**EXHIBIT 10.2**

 

**CHANGE INCONTROL AGREEMENT**

 

THIS CHANGE IN CONTROL AGREEMENT(the “***Agreement***”)is entered into as of July 27, 2010 (the “***Effective Date***”), by and between AbbasMohaddes (the “***Employee***”)and Iteris, Inc., a Delaware corporation (the “***Corporation***”).

 

Section 1.                                            Term of Agreement.

 

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

 

Section 2.                                            Definitions.

 

(a)                                  **“*Change inControl*”** shallmean any of the following transactions effecting a change in ownership orcontrol of this Corporation:

 

(i)                                     a merger or consolidation of the Corporation with or intoanother entity or any other corporate reorganization, if persons who were notstockholders of the Corporation immediately prior to such merger, consolidationor other reorganization own immediately after such merger, consolidation orother reorganization 50% or more of the voting power of the outstandingsecurities of each of (i) the continuing or surviving entity and (ii) anydirect or indirect parent corporation of such continuing or surviving entity.

 

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

 

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

 

Notwithstanding anything to thecontrary contained herein, a Change in Control be not be deemed to occur inconnection with any underwritten public offering of the Corporation’ssecurities.

 

(b)                                 **“*InvoluntaryTermination*”**shall mean the termination of the Service of any individual which occurs byreason of:

 

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

 

(ii)                                  Employee’s voluntary resignation following (A) a changein his position with the Corporation which materially reduces his level ofresponsibility, (B) a material reduction in his level of compensation(including base salary, fringe benefits and participation in

 

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bonus or incentive programs) or (C) arelocation of Employee’s place of employment by more than fifty (50) miles,provided and only if such change, reduction or relocation is effected by theCorporation without the Employee’s consent. Notwithstanding the foregoing, for purposes of clause (ii), anInvoluntary Termination shall only be found to exist if Employee has providedwritten notice to the Corporation indicating and describing the event under(A), (B) or (C) within 30 days of such event and the Corporation doesnot cure such event within 90 days following the receipt of such notice fromEmployee and the Employee resigns within 30 days after the cure period.

 

(c)                                  **“Willful *Misconduct*”**shall mean (i) themisappropriation of the Corporation’s funds or property, or any attempt byEmployee to secure any personal profit related to the business or businessopportunities of the Corporation without the informed, written approval of theAudit Committee of the Corporation’s Board of Directors; (ii) anyunauthorized use or disclosure by such person of confidential information ortrade secrets of the Corporation (or any Parent or Subsidiary); (iii) grossnegligence or reckless or willful misconduct in the performance of Employee’sduties; (iv) the failure to perform, or continuing neglect in theperformance of, duties assigned to Employee for at least ten (10) daysafter receipt by Employee from the Corporation of prior written notice of suchfailure or neglect; (v) the conviction of, or plea of *nolo contendre* to, any felony ormisdemeanor involving moral turpitude or fraud; or (vi) any other willfulmisconduct by Employee that the Board determines in good faith has had amaterial adverse effect upon the business or reputation of the Corporation.

 

(d)                                 **“*AnnualBase Pay*”**shallmean Employee’s base salary at the highest rate in effect at any regularlyscheduled payroll period preceding the occurrence of the Change in Control anddoes not include, for example, bonuses, overtime compensation, incentive pay,sales commissions or expense allowances.

 

(e)                                  **“*TargetBonus*”**shall mean50% of the bonus potential established for the Employee by the Corporation forthe applicable fiscal year.

 

Section 3.                                            Severance Payment; Employment at Will.

 

(a)                                  Entitlement to Payment.   Employee’s employment with the Corporationis at will, which means that it is not for a specific term and may beterminated by either the Corporation or the Employee, at any time, for anreason, without advance notice. Similarly, the Corporation may change the terms and conditions ofEmployee’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 theCorporation under this Agreement (the “***Severance Payment***”) if, the Employee isInvoluntarily Terminated in connection with or within twelve (12) months aftera Change in Control.  Employeeunderstands, agrees and acknowledges that as a condition precedent to receivingany 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 onelump sum starting with the next normally scheduled payroll date of theCorporation following the latest of the following dates:  (i) Employee’s last day of employment, (ii) thedate the Corporation receives Employee’s signed general release of all claimspursuant to Section 9, or (iii) the date the revocation period (ifany) specified in the general release of all claims expires.  The amount of the Severance Payment shall beequal to the following:

 

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

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

 

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Notwithstanding the foregoing, inthe event the Involuntary Termination is the result of Employee’s voluntarytermination of employment with the Corporation and such termination does notoccur within the first six months following the completion of the transactiongiving rise to the Change in Control, Employee shall only be entitled to 50% ofEmployee’s Annual Base Pay and no portion of Employee’s Target Bonus.  Payments made under this Agreement shall notbe treated as “compensation” for purposes of the 401(k) Profit SharingPlan.  Employee will also receive hisunpaid salary through his termination date and a lump sum payment for allaccrued and unused vacation (through the termination date) in a final paycheckprovided on his last day of work.  ThisSeverance Payment is intended to qualify as an involuntary separation payarrangement that is exempt from application of Section 409A of theInternal Revenue Code of 1986, as amended (the “***Code***”) because all severance paymentsare treated as paid on account of an involuntary separation (including avoluntary separation for good reason) and paid in a lump sum within the “short-termdeferral” period following the time the Employee obtains a vested right to suchpayments.

