Document:

Exhibit 10.29

 

	
  WELLS FARGO

  	
   

  	
  CONTINUING SECURITY AGREEMENT

  RIGHTS TO PAYMENT AND INVENTORY

  

 

1.                                       GRANT OF
SECURITY INTEREST.  For valuable
consideration, the undersigned, Iteris, Inc.,
or any of them (“Debtor”), hereby grants and transfers to WELLS FARGO BANK,
NATIONAL ASSOCIATION (“Bank”) a security interest in all accounts, deposit
accounts, chattel paper (whether electronic or tangible), instruments,
promissory notes, documents, general intangibles, payment intangibles,
software, letter of credit rights, health-care insurance receivables and other
rights to payment (collectively called “Rights to Payments”), now existing or
at any time hereafter, and prior to the termination hereof, arising (whether
they arise from the sale, lease or other disposition of inventory or from
performance of contracts for service, manufacture, construction, repair or
otherwise or from any other source whatsoever), including all securities,
guaranties, warranties, indemnity agreements, insurance policies, supporting
obligations and other agreements pertaining to the same or the property
described therein, and in all goods returned by or repossessed from Debtor’s
customers, together with a security interest in all inventory, goods held for
sale or lease or to be furnished under contracts for service, goods so leased
or furnished, raw materials, component parts and embedded software, work in
process or materials used or consumed in Debtor’s business and all warehouse
receipts, bills of lading and other documents evidencing goods owned or
acquired by Debtor, and all goods covered thereby, now or at any time
hereafter, and prior to the termination hereof, owned or acquired by Debtor,
wherever located, and all products thereof (collectively called “Inventory”),
whether in the possession of Debtor, warehousemen, bailees or any other person,
or in process of delivery and whether located at Debtor’s places of business or
elsewhere (with all Rights to Payment and Inventory referred to herein
collectively as the “Collateral”) together with whatever is receivable or
received when any of the Collateral or proceeds thereof are sold, leased,
collected, exchanged or otherwise disposed of, whether such disposition is
voluntary or involuntary, including without limitation, all rights to payment,
including returned premiums, with respect to any insurance relating to any of
the foregoing, and all rights to payment with respect to any claim or cause of
action affecting or relating to any of the foregoing (hereinafter called “Proceeds”).

 

2.                                       OBLIGATIONS
SECURED.  The obligations secured hereby
are the payment and performance of: (a) all present and future
Indebtedness of Debtor to Bank; (b) all obligations of Debtor and rights
of Bank under this Agreement; and (c) all present and future obligations
of Debtor to Bank of other kinds.  The
word “Indebtedness” is used herein in its most comprehensive sense and includes
any and all advances, debts, obligations and liabilities of Debtor, or any of
them, heretofore, now or hereafter made, incurred or created, whether voluntary
or involuntary and however arising, whether due or not due, absolute or
contingent, liquidated or unliquidated, determined or undetermined, and whether
Debtor may be liable individually or jointly, or whether recovery upon such
Indebtedness may be or hereafter becomes unenforceable.

 

3.                                       TERMINATION.  This Agreement will terminate upon the
performance of all obligations of Debtor to Bank, including without limitation,
the payment of all Indebtedness of Debtor to Bank, and the termination of all commitments
of Bank to extend credit to Debtor.  Upon
termination, Bank will, at Borrower’s cost and within a reasonable time period,
execute (if necessary) and deliver such instruments and documents, including
termination statements on form UCC-3, evidencing and acknowledging the
termination of Bank’s security interest in the Collateral and Bank shall
deliver to Borrower any Collateral in Bank’s possession.

 

4.                                       OBLIGATIONS
OF BANK.  Bank has no obligation to make
any loans hereunder.  Any money received
by Bank in respect of the Collateral may be deposited, at Bank’s option, into a
non-interest bearing account over which Debtor shall have no control, and the
same shall, for all purposes, be deemed Collateral hereunder.

 

5.                                       REPRESENTATIONS
AND WARRANTIES.  Debtor represents and
warrants to Bank that:  (a) Debtor’s
legal name is exactly as set forth on the first page of this Agreement,
and all of Debtor’s organizational documents or agreements delivered to Bank
are complete and accurate in every respect; (b) Debtor is the owner and
has possession or control of the Collateral and Proceeds; (c) Debtor has
the

 

 

exclusive
right to grant a security interest in the Collateral and Proceeds; (d) all
Collateral and Proceeds are genuine, free from liens, adverse claims, setoffs,
default, prepayment, defenses and conditions precedent of any kind or
character, except the lien created hereby or as otherwise agreed to by Bank, or
heretofore disclosed by Debtor to Bank, in writing; (e) all statements
contained herein and, where applicable, in the Collateral are true and complete
in all material respects; (f) no financing statement covering any of the
Collateral or Proceeds, and naming any secured party other than Bank, is on
file in any public office; (g) all persons appearing to be obligated on
Rights to Payment and Proceeds have authority and capacity to contract and are
bound as they appear to be; (h) all property subject to chattel paper has
been properly registered and filed in compliance with law and to perfect the
interest of Debtor in such property; and (i) all Rights to Payment and
Proceeds comply with all applicable laws concerning form, content and manner of
preparation and execution, including where applicable Federal Reserve
Regulation Z and any State consumer credit laws.

