Nestor Traffic Systems, Inc. Variable Rate Senior Notes due May 25, 2011
Dated:
April
1, 2007
TABLE OF CONTENTS
|
Section
|
Page
|
|||
|
1.
|
AUTHORIZATION
OF NOTES
|
1
|
||
|
2.
|
SALE
AND PURCHASE OF NOTES
|
1
|
||
|
3.
|
CLOSINGS;
EARLY TERMINATION
|
1
|
||
|
3.1.
|
Closings.
|
1
|
||
|
3.2.
|
Early
Termination.
|
2
|
||
|
4.
|
CONDITIONS
TO CLOSING
|
2
|
||
|
4.1.
|
Representations
and Warranties
|
2
|
||
|
4.2.
|
Performance;
No Default
|
2
|
||
|
4.3.
|
Compliance
Certificates
|
2
|
||
|
4.4.
|
Purchase
Permitted By Applicable Law, etc.
|
2
|
||
|
4.5.
|
Sale
of Other Notes
|
3
|
||
|
4.6.
|
Payment
of Special Counsel, Organizational, Research, Administration to Speed
I,
LLC Fees
|
3
|
||
|
4.7.
|
Proceedings
and Documents
|
3
|
||
|
5.
|
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
|
3
|
||
|
5.1.
|
Organization;
Power and Authority
|
3
|
||
|
5.2.
|
Authorization,
etc.
|
4
|
||
|
5.3.
|
Disclosure
|
4
|
||
|
5.4.
|
Organization
and Ownership of Shares of Subsidiaries; Affiliates
|
4
|
||
|
5.5.
|
Financial
Statements
|
4
|
||
|
5.6.
|
Compliance
with Laws, Other Instruments, etc.
|
5
|
||
|
5.7.
|
Governmental
Authorizations, etc.
|
5
|
||
|
5.8.
|
Litigation;
Observance of Agreements, Statutes and Orders
|
5
|
||
|
5.9.
|
Taxes
|
5
|
||
|
5.10.
|
Title
to Property; Leases
|
6
|
||
|
5.11.
|
Licenses,
Permits, etc.
|
6
|
||
|
5.12.
|
Private
Offering by the Company
|
6
|
||
|
5.13.
|
Existing
Indebtedness; Future Liens
|
6
|
||
|
5.14.
|
Foreign
Assets Control Regulations, etc.
|
7
|
||
|
6.
|
REPRESENTATIONS
OF THE PURCHASER
|
7
|
||
|
6.1.
|
Purchase
for Investment
|
7
|
||
|
6.2.
|
Accredited
Investor, etc.
|
7
|
||
|
7.
|
PAYMENTS
ON NOTES
|
8
|
||
|
7.1.
|
Place
of Payment
|
8
|
||
|
7.2.
|
Calculation
and Timing of Payment.
|
8
|
||
|
7.3.
|
Payment
at Maturity.
|
9
|
||
|
7.4.
|
Minimum
Return.
|
9
|
||
|
8.
|
INFORMATION
AS TO COMPANY
|
9
|
||
|
8.1.
|
Financial
and Business Information
|
9
|
||
|
8.2.
|
Inspection
|
10
|
||
TABLE
OF CONTENTS (Cont'd)
|
Section
|
Page
|
|||
|
9.
|
PREPAYMENT
OF THE NOTES
|
10
|
||
|
9.1.
|
Optional
Prepayments
|
10
|
||
|
9.2.
|
Maturity;
Surrender, etc.
|
10
|
||
|
10.
|
AFFIRMATIVE
COVENANTS
|
11
|
||
|
10.1.
|
Compliance
with Law
|
11
|
||
|
10.2.
|
Insurance
|
11
|
||
|
10.3.
|
Maintenance
of Properties
|
11
|
||
|
10.4.
|
Payment
of Taxes and Claims
|
11
|
||
|
10.5.
|
Corporate
Existence, etc.
|
12
|
||
|
10.6.
|
Keeping
of Records and Books of Account
|
12
|
||
|
10.7.
|
Additional
Assurances
|
12
|
||
|
10.8.
|
Obtaining
and Maintaining Speed ▇▇▇▇▇.
|
▇▇
|
||
|
▇▇.
|
NEGATIVE
COVENANTS
|
13
|
||
|
11.1.
|
Liens
|
13
|
||
|
12.
|
EVENTS
OF ▇▇▇▇▇▇▇
|
▇▇
|
||
|
▇▇.
|
REMEDIES
ON DEFAULT, ETC.
|
15
|
||
|
13.1.
|
Acceleration
|
15
|
||
|
13.2.
|
Other
Remedies
|
15
|
||
|
13.3.
|
Rescission
|
15
|
||
|
13.4.
|
No
Waivers or Election of Remedies, Expenses, etc.
|
16
|
||
|
14.
|
EXCHANGE;
SUBSTITUTION OF NOTES
|
16
|
||
|
14.1.
|
Transfer
and Exchange of Notes
|
16
|
||
|
14.2.
|
Replacement
of Notes
|
17
|
||
|
15.
|
EXPENSES,
ETC.
|
17
|
||
|
15.1.
|
Transaction
Expenses
|
17
|
||
|
15.2.
|
Survival
|
17
|
||
|
16.
|
SURVIVAL
OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT
|
18
|
||
|
17.
|
AMENDMENT
AND WAIVER.
|
18
|
||
|
17.1.
|
Requirements
|
18
|
||
|
17.2.
|
Solicitation
of Holders of Notes
|
18
|
||
|
17.3.
|
Binding
Effect, etc.
|
19
|
||
|
17.4.
|
Notes
held by Company, etc.
|
19
|
||
|
18.
|
NOTICES
|
19
|
||
|
19.
|
REPRODUCTION
OF DOCUMENTS
|
20
|
||
|
20.
|
CONFIDENTIAL
INFORMATION
|
20
|
||
ii
TABLE
OF CONTENTS
(Cont'd)
|
Section
|
Page
|
|||
|
21.
|
SUBSTITUTION
OF PURCHASER
|
21
|
||
|
22.
|
MISCELLANEOUS
|
21
|
||
|
22.1.
|
Successors
and Assigns
|
21
|
||
|
22.2.
|
Payments
Due on Non-Business Days
|
21
|
||
|
22.3.
|
Severability
|
21
|
||
|
22.4.
|
Construction
|
22
|
||
|
22.5.
|
Counterparts
|
22
|
||
|
22.6.
|
Governing
Law
|
22
|
||
|
22.7.
|
Headings
|
22
|
||
|
22.8.
|
Integration
|
22
|
||
|
22.9.
|
Waiver
of Jury Trial
|
22
|
||
iii
TABLE
OF SCHEDULES AND EXHIBITS
SCHEDULE A -- Purchaser
Information
SCHEDULE B -- Defined
Terms
SCHEDULE
5.10
- Title
to Assets
EXHIBIT 1 -- Form
of
Variable
Rate Senior Notes due May 25, 2011
iv
Variable
Rate Senior Notes due May 25, 2011
April
1,
2007
|
TO:
|
Ladies
and Gentlemen:
▇▇▇▇▇▇
Traffic Systems, Inc.,
a
Delaware
corporation (the “Company”),
a
wholly owned subsidiary of ▇▇▇▇▇▇, Inc. (“▇▇▇▇▇▇”)
agrees
with you as follows:
The
Company will authorize the issue and sale of $3,000,000
aggregate principal amount of its Variable
Rate Senior Notes due May 25, 2011
(the
“Notes”,
such
term to include any such notes issued in substitution therefor pursuant to
Section 14
of this
Agreement). The Notes shall be substantially in the form set out in Exhibit 1,
with
such changes therefrom, if any, as may be approved by you and the Company.
Certain capitalized terms used in this Agreement are defined in Schedule B;
references to a “Schedule”
or
an
“Exhibit”
are,
unless otherwise specified, to a Schedule or an Exhibit attached to
this Agreement.
2.
Sale
and Purchase of Notes
Subject
to the terms and conditions of this Agreement, the Company will issue and sell
to you and you will purchase from the Company, at one or more Closings as
provided for in Section 3,
Notes
in the principal amount of $3,000,000
at the
purchase price of 100% of the principal amount thereof.
3.
Closings;
Early Termination
3.1. Closings.
3.1.1. The
sale
and purchase
of the
Notes to be purchased by you shall occur at the offices of the Company, at
10:00
a.m., Eastern Time, at three closings (each, a “Closing”)
the
first to occur on April,
1
2007 or
on
such other Business Day thereafter as may be agreed upon by the Company and
you
(the
“Initial
Closing Date”);
and
3.1.2. The
second Closing will occur, if at all, on the 10th
day next
after you have received notice that the Company has entered into New Contracts
comprising at least 8 (a total of 16 actively deployed) Speed Units (the
“Second
Closing Date”),
or on
such other Business Day thereafter as may be agreed upon by the Company and
you.
The Second Closing Date shall occur, if at all, prior to December 31,
2007.
3.1.3. At
a Closing, the Company will deliver to you the Notes to be purchased by you
in
the form of a single Note (or such greater number of Notes in denominations
of
at least $100,000 as you may request) dated the date of the Closing and
registered in your name (or in the name of your nominee), against delivery
by
you to the Company or its order of immediately available funds in the amount
of
the purchase price therefor by wire transfer of immediately available funds
for
the account of the Company. If at a Closing the Company shall fail to tender
such Notes to you as provided above in this Section 3,
or any
of the conditions specified in Section 4
shall
not have been fulfilled to your satisfaction, you shall, at your election,
be
relieved of all further obligations under this Agreement, without thereby
waiving any rights you may have by reason of such failure or such
nonfulfillment.
3.2. Early
Termination.
Notwithstanding
anything herein or elsewhere to the contrary, in the event that, prior to the
Initial Closing, the Company is able to arrange for financing in an amount
not
less than $1.5 million on terms more favorable to the Company than those set
forth herein, then the Company may, by written notice to you, terminate this
Agreement and thereafter shall have no further liability to you except as set
forth in Section 4.6.
