Exhibit
10.2


SEPARATION AGREEMENT AND RELEASE OF CLAIMS


This Separation Agreement and Release of Claims (the “Agreement”) is made and entered into between Jack
Johnson (“Employee”)
and Iteris, Inc., a Delaware
corporation (the “Company”).


WHEREAS, the Company and Employee
desire to the maximum extent allowed by law to conclude, resolve and settle
certain claims that Employee has or may have under federal, state or local law,
or under any alleged contractual provision, arising out of or related to his
employment with the Company, or the termination of that relationship;


WHEREAS,
Employee holds the following stock options to purchase an aggregate of 597,980
shares of the Company’s Common Stock (collectively, the “Options”), all of
which will be fully vested as of the Termination Date (as defined below):




	
  Grant Date

  	
   

  	
  No. of Shares

  	
   

  	
  Exercise Price

  Per Share

  	
   

  
	
  09/30/07

  	
   

  	
  449,980

  	
   

  	
  $

  	
  0.54

  	
   

  
	
  09/01/98

  	
   

  	
  12,000

  	
   

  	
  $

  	
  1.40

  	
   

  
	
  09/27/01

  	
   

  	
  80,000

  	
   

  	
  $

  	
  1.19

  	
   

  
	
  05/01/02

  	
   

  	
  56,000

  	
   

  	
  $

  	
  1.40

  	
   

  
	
   

  	
   

  	
  597,980

  	
   

  	
   

  	
   

  






WHEREAS, the parties hereto
desire to enter into this Agreement and resolve all disputes among the parties
hereto.


NOW
THEREFORE, for and in consideration of the mutual covenants, conditions,
promises and agreements hereinafter set forth, the Company and Employee agree
as follows:


1.         The parties hereto agree that Employee’s
employment with the Company will terminate as of March 31, 2007 (the “Termination
Date”).


2.         Employee agrees he has not executed
this Agreement without first having been given the opportunity to consider it
for 21 calendar days, if he should so choose, and did not execute this
Agreement without first being advised in writing to consult with an attorney at
his expense.


3.         Provided that Employee signs this
Agreement and delivers the signed original to Greg Miner, the Chairman of the
Board of the Company, by 4:00 p.m. Pacific Time on March 22, 2007 and as
long as Employee has not exercised his right of revocation as described in
paragraph 19(g) below, the Company shall on the eighth day following receipt of
this Agreement:


            (a)        Concede
that Employee’s termination has not been for “Misconduct” as defined under the
Company’s stock option plans, and Employee shall be deemed to remain in Service
under the Options until the Termination Date.



 1
 









            (b)        Make severance payments to Employee at
the rate of Employee’s current salary for one year following the Termination
Date, which shall be payable in accordance with the Company’s regular payroll
practices.  The Company shall deduct from
such payments all withholdings and other taxes that the Company, in its sole
discretion, deems necessary or advisable; and


            (c)        Allow Employee to submit a letter of
resignation for his personnel file, which resignation shall be in the form
attached hereto as Exhibit A.


            (d)        Allow Employee to keep his Honda Pilot,
which is the Company car that has been provided for Employee’s use  The Company agrees to take all reasonable
steps to transfer title to such vehicle to Employee as soon as reasonably
practicable following the Termination Date.


            (e)        Allow Employee to keep his cell phone
and related telephone number (714-724-7108); provided however, that as of the
Termination Date hereof, Employee agrees to take all such reasonable steps to
transfer the cellular contract for such phone into Employee’s name, and
Employee shall assume all responsibility for any charges related to this cell
phone hereinafter incurred;


            (f)         Allow Employee to keep the Dell laptop
computer that was provided to Employee by the Company; provided however, that
the Company shall be entitled to remove all confidential or proprietary
information of the Company from such computer before releasing such laptop to
Employee;


            (g)        Provide continued coverage for Employee
under the Company’s healthcare plans and group insurance policies (to the
extent Employee is eligible) or if Employee elects COBRA benefits, the Company
shall reimburse Employee’s COBRA payments for Employee’s health insurance
benefits until March 31, 2008.