 

6.                                       COVENANTS OF
DEBTOR.

 

6.1                                 Debtor
Agrees in general:  (a) to pay
Indebtedness secured hereby when due; (b) to indemnify Bank against all
losses, claims, demands, liabilities and expenses of every kind caused by
property subject hereto; (c) to pay all costs and expenses, including reasonable
attorneys’ fees, incurred by Bank in the perfection and preservation of the
Collateral or Bank’s interest therein and/or the realization, enforcement and
exercise of Bank’s rights, powers and remedies hereunder; (d) to permit
Bank to exercise its powers; (e) to execute and deliver such documents as
Bank deems necessary to create, perfect and continue the security interests
contemplated hereby; (f) not to change its name, and as applicable, its
chief executive office, its principal residence or the jurisdiction in which it
is organized and/or registered without giving Bank prior written notice
thereof; (g) not to change the places where Debtor keeps any Collateral or
Debtor’s records concerning the Collateral and Proceeds without giving Bank
prior written notice of the address to which Debtor is moving same; and (h) to
cooperate with Bank in perfecting all security interests granted herein and in
obtaining such agreements from third parties as Bank deems necessary, proper or
convenient in connection with the preservation, perfection or enforcement of
any of its rights hereunder.

 

6.2                                 Debtor
agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise
in writing:  (a) that Bank is
authorized to file financing statements in the name of Debtor to perfect Bank’s
security interest in Collateral and Proceeds; (b) to insure Inventory and,
where applicable, Rights to Payment with Bank named as loss payee, in form,
substance and amounts, under agreements, against risks and liabilities, and
with insurance companies satisfactory to Bank; (c) not to use any
inventory for any unlawful purpose or in any way that would void any insurance
required to be carried in connection therewith; (d) not to remove
Inventory from Debtor’s premises, except for deliveries to buyers in the
ordinary course of Debtor’s business and except Inventory which consists of
mobile goods as defined in the California Uniform Commercial Code, in which
case Debtor agrees not to remove or permit the removal of the Inventory from
its state of domicile for a period in excess of 30 calendar days; (e) not
to permit any security interest in or lien on the Collateral or Proceeds,
including without limitation, liens arising from the storage of Inventory,
except in favor of Bank; (f) not to sell, hypothecate or otherwise dispose
of, nor permit the transfer by operation of law of, any of the Collateral or
Proceeds or any interest therein, except sales of Inventory to buyers in the
ordinary course of Debtor’s business; (g) to furnish reports to Bank of
all acquisitions, returns, sales and other dispositions of the Inventory in
such form and detail and at such times as Bank may require; (h) to permit
Bank to inspect the Collateral at any time; (i) to keep, in accordance
with generally accepted accounting principles, complete and accurate records
regarding all Collateral and Proceeds, and to permit Bank to inspect the same
and make copies thereof at any reasonable time; (j) if requested by Bank,
to receive and use reasonable diligence to collect Rights to Payment and
Proceeds, in trust and as the property of Bank, and to immediately endorse as
appropriate and deliver such Rights to Payment and Proceeds to Bank daily in
the exact form in which they are received together with a collection report in
form satisfactory to Bank; (k) not to commingle Rights to Payment,
Proceeds or collections thereunder with other property; (l) to give only
normal allowances and credits and to advise Bank thereof immediately in writing
If they affect any Rights to Payment or Proceeds in any material respect;
(m) on demand, to deliver to Bank returned property resulting from, or
payment equal to, such allowances or credits on any Rights to Payment or
Proceeds or to execute such

 

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documents
and do such other things as Bank may reasonably request for the purpose of
perfecting, preserving and enforcing its security interest in such returned
property; (n) from time to time, when requested by Bank, to prepare and
deliver a schedule of all Collateral and Proceeds subject to this
Agreement and to deliver to Bank such instruments as bank may reasonably, from
the standpoint of a secured creditor, require to evidence the grant of the
security interest created by this Agreement in all accounts, contracts, leases
and other chattel paper, instruments, documents and other evidences thereof;
(o) in the event Bank elects to receive payments of Rights to Payment or
Proceeds hereunder, to pay all expenses incurred by Bank in Connection
therewith, including expenses of accounting, correspondence, collection
efforts, reporting to account or contract debtors, filing, recording, record
keeping and expenses incidental thereto; and (p) to provide any service and do
any other acts which may be necessary to maintain, preserve and protect all
Collateral and, as appropriate and applicable, to keep all Collateral in good
and saleable condition in accordance with the standards and practices adhered
to generally by users and manufacturers of like property, and to keep all
Collateral and Proceeds free and clear of all defenses, rights of offset and
counterclaims.

