Exhibit 10.1

 

CONFIDENTIAL TREATMENT

 

COOPERATIVE AGREEMENT FOR
DEVELOPMENT, MANUFACTURE, MARKETING AND SALE OF PRODUCTS TO THE CLASS 1 AND 2
VEHICLE MARKETS INCORPORATING ITERIS’S LDWS TECHNOLOGY

between

                Iteris, Inc., a corporation duly existing and organized under
the laws of the State of Delaware USA, having its corporate offices at 1515 S.
Manchester Avenue, Anaheim, CA 92802-2907, USA,

 

hereinafter referred to as “ITERIS”

and

                Valeo Schalter und Sensoren GmbH, a company duly existing and
organized under the laws of Germany, with authorized capital of 2,500,000 Euros,
having its registered office at Stuttgarter Str. 119, 74321
Bietigheim-Bissingen, Germany, registered with the Commercial Register of
Vaihingen/ Enz under the number HRB 1795-Bes,

 

hereinafter referred to as “VALEO”.

 

Background

A.            Iteris has developed and is manufacturing, marketing, and
delivering, among other items, products incorporating its LDWS Technology for
automotive and truck use.

B.            Valeo is a company of the Valeo Group which, headquartered in
Paris, is one of the top automotive suppliers worldwide developing,
manufacturing and selling a variety of products.

C.            Effective May 14, 2001, Iteris and Valeo executed the Cooperative
Agreement for Development, Manufacturing, Marketing, and Delivery of Products
Incorporating Iteris’s AutoVue™ Sensor and Valeo’s Rain Sensor Technologies
(“Previous Agreement”) addressing Iteris’s and Valeo’s desires to cooperate with
each other to combine their respective technologies, talents, know-how,
marketing capabilities, and resources to develop, manufacture, market and sell
automotive products for various Original Equipment Manufacturers based upon
Iteris’s AutoVue™ sensor technology and Valeo’s rain sensor technology.

D.            The intent of the Parties under this Agreement is to terminate the
Previous Agreement and replace it with this Agreement wherein Iteris will grant
to Valeo, subject to the terms and conditions herein, specific rights, including
to develop, manufacture, market and sell products incorporating Iteris’s Lane
Departure Warning System (LDWS) Technology for the worldwide Class 1 and 2
vehicle markets including OEM, Tier 1, and Aftermarket. Iteris will retain all
rights for developing, marketing and selling products incorporating Iteris’s
LDWS Technology for Class 3 through 8 vehicles.

Therefore, the Parties agree as follows:

Iteris and Valeo Proprietary Information

 

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Article 1
Subject of Agreement/Supersedure

 

1.1                                 The subject of this Agreement is the
definition of the rights, obligations, terms and conditions relative to the
cooperation between the Parties for the development, manufacture, marketing and
sale of Products incorporating Iteris’s LDWS Technology to the Class 1 and 2
vehicle markets.

1.2                                 As of September 1, 2003 (the “Effective
Date”) of this Agreement, the Previous Agreement, Cooperative Agreement for
Development, Manufacturing, Marketing, and Delivery of Products Incorporating
Iteris’s AutoVue™ Sensor and Valeo’s Rain Sensor Technologies, is terminated by
mutual agreement of the Parties and is superseded by this Agreement. Purchase
Orders either existing or pending between Valeo and Iteris under the provisions
of the Previous Agreement for development labor and/or support shall be amended
by mutual agreement to only address efforts through September 1, 2003.

Article 2
Definitions

2.1                                 “Affiliate” shall mean any company under the
direct or indirect control of a Party or having such control over such Party or
being under such control jointly together with such Party.

2.2                                 “Aftermarket” shall mean the collective
market for automotive products and services installed or performed after
manufacturing and sale to the end user or dealer is complete by the OEM and
includes, but is not limited to Tier 1 suppliers, dealers, distributors,
resellers, customers, and users of such products or services.

2.3                                 “Agreement” shall mean this Agreement along
with its Exhibits and Amendments (if any).

2.4                                 “Application Software” shall mean software
which operates in the selected host operating system environment that implements
algorithms based upon inputs received and that provides outputs.

2.5                                 “Background Technology” shall mean drawings,
data, know-how, trade secrets, confidential information, inventions, software,
and other technical information and technology, and any intellectual property
rights to such information or technology including, but not limited to patents,
copyrights, data base rights and trade secret rights, other than Foreground
Technology.  Iteris’s Background Technology includes the Background Technology
that comprises any portion of Iteris’s LDWS Technology, that is required to use,
develop, manufacture, market, and sell Iteris’s LDWS Technology, or that
otherwise improves Iteris’s LDWS Technology, including improvements under
Article 10.1(a) below. Iteris represents that prior to signature of this
Agreement that it has provided to Valeo a schedule listing Iteris’s Background
Technology that Iteris shall update from time to time or as reasonably requested
by Valeo. Valeo has not made, and will not make, available to Iteris any
Background Technology, except with Iteris’s prior and express written consent.

 

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2.6                                 “Class 1 and 2 Vehicles” shall mean
automobiles and light trucks up to 10,000 pounds gross vehicle weight and any
derivative (e. g., Sport Utility Vehicle).

2.7                                 “Class 1 and 2 Vehicle Market” shall mean
all Customers including OEM, Tier 1, and Aftermarket engaged in the manufacture
of Class 1 and 2 vehicles and/or systems, assemblies, accessories or components
for Class 1 and 2 vehicles.

2.8                                 “Class 3 through Class 8 Vehicles” shall
mean all vehicles over 10,000 pounds gross weight.

2.9                                 “Class 3 through Class 8 Vehicle Market”
shall mean all Customers including OEM, Tier 1, and Aftermarket engaged in the
manufacture of Class 3 through Class 8 Vehicles and/or systems, assemblies,
accessories or components for Class 3 through Class 8 Vehicles.

2.10                           “Concept Competition Phase” shall mean the phase
and related efforts prior to P1 development where conceptual Products are
competitively defined and marketed to various Customers to develop sales
potential.

2.11                           “Customer” shall mean any customers to whom
Products may be marketed and sold, including the various OEM, suppliers and
Aftermarket (whether involved in the independent or original equipment arena)
customers. When this Agreement refers to a specific Customer (e.g., in defining
the term of the royalty obligations in Article 7.3(b)(ii) and the scope of the
surviving license rights identified in Article 9.3.), such references shall be
limited to a business unit focusing on a certain vehicle model or family of
models, which are sold under a common brand, such as the customer names in the
following list:

 

Class 1-2 Vehicle OEM Customer List
List based upon Customer structure as of the Effective Date.

NO.

 

CUSTOMER NAME

 

AFFILIATION

 

NOTES

01

 

GM North America

 

General Motors

 

Includes Buick, Cadillac, GMC, Oldsmobile, Pontiac, & Saturn brands

02

 

GM Shang-hai

 

General Motors

 

 

03

 

GM Holden

 

General Motors

 

 

04

 

GM South America

 

General Motors

 

 

05

 

Opel

 

General Motors

 

 

06

 

Saab

 

General Motors

 

Independent

07

 

Fiat

 

General Motors

 

 

08

 

Suzuki

 

General Motors

 

 

 

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09

 

Isuzu

 

General Motors

 

 

10

 

Fuji Heavy Industries

 

General Motors

 

 

11

 

SIA

 

General Motors

 

 

12

 

Daewoo

 

General Motors

 

 

13

 

Chrysler

 

DaimlerChrysler

 

Includes Chrysler, Dodge, and Jeep brands

14

 

Mercedes-Benz

 

DaimlerChrysler

 

 

15

 

Mitsubishi

 

DaimlerChrysler

 

 

16

 

Hyundai

 

DaimlerChrysler

 

 

17

 

Fiat

 

Fiat

 

 

18

 

Ford North America

 

Ford Motor Co.

