**EXHIBIT 10.3**

 

**ITERIS, INC.RESTRICTED STOCK UNIT AWARD AGREEMENT**

 

ThisRESTRICTED STOCK UNIT AWARD AGREEMENT (the “*Agreement*”)is made as of                               (the “*Grant Date*”), by and between Iteris, Inc.,a Delaware corporation (the “*Company*”),and                              (“*Participant*”).  The Award (as defined below) is subject tothe terms and conditions set forth in this Agreement and in the Iteris, Inc.2007 Omnibus Incentive Plan (the “*Plan*”).  Capitalized terms used but not otherwisedefined herein shall have the meaning ascribed to such terms in the Plan.

 

1.                                       Award.  The Company hereby grants to Participant arestricted stock unit award (the “*Award*”)covering              restricted stock units (the “*Units*”).  Each Unit represents the right to receive oneshare of common stock, par value $0.10 per share, of the Company (the “*Common Stock*”), subject to the vesting requirements of thisAgreement and the terms of the Plan.  TheAward represents the right to receive shares of Common Stock (the “*Shares*”) only when, and with respect to the number of Sharesto which, the Units have vested.

 

2.                                       Vesting.  Except as otherwise provided in thisAgreement, the Units shall vest in accordance with the following schedule:

 
| **On or  after each of  the following dates** | ** ** | **Number of Units vested** |
|-----------------------------------------------|------------|----------------------------|
|                                          |       |                       |
| First  anniversary of the Grant Date          |       |                       |
| Second  anniversary of the Grant Date         |       |                       |
| Third  anniversary of the Grant Date          |       |                       |
| Fourth  anniversary of the Grant Date         |       |                       |

 

3.                                       Restrictions onTransfer.  The Unitsmay not be sold, assigned, transferred or pledged, other than by will or thelaws of descent and distribution, and any such attempted transfer shall bevoid.

 

4.                                       Forfeiture.  If Participant ceases to be employed by orprovide Service to the Company or any Affiliate, whether or not terminated forcause, prior to vesting of the Units pursuant to Section 2 or Section 8hereof, all of Participant’s rights to all of the unvested Units (and theunvested Shares subject to such Units) shall be immediately and irrevocably forfeited.  Upon forfeiture, Participant will no longerhave any rights relating to the unvested Units (and the unvested Shares subjectto such Units).

 

5.                                       Issuance ofShares.  As soon as administrativelypracticable following the Participant’s vesting date under Section 2or Section 8 hereof, as applicable, and the Participant’ssatisfaction of any required tax withholding obligations (but in no event laterthan 60 days following the vesting date), the Company shall cause to be issuedand delivered to the Participant a certificate or certificates evidencingShares registered in the name of the Participant (or in the name of theParticipant’s legal representatives, beneficiaries or heirs, as the case maybe) or to instruct the Company’s transfer agent to electronically deliver suchshares to the respective 

 

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Participant.  The number of Shares issued shall equal thenumber of Units vested, reduced as necessary to cover applicable withholdingobligations in accordance with Section 7 hereof.  If it is administratively impracticable toissue Shares within the time frame described above because issuances of Sharesare prohibited or restricted pursuant to the policies of the Company that arereasonably designed to ensure compliance with applicable securities laws orstock exchange rules, then such issuance shall be delayed until suchprohibitions or restrictions lapse.

 

6.                                       Rights asShareholder.  Units arenot actual Shares, and only represent a right to receive Shares according tothe terms and conditions set forth herein and the terms of the Plan.  Accordingly, the issuance of a Unit shall notentitle the Participant to any of the rights or benefits generally accorded tostockholders unless and until a Share is actually issued under Section 5hereof.