4.         Employee
represents and warrants that the following represent all of his equity interest
in the Company and that he holds no other shares of the Company’s capital stock
and has no direct or indirect right to purchase or acquire any other equity
interest in the Company:  (a) the
Options; (b) a convertible debenture in the original principal amount of
$100,000; (c) warrants to purchase 6,335 shares of the Company’s Common Stock;
and (d) 378,393 shares of Common Stock (plus such additional shares of Common
Stock which may have been purchased through the Company’s 401(k) plan).


5.         Until
the Termination Date, Employee agrees to provide transition services from time
to time as reasonably requested by the Company, provided however, that such
services shall not exceed 160 hours in March 2007.


6.         Employee
acknowledges and agrees that he shall be paid his final paycheck including all
earned wages and accrued vacation on the Termination Date.  Except for (a) Employee’s vacation accrued
through the Termination Date, (b) Employee’s right to a bonus for services
rendered during the fiscal year ended March 31, 2007 to the extent earned
under that certain Iteris Executive Compensation Plan, or (c) reimbursement for
expenses incurred in the course of Employee’s



 2
 









employment through the Termination Date and documented
in accordance with the Company’s policies, Employee agrees that the Company
does not owe Employee any other wages, commissions, bonuses, expense
reimbursements, severance or other payments.


7.         Employee
understands and agrees the foregoing consideration set forth in paragraph 3
above shall constitute the entire consideration provided to him under this
Agreement; the amount of this consideration exceeds the amount he otherwise
would be entitled to as severance under his Change in Control Agreement dated
May 20, 2003 (the “Change in Control Agreement”) under any other practice,
program or policy of the Company. 
Notwithstanding anything to the contrary in the Company’s bonus and
option plans, related agreements and prior practices, Employee agrees that he
shall not accrue or earn any further bonus or commission payments from the
Company or any further accrual of vacation benefits after the Termination
Date.  Employee further agrees that the
Change in Control Agreement  shall be
deemed cancelled and terminated, and neither party thereto shall have any
further obligations thereunder.


8.         Employee
understands that if the Options or any portion of the Options are exercised
later than three (3) months from the Termination Date, the Options or such
portion of the Options may not qualify for treatment as an incentive stock
option within the meaning of Section 422 of the Internal Revenue Code.


9.         In
connection with Employee’s termination of employment or completion of severance
payments, regardless of whether Employee accepts this Agreement, Employee may
have rights to continued health insurance coverage pursuant to a federal
statute called “COBRA” or a similar state agency.  Subject to paragraph 3 of this Agreement,
COBRA coverage shall be at the Employee’s expense.  As part of the consideration for this
Agreement, however, if Employee does not qualify for continued healthcare
coverage under the Company’s plans, the Company will provide a monthly payment
to Employee in an amount equal to the COBRA cost for Employee with continuation
of coverage at the same level of participation and elections as Employee had as
of February 28, 2007.  In order to
receive this payment for continuation of coverage, Employee must be eligible
for and elect to continue coverage under COBRA. 
Employee is being provided with information about how to elect continued
coverage under COBRA on or prior to the Termination Date.  If so elected by Employee, this COBRA
coverage would be effective as of the date his active participation under the
Company’s healthcare plans is terminated, which is expected to be on March 31,
2008.  Any COBRA benefits or otherwise
after March 31, 2008 will be at Employee’s own expense.


10.       Employee
pledges and agrees he will not seek any further compensation from the Company
for any other claimed damages, costs or attorney’s fees in connection with the
matters encompassed by the Agreement. 
Employee also promises never to raise any claim of any kind for
employment, reemployment or reinstatement. 
Employee agrees the Company is entitled to reject without cause any such
application by him.


11.       Employee
represents and promises that he has returned or immediately will return all
property of the Company to the Company, other than Employee’s



 3
 









Company car, cell phone and Dell computer, which
Employee shall be entitled to keep after the Company shall have removed all
confidential information.


12.    Employee represents and
warrants that he has not filed any complaints, claims, grievances or actions
against the Company with any state, federal or local agency or court or any
other tribunal, and that he will not do so at any time hereafter based on
conduct or omissions occurring up to or on the date that Employee signs this
Agreement.