 

Includes Ford, Lincoln, & Mercury brands

19

 

Ford Europe

 

Ford Motor Co.

 

 

20

 

Premier Auto Group

 

Ford Motor Co.

 

Includes Volvo, Land Rover, Jaguar, & Aston Martin brands

21

 

Mazda

 

Ford Motor Co.

 

 

22

 

Nissan

 

Renault Nissan

 

Includes Nissan and Infinity brands

23

 

Renault / Renault Dacia

 

Renault Nissan

 

 

24

 

Renault Samsung

 

Renault Nissan

 

 

25

 

Toyota

 

Toyota Motors

 

Includes Toyota and Lexus brands

26

 

Daihatsu

 

Toyota Motors

 

 

27

 

Honda

 

Honda Motors

 

Includes Honda and Acura brands

28

 

PSA

 

PSA

 

Includes Peugeot & Citroën brands

29

 

BMW

 

BMW Group

 

 

30

 

Volkswagen

 

Volkswagen

 

Includes Volkswagen, Audi, SEAT, & Skoda Brands

 

                                                Any changes in the scope of
coverage or identity of a particular Customer identity that may affect the
rights or obligation of the Parties under this Agreement shall be reflected

 

 

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                                                at the time of such change. The
Parties agree that the above list may not be exhaustive as to relevant Customers
and should any additional Customer need to be reflected to effect the purposes
of this Agreement that the Parties will update the list in a mutually agreeable
manner.

2.12                           “Foreground Technology” shall mean all drawings,
data, know-how, trade secrets, confidential information, inventions, software
and other technical information or technology developed within the scope of the
cooperation between the Parties under this Agreement, during its term, by
Iteris, Valeo or both Parties jointly, and any intellectual property rights to
such information or technology including, but not limited to patents,
copyrights, data base rights and trade secret rights. Foreground Technology
shall not include any Background Technology.

2.13                           “AutoVue™ Operations” shall mean all engineering,
development, manufacturing, sales, and marketing operations, personnel and other
assets (whether owned or licensed, and if licensed, subject to the terms of such
license, except to the extent any such license provides for consideration to any
Iteris Affiliate) solely or substantially dedicated to the development,
manufacture, or sale of products for the automotive and/or truck industries that
incorporate or implement Iteris’s vision-based sensor and related technology,
know-how and intellectual property and shall include Iteris’s LDWS Technology,
which Iteris may, at its sole discretion and at any time, transfer to an
Affiliate. Any costs associated with such transfers, including charges related
to the transfer or ongoing use or license of any technology, shall be the sole
responsibility of Iteris and not chargeable to Valeo.

2.14                           “Iteris’s Lane Departure Warning System (LDWS)
Technology” shall mean the LDWS Technology developed or acquired by Iteris that
is vision-based, i.e., uses a video or digital camera (as opposed to radar or
infrared techniques) to view and analyze a 2-dimensional image of the roadway,
optical sensor image enhancement, installation and manufacturing techniques, and
software algorithms to implement Lane Departure Warning System Technology.

2.15                           “Lane Departure Warning System (LDWS) Technology”
shall mean technology that detects and tracks lane markings, calculates
trajectory, and provides outputs based upon vehicle position relative to the
lane markings.

2.16                           “OEM” shall mean Original Equipment Manufacturer
and for the purposes of this Agreement generally refers to the various worldwide
Class 1 and 2 vehicle manufacturers.

2.17                           “Operating System Software” shall mean software
developed or otherwise provided by Iteris that operates the system processor of
the Products and that hosts the Application Software.

2.18                           “P0, P1, P2, and P3 Development” shall be defined
as follows for the purposes of this Agreement:

P0-                               development activities related to a Product
that is currently in series production. Support includes activities to improve
production processes, reliability, and maintenance and to replace obsolete
parts.

 

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P1-                               development activities related to preparing a
specific Product for series production. Support includes activities to customize
interfaces to specific Customer products, A — D sample development,
qualification testing, and sales/marketing to current and prospective customers
for the Product.

P2-                               development activities, which are not for a
specific Customer , for new generation replacement LDWS technologies or for
non-LDWS technologies.

P3-                               development activities for general research
and identification of new technologies.

2.19                           “Party” or “Parties” are respective generic
references to either Iteris or Valeo in the singular tense or to both Iteris and
Valeo in the plural tense.

2.20                           “Product” or “Products” are equivalent names for
the applications for the Class 1 and 2 Vehicle Market incorporating LDWS
Technology; excluding those applications performing functions other than those
specific to LDWS Technology. Product or Products shall not include lane
departure warning applications outside the scope of LDWS Technology, such as
radar or infrared based applications.

2.21                           “Tier 1” shall mean those manufacturers and/or
suppliers recognized in the automotive industry as direct suppliers to OEMs.

2.22                           “Unit Sales Price” or “Unit Sales Prices” shall
mean the unit price or prices for Products paid to Valeo, its Affiliates or
permitted (if any) assigns or sublicensees by an individual Customer less all
amounts attributable to (a) discounts, (b) duties and customs charges, (c) taxes
remitted to seller or required to be charged by seller and (d) insurance,
shipping and handling.

Article 3
Iteris Support for Valeo Customer-Specific Development (P1) and Concept
Competition Phase Activities

3.1                                 Valeo shall provide funding for a minimum of
the time period set forth in Article 3.3 through March 31, 2008 (the “Initial
Term”) for Iteris personnel and direct expenses for engineering, marketing, and
sales support as described in Article 3.2(a) below for Valeo customer-specific
development (P1) and  Concept Competition Phase activities.

3.2                                 The general responsibilities of the Parties
shall be as follows:

a.                                       Iteris will provide engineering,
marketing, and sales support under the general direction of the Valeo Project
Manager and within the funding limitations established by the respective
purchase order issued by Valeo or such increases authorized in writing by the
Valeo Project Manager. Engineering, marketing, and sales support will include,
but not necessarily be limited to:

(1)                                  Electronic design of hardware, Operating
System Software, and Application Software;

(2)                                  Adapting electronic design to provide
Product functions;

 

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(3)                                  Application engineering support for LDWS
Technology component of Products;

(4)                                  Implementing customer-specific features
and/or modifications in electronics design and Application Software;

(5)                                  Supporting Valeo Product qualification
testing;

(6)                                  Providing general engineering, marketing
and sales support during the Concept Competition Phases for various Customers;
and

(7)                                  Providing P0, P2, P3 or other support as
Valeo may reasonably request within the general scope of this Agreement or
otherwise if necessary to maintain minimum team size.

