Exhibit 10.42


 


CHANGE IN CONTROL AGREEMENT


 


THIS CHANGE IN CONTROL AGREEMENT (the “Agreement”) is entered into as of June 11,
2008 (the “Effective
Date”), by and between James S. Miele (the “Employee”) and Iteris, Inc.,
a Delaware corporation (the “Corporation”).


 


Section 1.                                            Term of
Agreement.


 


This Agreement shall take effect on the Effective Date and shall expire
on the earlier of (i) the fifth anniversary of the Effective Date, or (ii) the
date Employee’s employment with the Corporation terminates for any reason other
than an Involuntary Termination (as defined herein) that is in connection with
or within twelve (12) months following a Change in Control.


 


Section 2.                                            Definitions.


 


                                                                                                (a)                                  “Change in Control”
shall mean any of the following transactions effecting a change in ownership or
control of this Corporation:


 


                                                                                                                                                (i)                                     a
merger or consolidation of the Corporation with or into another entity or any
other corporate reorganization, if persons who were not stockholders of the
Corporation immediately prior to such merger, consolidation or other
reorganization own immediately after such merger, consolidation or other
reorganization 50% or more of the voting power of the outstanding securities of
each of (i) the continuing or surviving entity and (ii) any direct or
indirect parent corporation of such continuing or surviving entity.


 


                                                                                                                                                (ii)                                  The
sale, transfer or other disposition of all or substantially all of the
Corporation’s assets;


 


                                                                                                                                                (iii)                               the
acquisition, directly or indirectly, by any person or related group of persons
(other than the Corporation or a person that directly or indirectly controls,
is controlled by or in under common control with, the Corporation), of “beneficial
ownership” as defined in Rule 13d-3 under the Securities Exchange Act of
1934, as amended (the “Exchange
Act”), of securities of the Corporation representing at least
50% of the total combined voting power represented by the Corporation’s then
outstanding voting securities.  For
purposes of this subsection, the term “person” shall have the same meaning as when
used in Sections 13(d) and 14(d) of the Exchange Act but shall
exclude (i) a trustee or other fiduciary holding securities under an
associate benefit plan of the Corporation or of a Parent or Subsidiary and (ii) a
corporation owned directly or indirectly by the stockholders of the Corporation
in substantially the same proportions as their ownership of the common stock of
the Corporation.


 


                                                Notwithstanding
anything to the contrary contained herein, a Change in Control be not be deemed
to occur in connection with any underwritten public offering of the Corporation’s
securities.


 


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                                                                                                (b)                                 “Involuntary Termination”
shall mean the termination of the Service of any individual which occurs by
reason of:


 


                                                                                                                                                (i)                                     Employee’s
involuntary dismissal or discharge by the Corporation for reasons other than
Misconduct, or


 


                                                                                                                                                (ii)                                  Employee’s
voluntary resignation following (A) a change in his position with the
Corporation which materially reduces his level of responsibility, (B) a
material reduction in his level of compensation (including base salary, fringe
benefits and participation in bonus or incentive programs) or (C) a
relocation of Employee’s place of employment by more than fifty (50) miles, provided
and only if such change, reduction or relocation is effected by the Corporation
without the Employee’s consent. 
Notwithstanding the foregoing, an Involuntary Termination shall only be
found to exist if Employee has provided written notice to the Corporation
within 90 days of the existence of an event under (A), (B) or (C), and the
Corporation does not cure such event within 30 days following the receipt of
such notice from Employee.  For avoidance
of doubt, a 5% reduction in the combined level of base salary and annual target
bonus opportunity shall constitute a material reduction for purposes of (A) above.


