**Exhibit 10.4**

 

**DEBENTURE REDEMPTIONAGREEMENT**

 

This DebentureRedemption Agreement (“***Agreement***”)is entered into as of January 9, 2009 by and between                         (“***Holder***”) and Iteris, Inc. (“***Iteris***” or the “***Company***”).

 

RECITALS

 

WHEREAS, Holderholds a 6% Convertible Debenture dated May 19, 2004 in the principalamount of $                  (the “***Debenture***”); and

 

WHEREAS, theparties hereto have reached certain agreements with respect to the redemptionof the above-described debenture.

 

NOW, THEREFORE,in consideration of the foregoing and the mutual promises and agreementscontained herein, the sufficiency of which is hereby acknowledged, the partieshereto agree as follows:

 

1.             DebentureRedemption.

 

1.1.          The Company agrees to redeem from Holder,and Holder agrees to sell back to the Company, the Debenture for a payment of                         ($                  )(the “***Redemption Price***”).  In addition to the payment of the RedemptionPrice, the Company shall pay at the Closing (as defined below) all accrued butunpaid interest on the Debenture as of the date of Closing.

 

1.2.          The redemption of the Debenture (the “***Redemption***”) shall take place at theoffices of Dorsey & Whitney LLP, 38 Technology Drive, Suite 100,Irvine, California 92618, at 1:00 P.M. Pacific Time on January 9,2009, or at such other time and place as the Company and Holder mutually agreeorally or in writing (which time and place are designated as the “***Closing***”).  At the Closing, Holder shall deliver to theCompany the original of the Debenture against payment by the Company of theamounts set forth in Section 1.1 by check, wire transfer or anycombination thereof.  Notwithstanding theforegoing, Holder acknowledges and agrees that, upon and as of the payment bythe Company of the amounts set forth in Section 1.1, whether or notHolder has delivered and surrendered the original of the Debenture to theCompany, the Debenture shall be deemed null and void and cancelled in itsentirety and Holder shall have no further rights with respect to or under theDebenture, whether such rights shall have accrued prior to or after the datehereof.

 

2.             Representationsand Warranties.  Holder herebyrepresents, warrants and acknowledges as follows:

 

2.1.          As of the date hereof, the principalamount outstanding under the Debenture is                         ($                  )and the accrued but unpaid interest outstanding under the Debenture is                         ($                  ).

 

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2.2.          Holder isthe sole record and beneficial owner of the Debenture.  Upon payment of the amounts set forth in Section 1.1,the Company will acquire good and valid title to the Debenture, free andclear of all liens, security interests, pledges, claims and encumbrancesof every kind, nature and description incurred or created by Holder.

 

2.3.          Holder has the full right and power toenter into this Agreement, to perform its obligations hereunder and toconsummate the transactions contemplated hereby.  The execution, delivery and performance ofthis Agreement by Holder, and the consummation of the transactions contemplatedhereby, (i) have been duly authorized by all requisite organizationalaction of Holder and (ii) do not and will not conflict with any lawapplicable to Holder or any of its properties or assets or any provisions ofHolder’s organizational documents or contracts, agreements or other instrumentto which Holder is a party or by which any of its properties or assets may bebound.

 

2.4.          Holder is an experienced andsophisticated investor, having such knowledge and experience in business andfinancial matters and investing as to be able to protect its own interests andassess the risks and merits of the Redemption. Holder has independently determined the advisability of entering intothis Agreement and is entering into this Agreement of its own volition, and isnot relying on any representations or statements of the Company or itsofficers, directors, shareholders, employees, agents, attorneys andrepresentatives except for those representations and statements expressly setforth herein.

 

2.5.          Holder has had the opportunity toconsult with counsel of its choice regarding the meaning and legal effect ofthis Agreement, and regarding the advisability of making the agreementsprovided for herein, and fully understands the same.

 

3.             Release.  The following release shall be effective uponthe Company’s payment of the amounts set forth in Section 1.1.