Throughout the Initial Term, Valeo will assume responsibility for the above
services in a mutually acceptable manner and timeframe.

b.                                      Valeo will provide a Project Manager to
manage the customer-specific development and Concept Competition Phase projects,
to provide general direction of Iteris activities within the funding limitations
established by the respective purchase order and to review and authorize, if
appropriate, increases to funding as needed to achieve development schedules and
goals. Valeo may locate the Project Manager at its convenience (including
on-site) and substitute the Project Manager at its discretion.  In addition
Valeo will:

(1)                                  Provide mechanical design of Product
housing and physical interface to vehicle;

(2)                                  Provide production Engineering/Quality
Control;

(3)                                  Provide technical support to Iteris as
necessary for separately developed or acquired features (if any) to be included
in a Product;

(4)                                  Lead Product qualification testing for
Customers;

(5)                                  Manufacture and distribute Products;

(6)                                  Serve as primary liaison with Customers;
and

(7)                                  Use commercially reasonable efforts to
market and sell Products incorporating Iteris’s LDWS Technology to Customers in
the Class 1 and 2 Vehicle Market.

(8)                                  Develop, in consultation with Iteris, a
marketing plan to promote Valeo’s sales of Iteris’s LDWS Technology to Customers
in the Class 1 and 2 Vehicle Market, which marketing plan shall be updated as
needed from time to time.

 

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3.3                                 Minimum Iteris team sizes and billing rates:

 

 

Equivalent

 

Billing

Year

 

No. of Persons

 

Rate

1: 09/01/03—03/31/04*

 

8

 

US$†/hour (equivalent to $† per year per employee)

2: 04/01/04—03/31/05

 

7

 

US$†/hour (equivalent to $† per year per employee)

3: 04/01/05—03/31/06

 

6***

 

US$†**/hour

4: 04/01/0 —03/31/07

 

5***

 

US$†**/hour

 

 

 

 

 

5: 04/01/07—03/31/08

 

4***

 

US$†**/hour

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*For purposes of this Agreement, Year 1 is a 7 month term.

** Rates per hour in years 3 through 5 are subject to negotiation. Re-evaluation
will be based on Iteris average yearly salary increase, provided that if such
increases exceed the local market norms that the Parties will mutually evaluate
the circumstances justifying such increases.

*** Minimum team sizes for years 3, 4 and 5 are indicative numbers and subject
to review 6 months prior to start of each respective year.

3.4                                 Valeo purchase orders issued to provide the
funding specified in this Article 3 shall be issued annually on a time and
material basis to fund at least the minimum level of effort specified in Article
3.3 above each year plus an allowance for other direct expenses such as material
and travel. All non-labor direct expenditures (including material and travel) in
excess of such allowance shall require the advance written approval of the Valeo
Project Manager prior to being incurred.  All labor shall be level-loaded by
month. Any increased level of effort authorized by the Valeo Project Manager
that results in a projected increase in the annual amount shall be supported by
an increase in authorized funding to avoid gaps in funding the minimum level of
effort in later months.

3.5                                 Articles 3.3 and 3.4 above provide an agreed
minimum level of effort for Iteris support for the Initial Term, subject to the
annual assessment as stated in Article 3.3. The agreed minimum level of effort
shall be subject to the following reviews and adjustments:

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† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

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Review Date

 

Milestone

 

Adjustments

September 2003

 

Customer A (Zeus) Production Order 1

 

If milestone is not achieved, funding will remain unchanged but efforts may be
redirected to focus on other opportunities.

March 2004

 

Customer B Letter of Intent/Production Commitment

 

If milestone is not achieved, funding will remain unchanged but efforts may be
redirected to focus on other opportunities.

June 2004

 

Customer C Letter of Intent/Production Commitment Customer A (Zeus) Production
Order 2

 

If milestone is not achieved, funding will remain unchanged but efforts may be
redirected to focus on other opportunities.

September 2004

 

Continued Strong Market Potential

 

If milestone is not achieved, funding reduction will be considered to be
effective April 2005.

September 2005

 

Continued Strong Market Potential

 

If milestone is not achieved, funding reduction will be considered to be
effective April 2006.

September 2006

 

Continued Strong Market Potential

 

If milestone is not achieved, funding reduction will be considered to be
effective April 2007.

April 2007 and subsequent annual periods

 

Continued Strong Market Potential

 

Evaluate current market and negotiate funding for extension of agreement.

 

3.6                                 Iteris will submit monthly invoices for
labor and other direct expenses on a time and material basis as follows: (a) at
the hourly rates for labor specified in Article 3.3 and (b)†. Payment from Valeo
to Iteris will be in US dollars, net 30 days after receipt of invoice.  Payment
shall be by electronic transfer of funds through a major U. S. correspondent
bank to:

†
†
†
†

 

†
†
†
†

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† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

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Article 4
Responsibility for Costs

Except for Valeo funding of Iteris Support for Valeo Customer-Specific
Development (P1) and Concept Competition Phase Activities, each Party shall bear
its own costs and expenses that it incurs in connection with this Agreement.

Article 5
Relationship Between Parties

5.1                                 This Agreement shall not constitute, create,
give effect to or otherwise be construed as a joint venture, pooling
arrangement, partnership or formal business organization of any kind.  The
Parties shall be deemed to be independent contractors and the employees of one
shall not be deemed to be employees or agents of the other. Neither Party shall
be entitled to act in the name or on behalf of the other Party.

5.2                                 All Iteris employees involved in the
implementation of this Agreement shall be employees of Iteris and not considered
employees or co-employees of Valeo for any reason (including compensation,
benefits, unemployment coverage and any employment related rights).

5.3                                 Each Party shall obligate all of its
employees and outside contractors to acknowledge in writing the confidentiality
of all information relevant to the scope of such employee or contractor’s
services and require, to the greatest extent permitted by law, that all such
information be protected and maintained in confidence and not disclosed or used
other than in connection with the employment or outside contractor relationship
with the Party.

5.4                                 The Parties agree, without charge to the
other Party, to execute, and to have their respective employees concerned
execute, all lawful documents and to make, and to have their respective
employees concerned make, all lawful oaths (including any necessary assignments
or other property transfer documents) required to prepare, file and prosecute
applications for protecting Foreground Technology, and to cooperate, and to have
their respective employees concerned cooperate, to provide such truthful
evidence and testimony as may be required to support such applications and the
granting and maintenance of any rights in Foreground Technology.  Each Party
warrants that its employees involved in the activities controlled by this
Agreement are under obligation to comply with the terms of this Article.

5.5                                 The Parties each will be responsible for all
obligations (including obligations for compensation for inventions) in relation
to their own employees, employees of their respective Affiliates and all
contractors or consultants engaged by such Party and named as an inventor in any
Foreground or Background Technology.

 

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Article 6
Proprietary Information

It is recognized that in the event the Parties desire to exchange information,
technology or other items pursuant hereto, such exchange may be subject to each
Party’s ability to obtain export license therefor from its respective
government. Each Party shall comply with such requirements and obtain and
maintain approvals under each Party’s respective government’s export regulations
(if any) in meeting the objective of this Agreement. Exchange of proprietary or
confidential information between the Parties shall be in accordance with the
obligations of confidentiality set forth in the Mutual Nondisclosure Agreement
executed between the Parties effective June 30, 2000, which is incorporated
herein by reference to the extent consistent with this Agreement, provided both
Parties shall be entitled to disclose Information received from the other Party
to any of its Affiliates (provided that such disclosure is consistent with
applicable government requirements and such Affiliates comply with the
obligations contained in said Mutual Non-Disclosure Agreement). The Parties
agree to extend the term of the Mutual Non-Disclosure Agreement to the
expiration or termination of this Agreement; provided that all disclosures
covered by the Mutual Nondisclosure Agreement shall be subject to the terms of
such agreement for ten years subsequent to initial disclosure or five years from
termination of this Agreement, which ever is shorter.