 

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

 

Section 4.                                            Payments Unfunded and Non-Assignable.

 

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

 

(b)                                 No Assignment.   The Employee’s right to payments under thisAgreement shall not be made subject to option or assignment, either byvoluntary or involuntary assignment or by operation of law, including (withoutlimitation) 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 aSeverance Payment under this Agreement, then the Corporation shall continue toprovide continued group health coverage, as otherwise required under applicablestated continuation law and the Consolidated Omnibus Budget Reconciliation Actof 1986, as amended and all applicable regulations (“***COBRA***”).  Provided that the Employee makes thenecessary COBRA elections and payments, the Corporation shall reimburseEmployee for the total applicable premium costs paid by Employee for suchhealth COBRA continuation coverage for Employee (and if applicable Employee’sdependents) until the earlier of (i) twelve months after the terminationof Employee’s employment, or (ii) the maximum COBRA period.  The Corporation’s obligation to reimbursepremiums under this Section shall cease when the Employee obtains newemployment offering healthcare benefits.

 

Section 6.                                            Tax Effect of Payments.

 

(a)                                  The amount of any cash payment to be received by Employeepursuant to Section 2 of this Agreement shall be reduced (but not belowzero) to the extent required so that no portion of any payment or benefit inthe nature of compensation received or to be received by Employee (whetherpayable 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) ofthe Code.

 

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(b)                                 The determination of whether any reduction in payments isrequired pursuant to Section 6(a) of this Agreement shall be made inwriting by the Corporation’s independent public accountants, or such otherindependent accounting firm or tax advisors selected by the Corporation in itssole discretion (the “***AccountingFirm***”), whose determination shall be conclusive and binding uponEmployee and the Corporation for all purposes under this Agreement.  For the purposes of making the calculations required by this Section 6, theAccounting Firm may make reasonable assumptions and approximations and may relyon reasonable, good faith interpretations concerning the application of Section 280Gand 4999 of the Code, applicable regulations and other authority.  The Corporation and the Employee shallfurnish to the Accounting Firm such information and documents as the AccountingFirm may reasonably request in order to make a determination under thisSection.  The Accounting Firm shallprovide detailed supporting calculations, in writing, to both the Corporationand the Employee of determinations made pursuant to this Section 6.  The Corporation shall bear all of the coststhat the Accounting Firm may reasonably incur in connection with anycalculations contemplated by this section.

 

(c)  In the event of anyuncertainty as to whether a reduction in payments to Employee is requiredpursuant to Section 6(a) of this Agreement, the Corporation shallinitially make the payment to Employee, and Employee shall be required torefund to the Corporation any amounts ultimately determined not to have beenpayable 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 theCorporation’s business and/or assets to assume this Agreement and to agreeexpressly and in writing to perform this Agreement in the same manner and tothe same extent as the Corporation would have been required to perform it inthe absence of a succession.  TheCorporation’s failure to obtain such an assumption prior to the effectivenessof a succession shall be a breach of this Agreement and shall result inEmployee’s Involuntary Termination hereunder. For all purposes under this Agreement, the term “***Corporation***” shallinclude any successor to the Corporation’s business and/or assets that executesand delivers the assumption agreement described in this Section 7(a) orthat becomes bound by this Agreement by operation of law.

 

(b)                                 Employee’s Successors.   This Agreement and all rights of theEmployee hereunder shall inure to the benefit of, and be enforceable by, theEmployee’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 bemodified, waived or discharged unless the modification, waiver or discharge isagreed to in writing and signed by the Employee and by an authorized officer ofthe Corporation (other than the Employee). No waiver by either party of any breach of, or of compliance with, anycondition or provision or of the same condition or provision at another time.

 

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

 

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

 

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(d)                                 Arbitration.   Except for responsibilities assigned to theAccounting Firm under Section 6, and except for the right of theCorporation and the Employee to seek injunctive relief in court, anycontroversy, claim or dispute of any type arising under or relating to Employee’semployment or the provisions of this Agreement shall be resolved in accordancewith this Section 8(d) of this Agreement, regarding resolution ofdisputes, which will be the sole and exclusive procedure for the resolution ofany such disputes.  This Agreement shallbe enforced in accordance with the Federal Arbitration Act, the enforcementprovisions of which are incorporated by this reference.  Matters subject to those provisions include,without limitation, claims or disputes based on statute, contract, common lawand tort and will include, for example, matters pertaining to termination,discrimination, harassment, compensation and benefits.  Matters to be resolved under these proceduresalso include claims and disputes arising out of statues such as the Fair LaborStandards Act, Title VII of the Civil Rights Act, the Age Discrimination inEmployment Act, the California Labor Code, and the California Fair Employmentand Housing Act.  Nothing contained inthis provision is intended to restrict Employee from submitting any matter toan administrative agency with jurisdiction over such matter.