 

7.                                       POWERS OF
BANK.  Debtor appoints Bank its true
attorney-in-fact to perform any of the following powers, which are coupled with
an interest, are irrevocable until termination of this Agreement and may be
exercised from time to time by Bank’s officers and employees, or any of them,
after and during the continuance of an Event of Default, or with respect to
subsections (b), (g), (i), (j), (k) and (n) only, whether or not Debtor is
in default:  (a) to perform any
obligation of Debtor hereunder in Debtor’s name or otherwise; (b) to give
notice to account debtors or others of Bank’s rights in the Collateral and
Proceeds, (c) to enforce or forebear from enforcing the Debtor’s rights
with respect to account debtors or others of Bank’s rights in the Collateral
and Proceeds and to make extension or modification agreements with respect
thereto; (d) to release persons liable on Proceeds and to give receipts
and acquittances and compromise disputes in connection therewith; (e) to
release or substitute security; (f) to resort to security in any order; (g) to
prepare, execute, file, record or deliver notes, assignments, schedules,
designation statements, financing statements, continuation statements,
termination statements, statements of assignment, applications for registration
or like papers to perfect, preserve or release Bank’s interest in the
Collateral and Proceeds; (h) to receive, open and read mail addressed to
Debtor; (i) to take cash, instruments for the payment of money and other
property to which Bank is entitled; (j) to verify facts concerning the
Collateral and Proceeds by inquiry of obligors thereon, or otherwise, in its
own name or a fictitious name; (k) to endorse, collect, deliver and
receive payment under instruments for the payment of money constituting or
relating to Proceeds; (l) to prepare, adjust, execute, deliver and receive
payment under insurance claims, and to collect and receive payment of and
endorse any instrument in payment of loss or returned premiums or any other
insurance refund or return, and to apply such amounts received by Bank, at Bank’s
sole option, toward repayment of the Indebtedness or replacement of the
Collateral; (m) to exercise all rights, powers and remedies which Debtor
would have, but for this Agreement, with respect to all Collateral and Proceeds
subject hereto; (n) to enter onto Debtor’s premises in inspecting the
Collateral; (o) to make withdrawals from and to close deposit accounts or
other accounts with any financial institution, wherever located, into which
Proceeds may have been deposited, and to apply funds so withdrawn to payment of
the Indebtedness; (p) to preserve or release the interest evidenced by
chattel paper to which Bank is entitled hereunder and to endorse and deliver
any evidence of title incidental thereto; and (q) to do all acts and
things and execute all documents in the name of Debtor or otherwise, deemed by
Bank as necessary, proper and convenient in connection with the preservation,
perfection or enforcement of its rights hereunder.

 

8.                                       PAYMENT OF
PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS.  Debtor agrees to pay, prior to delinquency,
all insurance premiums, taxes, charges, liens and assessments against the
Collateral and Proceeds, and upon the failure of Debtor to do so, Bank at its
option may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same.  Any such payments made by Bank shall be
obligations of Debtor to Bank, due and payable immediately upon demand,
together with interest at a rate determined in accordance with the provisions
of this Agreement, and shall be secured by the Collateral and Proceeds, subject
to all terms and conditions of this Agreement.

 

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9.                                       EVENTS OF
DEFAULT.  The occurrence of any of the
following shall constitute an “Event of Default” under this Agreement:  (a) any default in the payment or
performance of any obligation, or any defined event of default, under (i) any
contract or instrument evidencing any Indebtedness, or (ii) any other
agreement between Debtor and Bank, including without limitation any loan agreement,
relating to or executed in connection with any Indebtedness; (b) any
representation or warranty made by Debtor herein shall prove to be incorrect,
false or misleading in any material respect when made; (c) Debtor shall
fail to observe or perform any obligation or agreement contained herein; (d) any
impairment of the rights of Bank in any Collateral or Proceeds or any
attachment or like levy on any property of Debtor; and (e) Bank, in good
faith, believes any material portion or all of the Collateral and/or Proceeds
to be in danger of misuse, dissipation, commingling, loss, theft, damage or
destruction, or otherwise in jeopardy or unsatisfactory in character or value.

 

10.                                 REMEDIES.  Upon the occurrence of any Event of Default,
Bank shall have the right to declare immediately due and payable all or any
Indebtedness secured hereby and to terminate any commitments to make loans or
otherwise extend credit to Debtor.  Bank
shall have all other rights, powers, privileges and remedies granted to a
secured party upon default under the California Uniform Commercial Code or
otherwise provided by law, including without limitation, the right (a) to
contact all persons obligated to Debtor on any Collateral or Proceeds and to
instruct such persons to deliver all Collateral and/or Proceeds directly to
Bank, and (b) to sell, lease, license or otherwise dispose of any or all
Collateral.  All rights, powers,
privileges and remedies of Bank shall be cumulative.  No delay, failure or discontinuance of Bank
in exercising any right, power, privilege or remedy hereunder shall affect or
operate as a waiver of such right, power, privilege or remedy; nor shall any
single or partial exercise of any such right, power, privilege or remedy
preclude, waive or otherwise affect any other or further exercise thereof or
the exercise of any other right, power, privilege or remedy.  Any waiver, permit, consent or approval of
any kind by Bank of any default hereunder, or any such waiver of any provisions
or conditions hereof, must be in writing and shall be effective only to the
extent set forth in writing.  It is
agreed that public or private sales or other dispositions, for cash or on
credit, to a wholesaler or retailer or investor, or user of property of the
types subject to this Agreement, or public auctions, are all commercially
reasonable since differences in the prices generally realized in the different
kinds of dispositions are ordinarily offset by the differences in the costs and
credit risks of such dispositions.