The
Company shall have no obligation sell you Notes in a second Closing. Any such
second Closing shall be at the election of the Company.
4.
Conditions
to Closing
Your
obligation to purchase and pay for the Notes to be sold to you at the Closing
is
subject to the fulfillment to your reasonable satisfaction, prior to or at
a
Closing, of the following conditions:
4.1. Representations
and Warranties
The
representations and warranties of the Company in this Agreement shall be correct
when made and at the time of the Closing.
4.2. Performance;
No Default
The
Company shall have performed and complied with all agreements and conditions
contained in this Agreement required to be performed or complied with by it
prior to or at a Closing and after giving effect to the issue and sale of the
Notes, no Default or Event of Default shall have occurred and be
continuing.
4.3. Compliance
Certificates
4.3.1. Officer’s
Certificate.
The
Company shall have delivered to you an Officer’s Certificate, dated the date of
the Closing, certifying that the conditions specified in
Sections 4.1
and
4.2
have
been fulfilled.
4.3.2. Secretary’s
Certificate.
The
Company shall have delivered to you a certificate certifying as to the
resolutions attached thereto and other corporate proceedings relating to the
authorization, execution and delivery of the Notes and the
Agreements.
2
4.4. Purchase
Permitted By Applicable Law, etc.
On
the
date of the Closing, your purchase of Notes shall (i) be permitted by the
laws and regulations of each jurisdiction to which you are subject, without
recourse to provisions (such as Section 1405(a)(8) of the New York
Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (ii) not
violate any applicable law or regulation (including, without limitation,
Regulation U, T or X of the Board of Governors of the Federal Reserve System)
and (iii) not subject you to any tax, penalty or liability under or
pursuant to any applicable law or regulation, which law or regulation was not
in
effect on the date hereof. If requested by you, you shall have received an
Officer’s Certificate certifying as to such matters of fact as you may
reasonably specify to enable you to determine whether such purchase is so
permitted.
4.5. Sale
of
Other Notes
Contemporaneously
with a Closing, the Company shall sell to the purchasers specified in
Schedule A
(the
“Purchasers”)
and
such other Purchasers shall purchase the Notes to be purchased by them at the
Closing as specified in Schedule A.
4.6. Payment
of Special Counsel, Organizational, Research, Administration to Speed I, LLC
Fees
Without
limiting the provisions of Section 15.1,
the
Company shall have paid on or before the Closing the organizational, research,
legal and administration fees, charges and disbursements to the extent reflected
in a statement to Purchasers and Speed I, LLC rendered to the Company at least
one Business Day prior to the first Closing, which amount shall not exceed
$12,000.00. For subsequent Closings, the Company will not be asked to reimburse
Speed I, LLC more than $5,000 for expenses incurred related to each subsequent
Closing.
4.7. Proceedings
and Documents
All
corporate and other proceedings in connection with the transactions contemplated
by this Agreement and all documents and instruments incident to such
transactions shall be satisfactory to you and your special counsel, and you
and
your special counsel shall have received all such counterpart originals or
certified or other copies of such documents as you or they may reasonably
request.
5.
Representations
and Warranties of the Company
The
Company represents and warrants to you that:
5.1. Organization;
Power and Authority
Each
of
the Company and ▇▇▇▇▇▇ is a corporation duly organized, validly existing and
in
good standing under the laws of Delaware,
and is
duly qualified as a foreign corporation and is in good standing in each
jurisdiction in which such qualification is required by law, other than those
jurisdictions as to which the failure to be so qualified or in good standing
could not, individually or in the aggregate, reasonably be expected to have
a
Material Adverse Effect. The Company has all requisite corporate power and
authority to own or hold under lease the properties it purports to own or hold
under lease, to transact the business it transacts and proposes to transact,
to
execute and deliver this Agreement and the Notes and to perform the provisions
hereof and thereof.
3
5.2. Authorization,
etc.
This
Agreement and the Notes have been duly authorized by all necessary corporate
action on the part of the Company, and this Agreement constitutes, and upon
execution and delivery thereof each Note will constitute, the legal, valid
and
binding obligation of the Company enforceable against the Company in accordance
with its terms, except as such enforceability may be limited by (i) applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws
affecting the enforcement of creditors’ rights generally and (ii) general
principles of equity (regardless of whether such enforceability is considered
in
a proceeding in equity or at law).
5.3. Disclosure
▇▇▇▇▇▇
makes consolidated financial and business disclosure in its Reports. The Current
Report fairly describes, in all material respects, the general nature of the
business and principal properties of the Company and ▇▇▇▇▇▇. Except as disclosed
in Schedule 5.3,
this
Agreement, the Current Report, the documents, certificates or other writings
delivered to you by or on behalf of the Company in connection with the
transactions contemplated hereby, taken as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein not misleading in light of the circumstances under
which they were made. Except as disclosed in the Current Report or as expressly
described in Schedule 5.3,
or in
one of the documents, certificates or other writings identified therein, since
the last day of the period covered by the Current Report, there has been no
change in the financial condition, operations, business, properties or prospects
of the Company or ▇▇▇▇▇▇ except changes that individually or in the aggregate
could not reasonably be expected to have a Material Adverse Effect. There is
no
fact known to the Company that could reasonably be expected to have a Material
Adverse Effect that has not been set forth in the Current Report or in the
other
documents, certificates and other writings delivered to you by or on behalf
of
the Company specifically for use in connection with the transactions
contemplated hereby.
5.4. Organization
and Ownership of Shares of Subsidiaries; Affiliates
The
Company is a wholly owned Subsidiary of ▇▇▇▇▇▇. The Company has one Subsidary,
CrossingGuard, Inc., which is wholly owned by the Company, is inactive, owns
no
assets and conducts no operations.
5.5. Financial
Statements
Nestor’s
Reports contain the consolidated financial statements of ▇▇▇▇▇▇ and the Company.
The financial statements in the Current Report (including in each case the
related schedules and notes) fairly present in all material respects the
consolidated financial position of ▇▇▇▇▇▇ and the Company as of the respective
dates specified in such financial statements and the consolidated results
of their operations and cash flows for the respective periods so specified
and
have been prepared in accordance with GAAP consistently applied throughout
the
periods involved except as set forth in the notes thereto (subject, in the
case
of any interim financial statements, to normal year-end adjustments) for the
respective periods presented.
4
5.6. Compliance
with Laws, Other Instruments, etc.
The
execution, delivery and performance by the Company of this Agreement and the
Notes will not (a) contravene, result in any breach of, or constitute a
default under, or result in the creation of any Lien in respect of any property
of ▇▇▇▇▇▇ or the Company under any indenture, mortgage, deed of trust, loan,
purchase or credit agreement, lease, corporate charter or by-laws, or any other
agreement or instrument to which ▇▇▇▇▇▇ or the Company is bound or by which
▇▇▇▇▇▇ or the Company or any of their respective properties may be bound or
affected, (b) conflict with or result in a breach of any of the terms,
conditions or provisions of any order, judgment, decree, or ruling of any court,
arbitrator or Governmental Authority applicable to ▇▇▇▇▇▇ or the Company or
(c)
violate any provision of any statute or other rule or regulation of any
Governmental Authority applicable to ▇▇▇▇▇▇ or the Company.
5.7. Governmental
Authorizations, etc.
Except
for a Form D to be filed with the SEC and copies thereof to be filed with all
applicable state securities regulators (together with the applicable filing
fees), no consent, approval or authorization of, or registration, filing or
declaration with, any Governmental Authority is required in connection with
the
execution, delivery or performance by the Company of this Agreement or the
Notes.
5.8. Litigation;
Observance of Agreements, Statutes and Orders
5.8.1. Except
as
set forth in the Current Report, there are no actions, suits or proceedings
pending or, to the knowledge of the Company, threatened against or affecting
▇▇▇▇▇▇ or the Company or any property of ▇▇▇▇▇▇ or the Company in any court
or
before any arbitrator of any kind or before or by any Governmental Authority
that, individually or in the aggregate, could reasonably be expected to have
a
Material Adverse Effect.
5.8.2. Neither
▇▇▇▇▇▇ nor the Company is in default under any term of any agreement or
instrument to which it is a party or by which it is bound, or any order,
judgment, decree or ruling of any court, arbitrator or Governmental Authority
or
is in violation of any applicable law, ordinance, rule or regulation (including,
without limitation, Environmental Laws) of any Governmental Authority, which
default or violation, individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.
5.9. Taxes
▇▇▇▇▇▇
and the Company have filed all tax returns that are required to have been filed
in any jurisdiction, and have paid all taxes shown to be due and payable on
such
returns and all other taxes and assessments levied upon them or their
properties, assets, income or franchises, to the extent such taxes and
assessments have become due and payable and before they have become delinquent,
except for any taxes and assessments (i) the amount of which is not
individually or in the aggregate Material or (ii) the amount, applicability
or validity of which is currently being contested in good faith by appropriate
proceedings and with respect to which ▇▇▇▇▇▇ or the Company, as the case may
be,
has established adequate reserves in accordance with GAAP. The Company knows
of
no basis for any other tax or assessment that could reasonably be expected
to
have a Material Adverse Effect. The charges, accruals and reserves on the books
of ▇▇▇▇▇▇ and the Company in respect of Federal, state or other taxes for all
fiscal periods are adequate.
5
5.10. Title
to
Property; Leases
Except
as
set forth on Schedule
5.10,
▇▇▇▇▇▇
and the Company have good and sufficient title to their respective properties
that individually or in the aggregate are Material, including all such
properties reflected in the most recent audited balance sheet referred to in
the
Current Report or purported to have been acquired by ▇▇▇▇▇▇ or the Company
after
the last day of the period covered by the Current Report (except as sold or
otherwise disposed of in the ordinary course of business), in each case free
and
clear of Liens prohibited by this Agreement. All leases that individually or
in
the aggregate are Material are valid and subsisting and are in full force and
effect in all material respects.
5.11. Licenses,
Permits, etc.
