** **

**EXHIBIT 10.1**

 

 

**1700 Carnegie Ave.**

**Santa Ana, CA 92705**

 

July 27, 2010

 

Mr. AbbasMohaddes

3432Seaglen Drive

RanchoPalos Verdes, CA 90275

 

DearAbbas:

 

Onbehalf of the Board of Directors and the Compensation Committee of Iteris, Inc.(“Iteris” or the “Company”), I am pleased to present you with this letteragreement, which provides for certain compensation terms in connection withyour continued employment with Iteris.

 

Inaddition to your base salary and annual bonus, and subject to all necessaryBoard or committee approval, we intend to issue you a restricted stock unitaward (the “RSU”) covering 50,000 shares of Iteris’ common stock.  The RSU will have a four-year vesting periodand be subject to the terms of the 2007 Omnibus Incentive Plan and the relatedgrant documents.  We believe that the RSUwill even further align your personal and professional objectives with those ofthe Company and its stockholders.

 

For a period of three years from your acceptance of thisletter agreement (the “Term”), should your employment at Iteris be terminatedby the Company and such termination is not for cause (as defined in AttachmentA) or due to death or disability, you shall receive salary continuationpayments consisting of the monthly rate of your then current base salary for aperiod of twelve (12) months.  Inaddition, you shall be entitled at the end of that continuation period toreceive a payment in lieu of bonus of 50% of your on-target bonus amount as ineffect immediately prior to your termination.

 

In the event of the termination of your employment dueto death or disability during the Term, in addition to the payment of anycompensation earned through the date of the termination, you will receive a oneyear acceleration of the vesting of any unvested options or other equity-basedawards then held by you (including the RSU described above).

 

Wehave also included with this letter as Attachment B, a Change in ControlAgreement which provides for certain benefits and payments in the event of yourinvoluntary termination after a change in control (as such terms are defined inthe Change in Control Agreement).  If achange in control occurs 

 

----

 

priorto the date which is three years from the date of your acceptance of thisletter agreement, the amount of any severance or similar payments and benefitspayable to you, and whether any such payments or benefits will be payable, willbe determined pursuant to the Change in Control and not pursuant to the termsof this letter agreement.

 

Insigning this letter, you agree that you will perform your duties faithfully andto the best of your abilities, and you agree to devote your full business timeand effort to the performance of your duties.

 

Thisletter agreement (including the attachments hereto and the other documentsreferenced therein), the Company’s Non-Competition Agreement, anyconfidentiality agreement, proprietary information and inventions agreement orother similar agreements, and the Company’s equity incentive plans constitutesthe complete agreement between the parties with respect to the subject matterhereof and thereof and supersedes any prior written or verbal agreementrelating to such matter, including your offer letter dated February 2007.  No modification, amendment, or waiver of anyof the provisions contained in this letter agreement shall be binding upon anyparty to this letter agreement unless made in writing and signed by such partyor by a duly authorized officer or agent of such party.  This letter agreement may only be modified bya written agreement signed by you and the Chairman of the Board of Directors orthe Chairman of the Compensation Committee, or either such person’s designatedrepresentative.  This letter agreementwill be governed by California law without regard to the conflicts of lawprovisions thereof.

 

Pleaseconfirm your concurrence with this letter by signing and returning one copy ofthis letter.

 

FORTHE COMPENSATION COMMITTEE

OFTHE BOARD OF DIRECTORS OF ITERIS, INC.:

 
|                     |   |                |
|---------------------|--------|---------------------|
| Kevin  C. Daly      |   |                |
| Chairman            |   |                |
|                |   |                |
|                |   |                |
| ACCEPTED:           |   |                |
|                |   |                |
|                |   |                |
| /s/  ABBAS MOHADDES |   | July 27,  2010 |
| Abbas  Mohaddes     |   | Date                |

 

----

 

**Attachment A — Termination For Cause**

 

Iterisshall have the right to immediately terminate your employment by written noticeto you upon a good faith finding by Iteris or its Board of Directors, in itsreasonable judgment, of any of the following occurrences:

 

1.               your conviction of (a) afelony, or (b) another serious crime involving material harm to thestanding or reputation of Iteris;

 

2.               your willful misconduct ornegligence in the performance of your duties for Iteris which causes materialharm to Iteris;

 