13.    Each of the Employee and the
Company agrees to keep the fact and terms of this Agreement confidential and
will not hereafter disclose any information concerning this Agreement to
anyone, except as required by law, regulation or the Nasdaq listing
requirements, provided that such party may make such disclosures to his or its
respective counsel, accountants, officers, directors, financial advisors and
spouse, if any.  Notwithstanding the
foregoing, nothing contained herein shall preclude the disclosure of any
information contained herein as may be necessary for legitimate law enforcement
purposes or if such disclosure is otherwise required by law, regulation or the
Nasdaq rules.


14.    Employee agrees to continue to
be bound by that certain Iteris Associate Agreement dated January 7, 2002
between the Company and Employee. 
Notwithstanding the foregoing, Employee expressly agrees that he will
not disclose to any third party any trade secret or other confidential
information concerning the Company that was acquired or learned during the
course of his employment with the Company. 
By way of example and not limitation, such information includes
technical data, customer lists, product information and specifications,
customer preferences and identities, product roadmaps and service plans,
designs, schedules, pricing, management organization or other organization
charts, marketing plans, salary structures and data, computer code, research
and development plans and manufacturing plans and strategies and all other
trade secrets.


15.    Employee agrees that he will
not disparage the Company or any past or present (as of the time any statement
is made) officer, director or employee of the Company or otherwise make
statements whether or not such statements are thought to be (or are) true, and
whether or not such statements are made publicly, privately, subject to
confidentiality obligations or otherwise, which could tend to harm or injure
the personal or business reputation or business, of the Company or of any past
or present officer, director or employee of the Company, and whether or not
such statements are made to any present or former employee or director of the
Company or to someone outside of the Company. 
The Company agrees that it will not disparage Employee or otherwise make
statements which could tend to harm or injure the personal or business reputation
or business, of Employee, whether or not such statements are thought to be (or
are) true, and whether or not such statements are made publicly, privately,
subject to confidentiality obligations or otherwise.  Employee also agrees that he will not waive
the attorney-client privilege or otherwise use, disclose or consent to the use
or disclosure of any information relating to, or secured or developed in the
course of, his employment with the Company, the use or disclosure of which
could adversely affect the interests of the Company.



 4
 









16.    Employee agrees that all
rights under Civil Code section 1542 are hereby waived by him as to the
matters encompassed by this Agreement. 
Section 1542 provides as follows:


A general release does not extend to claims which the
creditor does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially affected his
settlement with the debtor.


17.    Employee agrees this Agreement
is in full accord, satisfaction and discharge of disputed claims encompassed by
this Agreement, and that this Agreement has been executed by Employee with the
express intention of effectuating the legal consequences provided for in Civil
Code section 1541, i.e., the extinguishment of certain obligations, known
or unknown.  Employee has read
section 1541 and it is fully understood by him.  It provides:


An obligation is extinguished by a release
therefrom given to the debtor by the creditor,
upon a new consideration, or in writing, with or without new consideration.


18.    Notwithstanding the
provisions of Civil Code section 1542, Employee, on behalf of himself, his
spouse, successors, heirs, and assigns, hereby forever and unconditionally
relieves, releases, and discharges the Company and any of its parent
corporations, subsidiaries (whether or not wholly-owned), brother-sister
corporations, and all other affiliated or related corporations, including but
not limited to all affiliates of the Company, 
all benefit plans sponsored by the Company, and entities, and each of
their respective present and former officers, directors, agents, employees,
representatives, administrators, accountants, attorneys, investigators,
insurers, investors, associates, successors, and assigns, in any and all
capacities (including but not limited to the fiduciary, representative or
individual capacity of any released person or entity), and any entity owned by
or affiliated with any of the above, from any and all claims, debts,
liabilities, demands, obligations, liens, grievances, promises, acts,
agreements, costs and expenses (including but not limited to attorneys’ fees),
damages, actions and causes of action, of whatever kind or nature, including
but not limited to any statutory, civil, administrative, or common law claim,
whether known or unknown, suspected or unsuspected, fixed or contingent,
apparent or concealed arising out of any act or omission occurring before
Employee’s execution of this Agreement, including but not limited to any claims
based on, arising out of, or related to Employee’s employment with, or the
ending of Employee’s employment with, the Company, including but not limited to
any claims arising from rights under federal, state, and local laws relating to
the regulation of federal or state tax payments or accounting; federal, state
or local laws that prohibit harassment or discrimination on the basis of race,
national origin, religion, sex, gender, age, marital status, bankruptcy status,
disability, perceived disability, ancestry, sexual orientation, family and
medical leave, or any other form of harassment or discrimination or related
cause of action (including but not limited failure to maintain an environment
free from harassment and retaliation, inappropriate comments or touching and/or
“off-duty” conduct of other Company employees); statutory or common law claims
of any