The Parties shall not disclose in any patent application, or in the course of
prosecuting any patent application, any proprietary or confidential information
of the other Party that is confidential except with prior written permission of
the other Party. Notwithstanding the above, the Parties will cooperate with each
other to assure that the best mode provision of 35 U.S.C. Section 112 is met as
to any patent application.

Article 7
Results of R & D Work, Intellectual Property Rights, Licensing

The following provisions shall apply to the rights and obligations of the
Parties with respect to the results of the development work under this
Agreement:

7.1                                 Background Technology

Each Party shall retain ownership of its Background Technology; and unless
otherwise specifically provided herein, neither Party grants the other any
license to its Background Technology. For purposes of clarification, without
limitation, neither Party shall be permitted to use the other Party’s Background
Technology to manufacture, use or sell Products, except as expressly provided
otherwise herein.

7.2           Foreground Technology

a.                                       From the Effective Date and thereafter,
all Foreground Technology shall be jointly owned by Iteris and Valeo.

b.                                      The Parties will reasonably pursue
registered protection of the Foreground Technology, including patent protection
to protect inventions, and will each consult with the other Party to determine
whether and in which countries

 

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                                                protection shall be sought,
which Party shall bear the responsibility (including any expense) for pursuing
the protection and maintaining any resulting right (e.g., patent), the desired
scope of protection, and which Party shall control prosecution of any
application for such right.

c.                                       If it is determined that only one Party
wishes to file or maintain an application to protect Foreground Technology in a
country, then the non-filing Party will assign its interest in the rights
following from such filed or maintained application in that country to the other
(who shall own it exclusively) with the non-filing Party retaining a
non-exclusive license (with the right to sub-license within the scope of this
Agreement) under any resulting right in such country.  Royalties payable shall
be as set forth in Article 7.3(b).  Where only one Party files an application
under this part, that Party shall bear all expenses.

d.                                      During the term of this Agreement, the
Parties agree that they will not grant any license or right under or otherwise
alienate or encumber their respective interest in any jointly owned Foreground
Technology, without the prior written approval of the other joint owner except
that Iteris may license, alienate or encumber rights that do not cover
applications for Class 1 and 2 Vehicles and Valeo may license, alienate or
encumber rights that do not cover applications for Class 3 through 8 Vehicles.
Either Party may, without prior written approval, in a limited license, grant to
its Affiliates the right to use Foreground Technology to the extent that the
licensing Party itself is permitted to use the Foreground Technology under this
Agreement, subject to all limitations and restrictions (including, but not
limited to, obligations related to accounting and royalties).  In the absence of
an agreement otherwise, which the Parties agree to negotiate in good faith, any
royalties paid by any third party for a license to any jointly owned Foreground
Technology for which the written approval of the other Party is required will be
shared equally by the Parties. Royalties paid by any third party for a license
to any jointly owned Foreground Technology for which the written approval of the
other Party is not required or any royalties paid specifically for any
exclusively owned rights in Foreground Technology under Article 7.2(c), will not
be shared or accounted for as between the Parties. Following the expiration or
any termination of this Agreement, each Party may use and enforce its rights in
the jointly owned Foreground Technology without restriction and without any
reporting or accounting obligation to the other Party.

e.                                     No Party shall abandon the prosecution or
maintenance of any patent or patent application with respect to any Foreground
Technology under its control, without notifying the other Party of such fact in
reasonable time, and in no event less than forty-five (45) days prior to any
relevant deadline for filing or other action, for the other Party to assume
prosecution or maintenance of such patent or patent application if it so
desires. If such other Party assumes prosecution or maintenance of such patent
or patent application, it shall thereafter have the same rights and obligations
relative to such patent or patent application as the exclusive owner and such
patent or patent application shall be assigned to such other Party, subject

 

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                                                only to a royalty free,
non-exclusive license (with rights to sub-license limited to purposes related to
Class 1 and 2 Vehicles only for Valeo and Class 3 through 8 Vehicles for Iteris)
to the assigning Party under any resulting right.

f.                                         Representatives of the Parties shall
meet in person at least once each calendar quarter, during the term of this
Agreement to review intellectual property issues that may require attention
under this Agreement, including but not limited to the identification of any new
inventions, the status of prosecution of intellectual property rights, the
identification of any third party intellectual property rights that may require
attention, the coordination and development of an intellectual property
strategy, the identification of any disputes or potential disputes with third
parties, the identification of any requirements for designing around
intellectual property rights of a third party, and the status of any other
matters reasonably relating to the above matters. The designated representatives
of the Parties shall make necessary and appropriate recommendations to the
Parties in order that the Parties can take reasonable measures pursuant to this
Article 7.2(f).

                                                The designated representatives
shall jointly recommend selection of appropriate legal counsel for performing or
otherwise taking any necessary or appropriate legal action.

                                                The designated representatives
shall jointly recommend a fair and equitable allocation of expense sharing to
assure timely and reasonable payment of expenses incurred in connection with the
execution of any intellectual property strategy (including but not limited to
the prosecution and maintenance of individually or jointly owned intellectual
property rights, and the cost of procuring legal advice to help assure freedom
to practice technology in view of third party patents).

7.3                                 Licenses to Technology

a.                                       Iteris hereby grants to Valeo a
nontransferable, worldwide license under Iteris’s Background Technology to use,
develop, manufacture, have manufactured, market and sell, the Products in the
Class 1 and 2 Vehicle Market (the “Iteris License”). Except to the extent the
Iteris License is rescinded or revoked by earlier termination of this Agreement
as specified in Article 9 below, the Iteris License shall be Exclusive to Valeo
for the period of the Initial Term, where “Exclusive” means that Iteris shall
not, with respect to the Class 1 and 2 Vehicle Market, use, develop,
manufacture, have manufactured, market or sell Products that include Iteris’s
Background Technology, nor shall Iteris license its Affiliates or third parties
to use Iteris’s Background Technology in a manner prohibited to Iteris; provided
that during the period of the Initial Term, Iteris shall retain (i) only the
rights to use and develop Iteris’s Background Technology solely with respect to
fulfilling its obligations to Valeo under this Agreement and (ii) unrestricted
rights to use, develop, manufacture, market and sell Iteris’s Background
Technology solely with respect to Products in the Class 3 through 8 Vehicle
Market and any other products that do not compete with Products in the Class 1
and 2 Vehicle

 

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                                                Market.  Upon payment in full of
the Worldwide Technology Access Fee as described in Articles 7.3(d) or 9.3(a)
below and subject to Article 7.3(e) below, the Iteris License shall become
Exclusive to Valeo in perpetuity.

b.                                      Valeo shall pay to Iteris a Product
royalty†.

                                                Such royalties shall be paid:†

To the extent the Product is part of a module or system that performs functions
other than those directly the result of LDWS Technology, the Parties will
negotiate in good faith to determine an appropriate portion of the module or
system price for purposes of establishing Unit Sales Price for calculation of
the royalty.

There shall only be a single royalty for Iteris’s LDWS Technology due for sale
of a Product even if a Product is covered by more than one intellectual property
right. In this Agreement, Valeo shall not have any obligation to pay Iteris a
royalty for any lane departure warning applications other than vision-based LDWS
Technology (e.g., radar or infrared).  Iteris agrees not to enforce any
intellectual property rights it may own against Valeo’s Affiliates, suppliers
and customers for any uses or applications of intellectual property that result
from rights granted by Valeo within the scope of the Iteris License.