 


                                                                                                (c)                                  “Misconduct” shall
mean (i) the misappropriation of the Corporation’s funds or property, or
any attempt by Employee to secure any personal profit related to the business
or business opportunities of the Corporation without the informed, written
approval of the Audit Committee of the Corporation’s Board of Directors; (ii) any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary); (iii) gross
negligence or reckless or willful misconduct in the performance of Employee’s
duties; (iv) the failure to perform, or continuing neglect in the
performance of, duties assigned to Employee for at least ten (10) days
after receipt by Employee from the Corporation of prior written notice of such
failure or neglect; (v) the conviction of, or plea of nolo contendre to, any felony or
misdemeanor involving moral turpitude or fraud; or (vi) any other
misconduct by Employee that the Board determines in good faith has had a
material adverse effect upon the business or reputation of the Corporation.


 


                                                                                                (d)                                 “Annual Base Pay” shall
mean Employee’s base salary at the highest rate in effect at any regularly
scheduled payroll period preceding the occurrence of the Change in Control and
does not include, for example, bonuses, overtime compensation, incentive pay,
sales commissions or expense allowances.


 


                                                                                                (e)                                  “Target Bonus” shall
mean the bonus potential established for the Employee by the Corporation for
the applicable fiscal year.


 


                                                Section 3.                                            Severance
Payment; Employment at Will.


 


                                                                                                                                                (a)                                  Entitlement
to Payment.   Employee’s employment
with the Corporation is at will, which means that it is not for a specific term
and may be 


 


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terminated by either the Corporation or the Employee, at any time, for
an reason, without advance notice. 
Similarly, the Corporation may change the terms and conditions of
Employee’s employment at any time, for any reason, without notice.  Notwithstanding the foregoing, subject to Section 9,
the Employee shall be entitled to receive a severance payment from the
Corporation under this Agreement (the “Severance Payment”) if, the Employee is
Involuntarily Terminated in connection with or within twelve (12) months after
a Change in Control.  Employee
understands, agrees and acknowledges that as a condition precedent to receiving
any of the Severance Payments and other benefits set forth in this Agreement,
Employee agrees to sign a Release in accordance with Section 9 herein.


 


                                                                                                                                                (b)                                 Time
and Amount of Payment   The Severance
Payment shall be paid in one lump sum starting with the next normally scheduled
payroll date of the Corporation following the latest of the following
dates:  (i) Employee’s last day of
employment, (ii) the date the Corporation receives Employee’s signed
general release of all claims pursuant to Section 9, or (iii) the
date the revocation period (if any) specified in the general release of all
claims expires.  The amount of the
Severance Payment shall be equal to the following:


 


·                  100% of the
Employee’s Annual Base Pay, plus


·                  50% of Employee’s
Target Bonus for the current fiscal year


 


Notwithstanding the foregoing, in the event
the Involuntary Termination is the result of Employee’s voluntary termination
of employment with the Corporation and such termination does not occur within
the first six months following the completion of the transaction giving rise to
the Change in Control, Employee shall only be entitled to 50% of Employee’s
Annual Base Pay and 25% of Employee’s Target Bonus.  Payments made under this Agreement shall not
be treated as “compensation” for purposes of the 401(k) Profit
Sharing Plan.  Employee will also receive
his unpaid salary through his termination date and a lump sum payment for all
accrued and unused vacation (through the termination date) in a final paycheck
provided on his last day of work.  This
Severance Payment is intended to qualify as an involuntary separation pay
arrangement that is exempt from application of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) because all severance payments
are treated as paid on account of an involuntary separation (including a
voluntary separation for good reason) and paid in a lump sum within the “short-term
deferral” period following the time the Employee obtains a vested right to such
payments.


 


                                                                                                                                                (c)                                  Mitigation
and Reemployment.   The Employee
shall not be required to mitigate the amount of any payment contemplated by
this Section 3 (whether by seeking new employment or in any other manner),
nor shall any such payment be reduced by any earnings that the Employee may
receive from any other source.


 


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                                                Section 4.                                            Payments
Unfunded and Non-Assignable.


 


                                                                                                                                                (a)                                  No
Funding.   Any payments to be made
under Section 4 shall represent an unfunded and unsecured obligation of
the Corporation, which shall represent an unfunded and unsecured obligation of
the Corporation’s general assets.  The
Employee shall be considered a general creditor of the Corporation and shall
have no rights to any segregated funds or property of the Corporation.