 

While
an Event of Default exists:  (a) Debtor
will deliver to Bank from time to time, as requested by Bank, current lists of
all Collateral and Proceeds; (b) Debtor will not dispose of any Collateral
or Proceeds except on terms approved by Bank; (c) at Bank’s request,
Debtor will assemble and deliver all Collateral and Proceeds, and books and
records pertaining thereto, to Bank at a reasonably convenient place designated
by Bank; and (d) bank may, without notice to Debtor, enter onto Debtor’s
premises and take possession of the Collateral. 
With respect to any sale by Bank of any Collateral subject to this
Agreement, Debtor hereby expressly grants to Bank the right to sell such
Collateral using any or all of Debtor’s trademarks, trade names, trade name
rights and/or proprietary labels or marks. 
Debtor further agrees that Bank shall have no obligation to process or
prepare any Collateral for sale or other disposition.

 

11.                                 DISPOSITION
OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS.  In disposing of Collateral hereunder, Bank
may disclaim all warranties of title, possession, quiet enjoyment and the
like.  Any proceeds of any disposition of
any Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing,
including reasonable attorneys’ fees, and the balance of such proceeds may be
applied by Bank toward the payment of the Indebtedness in such order of
application as Bank may from time to time elect.  Upon the transfer of all or any part of the
Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds
and shall be fully discharged thereafter from all liability and responsibility
with respect to any of the foregoing so transferred, and the transferee shall
be vested with all rights and powers of Bank hereunder with respect to any of
the foregoing so transferred; but with respect to any Collateral or Proceeds
not so transferred Bank shall retain all rights, powers, privileges and
remedies herein given.

 

4

 

12.                                 STATUTE OF
LIMITATIONS.  Until all Indebtedness
shall have been paid in full and all commitments by Bank to extend credit to
Debtor have been terminated, the power of sale or other disposition and all
other rights, powers, privileges and remedies granted to Bank hereunder shall
continue to exist and may be exercised by Bank at any time and from time to
time irrespective of the fact that the Indebtedness or any part thereof may
have become barred by any statute of limitations, or that the personal
liability of Debtor may have ceased, unless such liability shall have ceased
due to the payment in full of all Indebtedness secured hereunder.

 

13.                                 MISCELLANEOUS.  When there is more than one Debtor named
herein:  (a) the word “Debtor” shall
mean all or any one or more of them as the context requires; (b) the
obligations of each Debtor hereunder are joint and several; and (c) until
all Indebtedness shall have been paid in full, no Debtor shall have any right
of subrogation or contribution, and each Debtor hereby waives any benefit of or
right to participate in any of the Collateral or Proceeds or any other security
now or hereafter held by Bank.  Debtor
hereby waives any right to require Bank to (i) proceed against Debtor or
any other person, (ii) proceed against or exhaust any security from Debtor
or any other person, (iii) perform any obligation of Debtor with respect
to any Collateral or Proceeds, and (d) make any presentment or demand, or
give any notice of nonpayment or nonperformance, protest, notice of protest, or
notice of dishonor hereunder or in connection with any Collateral or
Proceeds.  Debtor further waives any
right to direct the application of payments or security for any Indebtedness of
Debtor or Indebtedness of customers of Debtor.

 

14.                                 NOTICES.  All notices, requests and demands required
under this Agreement must be in writing, addressed to Bank at the address
specified in any other loan documents entered into between Debtor and Bank and
to Debtor at the address of its chief executive office (or principal residence,
if applicable) specified below or to such other address as any party may
designate by written notice to each other party, and shall be deemed to have
been given or made as follows:  (a) if
personally delivered, upon delivery; (b) if sent by mail, upon the earlier
of the date of receipt or 3 days after deposit in the U.S. mail, first class
and postage prepaid; and (c) if sent by telecopy, upon receipt.

 

15.                                 COSTS,
EXPENSES AND ATTORNEYS’ FEES.  Debtor
shall pay to Bank immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all allocated costs of Bank’s in-house
counsel), expended or incurred by Bank in exercising any right, power,
privilege or remedy conferred by this Agreement or in the enforcement thereof,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with
any bankruptcy proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any other person)
relating to Debtor or in any way affecting any of the Collateral or Bank’s
ability to exercise any of its rights or remedies with respect thereto.  All of the foregoing shall be paid by Debtor
with interest from the date of demand until paid in full at a rate per annum
equal to the greater of ten percent (10%) or Bank’s Prime Rate in effect from
time to time.

 

16.                                 SUCCESSORS;
ASSIGNS; AMENDMENT.  This Agreement shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of the parties,
and may be amended or modified only in writing signed by Bank and Debtor.

 

17.                                 SEVERABILITY
OF PROVISIONS.  If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of Such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.

 

18.                                 GOVERNING
LAW.  This Agreement shall be governed by
and construed in accordance with the laws of the State of California.