Product royalty payments by Valeo to Iteris shall be payable †. Each Product
royalty payment shall be supported by written documentation certified by an
authorized Valeo representative showing calculation of royalty amount owed.
Iteris shall have the right to audit at reasonable times and upon at least
ten-(10) days advance notice and subject to an obligation of confidentiality
calculations and underlying documentation for a period of two (2) years after
receipt of payment. Unless otherwise notified in writing, payment by Valeo shall
be by electronic transfer as described in Article 3.6 above.

c.                                       Intentionally omitted.

d.                                      As compensation for the perpetual and
Exclusive rights to the Iteris License as provided in Article 7.3(a) above,
Valeo shall pay to Iteris a Worldwide Technology Access Fee (“WTAF”) in the
amount of $†. Payment provides for access to and use by Valeo to Iteris’s
executable object code and complete source code (including algorithms) in
accordance with the following milestones. Valeo may only use executable object
code, source code and algorithms within the scope of the licenses and ownership
allocation provided in this Agreement and on the conditions that such use will,
if Products are sold, result in payment of royalties to Iteris under this
Agreement. Unless otherwise notified in writing, payment by Valeo shall be by
electronic transfer as described in Article 3.6 above (subject to the
termination provisions set forth below).  In connection with such access,

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† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

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                                                Valeo shall receive at least
electronic copies of each deliverable together with any other information as may
be necessary for Valeo to successfully employ such code.

Description/deliverable

 

Amount

 

Payment /Delivery date

 

Worldwide Technology Access Fee:

†

 

†

 

†

 

†

Upon receipt of the respective payments, Iteris will provide to Valeo software
code as it existed ten (10) days before the specified delivery date, consisting
of Foreground Technology developed under this Agreement and Background
Technology that (i) comprises or constitutes Iteris’s LDWS Technology, (ii) is
required to use Iteris’s LDWS Technology, or (iii) improves Iteris’s LDWS
Technology, including improvements under Article 10.1(a) below.  Iteris agrees
to provide reasonable technical services to Valeo after the delivery date to
allow Valeo to access the provided code for its intended purpose.  The Parties
intend that Iteris will provide Valeo with the most up to date version of the
code at each delivery date.  At each delivery of executable object code, Iteris
agrees to supply the underlying source code to a mutually agreeable software
escrow.  Costs associated with the escrow shall be born by Valeo.

e.                                       If at any time Valeo (i) abandons the
development, manufacture, sale, or distribution of Products for a period in
excess of four (4) months (provided such manufacture, sale or distribution had
already commenced and that abandonment shall not include interruption caused by
a third party or an event beyond Valeo’s control); (ii) commences manufacture,
sales or distribution of Products incorporating vision-based LDWS Technology
other than Iteris’s LDWS Technology, or (iii) otherwise fails for a continual
period of four (4) months to use its commercially reasonable efforts to develop,
market and sell Products incorporating Iteris’s LDWS Technology, the Iteris
License granted by Iteris under Article 7.3(a) above shall become non-exclusive
and Iteris shall be free to develop, market, sell and distribute Products
incorporating Iteris’s LDWS Technology for the Class 1 and 2 Vehicle Market
and/or license others to do so. To implement this Article 7.3(e), Iteris must
notify Valeo in writing of the alleged occurrence of such event (i), (ii) or
(iii) and Valeo must fail to cure such alleged occurrence within thirty (30)
days of receipt of such notice. The occurrence of the

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† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

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                events described in (i) and (iii) above during the term of this
Agreement shall be considered as a basis for terminating this Agreement pursuant
to Article 9.2(c)(1).

f.                                         If the Iteris License becomes
non-exclusive for any reason under this Agreement, the applicable Product
royalty payable by Valeo for any remaining obligations thereafter shall be the
lower of †

g.                                    In the event that any intellectual
property rights accrue to one Party, which are not specifically contemplated by
the Agreement herein and which would literally or by equivalents cover subject
matter that is being developed and/or commercialized by the other Party, the
Parties agree to enter into good faith negotiations regarding a non-exclusive
license under such intellectual property rights at a reasonable royalty for the
purpose of affording the continued development and/or commercialization of
Foreground Technology by such other Party. In any event, to the extent that a
Party already pays a royalty to another Party for any such subject matter, no
additional royalty shall be owed.

The Parties acknowledge that the right to use Foreground Technology is limited
to circumstances where a license to Background Technology of the other Party is
not required. Valeo’s right to use Iteris’s Background Technology is solely
governed by the Iteris License.

7.4.                              Enforcement.

                                                In the event that it is believed
that any third party is infringing rights in any of the Background Technology or
the Foreground Technology then, before either Party confronts the third party,
the Parties agree to meet and negotiate in good faith a strategy for enforcement
of the rights, to determine the roles and responsibilities of the Parties, to
determine expense sharing, to determine allocation of sharing of proceeds and
other matters related to such enforcement. In the event that the Parties are
unable to reach an agreement based upon such meeting, then the right to enforce
rights in Background Technology or the Foreground Technology for Class 1 and 2
Vehicle applications shall reside primarily in Valeo, and the right to enforce
rights in Background Technology or the Foreground Technology for Class 3 through
8 Vehicle applications shall reside primarily in Iteris. Further, absent an
agreement, the Parties shall share in any recovery on a pro rata basis relative
to the pro rata portion of litigation expenses paid by each Party. The Parties
agree to provide reasonable assistance and cooperation in any proceeding.
Notwithstanding the above, in the event that enforcement is sought to be
undertaken while Valeo is a non-exclusive licensee under rights in the
Background Technology, then the right to enforce such rights shall reside
entirely in Iteris, and Valeo shall be entitled to no share of Iteris’s
recovery; provided that Valeo may, at its own expense, make a claim against an
infringer for any damages that it may have suffered separate and apart from
Iteris’s damages. Iteris agrees to reasonably cooperate with Valeo’s efforts to
make such a claim. Nothing herein shall require a Party in which the primary
right of enforcement

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† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

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                                                resides to pursue any
enforcement, and if such Party elects not to enforce rights, then the other
Party shall be entitled to enforce rights at its sole expense and shall be
entitled to the entirety of any recovery.  Valeo shall be entitled to register
this agreement in those countries that require license registration for
participation in litigation.

7.5                                 The parties agree to negotiate in good faith
regarding the use of the AutoVue™ trademark by Valeo.

Article 8
Liability/Indemnity/Representations

8.1                                 The employees or representatives of each
Party shall obey all pertinent rules and regulations of the other Party while on
the premises of the other Party.  Each Party shall defend,  indemnify and hold
harmless (including for reasonable attorney’s fees and costs) the other Party
against all claims for bodily injuries, including health, or damage to property
caused by a negligent act or omission of the indemnifying Party or its employees
arising under or in connection with this Agreement, provided that the
indemnifying Party is promptly notified of such claims, given all evidence in
the indemnified Party’s possession, and given reasonable assistance in and sole
control of the defense and all negotiations for settlement or compromise
thereof.

8.2                                 Each Party (the “Indemnifying Party”) shall
defend, indemnify and hold harmless the other Party (the “Indemnified Party”)
from and against any losses, damages or claims (including reasonable attorneys
fees and costs) (“Losses”) arising out of or related to any breach of any
representation, warranty or covenant under this Agreement by the Indemnifying
Party, provided that the Indemnifying Party is timely notified of such claims
and given reasonable assistance in and sole control of the defense and all
negotiations for settlement or compromise thereof.