 


                                                                                                                                                (b)                                 No
Assignment.   The Employee’s right to
payments under this Agreement shall not be made subject to option or
assignment, either by voluntary or involuntary assignment or by operation of
law, including (without limitation) bankruptcy, garnishment, attachment or
other creditor’s process, and any action in violation of this Section 4(b) shall
be void.


 


                                                Section 5.                                            Group
Insurance Coverage.   If the Employee
becomes entitled to a Severance Payment under this Agreement, then the
Corporation shall continue to provide continued group health coverage, as
otherwise required under applicable stated continuation law and the
Consolidated Omnibus Budget Reconciliation Act of 1986, as amended and all
applicable regulations (“COBRA”).  Provided that the Employee makes the
necessary COBRA elections and payments, the Corporation shall reimburse
Employee for the total applicable premium costs paid by Employee for such
health COBRA continuation coverage for Employee (and if applicable Employee’s
dependents) until the earlier of (i) twelve months after the termination
of Employee’s employment, or (ii) the maximum COBRA period.  The Corporation’s obligation to reimburse
premiums under this Section shall cease when the Employee obtains new
employment offering healthcare benefits.


 


                                                Section 6.                                            Tax
Effect of Payments.


 


                                                                                                                                                (a)                                  The
amount of any cash payment to be received by Employee pursuant to Section 2
of this Agreement shall be reduced (but not below zero) to the extent required
so that no portion of any payment or benefit in the nature of compensation
received or to be received by Employee (whether payable pursuant to the terms
of this Agreement or pursuant to any other plan, contract, agreement or
arrangement with the Corporation or any other person) (Such payments or
benefits are referred to collectively as the “Total Payments”) shall be treated as an “excess
parachute payment” within the meaning of Section 280G(b)(1) of the
Code.


 


                                                                                                                                                (b)                                 The
determination of whether any reduction in payments is required pursuant to Section 6(a) of
this Agreement shall be made in writing by the Corporation’s independent public
accountants, or such other independent accounting firm or tax advisors selected
by the Corporation in its sole discretion (the “Accounting Firm”), whose determination
shall be conclusive and binding upon Employee and the Corporation for all
purposes under this Agreement.  For
the  purposes of making the calculations
required by this Section 6, the Accounting Firm may make reasonable
assumptions and approximations and may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the
Code, applicable regulations and other authority.  The Corporation and the Employee shall
furnish to the Accounting 


 


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Firm such information and documents as the Accounting Firm may
reasonably request in order to make a determination under this Section.  The Accounting Firm shall provide detailed
supporting calculations, in writing, to both the Corporation and the Employee
of determinations made pursuant to this Section 6.  The Corporation shall bear all of the costs
that the Accounting Firm may reasonably incur in connection with any
calculations contemplated by this section.


 


                                                                                                                                                (c) 
In the event of any uncertainty as to whether a reduction in payments to
Employee is required pursuant to Section 6(a) of this Agreement, the
Corporation shall initially make the payment to Employee, and Employee shall be
required to refund to the Corporation any amounts ultimately determined not to
have been payable under the terms of this Agreement.


 


                                                Section 7.                                            Successors.


 


                                                                                                                                                (a)                                  Corporation’s
Successors.   The Corporation shall
require any successor (whether direct or indirect and whether by purchase,
lease, merger, consolidation, liquidation or otherwise) to all or substantially
all of the Corporation’s business and/or assets or, any successor as a result
of a “Change in Control” as defined by Section 2 (a) to assume this
Agreement and to agree expressly and in writing to perform this Agreement in
the same manner and to the same extent as the Corporation would have been
required to perform it in the absence of a succession.  The Corporation’s failure to obtain such an
assumption prior to the effectiveness of a succession shall be a breach of this
Agreement and shall result in Employee’s Involuntary Termination
hereunder.  For all purposes under this
Agreement, the term “Corporation”
shall include any successor to the Corporation’s business and/or assets that
executes and delivers the assumption agreement described in this Section 7(a) or
that becomes bound by this Agreement by operation of law.