 

Debtor
warrants that Debtor is an organization registered under the laws of the State
of Delaware.

 

Debtor
warrants that its chief executive office (or principal residence, if
applicable) is located at the following address:  1515 S.
Manchester, Anaheim, CA 92802

 

Debtor
warrants that the Collateral (except goods in transit) is located or domiciled
at the following additional addresses:  1585 S. Manchester, Anaheim, CA 92802

 

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IN
WITNESS WHEREOF, this Agreement has been duly executed as of May 27, 2004.

 

	
  Iteris, Inc.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/
  Jack Johnson

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/
  Abbas Mohaddes

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Secretary

  	
   

  
						

 

6Exhibit 10.30

 

	
  WELLS FARGO

  	
   

  	
  SECURITY AGREEMENT

  EQUIPMENT

  

 

1.                                       GRANT OF
SECURITY INTEREST.  For valuable
consideration, the undersigned Iteris, Inc.,
or any of them (“Debtor”), hereby grants and transfers to WELLS FARGO BANKS
NATIONAL ASSOCIATION (“Bank”) a security interest in all goods, tools,
machinery, furnishings, furniture and other equipment, now or at any time
hereafter, and prior to the termination hereof, owned or acquired by Debtor,
wherever located, whether in the possession of Debtor or any other person and
whether located on Debtor’s property or elsewhere, and all improvements,
replacements, accessions and additions thereto and embedded software Included
therein (collectively called “Collateral”), together with whatever is
receivable or received when any of the Collateral or proceeds thereof are sold,
leased, collected, exchanged or otherwise disposed of, whether such disposition
is voluntary or involuntary, including without limitation, (a) all
accounts, contract rights, chattel paper (whether electronic or tangible),
instruments, promissory notes, documents, general intangibles, payment
intangibles and other rights to payment of every kind now or at any time
hereafter arising from any such sale, lease, collection, exchange or other
disposition of any of the foregoing, (b) all rights to payment, including
returned premiums, with respect to any insurance relating to any of the
foregoing, and (c) all rights to payment with respect to any claim or
cause of action effecting or relating to any of the foregoing (hereinafter
called “Proceeds”).

 

2.                                       OBLIGATIONS
SECURED.  The obligations secured hereby
are the payment and performance of:  (a) all
present and future Indebtedness of Debtor to Bank; (b) all obligations of
Debtor and rights of Bank under this Agreement; and (c) all present and
future obligations of Debtor to Bank of other kinds.  The word “Indebtedness” is used herein in its
most comprehensive sense and includes any and all advances, debts, obligations
and liabilities of Debtor, or any of them, heretofore, now or hereafter made,
incurred or created, whether voluntary or involuntary and however arising,
whether due or not due, absolute or contingent, liquidated or unliquidated,
determined or undetermined, and whether Debtor may be liable individually or
jointly, or whether recovery upon such Indebtedness may be or hereafter becomes
unenforceable.

 

3.                                       TERMINATION.  This Agreement will terminate upon the
performance of all obligations of Debtor to Bank, including without limitation,
the payment of all Indebtedness of Debtor to Bank, and the termination of all
commitments of Bank to extend credit to Debtor. 
Upon termination, Bank will, at Borrower’s cost and within a reasonable
time period, execute (if necessary) and deliver such instruments and documents,
including termination statements on form UCC-3, evidencing and acknowledging
the termination of Bank’s security interest in the Collateral and Bank shall
deliver to Borrower any Collateral in Bank’s possession.

 

4.                                       OBLIGATIONS
OF BANK.  Bank has no obligation to make
any loans hereunder.  Any money received
by Bank in respect of the Collateral may be deposited, at Bank’s option, into a
non-interest bearing account over which Debtor shall have no control, and the
same shall, for all purposes, be deemed Collateral hereunder.

 

5.                                       REPRESENTATIONS
AND WARRANTIES.  Debtor represents and
warrants to Bank that:  (a) Debtor’s
legal name is exactly as set forth on the first page of this Agreement,
and all of Debtor’s organizational documents or agreements delivered to Bank
are complete and accurate in every respect; (b) Debtor is the owner and
has possession or control of the Collateral and Proceeds; (c) Debtor has
the exclusive right to grant a security interest in the Collateral and
Proceeds; (d) all Collateral and Proceeds are genuine, free from liens,
adverse claims, setoffs, default, prepayment, defenses and conditions precedent
of any kind or character, except the lien created hereby or as otherwise agreed
to by Bank, or heretofore disclosed by Debtor to Bank, in writing; (e) all
statements contained herein are true and complete in all material respects; (f) no
financing statement covering any of the Collateral or Proceeds, and naming any
secured party other than Bank, is on file in any public office; and (g) Debtor
is not in the business of selling goods of the kind included within the
Collateral subject to this Agreement, and Debtor acknowledges that no sale or
other disposition of any Collateral, including without limitation, any Collateral
which Debtor may deem to be surplus, has been or shall be consented to or
acquiesced in by Bank, except as specifically set forth in writing by Bank.