8.3                                 In the event a claim is received by one
Party that alleges the Products or any part thereof infringes upon the patent,
copyright, trademark or proprietary rights of others, the receiving Party shall
immediately notify the other Party in writing of such claim. The Party who has
developed the Background or Foreground Technology that is the subject of the
claim shall be authorized the sole power to defend or settle such claim, and
exercise its reasonable commercial efforts to procure for the other Party the
right to use the Products or modify or replace the Products to avoid
infringement. The other Party will cooperate, at its own expense, in the defense
of any such claims as reasonably requested by the defending Party. The Party who
has developed the Background or Foreground Technology that is the subject of the
claim shall defend, indemnify and hold the other Party harmless from any damages
resulting from a final judgment of infringement. In the event jointly developed
Foreground Technology is the subject of the claim, the Parties shall agree on
who shall assume the defense and how any costs relating to the defense as well
as any damages shall be shared among the Parties.

8.4                                 Each Party shall be liable under this
Agreement to the extent of its contributory actual liability, regardless of the
form of action giving rise to such liability (whether in contract, tort or
otherwise). IN NO EVENT WILL EITHER PARTY BE LIABLE FOR ANY

 

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                                                INDIRECT, PUNITIVE, EXEMPLARY,
CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES OF THE OTHER PARTY OR ANY THIRD
PARTY EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES AND
WHETHER OR NOT SUCH DAMAGES ARE FORESEEABLE OR ARE CAUSED AS A CONSEQUENCE OF
THE NEGLIGENCE OF THE PARTY OR OTHERWISE.

8.5                                 EXCEPT AS EXPRESSLY SET FORTH HEREIN,
NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING
WITHOUT LIMITATION, IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE OR NONINFRINGEMENT. VALEO AGREES THAT IT WILL NOT MAKE ANY
REPRESENTATIONS OR WARRANTIES WITH RESPECT TO ITERIS’S LDWS TECHNOLOGY OTHER
THAN THOSE WHICH ARE SPECIFICALLY APPROVED BY ITERIS IN WRITING; PROVIDED THAT
ITERIS SHALL NOT UNREASONABLY WITHHOLD SUCH APPROVAL.

8.6                                 Iteris representations, warranties and
covenants:

a.                                       Iteris represents and warrants that it
is the owner of the entire, right, title and interest in the Iteris’s LDWS
Technology, or has otherwise acquired rights to license all intellectual
property rights to Valeo that are necessary for the purposes of this Agreement,
including but not limited to the United States and foreign copyrights and patent
applications corresponding thereto and in the inventions described and claimed
therein.  Iteris has complete and unrestricted authority, and, except for the
jointly-owned patents/patent applications with †, the sole authority, to issue
licenses under Iteris’s LDWS Technology, and Iteris has not knowingly granted
licenses thereunder to any other entity that would restrict rights granted to
Valeo. Iteris/† jointly-owned patents/patent applications that are part of
Iteris’s LDWS Technology are as follows: †.  Iteris represents and warrant that
is has all necessary rights to license the Iteris /† jointly-owned patents /
patent applications under this Agreement.

b.                                      Iteris represents and warrants that it
has no knowledge of any actual or potential infringement of any intellectual
property rights of a third party that might result from the proposed practice by
Valeo of Iteris’s LDWS Technology, and no claims have been asserted against
Iteris that Iteris’s LDWS Technology violates any intellectual property rights
of any third party.

c.                                       Iteris shall use commercially
reasonably efforts to respect to the valid and enforceable intellectual property
rights of third parties and to design around any patent that is reasonably
believed to pose a risk to the freedom of Valeo to practice Iteris’s LDWS
Technology and to reasonably apprise Valeo of any intellectual property right
issued to a third party that may pose a risk to the freedom of Valeo to practice
Iteris’s LDWS Technology.

--------------------------------------------------------------------------------

† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

8.7                                 In connection with the mutual obligations of
the Parties hereunder, each Party shall maintain insurance coverage in amounts
not less than the following: (a) Comprehensive General Liability (including
Products/Completed Operations and Blanket Contractual Liability) limits in the
amounts of $1,000,000 combined bodily injury and property damage per occurrence;
and (b) Commercial Umbrella limits in the amount of $5,000,000 per occurrence
and $10,000,000 annual aggregate.  In addition, Iteris shall maintain
Information Technology Errors and Omissions insurance coverage with limits not
less than $10,000,000 per claim and aggregate of claims. Upon request, each
Party shall furnish certificates of insurance to the other Party setting forth
the amounts of coverage, policy numbers and dates of expiration for insurance
maintained pursuant to this paragraph. Such certificates shall provide that the
other Party will receive thirty (30) days prior written notification from the
insurer of any cancellation or termination.

Article 9
Term of Agreement

9.1                                 This Agreement shall be effective as of the
Effective Date and shall remain in force for an Initial Term ending March 31,
2008 unless this Agreement is terminated upon the earliest of the conditions of
termination listed in Article 9.2. The term of this Agreement shall be
automatically extended in one (1) year increments except upon written notice by
either Party to the other not less than ninety (90) days prior to the end of the
current term.

9.2                                 Conditions of Termination

                                                The conditions of termination of
this Agreement are as follows.

a.                                       Mutual Agreement

                                                Upon mutual written agreement of
the Parties;

b.                                      Convenience

                                                (1)           A Party that has a
right to terminate this Agreement under this Section 9.2(b) is referred to as a
“Terminating Party.” †, then the Terminating Party may terminate this Agreement
for its sole convenience upon three (3) months prior written notice to the other
of its intent to terminate this Agreement; provided, that over such 3-month
period both parties shall continue performance in compliance with this
Agreement. For purposes of Article 9.2(b)(1), DC Ventures GmbH and its
successors shall not be deemed a †; provided that its Affiliates shall not be
subject to such exclusion.

                                                (2)           Except as provided
in Article 9.2(b)(1) above: (i) With respect to the commitments made herein for
the first two (2) years or for a one-year extended term once it has commenced,
this Agreement may not be

--------------------------------------------------------------------------------

† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

                                                                terminated for
the sole convenience of either Party; and (ii) With respect to termination of
commitments made herein for years 3, 4, 5,  either Party may terminate this
Agreement for its sole convenience upon twelve (12) months prior  written notice
to the other of its intent to terminate this Agreement provided over such 12
months period both Parties shall continue performance in compliance with this
Agreement.

c.                                       Default

                                                Upon notice in writing by one
Party to the other if:

(1)                                  the other Party fails to perform or observe
any material term of this Agreement and, in the case of a remediable breach,
fails to remedy such breach or present a mutually agreeable plan to remedy such
breach, within  thirty (30) days of receipt of notification requiring it to do
so;

(2)                                  the other Party ceases to carry on its
business for more than 30 consecutive days  except in the case of Force Majeure
events as set forth in Article 11.11; or

(3)                                  any action, application or proceeding is
taken in respect to the other Party, which materially prevents or restricts the
terminating Party from receiving the benefits of this Agreement, for (a) a
voluntary arrangement or composition or reconstruction of its debts; (b) the
presentation of an administrative petition; (c) its winding up or dissolution;
(d) the appointment of a liquidator, trustee, receiver, administrative receiver
or similar officer; (e) a petition for a bankruptcy order or an application for
a voluntary arrangement; or (f) any similar action, application or proceeding in
any jurisdiction to which it is subject.

