aggregate value of any reserves not already deducted
  from assets

  	
   

  	
  $_____

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  F.

  	
   

  	
  Aggregate value of liabilities of Borrower and its
  Subsidiaries (including all Indebtedness) and current portion of Subordinated
  Debt permitted by Bank to be paid by Borrower (but no other Subordinated
  Debt)

  	
   

  	
  $_____

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  G.

  	
   

  	
  Aggregate value of Indebtedness of Borrower
  subordinated to Borrower’s Indebtedness to Bank

  	
   

  	
  $_____

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  H.

  	
   

  	
  Tangible Net Worth (line A minus line B minus line C
  minus line D minus line E minus line F plus line G)

  	
   

  	
  $_____

  

 

Is line H equal to or
greater than $______?

	
  ________No, not in compliance

  	
   

  	
  ______ Yes,
  in compliance

  

 

 3

 

Exhibit F

Transaction Report

 1

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]