 5
 









kind, including but not limited to, any alleged violation of Title VII
of the Civil Rights Act of 1964, The Civil Rights Act of 1991, Sections 1981
through 1988 of Title 42 of the United States Code, as amended; The Employee
Retirement Income Security Act of 1971, as amended, the Age Discrimination In
Employment Act, the Older Worker’s Benefit Protection Act, The Americans with
Disability Act of 1990, as amended, the Workers Adjustment and Retraining
Notification Act, as amended; the Occupational Safety and Health Act, as
amended, the Sarbanes-Oxley Act of 2002, the California Family Rights Act (Cal.
Govt. Code § 12945.2 et seq.), the California Fair Employment and Housing Act
(Cal. Govt. Code § 12900 et. seq.), statutory provision regarding
retaliation/discrimination for filing a workers’ compensation claim under Cal.
Labor Code § 132a, California Unruh Civil Rights Act, California Sexual
Orientation Bias Law (Cal. Lab. Code § 1101 et. seq.), California AIDS Testing
and Confidentiality Law, California Confidentiality of Medical Information
(Cal. Civ. Code § 56 et. seq.) contract, tort, and property rights, breach of
contract, breach of implied-in-fact contract, breach of the implied covenant of
good faith and fair dealing, tortious interference with contract or current or
prospective economic advantage, fraud, deceit, invasion of privacy, unfair
competition, misrepresentation, defamation, wrongful termination, tortious
infliction of emotional distress (whether intentional or negligent), breach of
fiduciary duty, violation of public policy, or any other common law claim of
any kind whatsoever; any claims for severance pay, sick leave, family leave,
liability pay, overtime pay, vacation, life insurance, health insurance,
continuation of health benefits, disability or medical insurance (except as
specifically provided for under this Agreement), or any other fringe benefit or
compensation, including but not limited to stock options; any claim for damages
or declaratory or injunctive relief of any kind.  Employee represents that he has no workers’
compensation claims that he intends to bring against the Company and has
suffered no work related injury or illness. 
Employee further covenants not to sue or institute administrative
proceedings with respect to any claims released in this Agreement.  Notwithstanding the foregoing, this release
does not include a release of (i) Employee’s rights for state mandated
insurance for unemployment insurance and workers’ compensation insurance or
(ii) the obligations of the Company to indemnify Employee pursuant to Labor
Code Section 2802 or pursuant to that certain Indemnification Agreement dated
April 25, 2005 between Employee and the Company (the “Indemnification Agreement”).  For the purposes of clarity, nothing
contained herein shall terminate Employee’s rights under the Indemnification
Agreement.


 


19.    It is expressly understood
by Employee that among the civil claims being waived in this release are those
arising under the federal Age Discrimination in Employment Act to the extent
that the facts giving rise to such claims occurred prior to or on the date that
Employee signs this Agreement Employee understands and agrees he:


(a)        Has
had 21 calendar days to consider this Agreement before signing it, and, if he
signs this Agreement before such 21 day period has elapsed, he does so
voluntarily and with the advice of counsel (Employee understands and
acknowledges that Dorsey & Whitney LLP is only representing the Company in
connection with this Agreement and is not representing Employee);



 6
 









(b)       Has
carefully read and fully understands the provisions of this Agreement;


(c)        Is,
through this Agreement, releasing the Company from certain claims he may have
against the Company;


(d)       Knowingly
and voluntarily agrees the terms set forth in the Agreement;