 

 

6.                                       COVENANTS OF
DEBTOR.

 

6.1                                 Debtor
Agrees in general:  (a) to pay
indebtedness secured hereby when due; (b) to indemnify Bank against all
losses, claims, demands, liabilities and expenses of every kind caused by
property subject hereto; (c) to pay all costs and expenses, including
reasonable attorneys’ fees, incurred by Bank in the perfection and preservation
of the Collateral or Bank’s interest therein and/or the realization,
enforcement and exercise of Bank’s rights, powers and remedies hereunder; (d) to
permit Bank to exercise its powers; (e) to execute and deliver such
documents as Bank deems necessary to create, perfect and continue the security
interests contemplated hereby; (f) not to change its name, and as
applicable, its chief executive office, its principal residence or the
jurisdiction in which it is organized and/or registered without giving Bank
prior written notice thereof; (g) not to change the places where Debtor
keeps any Collateral or Debtor’s records concerning the Collateral and Proceeds
without giving Bank prior written notice of the address to which Debtor is
moving same; and (h) to cooperate with Bank in perfecting all security
interests granted herein and in obtaining such agreements from third parties as
Bank deems necessary, proper or convenient in connection with the preservation,
perfection or enforcement of any of its rights hereunder.

 

6.2                                 Debtor
agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise
in writing:  (a) that Bank is
authorized to file financing statements in the name of Debtor to perfect Bank’s
security interest in Collateral and Proceeds; (b) to insure the Collateral
with Bank named as loss payee, in form, substance and amounts, under
agreements, against risks and liabilities, and with insurance companies
satisfactory to Bank; (c) to operate the Collateral in accordance with all
applicable statutes, rules and regulations relating to the use and control
thereof, and not to use the Collateral for any unlawful purpose or in any way
that would void any insurance required to be carried in connection therewith; (d) not
to permit any security interest in or lien on the Collateral or Proceeds,
including without limitation, liens arising from repairs to or storage of the
Collateral, except in favor of Bank; (e) to pay when due all license fees,
registration fees and other charges in connection with any Collateral; (f) not
to remove the Collateral from Debtor’s premises unless the Collateral consists
of mobile goods as defined in the California Uniform Commercial Code, in which
case Debtor agrees not to remove or permit the removal of the Collateral from
its state of domicile for a period in excess of 30 calendar days; (g) not
to sell, hypothecate or otherwise dispose of, nor permit the transfer by
operation of law of, any of the Collateral or Proceeds or any interest therein;
(h) not to rent, lease or charter the Collateral; (i) to permit Bank
to inspect the Collateral at any time; (j) to keep, in accordance with
generally accepted accounting principles, complete and accurate records
regarding all Collateral and Proceeds, and to permit Bank to inspect the same
and make copies thereof at any reasonable time; (k) if requested by Bank,
to receive and use reasonable diligence to collect Proceeds, in trust and as
the property of Bank, and to Immediately endorse as appropriate and deliver
such Proceeds to Bank daily in the exact form in which they are received
together with a collection report in form satisfactory to Bank; (l) not to
commingle Proceeds or collections thereunder with other property; (m) to
give only normal allowances and credits and to advise Bank thereof immediately
in writing if they affect any Collateral or Proceeds in any material respect;
(n) in the event Bank elects to receive payments of Proceeds hereunder, to
pay all expenses incurred by Bank in connection therewith, including expenses
of accounting, correspondence, collection efforts, reporting to account or
contract debtors, filing, recording, record keeping and expenses incidental
thereto; and (o) to provide any service and do any other acts which may be
necessary to maintain, preserve and protect all Collateral and, as appropriate
and applicable, to keep the Collateral in good and saleable condition and
repair, to deal with the Collateral in accordance with the standards and
practices adhered to generally by owners of like property, and to keep all Collateral
and Proceeds free and clear of all defenses, rights of offset and
counterclaims.

 

7.                                       Debtor
appoints Bank its true attorney-in-fact to perform any of the following powers,
which are coupled with an interest, are irrevocable until termination of this Agreement
and may be exercised from time to time by Bank’s officers and employees, or any
of them, after and during the continuance of an Event of Default, or with
respect to subsections (b), (g), (i), (j), (k) and (n) only, whether or
not Debtor is in

 

2

 