Except
as
disclosed in the Current Report,
5.11.1. ▇▇▇▇▇▇
and the Company own or possess all licenses, permits, franchises,
authorizations, patents, copyrights, service marks, trademarks and trade names,
or rights thereto, that individually or in the aggregate are Material, without
known conflict with the rights of others;
5.11.2. to
the
best knowledge of the Company, no product of ▇▇▇▇▇▇ or the Company infringes
in
any material respect any license, permit, franchise, authorization, patent,
copyright, service ▇▇▇▇, trademark, trade name or other right owned by any
other
Person; and
5.11.3. to
the
best knowledge of the Company, there is no Material violation by any Person
of
any right of ▇▇▇▇▇▇ or the Company with respect to any patent, copyright,
service ▇▇▇▇, trademark, trade name or other right owned or used by ▇▇▇▇▇▇
or
the Company.
5.12. Private
Offering by the Company
None
of
▇▇▇▇▇▇, the Company nor anyone acting on their respective behalf has offered
the
Notes or any similar securities for sale to, or solicited any offer to buy
any
of the same from, or otherwise approached or negotiated in respect thereof
with,
any person other than you and accredited investors (as such term is defined
in
Section 501(a) of Regulation D), each of which has been offered the Notes at
a
private sale for investment. None of ▇▇▇▇▇▇, the Company nor anyone acting
on
their respective behalf has taken, or will take, any action that would subject
the issuance or sale of the Notes to the registration requirements of
Section 5 of the Securities Act or the qualification requirements of any
state securities laws.
6
5.13. Existing
Indebtedness; Future Liens
5.13.1. The
Current Report sets forth a complete and correct list of all outstanding
Indebtedness of ▇▇▇▇▇▇ and the Company as of the last date covered by the
Current Report, since which date there has been no Material change in the
amounts, interest rates, sinking funds, installment payments or maturities
of
the Indebtedness of ▇▇▇▇▇▇ or the Company. Neither ▇▇▇▇▇▇ nor the Company is
in
default and no waiver of default is currently in effect, in the payment of
any
principal or interest on any Indebtedness of ▇▇▇▇▇▇ or the Company and no event
or condition exists with respect to any Indebtedness of ▇▇▇▇▇▇ or the Company
that would permit (or that with notice or the lapse of time, or both, would
permit) one or more Persons to cause such Indebtedness to become due and payable
before its stated maturity or before its regularly scheduled dates of
payment.
5.13.2. Neither
▇▇▇▇▇▇ nor the Company has agreed or consented to cause or permit in the future
(upon the happening of a contingency or otherwise) any of its property, whether
now owned or hereafter acquired, to be subject to a Lien not permitted by
Section 11.1.
5.14. Foreign
Assets Control Regulations, etc.
Neither
the sale of the Notes by the Company hereunder nor its use of the proceeds
thereof will violate the Trading with the Enemy Act, as amended, or any of
the
foreign assets control regulations of the United States Treasury Department
(31
CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto.
6.
Representations
of the Purchaser
6.1. Purchase
for Investment
You
represent that you are purchasing the Notes for your own account or for one
or
more separate accounts maintained by you or for the account of one or more
pension or trust funds and not with a view to the distribution thereof, provided
that the disposition of your or their property shall at all times be within
your
or their control. You understand that the Notes have not been registered under
the Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration is
available, except under circumstances where neither such registration nor such
an exemption is required by law, and that the Company is not required to
register the Notes.
6.2. Accredited
Investor, etc.
You
represent and warrant that:
6.2.1. other
than a finders fee due to Danzell Investment Management, Ltd in the amount
of
6.0% of the aggregate proceeds to the Company, you know of no valid claims
for
brokerage commissions, finder's fees or similar compensation in connection
with
the transactions contemplated by this Agreement based upon any arrangement
or
agreement made by you or on your behalf and you agree to indemnify and hold
harmless ▇▇▇▇▇▇ and the Company against any liability or expense to it arising
out of such a claim to the extent that such claim arises out of your actions
or
alleged actions;
7
6.2.2.
(i) you
have received such information with respect to your purchase of the Notes as
you
have requested in connection with your investment decision, have had an
opportunity to ask questions about the Company and his investment to officers
of
the Company, and have received answers to such questions as were asked; and
(ii)
the officers of the Company have made available to you any and all written
information which you have requested and have answered to your satisfaction
all
inquiries made by you;
6.2.3. you
have
adequate net worth and means of providing for you current needs so that you
can
afford to sustain a complete loss of your investment in the Notes. Your overall
commitment to investments which are not readily marketable is not
disproportionate to your net worth and your investment in the Notes will not
cause such overall commitment to become excessive. You are an “accredited
investor” within the definition set forth in Rule 501(a) of Regulation D
promulgated under the Securities Act.
7.
Payments
on Notes
7.1. Place
of
Payment
7.1.1. So
long
as you or your nominee shall be the holder of any Note, and notwithstanding
anything contained in such Note to the contrary, the Company will pay all sums
becoming due on such Note for principal and interest by the method and at the
address specified for such purpose opposite your name in Schedule A,
or by
such other method or at such other address as you shall have from time to time
specified to the Company in writing for such purpose, without the presentation
or surrender of such Note or the making of any notation thereon, except that
upon written request of the Company made concurrently with or reasonably
promptly after payment or prepayment in full of any Note, you shall surrender
such Note for cancellation, reasonably promptly after any such request, to
the
Company at its principal executive office. All payments and prepayments of
principal, fees, interest and any other amounts owed from time to time under
this Agreement and/or under the Notes shall be received by you prior to 2:00
o’clock P.M. local time on the Business Day that such payment is due. Any such
payment or prepayment which is received by Lender in Dollars and in immediately
available funds after 2:00 o’clock P.M. on a Business Day shall be deemed
received for all purposes of this Agreement, on the next succeeding Business
Day.
7.1.2. Prior
to
any sale or other disposition of any Note held by you or your nominee you will,
at your election, either endorse thereon the amount of principal paid thereon
and the last date to which interest has been paid thereon or surrender such
Note
to the Company in exchange for a new Note or Notes pursuant to
Section 14.1.
The
Company will afford the benefits of this Section 7.1
to any
direct or indirect transferee of any Note purchased by you under this Agreement
and that has made the same agreement relating to such Note as you have made
in
this Section 7.1.
8
7.2. Calculation
and Timing of Payment.
7.2.1. Payment
after Initial Closing.
After
the first Closing, but prior to the Second Closing, if any, if any, Payments
on
the Notes will be made quarterly in arrears based on the number of citations
issued pursuant to any Contract or New Contract comprising, at any time, not
more than 16 Speed Units for which the Company has received payment during
the
immediately preceding quarter (a “Qualifying
Citation”).
You
will receive the Citation Payment for each Qualifying Citation. The Company
will
compile the number of Qualifying Citations in each quarter within 45 days after
the end of such quarter and shall make Citation Payment to you based on the
number of such Qualifying Citations. In the event the Company is operating
more
than 16 Speed Units at any time prior to the Maturity Date or earlier prepayment
of the Notes, Qualifying Citations shall be issued only from the 16 Speed Units
that have been in operation the longest.
7.2.2. Payment
after the Second Closing.
After
the Second Closing, Payments on the Notes will be made quarterly in arrears
based on the number of Qualifying Citations issued pursuant to any Contract
or
New Contract comprising, at any time, not more than 32 Speed Units. You will
receive the Citation Payment for each Qualifying Citation. The Company will
compile the number of Qualifying Citations in each quarter within 45 days after
the end of such quarter and shall make Citation Payment to you based on the
number of such Qualifying Citations. In the event the Company is operating
more
than 32 Speed Units at any time prior to the Maturity Date or earlier prepayment
of the Notes, Qualifying Citations shall be issued only from the 32 Speed Units
that have been in operation the longest.
7.3. Payment
at Maturity.
At
the
Maturity Date, the Company will pay you all outstanding principal together
with
all accumulated but unpaid Citation Payments (plus any amount required to make
your minimum annual return equal to 10.0%, if required pursuant to Section
7.4)
and all
unpaid costs, fees, penalties or other amounts due pursuant to this Agreement,
the Notes or the Security Documents.
7.4. Minimum
Return.
At
the
end of each Note Year, with respect to each Note, the Company will determine
whether the annual rate of return on such Note was equal to or greater than
10.0% per annum. In the event that your annual rate of return for the
immediately preceding year was less than 10.0%, the Company will, within 45
days
following the end of such year, make an interest payment to you in an amount
sufficient to make the annual rate of return for such prior year equal to
10.0%.
The
Company shall deliver to each holder of Notes:
8.1.1. Quarterly
Payment Report - The Company shall provide you, within 45 days after the end
of
each quarter,
a
statement in reasonable detail setting forth the number of Qualifying Citations
in the preceding quarter and the aggregate amount of the Citation Payments
for
such quarter.
9
8.1.2. Notice
of
Default or Event of Default -- promptly, and in any event within five days
after
a Responsible Officer becoming aware of the existence of any Default or Event
of
Default or that any Person has given any notice or taken any action with respect
to a claimed default hereunder or that any Person has given any notice or taken
any action with respect to a claimed default of the type referred to in
Sections 12(d)
through
12(i),
a
written notice specifying the nature and period of existence thereof and what
action the Company is taking or proposes to take with respect
thereto;
8.1.3. Notices
from Governmental Authority -- promptly, and in any event within 30 days of
receipt thereof, copies of any notice to the Company or any Subsidiary from
any
Federal or state or local Governmental Authority relating to any order, ruling,
statute or other law or regulation that could reasonably be expected to have
a
Material Adverse Effect; and
The
Company shall permit the representatives of each holder of Notes, at the expense
of such holder and upon reasonable prior notice to the Company, to visit the
principal executive office of the Company, to discuss the affairs, finances
and
accounts of ▇▇▇▇▇▇ and the Company with the Company’s officers and to inspect
the Company records relating to Qualifying Citations.
9.