(e)        Knowingly
and voluntarily intends to be legally bound by the Agreement;


(f)        Was
advised and hereby is again advised to consider the terms of this Agreement and
consult with his attorney prior to executing this Agreement;


(g)       Has
a full seven (7) calendar days following his execution of this Agreement to
revoke this Agreement by so notifying Chairman of the Board of the Company, in
writing, within that period, and that he has been and hereby is advised in
writing that this Agreement shall not become effective or enforceable until the
revocation period has expired;


(h)       Was
advised and is advised that his rights or claims under the Age Discrimination
in Employment that may arise after the date this Agreement is executed are not
waived; and


(i)         Understands
and agrees that changes to this Agreement, whether or not material, shall not
start the 21-day deliberation period nor seven-day revocation period anew.


20.    The Company on behalf of
itself and its successors and assigns hereby forever and unconditionally
relieves, releases and discharges Employee and his respective agents, assigns
and heirs from any and all liabilities, claims, debts, liabilities, demands,
obligations, liens, grievances, promises, acts, agreements, costs and expenses
(including but not limited to attorneys fees, damages, actions and causes of
action of whatever kind or nature, arising out of actions taken by Employee in
the course and scope of his employment.  As
of the date of this Agreement, the Company is not aware of any wrongful actions
taken by the Employee .


21.    The parties represent and
acknowledge that in executing this Agreement they do not rely and have not
relied upon any representation or statement made by any of the parties or by
any of the parties’ agents, attorneys or representatives with regard to the
subject matter, basis or effect of this Agreement or otherwise, other than
those stated in this written Agreement.


22.    This Agreement shall be
binding upon the parties hereto and upon their heirs, administrators,
representatives, executors, successors and assigns, and shall inure to the
benefit of said parties and each of them and to their heirs, administrators,
representatives, executors, successors and assigns.  Employee expressly warrants that he



 7
 









is the sole owner of and he has not transferred to any
person or entity any rights, causes of action or claims released in this
Agreement.


23.    Should any provision of
this Agreement be declared or be determined by any court of competent
jurisdiction to be wholly or partially illegal, invalid, or unenforceable, the
legality, validity and enforceability of the remaining parts, terms or
provisions shall not be affected thereby, and said illegal, unenforceable, or
invalid part, term or provision shall be deemed not to be a part of this
Agreement.


24.    This Agreement sets forth
the entire agreement between the parties hereto and fully supersedes any and
all prior agreements or understandings, written or oral, between the parties
hereto pertaining to the subject matter hereof.


25.    Employee further
understands that nothing contained in this Agreement, including, but not
limited to, paragraph 18, will be interpreted to prevent him from filing a
charge with a governmental agency or participating in or cooperating with an
investigation conducted by a governmental agency.  However, Employee agrees that he is waiving
the right to monetary damages or other individual legal or equitable relief
awarded as a result of any such proceeding.



 8
 









IN WITNESS WHEREOF, the parties hereto hereby execute
this Agreement as of the dates set forth opposite their names.


	
  DATED:

  	
   

  	
    March 1, 2007

  	
   

  	
   

  	
             /S/
  JACK JOHNSON

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  JACK JOHNSON

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DATED:

  	
   

  	
    March 1, 2007

  	
   

  	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  By:

  	
    /S/ GREGORY A. MINER

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Gregory A. Miner,

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
  Chairman of the Board

  
												




 9
 









ACKNOWLEDGEMENT OF
RECEIPT


 


The undersigned hereby acknowledges receipt of this
Separation Agreement and Release of Claims.


	
  Dated: March 1, 2007

  	
   

  	
             /S/
  JACK JOHNSON

  
	
   

  	
   

  	
  JACK JOHNSON

  



 



 10














EXHIBIT A


Resignation


I hereby resign as
the President, Chief Executive Officer and as a member of the Board of
Directors of Iteris, Inc., and from all other officer or director positions
that I may now hold with Iteris, Inc. or any of its subsidiaries, effective
March 1, 2007.


	
  

  	
   

  	
        /S/ JACK JOHNSON

  
	
   

  	
   

  	
  JACK JOHNSON