default:  (a) to perform any obligation of Debtor
hereunder in Debtor’s name or otherwise; (b) to give notice to account
debtors or others of Bank’s rights in the Collateral and Proceeds, (c) to
enforce or forebear from enforcing the Debtor’s rights with respect to account
debtors or others of Bank’s rights in the Collateral and Proceeds and to make
extension or modification agreements with respect thereto; (d) to release
persons liable on Proceeds and to give receipts and acquittances and compromise
disputes in connection therewith; (e) to release or substitute security; (f) to
resort to security in any order; (g) to prepare, execute, file, record or
deliver notes, assignments, schedules, designation statements, financing
statements, continuation statements, termination statements, statements of
assignment, applications for registration or like papers to perfect, preserve
or release Bank’s interest in the Collateral and Proceeds; (h) to receive,
open and read mail addressed to Debtor; (i) to take cash, instruments for
the payment of money and other property to which Bank is entitled; (j) to
verify facts concerning the Collateral and Proceeds by inquiry of obligors
thereon, or otherwise, in its own name or a fictitious name; (k) to
endorse, collect, deliver and receive payment under instruments for the payment
of money constituting or relating to Proceeds; (l) to prepare, adjust,
execute, deliver and receive payment under insurance claims, and to collect and
receive payment of and endorse any instrument in payment of loss or returned
premiums or any other insurance refund or return, and to apply such amounts
received by Bank, at Bank’s sole option, toward repayment of the Indebtedness
or replacement of the Collateral; (m) to exercise all rights, powers and
remedies which Debtor would have, but for this Agreement, with respect to all
Collateral and Proceeds subject hereto; (n) to enter onto Debtor’s
premises in inspecting the Collateral; (o) to preserve or release the
interest evidenced by chattel paper to which Bank is entitled hereunder and to
endorse and deliver any evidence of title incidental thereto; and (p) to
do all acts and things and execute all documents in the name of Debtor or
otherwise, deemed by Bank as necessary, proper and convenient in connection
with the preservation, perfection or enforcement of its rights hereunder.

 

8.                                       PAYMENT OF
PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS.  Debtor agrees to pay, prior to delinquency,
all insurance premiums, taxes, charges, liens and assessments against the
Collateral and Proceeds, and upon the failure of Debtor to do so, Bank at its
option may pay any of them and shall be the sole judge of the legality or
validity thereof and the amount necessary to discharge the same.  Any such payments made by Bank shall be
obligations of Debtor to Bank, due and payable immediately upon demand,
together with interest at a rate determined in accordance with the provisions
of this Agreement, and shall be secured by the Collateral and Proceeds, subject
to all terms and conditions of this Agreement.

 

9.                                       EVENTS OF
DEFAULT.  The occurrence of any of the
following shall constitute an “Event of Default” under this Agreement:  (a) any default in the payment or
performance of any obligation, or any defined event of default, under (i) any
contract or instrument evidencing any Indebtedness, or (ii) any other
agreement between Debtor and Bank, including without limitation any loan
agreement, relating to or executed in connection with any indebtedness; (b) any
representation or warranty made by Debtor herein shall prove to be incorrect,
false or misleading in any material respect when made; (c) Debtor shall
fail to observe or perform any obligation or agreement contained herein; (d) any
impairment of the rights of Bank in any Collateral or Proceeds or any
attachment or like levy on any property of Debtor; and (e) Bank, in good
faith, believes any material portion or all of the Collateral and/or Proceeds
to be in danger of misuse, dissipation, commingling, loss, theft, damage or
destruction, or otherwise in jeopardy or unsatisfactory in character or value.

 

10.                                 REMEDIES.  Upon the occurrence of any Event of Default,
Bank shall have the right to declare immediately due and payable all or any Indebtedness
secured hereby and to terminate any commitments to make loans or otherwise
extend credit to Debtor.  Bank shall have
all other rights, powers, privileges and remedies granted to a secured party
upon default under the California Uniform Commercial Code or otherwise provided
by law, including without limitation, the right (a) to contact all persons
obligated to Debtor on any Collateral or Proceeds and to instruct such persons
to deliver all Collateral and/or Proceeds directly to Bank, and (b) to sell,
lease, license or otherwise dispose of any or all Collateral.  All rights, powers, privileges and remedies
of Bank shall be cumulative.  No delay,
failure or discontinuance of Bank in exercising any right, power, privilege or
remedy hereunder shall affect or operate as a waiver of such right, power,
privilege or remedy; nor shall any single or partial exercise of any such
right, power, privilege or remedy preclude, waive or otherwise affect any other
or further exercise thereof or the

 

3

 

exercise
of any other right, power, privilege or remedy. 
Any waiver, permit, consent or approval of any kind by Bank of any
default hereunder, or any such waiver of any provisions or conditions hereof,
must be in writing and shall be effective only to the extent set forth in
writing.  It is agreed that public or
private sales or other dispositions, for cash or on credit, to a wholesaler or
retailer or investor, or user of property of the types subject to this
Agreement, or public auctions, are all commercially reasonable since
differences in the prices generally realized in the different kinds of
dispositions are ordinarily offset by the differences in the costs and credit
risks of such dispositions.

 

While
an Event of Default exists:  (a) Debtor
will deliver to Bank from time to time, as requested by Bank, current lists of
all Collateral and Proceeds; (b) Debtor will not dispose of any Collateral
or Proceeds except on terms approved by Bank; (c) at Bank’s request,
Debtor will assemble and deliver all Collateral and Proceeds, and books and
records pertaining thereto, to Bank at a reasonably convenient place designated
by Bank; and (d) Bank may, without notice to Debtor, enter onto Debtor’s
premises and take possession of the Collateral. 
Debtor further agrees that Bank shall have no obligation to process or
prepare any Collateral for sale or other disposition.