 

3.1.          Other than the obligations, covenants,representations and warranties provided for in this Agreement, Holder, foritself and its predecessors, successors, heirs, agents and assigns(individually and collectively, the “***Releasing Parties***”),hereby waives, releases, and forever discharges Iteris and its predecessors,successors, assigns, officers, directors, shareholders, employees, agents,attorneys and representatives, past and present, (collectively, the “***Iteris Released Parties***”) of andfrom any and all rights, claims, debts, liabilities, demands, obligations,promises, damages, causes of action and claims for relief of any kind, manner,nature and description, known or unknown, which any of the Releasing Partieshave, may have had, might have asserted, may now have or assert, or mayhereafter have or assert against the Iteris Released Parties, or any of them,related to or arising under the Redemption and Holder’s purchase and ownershipof the Debenture.  Holder represents andwarrants that it has not filed any claims, charges, complaints or actionsagainst the Company and has not assigned or transferred to any person or entityany of the claims Holder is releasing in this Agreement.

 

3.2.          The Releasing Parties acknowledge andagree that the foregoing release includes in its effect all claims that they donot know or suspect to exist in their favor as of the date hereof, and theReleasing Parties expressly waive any statute, legal doctrine or other similarlimitation upon the effect of general releases. In particular, the Releasing Parties waive any and 

 

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all rights and benefits conferred upon themby Section 1542 of the California Civil Code, which states as follows:

 

A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOTKNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THERELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HERSETTLEMENT WITH THE DEBTOR.

 

4.             Governing Law.  ThisAgreement shall in all respects be interpreted, enforced, and governed by andunder the internal laws of the State of Delaware, without giving effect to anychoice of law or conflict of law principles.

 

5.             Entire Agreement.  This Agreement constitutes the entireagreement between the parties with respect to the subject matter and supersedesall prior oral or written communications, understandings and agreements withrespect thereto.

 

6.             Headings.** **The use of headings in thisAgreement is merely for convenience and such headings shall not be used inconstruing any provisions of this Agreement.

 

7.             Interpretation.  Each party has had the opportunity tonegotiate modifications to the language of this Agreement and agrees that, inany dispute regarding the interpretation or construction of this Agreement, nopresumption shall operate in favor of or against any party by virtue of itsrole in drafting or not drafting the terms and conditions set forth herein.

 

8.             Severability.  If any part, term or provision of thisAgreement is held by a court to be void or voidable, illegal, unenforceable,invalid or otherwise in conflict with law, (i) the remaining provisions orapplications of this Agreement shall not be affected and the rights andobligations of the parties shall be construed and enforced as if this Agreementdid not contain the particular term or provision held to be invalid and (ii) suchprovision shall be amended to conform as nearly as possible, and only to theextent required, to applicable law.

 

9.             Counterparts.  This Agreement may be executed in severalcounterparts, each of which shall be deemed to be an original, and all suchcounterparts together shall constitute but one and the same instrument.  A photocopy or facsimile signature may beused as an original.

 

*[Signature Page Follows]*

 

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IN WITNESS WHEREOF, the undersigned have executed this Agreement to beeffective as of the date first indicated above.

 
| **Iteris, Inc.** | ** ** | **[                            ]**  |
|-----------------------|------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **            | ** ** | ** **                                                                                                                                                                           |
| ** **            | ** ** | ** **                                                                                                                                                                           |
| By:                   | ** ** |                                                                                                                                                                                 | By: | ** ** |
|                  |       |                                                                                                                                                                                 |
| Name:                 | ** ** |                                                                                                                                                                                 | Name: | ** ** |
|                  |       |                                                                                                                                                                                 |
| Title:                | ** ** |                                                                                                                                                                                 | Title: | ** ** |

 

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**Schedule for Exhibit 10.4**

 

Iteris, Inc.entered into a Debenture Redemption Agreement with the following Holders, eachsubstantially identical to this Exhibit 10.4 except as noted below:

 
| **Holder**                         | ** ** | **Principal Amount  of Debenture** | ** **   | **Redemption Price** | ** ** | **Principal  Outstanding** | ** ** | **Accrued But**

**Unpaid Interest** | ** **   |
|------------------------------------|------------|----------------------------------------------|--------------|---------------------------|------------|----------------------------|------------|------------------------------------------------|--------------|
|                               |       |                                         |         |                      |       |                       |       |                                           |         |
| Irvin R. Kessler                   |       | $                                            | 1,000,000.00 |                      | $          | 980,000.00                 |       | $                                              | 1,000,000.00 |   | $ | 1,479.45 |   |
|                               |       |                                         |         |                      |       |                       |       |                                           |         |
| Provident Premier Master Fund Ltd. |       | $                                            | 500,000.00   |                      | $          | 490,000.00                 |       | $                                              | 500,000.00   |   | $ | 737.70 |   |

 

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