9.3           Results of Termination

                                                The provisions contained in this
Agreement which by their terms or operation are intended to survive any
termination of this Agreement (including, Articles 4, 6, 7.1, 7.2, 7.3, 8,
10.1(a), 10.1(c) and 11.6 and any obligations for payments between the Parties
that have accrued before the effective date of the termination ) shall survive
any such termination. In addition, unless otherwise agreed in a mutual
termination agreement under Article 9.2(a):

a.                                       If termination occurs after payment of
the WTAF, then the Iteris License shall become a perpetual and Exclusive
license.

b.                                      If termination occurs before payment of
the WTAF and termination is effected by: (1) mutual agreement under Article
9.2(a); (2) Valeo for its convenience under Article 9.2(b)(1); (3) Iteris for
its convenience under Article 9.2(b)(2); or (4) Valeo for default by Iteris
under Article 9.2(c), then Valeo may accelerate payment on the balance of the
WTAF prior to the termination date and, once Iteris has received the balance of
the WTAF, the Iteris License shall become a perpetual and Exclusive license.

 

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c.                                       If termination occurs before payment of
the WTAF and termination is effected by: (1) Iteris for its convenience under
Article 9.2(b)(1); (2) Valeo for its convenience under Article 9.2(b)(2); or (3)
Iteris for default by Valeo under Article 9.2(c), then the Iteris License shall
become a perpetual and non-exclusive license for Customers for which Valeo has
commenced production.  Also, the Iteris License shall become a non-exclusive
license for Customers for which Valeo has received, at time of termination, an
executed letter of intent for development leading to production.  If the letter
of intent leads to production before expiration of the letter (and any
extensions), then the Iteris License shall become a perpetual and non-exclusive
license for that Customer.  If the letter of intent does not lead to production,
then the Iteris License shall terminate upon expiration of the letter of intent
for that Customer.  The Iteris License shall otherwise terminate.

d.                                      If termination occurs before payment of
the WTAF and termination is effected by: (1) Valeo for its convenience under
Article 9.2(b)(1); (2) Iteris for its convenience under Article 9.2(b)(2); or
(3) Valeo for default by Iteris under Article 9.2(c), then the Iteris License
shall become a perpetual and Exclusive license for Customers for which Valeo has
commenced production.  Also, the Iteris License shall become an Exclusive
license for Customers for which Valeo has received, at time of termination, an
executed letter of intent for development leading to production.  If the letter
of intent leads to production before expiration of the letter (and any
extensions), then the Iteris License shall become a perpetual and Exclusive
license for that Customer.  If the letter of intent does not lead to production,
the Iteris License shall become a perpetual and non-exclusive license upon
expiration of the letter of intent for that Customer.  The Iteris License shall
otherwise become a perpetual and non-exclusive license.

e.                                       The licenses under Articles 9.3(a-d)
shall be subject to Articles 7.3(b) and 7.3(e) (but for its last sentence). The
definition of “Exclusive” in Article 7.3(a) shall apply to Article 9.3
generally.

f.                                         If termination occurs before payment
of the WTAF, Valeo chooses not to accelerate payment on the balance of the WTAF
prior to the termination date and the termination is effected by mutual
agreement under Article 9.2(a), then the Parties shall negotiate in good faith
the terms of the Iteris License.

g.                                      For the Iteris License surviving
termination, (i) if Valeo breaches by failing to perform or observe any material
term surviving termination, then Iteris may terminate the Iteris License;
provided that in the case of a remediable breach, within four (4) months of
receipt of notification of the breach, Valeo may remedy the breach or present a
mutually agreeable plan to remedy the breach; and (ii) if Iteris breaches by
failing to perform or observe any term surviving termination that dilutes
Valeo’s rights under the surviving Iteris License in any material respect or
impairs Valeo’s ability to sell Products pursuant to the terms of the surviving
Iteris License in any material respect, then the Iteris License shall become
royalty-free; provided that in the case of a remediable breach, within four (4)
months of receipt of notification of the breach, Iteris may remedy the breach or

 

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                                                present a mutually agreeable
plan to remedy the breach.  If Iteris remedies the breach or presents a mutually
agreeable plan within the four (4) month period, then the Iteris License shall
become royalty bearing at the end of the four (4) month period.  If Iteris fails
to remedy the breach or present a mutually agreeable plan within the four (4)
month period, then the Iteris License shall become perpetually royalty free. 
The Iteris License of this Article shall be subject to Article 7.3(e) (but for
its last sentence).

h.                                      Upon termination of this Agreement, each
Party shall promptly return to the other Party all equipment, tooling and other
materials owned, purchased by, or purchased on behalf of the other Party that is
in its possession or control or the possession or control of third parties on
its behalf.

Article 10
Special Provisions

10.1                           Obligations of the Parties regarding LDWS
Technology

a.                                       Throughout the term of this Agreement,
Iteris shall undertake and support improvements of Iteris Background  Technology
at its own expense in order to optimize the performance and cost competitiveness
of the Products. After any expiration or termination of this Agreement, Iteris
shall provide the foregoing support on commercially reasonable mutually
agreeable terms.

b.                                      During the term of this Agreement,
Iteris shall not engage, directly or indirectly (including through consultants
or contractors) in the development of vision-based LDWS Technology, including
Iteris’s LDWS Technology, for Class 1 and 2 vehicles other than for use by Valeo
pursuant to the terms of this Agreement.

c.                                       Valeo shall not sublicense or otherwise
authorize any third party, including its Affiliates, to sell Products to any
Customer(s) if such sublicense or other authorization avoids or otherwise
reduces the Product royalty that would be payable to Iteris if Valeo were to
sell directly to the same Customer(s).

 

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10.2                           †

At any time in its sole discretion, Iteris may seek third party investment
specifically for the development of or other participation in development of
automotive functions involving Iteris technologies other than vision-based LDWS
Technology. †

10.3         †

a.                                       If Iteris decides, including through
its shareholders or directors, to decrease significantly or cease the
development of the AutoVue™ Operations, †

b.                                      At any time in its sole discretion,
Iteris may seek to sell its AutoVue™ Operations. †

(i)                                     †

(ii)                                  †

(iii)                               †

(iv)                              †

(v)                                 †

c.                                       †

d.                                    †

e.                                       †

10.4                           Both Parties recognize that parallel development
of products incorporating Iteris’s LDWS Technology for their respective markets
(Valeo—Class 1 and 2; Iteris—Class 3 through 8) could result in opportunities to
reduce manufacturing costs through quantity purchases of common parts such as
cameras, lens, etc. To the maximum extent reasonably commercially practical, the
Parties agree to cooperate in such procurements by pooling purchases or
reselling one to the other so that the Parties achieve the benefits of quantity
purchases.

 

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† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

--------------------------------------------------------------------------------

 

Article 11
Miscellaneous Provisions

11.1                           Contacts are as listed below or as either Party
may designate and notify the other Party in writing.