 


                                                                                                                                                (b)                                 Employee’s
Successors.   This Agreement and all
rights of the Employee hereunder shall inure to the benefit of, and be
enforceable by, the Employee’s personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees.


 


                                                Section 8.                                            Miscellaneous
Previsions


 


                                                                                                                                                (a)                                  No
Waivers.   No provision of this
Agreement shall be modified, waived or discharged unless the modification,
waiver or discharge is agreed to in writing and signed by the Employee and by
an authorized officer of the Corporation (other than the Employee).  No waiver by either party of any breach of,
or of compliance with, any condition or provision or of the same condition or
provision at another time.


 


                                                                                                                                                (b)                                 Choice
of Law.   The validity,
interpretation, construction and performance of this Agreement shall be
governed by the laws of the State of California.


 


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                                                                                                                                                (c)                                  Severability.   The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.


 


                                                                                                                                                (d)                                 Arbitration.   Except for responsibilities assigned to the
Accounting Firm under Section 6, and except for the right of the
Corporation and the Employee to seek injunctive relief in court, any
controversy, claim or dispute of any type arising under or relating to Employee’s
employment or the provisions of this Agreement shall be resolved in accordance
with this Section 8(d) of this Agreement, regarding resolution of
disputes, which will be the sole and exclusive procedure for the resolution of
any such disputes.  This Agreement shall
be enforced in accordance with the Federal Arbitration Act, the enforcement
provisions of which are incorporated by this reference.  Matters subject to those provisions include,
without limitation, claims or disputes based on statute, contract, common law
and tort and will include, for example, matters pertaining to termination,
discrimination, harassment, compensation and benefits.  Matters to be resolved under these procedures
also include claims and disputes arising out of statues such as the Fair Labor
Standards Act, Title VII of the Civil Rights Act, the Age Discrimination in
Employment Act, the California Labor Code, and the California Fair Employment
and Housing Act.  Nothing contained in
this provision is intended to restrict Employee from submitting any matter to
an administrative agency with jurisdiction over such matter.


 


                                                                                                                                                                                                (1)                                  Mediation.  The Corporation and Employee will make a good
faith attempt to resolve any and all claims and disputes relating to the
subject matter of this Agreement through good faith negotiations. If such
claims and disputes cannot be settled through negotiation, the Corporation and Employee
agree to submit them to mediation in Orange County, California before resorting
to arbitration or any other dispute resolution procedure.  The mediation of any such claim or dispute
must be conducted in accordance with the then current JAMS procedures for the
resolution of employment disputes by mediation, by a mediator who has both
training and experience as a mediator of general employment and commercial
matters.  If the parties to this
Agreement cannot agree on a mediator, then the mediator will be selected by
JAMS in accordance with JAMS’ strike list method.  Within thirty (30) days after the selection
of the mediator for one mediation session of at least four (4) hours.  If the claim or dispute cannot be settled
during such mediation session or mutually agreed continuation of the session,
either the Corporation or Employee may give the mediator and the other party to
the claim or dispute written notice declaring the end of the mediation
process.  All discussion connection with
this mediation provision will be confidential and treated as compromise and
settlement discussions.  Nothing
disclosed in any such discussion, which is not independently discoverable, may
be used for any purpose in any later proceeding.  The mediator’s fees will be paid in equal
portions by the Corporation and the Employee, unless the Corporation agrees to
pay all such fees.