Prepayment
of the Notes
9.1. Optional
Prepayments
The
Company may, at its option, upon notice as provided below, prepay at any time
all, but not less than all, the Notes, (a) if the Required Hours have been
achieved, at 100.0% or the then outstanding principal amount or (b) if the
Required Hours have not been achieved, at 110% of the then outstanding principal
amount, plus, in either case, all accumulated but unpaid Citation Payments
and
all unpaid costs, fees, expenses or other charges due to you from the Company
pursuant to this Agreement, the Notes or the Security Documents. The Company
will give each holder of Notes written notice of an optional prepayment under
this Section 9.1
not less
than 30 days and not more than 60 days prior to the date fixed for such
prepayment. Such notice shall specify such date, the aggregate principal amount
of the Notes to be prepaid on such date, the principal amount of each Note
held
by such holder to be prepaid, and the interest to be paid on the Citation
Payments (to the extent known) to be paid as of such date with respect to the
Notes, and shall be accompanied by a statement as to the estimated Citation
Payments due in connection with such prepayment (calculated as if the date
of
such notice were the date of the prepayment), setting forth the details of
such
computation. Two Business Days prior to such prepayment, the Company shall
deliver to each holder of Notes a certificate specifying the calculation of
such
Citation Payments as of the specified prepayment date.
9.2. Maturity;
Surrender, etc.
The
Company shall make payment in full on the Notes on the Maturity Date and from
and after such date, unless the Company shall fail to pay such principal amount
when so due and payable, together with due but unpaid Citation Payments or
minimum annual return payments in accordance with Section 7.4,
if any,
as aforesaid, all obligation on the part of the Company to make Citation
Payments shall cease. Any Note paid or prepaid in full shall be surrendered
to
the Company and cancelled and shall not be reissued.
10
10. Affirmative
Covenants
The
Company covenants that from and after the date hereof and for so long as any
of
the Notes are outstanding:
10.1. Compliance
with Law
The
Company will comply with all laws, ordinances or governmental rules or
regulations to which each of them is subject, including, without limitation,
Environmental Laws, and will obtain and maintain in effect all licenses,
certificates, permits, franchises and other governmental authorizations
necessary to the ownership of their respective properties or to the conduct
of
their respective businesses, in each case to the extent necessary to ensure
that
non-compliance with such laws, ordinances or governmental rules or regulations
or failures to obtain or maintain in effect such licenses, certificates,
permits, franchises and other governmental authorizations could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
10.2. Insurance
The
Company will maintain, with financially sound and reputable insurers, insurance
with respect to their respective properties and businesses against such
casualties and contingencies, of such types, on such terms and in such amounts
(including deductibles, co-insurance and self-insurance, if adequate reserves
are maintained with respect thereto) as is customary in the case of entities
of
established reputations engaged in the same or a similar business and similarly
situated.
10.3. Maintenance
of Properties
The
Company will maintain and keep, or cause to be maintained and kept, its
properties in good repair, working order and condition (other than ordinary
wear
and tear), so that the business carried on in connection therewith may be
properly conducted at all times, provided that this Section 10.3
shall
not prevent the Company from discontinuing the operation and the maintenance
of
any of its properties if such discontinuance is desirable in the conduct of
its
business and the Company has concluded that such discontinuance could not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
10.4. Payment
of Taxes and Claims
The
Company will file all tax returns required to be filed in any jurisdiction
and
to pay and discharge all taxes shown to be due and payable on such returns
and
all other taxes, assessments, governmental charges, or levies imposed on them
or
any of their properties, assets, income or franchises, to the extent such taxes
and assessments have become due and payable and before they have become
delinquent and all claims for which sums have become due and payable that have
or might become a Lien on properties or assets of the Company, provided that
the
Company need not pay any such tax or assessment or claims if (i) the
amount, applicability or validity thereof is contested by the Company on a
timely basis in good faith and in appropriate proceedings, and the Company
has
established adequate reserves therefor in accordance with GAAP on the books
of
the Company or (ii) the nonpayment of all such taxes and assessments in the
aggregate could not reasonably be expected to have a Material Adverse
Effect.
11
10.5. Corporate
Existence, etc.
The
Company will at all times preserve and keep in full force and effect its
corporate existence. The Company will at all times preserve and keep in full
force and effect the corporate existence of each of its Subsidiaries (unless
merged into the Company or a Subsidiary) and all rights and franchises of the
Company and its Subsidiaries unless, in the good faith judgment of the Company,
the termination of or failure to preserve and keep in full force and effect
such
corporate existence, right or franchise could not, individually or in the
aggregate, have a Material Adverse Effect.
10.6. Keeping
of Records and Books of Account
The
Company will keep adequate records and books of account with respect to the
Contracts, the New Contracts and the Speed Units, reflecting all financial
transactions related thereto.
10.7. Additional
Assurances
The
Company shall from time to time hereafter, execute and deliver or cause to
be
executed and delivered, such additional instruments, certificates and documents,
and take all such actions, as you shall reasonably request for the purpose
of
implementing or effectuating the provisions of this Agreement, and upon the
exercise by you of any power, right, privilege or remedy pursuant to this
Agreement which requires any consent, approval, registration, qualification
or
authorization of any Governmental Authority or instrumentality, exercise and
deliver all applications, certifications, instruments and other documents and
papers that you may be so required to obtain.
10.8. Obtaining
and Maintaining Speed Units.
The
Company shall use commercially reasonable best efforts to preserve Contracts
and
obtain New Contracts such that the Company shall operate (a) after the initial
Closing but prior to the Second Closing Date, 16 Speed Units, and (b) after
the
Second Closing 32 Speed Units, until the Maturity Date or until the Notes have
been prepaid in accordance with Section 9.
In the
event that any Contract or New Contract is terminated or expires, and as a
result thereof, the number of Speed Units operated by the Company is less than
the number specified above in this Section 10.8,
then
the Company shall use commercially reasonable best efforts to obtain one or
more
New Contracts or enhance any then existing Contract or New Contract such that
the number of operating Speed Units is as specified above in this Section
10.8.
Notwithstanding the foregoing, if the number of Speed Units operated by the
Company falls below the number specified above in this Section 10.8,
the
Company shall not be obliged to replace the existing shortfall with any then
existing New Contracts.
12
11.
Negative
Covenants
The
Company covenants that from and after the date hereof and for so long as any
of
the Notes are outstanding:
11.1. Liens
The
Company will not create, incur, assume or suffer to exist any Lien upon any
of
the assets constituting Collateral (as such term is defined in the Security
Agreement) except as follows (collectively, “Permitted
Liens”):
11.1.1. Liens
to
secure taxes, assessments and other government charges in respect of obligations
not overdue or Liens on properties to secure claims for labor, material or
supplies in respect of obligations not overdue, or which are being contested
in
good faith by appropriate proceedings diligently conducted and with respect
to
which adequate reserves are being maintained in accordance with GAAP so long
as
such Liens are not being foreclosed;
11.1.2. Liens
made in connection with, or to secure payment of, worker’s compensation,
unemployment insurance, old age pension or other social security
obligations;
11.1.3. Liens
of
carriers, warehousemen, mechanics and materialmen, and other like liens on
properties, in existence less than 120 days from the date of creation thereof
in
respect of obligations not overdue, or which are being contested in goof faith
by appropriate proceedings diligently conducted and with respect to which
adequate reserves are being maintained in accordance with GAAP so long as such
Liens are not being foreclosed;
11.1.4. Liens
resulting from legal proceedings being contested in good faith by appropriate
legal or administrative proceedings by the Company, and as to which the Company
shall have established an adequate reserve on its books;
11.1.5. any
Liens
in favor of any state of the United States or any political subdivision of
any
such state, or any agency of any such state or political subdivisions, or
trustee acting on behalf of holders of obligations issued by any of the
foregoing or any financial institutions lending to or purchasing obligations
of
any of the foregoing, which Lien is created or assumed for the purpose of
financing all or part of the cost of acquiring or constructing the property
subject thereto; and
11.1.6. Liens
resulting from conditional sale agreements, capital leases or other title
retention agreements.
12.
Events
of Default
An
“Event
of Default”
shall
exist if any of the following conditions or events shall occur and be
continuing:
(a) the
Company defaults in the payment of any principal on any Note when the same
becomes due and payable, whether at maturity or at a date fixed for prepayment
or by declaration or otherwise; or
13
(b) the
Company defaults in the payment of any Citation Payment for more than five
Business Days after the same becomes due and payable; or
(c) the
Company fails to make a payment required by Section 7.4
for more
than five Business Days after the same becomes due and payable.