 

11.                                 DISPOSITION
OF COLLATERAL AND PROCEEDS; TRANSFER OF INDEBTEDNESS.  In disposing of Collateral hereunder, Bank may
disclaim all warranties of title, possession, quiet enjoyment and the
like.  Any proceeds of any disposition of
any Collateral or Proceeds, or any part thereof, may be applied by Bank to the
payment of expenses incurred by Bank in connection with the foregoing,
including reasonable attorneys’ fees, and the balance of such proceeds may be
applied by Bank toward the payment of the indebtedness in such order of
application as Bank may from time to time elect.  Upon the transfer of all or any part of the
Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds
and shall be fully discharged thereafter from all liability and responsibility
with respect to any of the foregoing so transferred, and the transferee shall
be vested with all rights and powers of Bank hereunder with respect to any of
the foregoing so transferred; but with respect to any Collateral or Proceeds
not so transferred Bank shall retain all rights, powers, privileges and
remedies herein given.

 

12.                                 STATUTE OF
LIMITATIONS.  Until all Indebtedness
shall have been paid in full and all commitments by Bank to extend credit to
Debtor have been terminated, the power of sale or other disposition and all
other rights, powers, privileges and remedies granted to Bank hereunder shall continue
to exist and may be exercised by Bank at any time and from time to time
irrespective of the fact that the Indebtedness or any part thereof may have
become barred by any statute of limitations, or that the personal liability of
Debtor may have ceased, unless such liability shall have ceased due to the
payment in full of all Indebtedness secured hereunder.

 

13.                                 MISCELLANEOUS.  When there is more than one Debtor named
herein:  (a) the word “Debtor” shall
mean all or any one or more of them as the context requires; (b) the
obligations of each Debtor hereunder are joint and several; and (c) until
all Indebtedness shall have been paid in full, no Debtor shall have any right
of subrogation or contribution, and each Debtor hereby waives any benefit of or
right to participate in any of the Collateral or Proceeds or any other security
now or hereafter held by Bank.  Debtor
hereby waives any right to require Bank to (i) proceed against Debtor or
any other person, (ii) proceed against or exhaust any security from Debtor
or any other person, (iii) perform any obligation of Debtor with respect
to any Collateral or Proceeds, and (d) make any presentment or demand, or
give any notice of nonpayment or nonperformance, protest, notice of protest or
notice of dishonor hereunder or in connection with any Collateral or
Proceeds.  Debtor further waives any
right to direct the application of payments or security for any Indebtedness of
Debtor or indebtedness of customers of Debtor.

 

14.                                 NOTICES.  All notices, requests and demands required
under this Agreement must be in writing, addressed to Bank at the address
specified in any other loan documents entered into between Debtor and Bank and
to Debtor at the address of its chief executive office (or principal residence,
if applicable) specified below or to such other address as any party may
designate by written notice to each other party, and shall be deemed to have
been given or made as follows: (a) if personally delivered, upon delivery;
(b) if sent by mail, upon the earlier of the date of receipt or 3 days
after deposit in the U.S. mail, first class and postage prepaid; and (c) if
sent by telecopy, upon receipt.

 

4

 

15.                                 COSTS,
EXPENSES AND ATTORNEYS’ FEES.  Debtor
shall pay to Bank immediately upon demand the full amount of all payments,
advances, charges, costs and expenses, including reasonable attorneys’ fees (to
include outside counsel fees and all allocated costs of Bank’s in-house
counsel), expended or incurred by Bank in exercising any right, power,
privilege or remedy conferred by this Agreement or in the enforcement thereof,
whether incurred at the trial or appellate level, in an arbitration proceeding
or otherwise, and including any of the foregoing incurred in connection with
any bankruptcy proceeding (including without limitation, any adversary
proceeding, contested matter or motion brought by Bank or any other person)
relating to Debtor or in any way affecting any of the Collateral or Bank’s
ability to exercise any of its rights or remedies with respect thereto.  All of the foregoing shall be paid by Debtor
with interest from the date of demand until paid in full at a rate per annum
equal to the greater of ten percent (10%) or Bank’s Prime Rate in effect from
time to time.

 

16.                                 SUCCESSORS;
ASSIGNS; AMENDMENT.  This Agreement shall
be binding upon and inure to the benefit of the heirs, executors,
administrators, legal representatives, successors and assigns of the parties,
and may be amended or modified only in writing signed by Bank and Debtor.

 

17.                                 SEVERABILITY
OF PROVISIONS.  If any provision of this
Agreement shall be held to be prohibited by or invalid under applicable law,
such provision shall be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or any
remaining provisions of this Agreement.

 

18.                                 GOVERNING
LAW.  This Agreement shall be governed by
and construed in accordance with the laws of the State of California.

 

Debtor
warrants that Debtor is an organization registered under the laws of the State
of Delaware.

 

Debtor
warrants that its chief executive office (or principal residence, if
applicable) is located at the following address:  1515 S.
Manchester, Anaheim, CA 92802

 

Debtor
warrants that the Collateral (except goods in transit) is located or domiciled
at the following additional addresses:  1585 S. Manchester, Anaheim, CA 92802

 

5

 

IN
WITNESS WHEREOF, this Agreement has been duly executed as of May 27, 2004.

 

	
  Iteris, Inc.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
  /s/
  Jack Johnson

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  CEO

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/
  Abbas Mohaddes

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Secretary

  	
   

  
						

 

6

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