3.               your intentional conductbringing Iteris into public disgrace or disrepute, including, but not limitedto, dishonesty, fraud, material and deliberate injury or attempted injury, ineach case related to Iteris or its business;

 

4.               your material breach of anyof the terms or conditions of this Agreement or the Non-competition Agreementwhich, if curable, is not cured to Iteris’s reasonable satisfaction withinfifteen (15) days (or such other time period as the parties may mutually agreein writing) of written notice thereof; or

 

3

----

 

**Attachment B — Change in Control Agreement**

 

**CHANGE IN CONTROL AGREEMENT**

 

THISCHANGE IN CONTROL AGREEMENT (the “***Agreement***”) is entered into as of July 27,2010 (the “***EffectiveDate***”), by and between Abbas Mohaddes (the “***Employee***”) and Iteris, Inc.,a Delaware corporation (the “***Corporation***”).

 

Section 1.                                            Term ofAgreement.

 

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

 

Section 2.                                            Definitions.

 

(a)                                  **“*Change in Control*”** shall mean anyof the following transactions effecting a change in ownership or control ofthis Corporation:

 

(i)                                     a merger or consolidationof the Corporation with or into another entity or any other corporatereorganization, if persons who were not stockholders of the Corporationimmediately prior to such merger, consolidation or other reorganization ownimmediately after such merger, consolidation or other reorganization 50% ormore of the voting power of the outstanding securities of each of (i) thecontinuing or surviving entity and (ii) any direct or indirect parentcorporation of such continuing or surviving entity.

 

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

 

(iii)                               theacquisition, 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 “beneficialownership” as defined in Rule 13d-3 under the Securities Exchange Act of1934, as amended (the “***ExchangeAct***”), of securities of the Corporation representing at least50% of the total combined voting power represented by the Corporation’s thenoutstanding voting securities.  Forpurposes of this subsection, the term “***person***” shall have the same meaning as whenused in Sections 13(d) and 14(d) of the Exchange Act but shallexclude (i) a trustee or other fiduciary holding securities under anassociate benefit plan of the Corporation or of a Parent or Subsidiary and (ii) acorporation owned directly or indirectly by the stockholders of the Corporationin substantially the same proportions as their ownership of the common stock ofthe Corporation.

 

Notwithstandinganything to the contrary contained herein, a Change in Control be not be deemedto occur in connection with any underwritten public offering of the Corporation’ssecurities.

 

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

 

(i)                                     Employee’sinvoluntary dismissal or discharge by the Corporation for reasons other thanWillful Misconduct, or

 

4

----

 

(ii)                                  Employee’svoluntary resignation following (A) a change in his position with theCorporation which materially reduces his level of responsibility, (B) amaterial reduction in his level of compensation (including base salary, fringebenefits and participation in 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)                                 **“*Annual Base Pay*”**shall meanEmployee’s base salary at the highest rate in effect at any regularly scheduledpayroll period preceding the occurrence of the Change in Control and does notinclude, for example, bonuses, overtime compensation, incentive pay, salescommissions or expense allowances.

 

(e)                                  **“*Target Bonus*”**shall mean 50%of the bonus potential established for the Employee by the Corporation for theapplicable fiscal year.

 

Section 3.                                            SeverancePayment; Employment at Will.

 

(a)                                  Entitlement toPayment.   Employee’semployment with the Corporation is at will, which means that it is not for aspecific term and may be terminated by either the Corporation or the Employee,at any time, for an reason, without advance notice.  Similarly, the Corporation may change theterms and conditions of Employee’s employment at any time, for any reason,without notice.  Notwithstanding theforegoing, subject to Section 9, the Employee shall be entitled to receivea severance payment from the Corporation under this Agreement (the “***Severance Payment***”)if, the Employee is Involuntarily Terminated in connection with or withintwelve (12) months after a Change in Control. Employee understands, agrees and acknowledges that as a condition precedentto receiving any of the Severance Payments and other benefits set forth in thisAgreement, Employee agrees to sign a Release in accordance with Section 9herein.