(d) the
Company defaults in the performance of or compliance with any term
contained herein (other than those referred to in paragraphs (a), (b), (c)
and (d) of this Section 12)
and
such default is not remedied within 30 days after the earlier of (i) a
Responsible Officer obtaining actual knowledge of such default and (ii) the
Company receiving written notice of such default from any holder of a Note
(any
such written notice to be identified as a “notice of default” and to refer
specifically to this paragraph (e) of Section 12);
or
(e) any
representation or warranty made in writing by or on behalf of the Company or
by
any officer of the Company in this Agreement or in any writing furnished in
connection with the transactions contemplated hereby proves to have been false
or incorrect in any Material respect on the date as of which made;
or
(f) (i) the
Company or ▇▇▇▇▇▇ is in default (as principal or as guarantor or other surety)
in the payment of any principal of or premium or make whole amount or interest
on any Indebtedness that is outstanding in an aggregate principal amount of
at
least $10,000,000 beyond any period of grace provided with respect thereto,
or
(ii) the Company or ▇▇▇▇▇▇ is in default in the performance of or compliance
with any term of any evidence of any Indebtedness in an aggregate outstanding
principal amount of at least $10,000,000 or of any mortgage, indenture or other
agreement relating thereto or any other condition exists, and as a consequence
of such default or condition such Indebtedness has become, or has been declared
(or one or more Persons are entitled to declare such Indebtedness to be), due
and payable before its stated maturity or before its regularly scheduled dates
of payment, or (iii) as a consequence of the occurrence or continuation of
any
event or condition (other than the passage of time or the right of the holder
of
Indebtedness to convert such Indebtedness into equity interests);
or
(g) the
Company or ▇▇▇▇▇▇ (i) is generally not paying, or admits in writing its
inability to pay, its debts as they become due, (ii) files, or consents by
answer or otherwise to the filing against it of, a petition for relief or
reorganization or arrangement or any other petition in bankruptcy, for
liquidation or to take advantage of any bankruptcy, insolvency, reorganization,
moratorium or other similar law of any jurisdiction, (iii) makes an
assignment for the benefit of its creditors, (iv) consents to the
appointment of a custodian, receiver, trustee or other officer with similar
powers with respect to it or with respect to any substantial part of its
property, (v) is adjudicated as insolvent or to be liquidated, or
(vi) takes corporate action for the purpose of any of the foregoing;
or
(h) a
court
or governmental authority of competent jurisdiction enters an order appointing,
without consent by the Company, a custodian, receiver, trustee or other officer
with similar powers with respect to it or with respect to any substantial part
of its property, or constituting an order for relief or approving a petition
for
relief or reorganization or any other petition in bankruptcy or for liquidation
or to take advantage of any bankruptcy or insolvency law of any jurisdiction,
or
ordering the dissolution, winding-up or liquidation of the Company or ▇▇▇▇▇▇,
or
any such petition shall be filed against the Company or ▇▇▇▇▇▇ and such petition
shall not be dismissed within 60 days; or
14
(i) a
final
judgment or judgments for the payment of money aggregating in excess of
$5,000,000 are rendered against one or more of the Company and ▇▇▇▇▇▇ and which
judgments are not, within 60 days after entry thereof, bonded, discharged or
stayed pending appeal, or are not discharged within 60 days after the expiration
of such stay; or
13.
Remedies
on Default, Etc.
13.1. Acceleration
13.1.1. If
an
Event of Default with respect to the Company described in
paragraph 12(g)
or
12(h)
(other
than an Event of Default described in clause (i) of paragraph 12(g)
or
described in clause (vi) of paragraph 12(g)
by
virtue of the fact that such clause encompasses clause (i) of
paragraph 12(g))
has
occurred, all the Notes then outstanding shall automatically become immediately
due and payable.
13.1.2. If
any
other Event of Default has occurred and is continuing, any holder or holders
of
more than a majority in principal amount of the Notes at the time outstanding
may at any time at its or their option, by notice or notices to the Company,
declare all the Notes then outstanding to be immediately due and
payable.
13.1.3. If
any
Event of Default described in paragraph 12(a)
or
12(b)
has
occurred and is continuing, any holder or holders of Notes at the time
outstanding affected by such Event of Default may at any time, at its or their
option, by notice or notices to the Company, declare all the Notes held by
it or
them to be immediately due and payable.
Upon
any
Notes becoming due and payable under this Section 13.1,
whether
automatically or by declaration, such Notes will forthwith mature and the entire
unpaid principal amount of such Notes, plus all accrued and unpaid Citation
Payments thereon, shall all be immediately due and payable, in each and every
case without presentment, demand, protest or further notice, all of which are
hereby waived.
13.2. Other
Remedies
If
any
Default or Event of Default has occurred and is continuing, and irrespective
of
whether any Notes have become or have been declared immediately due and payable
under Section 13.1,
the
holder of any Note at the time outstanding may proceed to protect and enforce
the rights of such holder by an action at law, suit in equity or other
appropriate proceeding, whether for the specific performance of any agreement
contained herein or in any Note, or for an injunction against a violation of
any
of the terms hereof or thereof, or in aid of the exercise of any power granted
hereby or thereby or by law or otherwise.
15
13.3. Rescission
At
any
time after any Notes have been declared due and payable pursuant to clause
13.1.2
or
13.1.3,
the
holders of not less than a majority in principal amount of the Notes then
outstanding, by written notice to the Company, may rescind and annul any such
declaration and its consequences if (a) the Company has paid all overdue
Citation Payments on the Notes, all principal on any Notes that is due and
payable and are unpaid other than by reason of such declaration, and all
interest on such overdue principal and Citation Payments, if any, and (to the
extent permitted by applicable law) any overdue interest in respect of the
Notes, (b) all Events of Default and Defaults, other than non-payment of
amounts that have become due solely by reason of such declaration, have been
cured or have been waived pursuant to Section 17,
and
(c) no judgment or decree has been entered for the payment of any monies
due pursuant hereto or to the Notes. No rescission and annulment under this
Section 13.3
will
extend to or affect any subsequent Event of Default or Default or impair any
right consequent thereon.
13.4. No
Waivers or Election of Remedies, Expenses, etc.
No
course
of dealing and no delay on the part of any holder of any Note in exercising
any
right, power or remedy shall operate as a waiver thereof or otherwise prejudice
such holder’s rights, powers or remedies. No right, power or remedy conferred by
this Agreement or by any Note upon any holder thereof shall be exclusive of
any
other right, power or remedy referred to herein or therein or now or hereafter
available at law, in equity, by statute or otherwise. Without limiting the
obligations of the Company under Section 15,
the
Company will pay to the holder of each Note on demand such further amount as
shall be sufficient to cover all costs and expenses of such holder incurred
in
any enforcement or collection under this Section 13,
including, without limitation, reasonable attorneys’ fees, expenses and
disbursements.
Upon
surrender of any Note at the principal executive office of the Company for
transfer or exchange (and in the case of a surrender for transfer, duly endorsed
or accompanied by a written instrument of transfer duly executed by the
registered holder of such Note or his attorney duly authorized in writing and
accompanied by the address for notices of each transferee of such Note or part
thereof), the Company shall execute and deliver, at the Company’s expense
(except as provided below), one or more new Notes (as requested by the holder
thereof) in exchange therefor, in an aggregate principal amount equal to the
unpaid principal amount of the surrendered Note. Each such new Note shall be
payable to such Person as such holder may request and shall be substantially
in
the form of Exhibit 1.
Each
such new Note shall be dated and bear interest from the date to which interest
shall have been paid on the surrendered Note or dated the date of the
surrendered Note if no interest shall have been paid thereon. The Company may
require payment of a sum sufficient to cover any stamp tax or governmental
charge imposed in respect of any such transfer of Notes. Notes shall not be
transferred in denominations of less than $100,000, provided that if necessary
to enable the transfer by a holder of its entire holding of Notes, one Note
may
be in a denomination of less than $100,000. Any transferee, by its acceptance
of
a Note registered in its name (or the name of its nominee), shall be deemed
to
have made the representation set forth in Section 6.
16
Upon
receipt by the Company of evidence reasonably satisfactory to it of the
ownership of and the loss, theft, destruction or mutilation of any Note,
and
14.2.1. in
the
case of loss, theft or destruction, of indemnity reasonably satisfactory to
it
(provided that if the holder of such Note is, or is a nominee for, an original
Purchaser or another holder of a Note with a minimum net worth of at least
$10,000,000, such Person’s own unsecured agreement of indemnity shall be deemed
to be satisfactory), or
14.2.2. in
the
case of mutilation, upon surrender and cancellation thereof,the Company at
its
own expense shall execute and deliver, in lieu thereof, a new Note, dated and
bearing interest from the date to which interest shall have been paid on such
lost, stolen, destroyed or mutilated Note or dated the date of such lost,
stolen, destroyed or mutilated Note if no interest shall have been paid
thereon.
15.
Expenses,
Etc.
15.1. Transaction
Expenses
Whether
the transactions contemplated hereby are consummated, the Company will pay
all
costs and expenses (including Danzell Investment Management, Ltd.
administrative, printing, research, mailing and other related costs to the
formation of Speed I, LLC and reasonable attorneys’ fees of a special counsel
and, if reasonably required, local or other counsel) incurred by you or any
holder of a Note in connection with such transactions and in connection with
any
amendments, waivers or consents under or in respect of this Agreement or the
Notes (whether or not such amendment, waiver or consent becomes effective),
including, without limitation: (a) the costs and expenses incurred in enforcing
or defending (or determining whether or how to enforce or defend) any rights
under this Agreement or the Notes or in responding to any subpoena or other
legal process or informal investigative demand issued in connection with this
Agreement or the Notes, or by reason of being a holder of any Note, and (b)
the
costs and expenses, including financial advisors’ fees, incurred in connection
with the insolvency or bankruptcy of the Company or in connection with any
work-out or restructuring of the transactions contemplated hereby and by the
Notes. The Company will pay, and will save you and each other holder of a Note
harmless from, all claims in respect of any fees, costs or expenses if any,
of
brokers and finders (other than those retained by Speed I, LLC or Danzell
Investment Management, Ltd). The Company’s aggregate obligation pursuant to this
Section 15.1
shall
not exceed $12,000.00 for identified expenses for the first Closing and $5,000
for the Second Closing; as well as, 6% of the face value of the Notes payable
to
Danzell Investment Management, Ltd., paid within 10 business days after each
Closing, paid as a Finder’s Fee to Danzell Investment Management, Ltd. In no
event will the Company be obligated to pay a finder or similar fee to any Person
in an aggregate amount greater than 6% of the principal actually
received.
15.2. Survival
The
obligations of the Company under this Section 15
will
survive the payment or transfer of any Note, the enforcement, amendment or
waiver of any provision of this Agreement or the Notes, and the termination
of
this Agreement.
17
16.
Survival
of Representations and Warranties; Entire Agreement
All
representations and warranties contained herein shall survive the execution
and
delivery of this Agreement and the Notes, the purchase or transfer by you of
any
Note or portion thereof or interest therein and the payment of any Note, and
may
be relied upon by any subsequent holder of a Note, regardless of any
investigation made at any time by or on behalf of you or any other holder of
a
Note. All statements contained in any certificate or other instrument delivered
by or on behalf of the Company pursuant to this Agreement shall be deemed
representations and warranties of the Company under this Agreement. Subject
to
the preceding sentence, this Agreement and the Notes embody the entire agreement
and understanding between you and the Company and supersede all prior agreements
and understandings relating to the subject matter hereof. The Company may update
any representation or warranty prior to any Closing.