Iteris

Project/Technical                 †
†
Iteris, Inc.
1515 S. Manchester Avenue
Anaheim, CA 92802-2907
†
†

Contract                                  †
Iteris, Inc.
1515 S. Manchester Avenue
Anaheim, CA 92802-2907
†
†

Valeo

Project/Technical                                                   †
†
Valeo Schalter und Sensoren GmbH
Stuttgarter Str.
74321 Bietigheim-Bissingen
Germany

†
†

Contract                                                                                                 
†
†
†

†
†

11.2                           Except as otherwise provided herein, all notices,
requests and demands to or upon a Party hereto, to be effective, shall be in
writing and shall be sent by personal delivery against receipt, by prepaid
express courier, or by facsimile, confirmed by hard copy sent by mail or
courier, and shall be deemed to have been validly served, given or delivered

--------------------------------------------------------------------------------

† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

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                                                immediately when delivered
personally against receipt, at the date and time of delivery recorded by the
courier if delivery is by express courier, or, in the case of facsimile notice,
when sent and receipt is confirmed by a valid transmission report.

11.3                           This Agreement shall not be amended or modified,
nor shall any waiver of any right hereunder be effective unless set forth in a
document executed by duly authorized representatives of both Parties.  The
failure of a Party to insist on strict performance of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent breach of the same.

11.4                           Should any one or several of the provisions of
this Agreement be or become invalid, illegal, unenforceable, or in conflict with
any law this shall not affect the validity of the other provisions.  The Parties
agree to replace the legally invalid provision, if possible, by an effective
provision whose economic effect is as similar as possible to the original
provision, and the Parties agree that this new provision shall be deemed to have
been agreed upon from the time when the original provision became invalid.

11.5                           Each Party’s obligations hereunder shall be
subject to all applicable export control regulations  and each Party agrees not
to export any item resulting from this Agreement for ultimate delivery to those
areas to which delivery would be forbidden under applicable law.

11.6                           This Agreement is based on mutual trust and
confidence.  The Parties to this Agreement shall try to settle any disputes
amicably through their management representatives.  The responsible managers of
the signatory Parties to the Agreement shall first meet in person and make a
good faith attempt to resolve any such dispute.  If after such good faith
attempt, the responsible managers cannot otherwise settle or resolve the claim
or controversy, the senior executive management representatives of each Party
shall meet in person and make a good faith attempt to resolve or settle the
matter.

a.                                       In the event of any disputes over
whether a patent or other intellectual property is deemed Background or
Foreground Technology under this Agreement, the Parties, patent counsel for the
Parties, or both shall meet in person in a good faith effort to resolve the
dispute (which resolution may call for the submission of the dispute to a
neutral third party for facilitative mediation), within one month of
notification of the dispute.  If such meeting does not result in an agreement,
then within one month the Parties shall submit the dispute to arbitration by a
panel of three independent third party patent attorneys each having at least 7
years of experience, who shall make the determination.  Each Party shall select
one panelist with the final panelist selected by the two initially selected
panelists.  The determination shall be made by the panel based upon the
submission of a written brief by each Party (not to exceed 20 pages) with any
necessary attachments, and a hearing consisting of a maximum of one hour per
side of oral argument, with no testifying witnesses.  The briefing and hearing
shall occur no later than two months from the date of selection of the panel.
The panel shall be required to render a decision within one month of the
hearing.  Parties agree that the decision of the panel shall be final and
binding upon the Parties hereto. Judgment upon such an award may

 

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                                                be entered in any court of
competent jurisdiction.  Unless the Parties agree otherwise, two-thirds of the
expenses of the panel shall be borne by the losing Party and the remaining
one-third of the expenses of panel shall be borne by the winning Party.  The
arbitration shall be carried out in accordance with the Rules of Reconciliation
and Arbitration of the International Chamber of Commerce and in English.

b.                                      Unless the Parties first cannot agree to
attempt resolution by a non-binding facilitative mediation, any other dispute
between the Parties arising out of this Agreement, not covered by the foregoing
provision, shall be solely and finally settled by a court of arbitration
consisting of three arbitrators, unless the Parties agree on arbitration with
one arbitrator only, in accordance with the Rules of Reconciliation and
Arbitration of the International Chamber of Commerce and done in the English
language.  The Parties agree that in the event that such an arbitration requires
interpretation of the claims or validity of any patent at least one of the
arbitrators shall be a mutually agreeable independent third party patent
attorney, having at least 10 years of relevant patent experience. The place of
arbitration shall be in New York, New York. The award thereof shall be final and
binding upon the Parties hereto. Judgment upon such an award may be entered in
any court of competent jurisdiction.  Either Party may call for arbitration by
providing thirty days written notice of intent to refer any matter to
arbitration under this Agreement

11.7                           This Agreement shall be subject to the laws of
the State of New York, except for its conflict of laws rules and excluding any
International Convention regarding the International Sale of Goods.

11.8                           Neither this Agreement nor any interest herein
may be assigned, in whole or in part, by either Party hereto without the prior
written consent of the other Party hereto, except that without securing such
prior consent, either Party hereto shall have the right to assign this
Agreement, in whole or in part, to any of its Affiliates or to any successor by
way of merger or consolidation or the acquisition of substantially all of the
business and assets of such Party relating to the subject matter of this
Agreement, provided that such successor shall expressly assume all of the
obligations and liabilities of such Party under this Agreement to the extent
assigned, and provided further, that such Party shall remain liable and
responsible to the other Party hereto for the performance and observance of all
such obligations.

11.9                           Any news release, public announcement,
advertisement or publicity (“Release”) proposed to be released by either Party
concerning the specific rights or obligations of the other Party in connection
with this Agreement or non-public information involving the other Party shall be
subject to the approval of the other Party prior to release. Further, any
Release by one Party involving the application of LDWS Technology to the vehicle
market identified to the other Party (Class 1 and Class 2 Vehicles for Valeo and
Class 3 through Class 8 Vehicles for Iteris) shall be subject to the approval of
the other Party prior to Release.  However, either Party may, without the
approval of the other Party, issue any Release that is of a general nature or
that promotes or advocates application of

 

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                                                LDWS Technology, and such
Releases may include general references to the other Party, the cooperation
between the Parties, and the respective markets for which each Party is
responsible.

11.10                     During the period that this Agreement is in effect and
through completion of any resulting contract or subcontract arrangement, both
Parties agree not to solicit for employment any technical or professional
employees from the other Party without the prior written authorization of the
other Party.

11.11                     Force Majeure — Neither Party shall be deemed to be in
default of any provision of this Agreement for failures in performance resulting
from acts or events beyond the reasonable control of such Party; including, but
not limited to, acts of God, civil or military authority, civil disturbances,
wars, strikes, fires, or catastrophes. If however, such condition persists for
more than 90 days, the other Party may initiate termination of this Agreement in
accordance with Article 9.

11.12                     This Agreement constitutes the entire understanding
and agreement of and between the Parties with respect to the subject matter
hereof and supersedes all prior representations and agreements. The Article and
paragraph headings herein are for convenience only and shall not limit in any
way the scope of any provision of this Agreement.

 

IN WITNESS, WHEREOF, the Parties hereto have executed this Agreement in
duplicate as of the date herein above indicated.

 

Valeo Schalter und Sensoren GmbH

 

Iteris, Inc.

 

 

 

By: †

 

By: †

 

 

 

Name: †

 

Name: †

 

 

 

Title: †

 

Title: †

 

 

 

Date: September 29, 2003

 

Date: September 29, 2003

 

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† In accordance with Rule 24b-2 under the Securities Exchange Act of 1934, this
confidential information has been omitted from this exhibit pursuant to a
request for confidential treatment, and has been filed separately with the
Securities and Exchange Commission.

 

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