 

(b)                                 Time and Amountof Payment   TheSeverance Payment shall be paid in one lump sum starting with the next normallyscheduled payroll date of the Corporation following the latest of the followingdates:  (i) Employee’s last day ofemployment, (ii) the date the Corporation receives Employee’s signedgeneral release of all claims pursuant to Section 9, or (iii) thedate the revocation period (if any) specified in the general release of allclaims expires.  The amount of theSeverance Payment shall be equal to the following:

 

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

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

 

5

----

 

Notwithstandingthe foregoing, in the event the Involuntary Termination is the result ofEmployee’s voluntary termination of employment with the Corporation and suchtermination does not occur within the first six months following the completionof the transaction giving rise to the Change in Control, Employee shall only beentitled to 50% of Employee’s Annual Base Pay and no portion of Employee’sTarget Bonus.  Payments made under thisAgreement shall not be treated as “compensation” for purposes of the 401(k) ProfitSharing Plan.  Employee will also receivehis unpaid 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 andReemployment.   TheEmployee shall not be required to mitigate the amount of any paymentcontemplated by this Section 3 (whether by seeking new employment or inany other manner), nor shall any such payment be reduced by any earnings thatthe Employee may receive from any other source.

 

Section 4.                                            PaymentsUnfunded 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 InsuranceCoverage.   If theEmployee becomes entitled to a Severance Payment under this Agreement, then theCorporation shall continue to provide continued group health coverage, asotherwise required under applicable stated continuation law and theConsolidated Omnibus Budget Reconciliation Act of 1986, as amended and allapplicable 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 ofPayments.

 

(a)                                  The amount ofany cash payment to be received by Employee pursuant to Section 2 of thisAgreement shall be reduced (but not below zero) to the extent required so thatno portion of any payment or benefit in the nature of compensation received orto be received by Employee (whether payable pursuant to the terms of thisAgreement or pursuant to any other plan, contract, agreement or arrangementwith the Corporation or any other person) (Such payments or benefits arereferred to collectively as the “***Total Payments***”) shall be treated as an “excessparachute payment” within the meaning of Section 280G(b)(1) of theCode.

 

6

----

 

(b)                                 Thedetermination of whether any reduction in payments is required pursuant to Section 6(a) ofthis Agreement shall be made in writing by the Corporation’s independent publicaccountants, or such other independent accounting firm or tax advisors selectedby the Corporation in its sole discretion (the “***Accounting Firm***”), whose determinationshall be conclusive and binding upon Employee and the Corporation for allpurposes under this Agreement.  Forthe  purposes of making the calculationsrequired by this Section 6, the Accounting Firm may make reasonableassumptions and approximations and may rely on reasonable, good faithinterpretations concerning the application of Section 280G and 4999 of theCode, 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 ofany uncertainty 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’sSuccessors.   TheCorporation shall require any successor (whether direct or indirect and whetherby purchase, lease, merger, consolidation, liquidation or otherwise) to all orsubstantially all of the Corporation’s business and/or assets to assume thisAgreement and to agree expressly and in writing to perform this Agreement inthe same manner and to the same extent as the Corporation would have beenrequired to perform it in the absence of a succession.  The Corporation’s failure to obtain such anassumption prior to the effectiveness of a succession shall be a breach of thisAgreement and shall result in Employee’s Involuntary Terminationhereunder.  For all purposes under thisAgreement, the term “***Corporation***”shall include any successor to the Corporation’s business and/or assets thatexecutes and delivers the assumption agreement described in this Section 7(a) orthat becomes bound by this Agreement by operation of law.

 

(b)                                 Employee’sSuccessors.   ThisAgreement and all rights of the Employee hereunder shall inure to the benefitof, and be enforceable by, the Employee’s personal or legal representatives,executors, administrators, successors, heirs, distributees, devisees andlegatees.

 

Section 8.                                            MiscellaneousPrevisions

 

(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.

 

7

----

 

(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.

 

(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 in thisprovision is intended to restrict Employee from submitting any matter to anadministrative 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

 

8

----

 

permittedby law any 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.

 

Section 9.                                            Release andWaiver of Claims.  Inconsideration for Employee’s receipt of the Severance Payments or otherbenefits as specified in this Agreement, to which Employee is not otherwiseentitled, 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, assignsand agents may now or hereafter have against the Corporation, its subsidiariesand other related entities, and their respective employees, stockholders,directors, attorneys, accountants, successors and assigns or other agents inthe 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        |

 

9

----

 

INWITNESS WHEREOF, each of the parties has executed this Agreement, in the caseof the Corporation by its duly authorized officer, as of the day and year firstabove written.

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

 

10

----