17.
Amendment
and Waiver.
17.1. Requirements
This
Agreement and the Notes may be amended, and the observance of any term hereof
or
of the Notes may be waived (either retroactively or prospectively), with (and
only with) the written consent of the Company and the Required Holders, except
that (a) no amendment or waiver of any of the provisions of
Section 1
through
6
or
21
hereof,
or any defined term (as it is used therein), will be effective as to you unless
consented to by you in writing, and (b) no such amendment or waiver may, without
the written consent of the holder of each Note at the time outstanding affected
thereby, (i) subject to the provisions of Section 13
relating
to acceleration or rescission, change the amount or time of any prepayment
or
payment of principal of, or reduce the rate or change the time of payment or
method of computation of interest or of the Citation Payment on, the Notes,
(ii) change the percentage of the principal amount of the Notes the holders
of which are required to consent to any such amendment or waiver, or
(iii) amend any of Sections 9,
12(a),
12(b),
13,
17
or
20.
17.2. Solicitation
of Holders of Notes
17.2.1. Solicitation.
The Company will provide each holder of the Notes (irrespective of the amount
of
Notes then owned by it) with sufficient information, sufficiently far in advance
of the date a decision is required, to enable such holder to make an informed
and considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the Notes. The Company
will deliver executed or true and correct copies of each amendment, waiver
or
consent effected pursuant to the provisions of this Section 17
to each
holder of outstanding Notes promptly following the date on which it is executed
and delivered by, or receives the consent or approval of, the requisite holders
of Notes.
18
17.2.2. Payment.
The Company will not directly or indirectly pay or cause to be paid any
remuneration, whether by way of supplemental or additional interest, fee or
otherwise, or grant any security, to any holder of Notes as consideration for
or
as an inducement to the entering into by any holder of Notes or any waiver
or
amendment of any of the terms and provisions hereof unless such remuneration
is
concurrently paid, or security is concurrently granted, on the same terms,
ratably to each holder of Notes then outstanding even if such holder did not
consent to such waiver or amendment.
17.3. Binding
Effect, etc.
Any
amendment or waiver consented to as provided in this Section 17
applies
equally to all holders of Notes and is binding upon them and upon each future
holder of any Note and upon the Company without regard to whether such Note
has
been marked to indicate such amendment or waiver. No such amendment or waiver
will extend to or affect any obligation, covenant, agreement, Default or Event
of Default not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the holder of any Note
nor
any delay in exercising any rights hereunder or under any Note shall operate
as
a waiver of any rights of any holder of such Note. As used herein, the term
“this Agreement” and references thereto shall mean this Agreement as it may from
time to time be amended or supplemented in accordance with the terms
hereof.
17.4. Notes
held by Company, etc.
Solely
for the purpose of determining whether the holders of the requisite percentage
of the aggregate principal amount of Notes then outstanding approved or
consented to any amendment, waiver or consent to be given under this Agreement
or the Notes, or have directed the taking of any action provided herein or
in
the Notes to be taken upon the direction of the holders of a specified
percentage of the aggregate principal amount of Notes then outstanding, Notes
directly or indirectly owned by the Company or any of its Affiliates shall
be
deemed not to be outstanding.
18. Notices
All
notices and communications provided for hereunder shall be in writing and sent
(a) by telecopy if the sender on the same day sends a confirming copy of
such notice by a recognized overnight delivery service (charges prepaid), or
(b) by registered or certified mail with return receipt requested (postage
prepaid), or (c) by a recognized overnight delivery service (with charges
prepaid). Any such notice must be sent:
(i) if
to you
or your nominee, to you or it at the address specified for such communications
in Schedule A,
or at
such other address as you or it shall have specified to the Company in
writing,
(ii) if
to any
other holder of any Note, to such holder at such address as such other holder
shall have specified to the Company in writing, or
(iii) if
to the
Company, to the Company at its address set forth at the beginning hereof to
the
attention of the Chief Financial Officer, or at such other address as the
Company shall have specified to the holder of each Note in writing.
19
Notices
under this Section 18
will be
deemed given only when actually received.
19.
Reproduction
of Documents
This
Agreement and all documents relating thereto, including, without limitation,
(a) consents, waivers and modifications that may hereafter be executed,
(b) documents received by you at the Closing (except the Notes themselves),
and (c) financial statements, certificates and other information previously
or hereafter furnished to you, may be reproduced by you by any photographic,
photostatic, microfilm, microcard, miniature photographic or other similar
process and you may destroy any original document so reproduced. The Company
agrees and stipulates that, to the extent permitted by applicable law, any
such
reproduction shall be admissible in evidence as the original itself in any
judicial or administrative proceeding (whether or not the original is in
existence and whether or not such reproduction was made by you in the regular
course of business) and any enlargement, facsimile or further reproduction
of
such reproduction shall likewise be admissible in evidence. This
Section 19
shall
not prohibit the Company or any other holder of Notes from contesting any such
reproduction to the same extent that it could contest the original, or from
introducing evidence to demonstrate the inaccuracy of any such
reproduction.
20.
Confidential
Information
For
the
purposes of this Section 20,
“Confidential Information” means information delivered to you by or on behalf of
the Company or any Subsidiary in connection with the transactions contemplated
by or otherwise pursuant to this Agreement that is proprietary in nature and
that was clearly marked or labeled or otherwise adequately identified when
received by you as being confidential information of the Company or such
Subsidiary, provided that such term does not include information that
(a) was publicly known or otherwise known to you prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or
omission by you or any person acting on your behalf, (c) otherwise becomes
known to you other than through disclosure by the Company or any Subsidiary
or
(d) constitutes financial statements delivered to you under
Section 8.1
that are
otherwise publicly available. You will maintain the confidentiality of such
Confidential Information in accordance with procedures adopted by you in good
faith to protect confidential information of third parties delivered to you,
provided that you may deliver or disclose Confidential Information to
(i) your directors, officers, employees, agents, attorneys and affiliates
(to the extent such disclosure reasonably relates to the administration of
the
investment represented by your Notes), (ii) your financial advisors and other
professional advisors who agree to hold confidential the Confidential
Information substantially in accordance with the terms of this
Section 20,
(iii) any other holder of any Note, (iv) any Person to which you sell
or offer to sell such Note or any part thereof or any participation therein
(if
such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20),
(v) any Person from which you offer to purchase any security of the Company
(if such Person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 20),
(vi) any federal or state regulatory authority having jurisdiction over
you, (vii) the National Association of Insurance Commissioners or any
similar organization, or any nationally recognized rating agency that requires
access to information about your investment portfolio or (viii) any other
Person to which such delivery or disclosure may be necessary or appropriate
(w) to effect compliance with any law, rule, regulation or order applicable
to you, (x) in response to any subpoena or other legal process, (y) in
connection with any litigation to which you are a party or (z) if an Event
of Default has occurred and is continuing, to the extent you may reasonably
determine such delivery and disclosure to be necessary or appropriate in the
enforcement or for the protection of the rights and remedies under your Notes
and this Agreement. Each holder of a Note, by its acceptance of a Note, will
be
deemed to have agreed to be bound by and to be entitled to the benefits of
this
Section 20
as
though it were a party to this Agreement. On reasonable request by the Company
in connection with the delivery to any holder of a Note of information required
to be delivered to such holder under this Agreement or requested by such holder
(other than a holder that is a party to this Agreement or its nominee), such
holder will enter into an agreement with the Company embodying the provisions
of
this Section 20.
20
21. Substitution
of Purchaser
You
shall
have the right to substitute any one of your Affiliates as the purchaser of
the
Notes that you have agreed to purchase hereunder, by written notice to the
Company, which notice shall be signed by both you and such Affiliate, shall
contain such Affiliate’s agreement to be bound by this Agreement and shall
contain a confirmation by such Affiliate of the accuracy with respect to it
of
the representations set forth in Section 6.
Upon
receipt of such notice, wherever the word “you” is used in this Agreement (other
than in this Section 21),
such
word shall be deemed to refer to such Affiliate in lieu of you. In the event
that such Affiliate is so substituted as a purchaser hereunder and such
Affiliate thereafter transfers to you all of the Notes then held by such
Affiliate, upon receipt by the Company of notice of such transfer, wherever
the
word “you” is used in this Agreement (other than in this
Section 21),
such
word shall no longer be deemed to refer to such Affiliate, but shall refer
to
you, and you shall have all the rights of an original holder of the Notes under
this Agreement.
22. Miscellaneous
22.1. Successors
and Assigns
All
covenants and other agreements contained in this Agreement by or on behalf
of
any of the parties hereto bind and inure to the benefit of their respective
successors and assigns (including, without limitation, any subsequent holder
of
a Note) whether so expressed or not.
22.2. Payments
Due on Non-Business Days
Anything
in this Agreement or the Notes to the contrary notwithstanding, any payment
of
principal of or Citation Payment or interest on any Note that is due on a date
other than a Business Day shall be made on the next succeeding Business Day
and
shall include the additional days elapsed in the computation of the interest
payable on such next succeeding Business Day.
22.3. Severability
Any
provision of this Agreement that is prohibited or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall (to the full extent permitted by law) not invalidate or
render unenforceable such provision in any other jurisdiction.
21
22.4. Construction
Each
covenant contained herein shall be construed (absent express provision to the
contrary) as being independent of each other covenant contained herein, so
that
compliance with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with any other covenant. Where any
provision herein refers to action to be taken by any Person, or which such
Person is prohibited from taking, such provision shall be applicable whether
such action is taken directly or indirectly by such Person.
22.5. Counterparts
This
Agreement may be executed in any number of counterparts, each of which shall
be
an original but all of which together shall constitute one instrument. Each
counterpart may consist of a number of copies hereof, each signed by less than
all, but together signed by all, of the parties hereto.