 


                                                                                                                                                                                                (2)                                  Arbitration.  If a claim or dispute relating to the subject
matter of this Agreement has not been resolved in accordance with Section 8(d)(1) above,
then the claim or dispute will be determined by arbitration in accordance with
the then 


 


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current JAMS employment arbitration rules and procedures, except
as modified herein.  The arbitration will
be conducted in Orange County, California by a sole neutral arbitrator who has
training and experience as an arbitrator of general employment and commercial
matters.  If the Corporation and Employee
cannot agree on an arbitrator, then the arbitrator will be selected by JAMS in
accordance with Rule 12 of the JAMS employment arbitration rules and
procedures.  No person who has served as
a mediator under the mediation provision above, however, may be selected as the
arbitrator for the same claim or dispute. 
Reasonable discovery will be permitted and the arbitrator may decide any
issue as to discovery.  The arbitrator
may decide any issue as to whether or as to the extent to which any dispute is
subject to the dispute resolution provisions in Section 8, and the arbitrator
may award any relief permitted by law. 
The arbitrator must base the arbitration award on the provisions of Section 8
of this Agreement and applicable law and must render the award in writing,
including an explanation of the reasons for the award.  Judgment upon the award may be entered by any
court having jurisdiction of the matter, and the decision of the arbitrator
will be final and binding.  The parties
hereto hereby waive to the fullest extent permitted by law any rights to appeal
or to review such award by any court. 
The statute of limitations applicable to the commencement of a lawsuit
will apply to the commencement of an arbitration under Section 8(d)(2) of
the Agreement.  A the request of any
party, the arbitrator, attorneys, parties to the arbitration, witnesses,
experts, court reporters or other persons present at the arbitration shall
agree in writing to maintain the strict confidentiality of the arbitration
proceedings.  The arbitrator’s fees will
be paid in full by the Corporation, unless Employee agrees in writing to pay
some or all of such fees.


 


                                                Section 9.                                            Release
and Waiver of Claims.  In
consideration for Employee’s receipt of the Severance Payments or other
benefits as specified in this Agreement, to which Employee is not otherwise
entitled, Employee agrees to sign and agree to the terms of a broad,
confidential release of all claims, causes of action, judgments, damages,
liabilities, demands or any other claims Employee or Employee’s heirs, assigns
and agents may now or hereafter have against the Corporation, its subsidiaries
and other related entities, and their respective employees, stockholders,
directors, attorneys, accountants, successors and assigns or other agents in
the form and manner required by the Corporation (the “Release”).  Execution of the Release is a condition
precedent for qualifying to receive any Severance Payments or other benefits as
set forth in this Agreement.  Employee
further understands and acknowledges that if Employee refuses to sign the
Release provided by the Corporation, or attempts to revoke such a Release, to
the extent permitted by its terms, Employee shall be disqualified from
receiving Severance Payments or any other benefits provided by this Agreement.


 


                                                Section 10.                                      Notices.  All notices, demands and other communications
required or permitted to be sent or given hereunder shall be in writing and
will be duly given and effective (i) if delivered in person or by a
reputable courier service, upon such deliver; (ii) if sent by first class
US mail, on the fourth business day following its mailing, certified mail,
postage prepaid and return receipt requested; or (iii) if sent by
overnight mail, on the business day following its mailing provided that the
delivery charges are prepaid.  The
addresses of the parties for the purposes of notice are set forth below.  Each party 


 


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may change its address from time to time upon ten days prior notice
given in accordance with this Section.


 


 


	
  Notice to the Corporation:

  	
   

  	
  Iteris, Inc.

  
	
   

  	
   

  	
  1700 Carnegie Avenue, Suite 100

  
	
   

  	
   

  	
  Santa Ana, CA 92705-5551

  
	
   

  	
   

  	
  Attn: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
  Notice to Employee:

  	
   

  	
  Jim Miele

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


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                                                                                                IN
WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Corporation by its duly authorized officer, as of the day and year first
above written.


 


	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ABBAS MOHADDES

  
	
   

  	
   

  	
     Abbas Mohaddes,

  
	
   

  	
   

  	
     Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
     /s/ JAMES S. MIELE

  
	
   

  	
  JAMES S. MIELE

  



 


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