 

(1)                                  Mediation.  The Corporation and Employee will make a goodfaith attempt to resolve any and all claims and disputes relating to thesubject matter of this Agreement through good faith negotiations. If suchclaims and disputes cannot be settled through negotiation, the Corporation andEmployee agree to submit them to mediation in Orange County, California beforeresorting to arbitration or any other dispute resolution procedure.  The mediation of any such claim or disputemust be conducted in accordance with the then current JAMS procedures for theresolution of employment disputes by mediation, by a mediator who has bothtraining and experience as a mediator of general employment and commercialmatters.  If the parties to thisAgreement cannot agree on a mediator, then the mediator will be selected byJAMS in accordance with JAMS’ strike list method.  Within thirty (30) days after the selectionof the mediator for one mediation session of at least four (4) hours.  If the claim or dispute cannot be settledduring such mediation session or mutually agreed continuation of the session,either the Corporation or Employee may give the mediator and the other party tothe claim or dispute written notice declaring the end of the mediationprocess.  All discussion connection withthis mediation provision will be confidential and treated as compromise andsettlement discussions.  Nothingdisclosed in any such discussion, which is not independently discoverable, maybe used for any purpose in any later proceeding.  The mediator’s fees will be paid in equalportions by the Corporation and the Employee, unless the Corporation agrees topay all such fees.

 

(2)                                  Arbitration.  If a claim or dispute relating to the subjectmatter 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 withthe then current JAMS employment arbitration rules and procedures, exceptas modified herein.  The arbitration willbe conducted in Orange County, California by a sole neutral arbitrator who hastraining and experience as an arbitrator of general employment and commercialmatters.  If the Corporation and Employeecannot agree on an arbitrator, then the arbitrator will be selected by JAMS inaccordance with Rule 12 of the JAMS employment arbitration rules andprocedures.  No person who has served asa mediator under the mediation provision above, however, may be selected as thearbitrator for the same claim or dispute. Reasonable discovery will be permitted and the arbitrator may decide anyissue as to discovery.  The arbitratormay decide any issue as to whether or as to the extent to which any dispute issubject to the dispute resolution provisions in Section 8, and thearbitrator may award any relief permitted by law.  The arbitrator must base the arbitrationaward on the provisions of Section 8 of this Agreement and applicable lawand must render the award in writing, including an explanation of the reasonsfor the award.  Judgment upon the awardmay be entered by any court having jurisdiction of the matter, and the decisionof the arbitrator will be final and binding. The parties hereto hereby waive to the fullest extent permitted by lawany rights to appeal or to review such award by any court.  The statute of limitations applicable to thecommencement of a lawsuit will apply to the commencement of an arbitrationunder Section 8(d)(2) of the Agreement.  A the request of any party, the arbitrator,attorneys, parties to the arbitration, witnesses, experts, court reporters orother persons present at the arbitration shall agree in writing to maintain thestrict confidentiality of the arbitration proceedings.  The arbitrator’s fees will be paid in full bythe Corporation, unless Employee agrees in writing to pay some or all of suchfees.

 

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Section 9.                                            Release and Waiver of Claims.  In consideration for Employee’s receipt ofthe Severance Payments or other benefits as specified in this Agreement, towhich Employee is not otherwise entitled, Employee agrees to sign and agree tothe 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, itssubsidiaries and other related entities, and their respective employees,stockholders, directors, attorneys, accountants, successors and assigns orother agents in the form and manner required by the Corporation (the “***Release***”).  Execution of the Release is a conditionprecedent for qualifying to receive any Severance Payments or other benefits asset forth in this Agreement.  Employeefurther understands and acknowledges that if Employee refuses to sign theRelease provided by the Corporation, or attempts to revoke such a Release, tothe extent permitted by its terms, Employee shall be disqualified fromreceiving Severance Payments or any other benefits provided by this Agreement.

 

Section 10.                                      Notices.  All notices, demands and other communicationsrequired or permitted to be sent or given hereunder shall be in writing andwill be duly given and effective (i) if delivered in person or by areputable courier service, upon such deliver; (ii) if sent by first classUS mail, on the fourth business day following its mailing, certified mail,postage prepaid and return receipt requested; or (iii) if sent byovernight mail, on the business day following its mailing provided that thedelivery charges are prepaid.  Theaddresses of the parties for the purposes of notice are set forth below.  Each party may change its address from timeto 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:        | Abbas Mohaddes                        |
|                       | 3432 Seaglen Drive                    |
|                       | Rancho Palos Verdes, CA 90275         |

 

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

 
|   | ITERIS, INC.  |
|--------|--------------------|
|   |               |
|   |               |
|   | By:                |  |
|   |               | Kevin C Daly, |
|   |               | Chairman, Compensation Committee |
|   |               | Iteris, Inc. Board of  Directors |
|   |               |   |
|   |               |   |
|   | /s/ ABBAS MOHADDES |
|   | ABBAS MOHADDES     |

 

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