22.6. Governing
Law
This
Agreement shall be construed and enforced in accordance with, and the rights
of
the parties shall be governed by, the law of the State of Delaware
excluding choice-of-law principles of the law of such State that would require
the application of the laws of a jurisdiction other than such
State.
22.7. Headings
Section headings
in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other
purpose.
22.8. Integration
This
Agreement is intended by the parties as the final, complete and exclusive
statement of the transactions evidenced by this Agreement. All prior or
contemporaneous promises, agreements and understandings, whether oral or
written, are deemed to be superceded by this Agreement, and no party is relying
on any promise, agreement or understanding with respect to the matters covered
by this Agreement which is not set forth in this Agreement.
22.9. Waiver
of
Jury Trial
THE
PARTIES HERETO MUTUALLY HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY CLAIM BASED HEREON, ARISING
OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY NOTE CONTEMPLATED TO BE
EXECUTED IN CONNECTION HEREWITH OR ANY COURSE OF CONDUCT, COURSE OF DEALINGS,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY. THIS WAIVER
CONSTITUTES A MATERIAL INDUCEMENT FOR EACH OF THE PARTIES TO ENTER INTO THIS
AGREEMENT AND CONSUMMATE THE TRANSACTIONS CONTEMPLATED HEREBY.
[Remainder
of Page Intentionally Blank]
22
If
you
are in agreement with the foregoing, please sign the form of agreement on the
accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and the
Company.
▇▇▇▇▇▇
Traffic Systems, Inc.
By: /s/
▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇
▇.▇▇▇▇▇▇▇
Title: President
The
foregoing is hereby
agreed
to
as of the
date
thereof.
Note
Purchasers
HG
Investments, LLC
By:
/s/
▇▇▇▇ ▇▇▇▇▇▇
Name:
▇▇▇▇ ▇▇▇▇▇▇
Title:
Authorized Member
If
you
are in agreement with the foregoing, please sign the form of agreement on the
accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and the
Company.
▇▇▇▇▇▇
Traffic Systems, Inc.
By:
/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇
Title: President
The
foregoing is hereby
agreed
to
as of the
date
thereof.
Note
Purchasers
Foundation
Partners I, LLC
By: /s/▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Title: Authorized
Member
If
you
are in agreement with the foregoing, please sign the form of agreement on the
accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and the
Company.
▇▇▇▇▇▇
Traffic Systems, Inc.
By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇
Title: President
The
foregoing is hereby
agreed
to
as of the
date
thereof.
Note
Purchasers
Silver
Star Partners I, LLC
By: /s/
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇
Title: Authorized
Member
If
you
are in agreement with the foregoing, please sign the form of agreement on
the
accompanying counterpart of this Agreement and return it to the Company,
whereupon the foregoing shall become a binding agreement between you and
the
Company.
▇▇▇▇▇▇
Traffic Systems, Inc.
By:
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇
Title: President
The
foregoing is hereby
agreed
to
as of the
date
thereof.
Note
Purchasers
Kuekenhof
Equity Fund, L.P.
By: /s/
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Name: ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇
Title: General
Partner
SCHEDULE
A
|
Name
of Purchaser
|
Principal
Amount of Notes to be Purchased
|
Payment
Wire Transfer Instructions
|
Notice
of Payment and Confirmation of Wire Transfer
Address
|
All
Other Notices
|
|
HG
Investments, LLC
|
$250,000
|
▇▇.
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
▇▇.
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇
▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Foundation
Partners I, LLC
|
$750,000
|
c/o
Danzell Investment Management, Ltd.
2
Corpus Christi
The
Professional Building; ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
▇/▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇.
▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
The
Professional Building; ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Silver
Star Partners I, LLC
|
$250,000
|
c/o
Danzell Investment Management, Ltd.
2
Corpus Christi
The
Professional Building; ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
▇/▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇.
▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
The
Professional Building; ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇
|
|
|
Kuekenhof
Equity Fund, L.P.
|
$250,000
|
c/o
Kuekenhof Capital Management, LLC
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
c/o
Kuekenhof Capital Management, LLC
▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇
▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇
|
Schedule
A
A-1
SCHEDULE
B
DEFINED
TERMS
As
used
herein, the following terms have the respective meanings set forth below or
set
forth in the Section hereof following such term:
“Affiliate”
means,
at any time, and with respect to any Person, (a) any other Person that at such
time directly or indirectly through one or more intermediaries Controls, or
is
Controlled by, or is under common Control with, such first Person, and (b)
any
Person beneficially owning or holding, directly or indirectly, 10% or more
of
any class of voting or equity interests of the Company or any Subsidiary or
any
corporation of which the Company and its Subsidiaries beneficially own or hold,
in the aggregate, directly or indirectly, 10% or more of any class of voting
or
equity interests. As used in this definition, “Control” means the possession,
directly or indirectly, of the power to direct or cause the direction of the
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise. Unless the context otherwise clearly
requires, any reference to an “Affiliate” is a reference to an Affiliate of the
Company.
“Applicable
Laws”
means
any law, rule, regulation, order, decree or other requirement having the force
of law, and, where applicable, any interpretation thereof by any authority
having jurisdiction with respect thereto or charged with the administration
thereof.
“Business
Day”
means
any day other than a Saturday, a Sunday or a day on which commercial banks
in
New York, New York are required or authorized to be closed.
“Capital
Lease”
means,
at any time, a lease with respect to which the lessee is required concurrently
to recognize the acquisition of an asset and the incurrence of a liability
in
accordance with GAAP.
“Citation
Payment”
means
to
(a)
$5.00 per paid citation issued with respect to Contracts or New Contracts for
which the Company is paid on an “as issued” basis, (b) $6.00 per paid citation
issued with respect to Contracts or New Contracts for which the Company is
paid
on an “as paid” basis and (c) 17% of amounts collected with respect to Contracts
or New Contracts for which the Company is paid on a “fixed fee” basis; in each
case, multiplied
by a fraction, the numerator of which is the total outstanding principal on
Notes that you own and the denominator of which is the total outstanding
principal on all Notes.
“Closing”
is
defined in Section 3.
“Closing
Dates”
is
defined in Section 3
“Code”
means
the Internal Revenue Code of 1986, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time.
“Company”
means
▇▇▇▇▇▇
Traffic Systems, Inc.,
a
Delaware corporation.
“Confidential
Information”
is
defined in Section 20.
Schedule
B
B-1
“Contract”
means
any contract or agreement entered into prior to April 1, 2007 and after October
1, 2006 between the Company and any state, municipality or other subdivision
of
any state for the operation of Speed Units to monitor and enforce motor vehicle
speed laws and to issue citations to offending motor vehicle
operators.
“Current
Report”
has
the
meaning provided in Section 4.2.
“Default”
means
an event or condition the occurrence or existence of which would, with the
lapse
of time or the giving of notice or both, become an Event of
Default.
“Event
of Default”
is
defined in Section 12.
“Exchange
Act”
means
the Securities Exchange Act of 1934, as amended.
“GAAP”
means
generally accepted accounting principles as in effect from time to time in
the
United States of America.
“Governmental
Authority”
means
(a) the
government of
(i) the
United States of America or any State or other political subdivision thereof,
or
(ii) any
jurisdiction in which the Company or any Subsidiary conducts all or any part
of
its business, or which asserts jurisdiction over any properties of the Company
or any Subsidiary, or
(b) any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of, or pertaining to, any such government.
“Guaranty”
means,
with respect to any Person, any obligation (except the endorsement in the
ordinary course of business of negotiable instruments for deposit or collection)
of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend
or other obligation of any other Person in any manner, whether directly or
indirectly, including (without limitation) obligations incurred through an
agreement, contingent or otherwise, by such Person:
(a) to
purchase such indebtedness or obligation or any property constituting security
therefor;
(b) to
advance or supply funds (i) for the purchase or payment of such indebtedness
or
obligation, or (ii) to maintain any working capital or other balance sheet
condition or any income statement condition of any other Person or otherwise
to
advance or make available funds for the purchase or payment of such indebtedness
or obligation;
(c) to
lease
properties or to purchase properties or services primarily for the purpose
of
assuring the owner of such indebtedness or obligation of the ability of any
other Person to make payment of the indebtedness or obligation; or
Schedule
B
B-2
(d) otherwise
to assure the owner of such indebtedness or obligation against loss in respect
thereof.
“holder”
means,
with respect to any Note, the Person in whose name such Note is maintained
by
the Company.
“Indebtedness”
with
respect to any Person means, at any time, without duplication,
(a) its
liabilities for borrowed money and its redemption obligations in respect of
mandatorily redeemable Preferred Stock;
(b) its
liabilities for the deferred purchase price of property acquired by such Person
(excluding accounts payable arising in the ordinary course of business but
including all liabilities created or arising under any conditional sale or
other
title retention agreement with respect to any such property);
(c) all
liabilities appearing on its balance sheet in accordance with GAAP in respect
of
Capital Leases;
(d) all
liabilities for borrowed money secured by any Lien with respect to any property
owned by such Person (whether or not it has assumed or otherwise become liable
for such liabilities);
(e) all
its
liabilities in respect of letters of credit or instruments serving a similar
function issued or accepted for its account by banks and other financial
institutions (whether or not representing obligations for borrowed
money);
(f) Swaps
of
such Person;
(g) every
obligation of such Person under any Synthetic Lease; and
(h) any
Guaranty of such Person with respect to liabilities of a type described in
any
of clauses (a) through (g) hereof.
Indebtedness
of any Person shall include all obligations of such Person of the character
described in clauses (a) through (g) to the extent such Person remains legally
liable in respect thereof notwithstanding that any such obligation is deemed
to
be extinguished under GAAP.
“Initial
Closing Date”
is
defined in Section 3.
“Knowledge”
of
the
Company, when used herein, means the actual present knowledge of the Company’s
Chief Financial Officer.
“Lien”
means,
with respect to any Person, any mortgage, lien, pledge, charge, security
interest or other encumbrance, or any interest or title of any vendor, lessor,
lender or other secured party to or of such Person under any conditional sale
or
other title retention agreement or Capital Lease, upon or with respect to any
property or asset of such Person (including in the case of stock, stockholder
agreements, voting trust agreements and all similar arrangements).
Schedule
B
B-3
“Material”
means
material in relation to the business, operations, affairs, financial condition,
assets, properties, or prospects of the Company and ▇▇▇▇▇▇ taken as a
whole.
“Material
Adverse Effect”
means
a
material adverse effect on (a) the business, operations, affairs, financial
condition, assets, properties or prospects of the Company and ▇▇▇▇▇▇ taken
as a
whole, or (b) the ability of the Company to perform its obligations under this
Agreement and the Notes, or (c) the validity or enforceability of this Agreement
or the Notes.
“Maturity
Date”
means
May 25, 2011.
“New
Contract”
means
any Contract entered into after April 1, 2007.
“Notes”
has
the
meaning provided in Section 1.
“Note
Year”
means,
with respect to any Note, the 12 month period beginning on the month and day
that the Note issued and ending the day before the anniversary of such
date.
“Officer’s
Certificate”
means
a
certificate of a Senior Financial Officer or of any other officer of the Company
whose responsibilities extend to the subject matter of such
certificate.
“Permitted
Liens”
has
the
meaning provided in Section 11.1.
“Person”
means
an individual, partnership, corporation, limited liability company, association,
trust, unincorporated organization, or a government or agency or political
subdivision thereof.
“Preferred
Stock”
means
any class of capital stock of a corporation that is preferred over any other
class of capital stock of such corporation as to the payment of dividends or
the
payment of any amount upon liquidation or dissolution of such
corporation.
“Priority
Indebtedness”
means,
as of the date of determination thereof, the sum of (a) all Indebtedness of
the
Company and its Subsidiaries secured by Permitted Liens plus, but without
duplication, (b) all other Indebtedness of Subsidiaries (excluding, in any
event, Indebtedness due or owing to the Company or another wholly owned
Subsidiary).
“property”
or
“properties”
means,
unless otherwise specifically limited, real or personal property of any kind,
tangible or intangible, ▇▇▇▇▇▇ or inchoate.
“Purchasers”
has
the
meaning set forth in Section 4.5.
“Qualifying
Citation”
has
the
meaning set forth in Section 7.2
“Report”
has
the
meaning set forth in Section 4.2.
“Required
Holders”
means,
at any time, the holders of at least a majority in principal amount of the
Notes
at the time outstanding (exclusive of Notes then owned by the Company or any
of
its Affiliates).
Schedule
B
B-4
“Required
Hours”
means
81,600 of operations of Speed Units for each $1,500,000.00 of principal
outstanding on the Notes.
“Responsible
Officer”
means
any Senior Financial Officer and any other officer of the Company with
responsibility for the administration of the relevant portion of this
agreement.
“Second
Closing Date”
is
defined in Section 3.
“Securities
Act”
means
the Securities Act of 1933, as amended from time to time.
“Security
Agreement”
means
that certain Security Agreement between you and the Company pursuant to which
the obligations of the Company pursuant to this Agreement and the Notes are
secured by a first priority Lien on all of the Company’s assets directly related
to the Contracts and the New Contracts, but specifically excluding any assets
of
the Company that are used or useful with respect to both Contracts and New
Contracts and any other of the Company’s business or operations.
“Security
Documents”
means
any and all documents, instruments or agreements now or hereafter providing
security for amounts due under the Notes, including without limitation, that
certain Security Agreement of even date herewith between you and the
Company.
“SEC”
means
the Securities Exchange Commission of the United States.
“Senior
Financial Officer”
means
the chief financial officer, principal accounting officer, treasurer or
comptroller of the Company.
“Speed
Unit”
means
any fixed or mobile device employed by the Company for the detection of speed
violations pursuant to any Contract or New Contract which are specifically
identified to holders of the Notes as Speed Units generating Qualifying
Citations, provided that the number of Speed Units that are the subject of
this
Agreement shall never exceed 48.
“Subsidiary”
means,
as to any Person, any corporation, association or other business entity in
which
such Person or one or more of its Subsidiaries or such Person and one or more
of
its Subsidiaries owns sufficient equity or voting interests to enable it or
them
(as a group) ordinarily, in the absence of contingencies, to elect a majority
of
the directors (or Persons performing similar functions) of such entity, and
any
partnership or joint venture if more than a 50% interest in the profits or
capital thereof is owned by such Person or one or more of its Subsidiaries
or
such Person and one or more of its Subsidiaries (unless such partnership can
and
does ordinarily take major business actions without the prior approval of such
Person or one or more of its Subsidiaries). Unless the context otherwise clearly
requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the
Company.
Schedule
B
B-5
“Swaps”
means,
with respect to any Person, payment obligations with respect to interest rate
swaps, currency swaps and similar obligations obligating such Person to make
payments, whether periodically or upon the happening of a contingency. For
the
purposes of this Agreement, the amount of the obligation under any Swap shall
be
the amount determined in respect thereof as of the end of the then most recently
ended fiscal quarter of such Person, based on the assumption that such Swap
had
terminated at the end of such fiscal quarter, and in making such determination,
if any agreement relating to such Swap provides for the netting of amounts
payable by and to such Person thereunder or if any such agreement provides
for
the simultaneous payment of amounts by and to such Person, then in each such
case, the amount of such obligation shall be the net amount so
determined.
Schedule
B
B-6
[FORM
OF NOTE]
This
Note
has not been registered under the Securities Act of 1933 as amended (the
“Act”)
or
registered or qualified under any state securities law and may not be offered,
sold, or otherwise transferred except in connection in compliance with the
registration requirements of the Act and applicable state securities laws or
pursuant to an exemption therefrom.
▇▇▇▇▇▇
Traffic Systems, Inc.
Variable
Rate Senior Notes due May 25, 2011
No.
1April
[ ], 2007
FOR
VALUE
RECEIVED, the undersigned, ▇▇▇▇▇▇
Traffic Systems, Inc.
(herein
called the “Company”),
a
corporation organized and existing under the laws of the State of Delaware,
hereby
promises to pay to [ ], or registered assigns, the principal
sum of $[ ]
in
accordance with the terms and conditions specified in the Note Purchase
Agreement (referred to below), with interest (computed on the basis of a 360-day
year of twelve 30-day months) (a) on the unpaid balance thereof in the
manner specified below, payable quarterly, on the 45th
day
after the end of each quarter in each year until the principal hereof shall
have
become due and payable.
Citation
Payments (as defined in the Note Purchase Agreement) hereunder will be made
quarterly in arrears based on the number of Qualifying Citations (as defined
in
the Note Purchase Agreement) issued in the immediately preceding quarter.
In
the
event that the annual rate of return for the immediately preceding year on
this
Note was less than 10.0%, the Company will, within 45 days following the end
of
such year, make an interest payment to you in an amount sufficient to make
the
annual rate of return for such prior year equal 10.0%. In the event at any
time
during any year that the annual rate of return on this Note is equal to 80.0%,
the Company’s obligation to make Citation Payments for that year will cease. The
Company will be obligated to begin making Citation Payments again in the
following year.
At
the
Maturity Date, the Company will pay all outstanding principal together with
all
accumulated but unpaid Citation Payments (plus any amount required to make
your
cumulative annual return equal to 10.0%) and all unpaid costs, fees, penalties
or other amounts due pursuant to this Agreement, the Notes or the Security
Documents.
Payments
of principal and Citation Payments and any other payments due on this Note
are
to be made in lawful money of the United States of America at the location
specified in Section 7
of the
Note Purchase Agreements referred to below or at such other place as the Company
shall have designated by written notice to the holder of this Note as provided
in the Note Purchase Agreements referred to below. Whenever any payment required
to be made hereunder becomes due on a Saturday, Sunday or public holiday, such
payment shall be due on the next succeeding business day, and such extension
of
time shall be included in computing interest in connection with such
payment.
This
Note
is issued pursuant to a separate Note Purchase Agreement dated as of
April
1,
2007
(as from
time to time amended, the “Note
Purchase Agreement”),
between the Company and the purchaser named therein and is entitled to the
benefits thereof. Each holder of this Note will be deemed, by its acceptance
hereof, (i) to have agreed to the confidentiality provisions set forth in
Section 20
of the
Note Purchase Agreement and (ii) to have made the representation set forth
in
Section 6
of the
Note Purchase Agreement. Capitalized terms used herein and not otherwise defined
shall have the meaning ascribed to them in the Note Purchase Agreement unless
the context clearly requires otherwise.
This
Note
is subject to optional prepayment, in whole but not in part, at the times and
on
the terms specified in the Note Purchase Agreement, but not
otherwise.
If
an
Event of Default, as defined in the Note Purchase Agreement, occurs and is
continuing, the principal of this Note may be declared or otherwise become
due
and payable in the manner, at the price, and with the effect provided in the
Note Purchase Agreement.
This
Note
shall be construed and enforced in accordance with, and the rights of the
parties shall be governed by, the law of the State of Delaware excluding
choice-of-law principles of the law of such State that would require the
application of the laws of a jurisdiction other than such State.
[The
Remainder of this Page is Intentionally Blank.]
IN
WITNESS WHEREOF, the undersigned has executed this Promissory Note as of the
date first written above.
▇▇▇▇▇▇
Traffic Systems, Inc.
By:
___________________________________
Name: ▇▇▇▇▇
▇▇▇▇▇▇▇
Title: President
Schedule
5.10
Title
to Assets
The
Company has purchase 25 Ford E Series Vans for use in Contracts and New
Contracts. A valid title certificate has not issued for 10 of these vehicles.
The dealerships from which the Company purchased the Vans has not issued valid
title documents because the dealership’s agent accepted payment from the Company
but did not forward payment to the dealerships. The Company believes that it
has
a valid claim to title of the vehicles and is currently pursuing legal and
negotiated solutions to the matter. The Company does not believe that the
failure to have valid title to each of the 10 vehicles will materially affect
the Company’s ability to secure New Contracts or to perform its obligations
under any such New Contracts.