 

7.                                       Taxes.  The Participant hereby agrees to makeadequate provision for any sums required to satisfy the applicable federal,state, local or foreign employment, social insurance, payroll, income or othertax withholding obligations (the “*Withholding Obligations*”)that arise in connection with this Agreement. The Company may establish procedures to ensure satisfaction of allapplicable Withholding Obligations arising in connection with this Agreement,including any means described in Section 8 of the Plan.  The Participant hereby authorizes theCompany, at its sole discretion and subject to any limitations under applicablelaw, to satisfy any such Withholding Obligations by (a) withholding fromthe wages and other cash compensation payable to the Participant, (b) causingthe Participant to tender a cash payment to the Company, (c) delivering tothe Company for cancellation shares of the Company’s Common Stock already ownedby the Participant, or (d) selling on the Participant’s behalf (using anybrokerage firm determined acceptable to the Company for such purpose) a portionof the Shares issued in payment of the vested Units as the Company determinesto be appropriate to generate cash proceeds sufficient to satisfy theWithholding Obligations, in connection with which the Participant shallconcurrently provide, if necessary or applicable, irrevocable instructions (i) tothe brokerage firm to effect the immediate sale of some or all of the VestedShares and remit to the Company, out of the sale proceeds available on the settlementdate, sufficient funds to satisfy the Withholding Obligations and (ii) tothe Company to deliver the certificates for the Shares directly to suchbrokerage firm in order to complete the sale. The Participant shall be responsible for all brokerage fees and othercosts of sale, and the Participant further agrees to indemnify and hold theCompany harmless from any losses, costs, damages or expenses relating to anysuch sale.  The Company may refuse todeliver Shares if the Participant fails to comply with the Participant’sobligations in connection with the Withholding Obligations described in thisparagraph.

 

8.                                       Change inControl.

 

(a)                                  Immediately prior to theeffective date of a “Change in Control” (as defined below), all Units subjectto this Award will vest, except and to the extent: (i) this Award is to beassumed by the successor corporation (or parent thereof) or is otherwise to becontinued in full force and effect pursuant to the terms of the Change inControl transaction or (ii) this Award is to be replaced with a cashincentive program of the successor corporation which preserves the value (i.e.,the Fair Market Value) of the unvested Units (and the unvested Shares) subjectto this Award existing at the time of the Change in Control and provides forsubsequent payout of that value no later than the time the Units subject tothis Award would have vested.

 

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(b)                                 Immediately following theconsummation of the Change in Control, this Award shall terminate, except tothe extent assumed by the successor corporation (or parent thereof) orotherwise continued in effect pursuant to the terms of the Change in Controltransaction.

 

(c)                                  If this Award is assumed orotherwise continued in effect in connection with a Change in Control, then thisAward shall be appropriately adjusted, upon such Change in Control, to apply tothe number and class of securities which would have been issuable toParticipant in consummation of such Change in Control had the Units subject tothis Award been fully vested immediately prior to such Change in Control.  To the extent that the holders of CommonStock receive cash consideration for their Common Stock in consummation of theChange in Control, the successor corporation (or its parent) may, in connectionwith the assumption of this Award, substitute one or more shares of its owncommon stock with a fair market value equivalent to the cash consideration paidper share of Common Stock in such Change in Control.

 

(d)                                 This Agreement shall not inany way affect the right of the Company to adjust, reclassify, reorganize orotherwise change its capital or business structure or to merge, consolidate,dissolve, liquidate or sell or transfer all or any part of its business orassets.

 

(e)                                  For purposes of thisAgreement, “*Change in Control*” shall mean a changein ownership or control of the Company effected through any of the followingtransactions: (i) a merger, consolidation or other reorganization unlesssecurities representing more than 50% of the total combined voting power of thevoting securities of the successor corporation are immediately thereafterbeneficially owned, directly or indirectly and in substantially the sameproportion, by the persons who beneficially owned the Company’s outstandingvoting securities immediately prior to such transaction; (ii) a sale,transfer or other disposition of all or substantially all of the Company’sassets; or (iii) the acquisition, directly or indirectly, by any person orrelated group of persons (other than the Company or a person that directly orindirectly controls, is controlled by, or is under common control with, theCompany), of beneficial ownership (within the meaning of Rule 13d-3 of theExchange Act) of securities possessing more than 50% of the total combinedvoting power of the Company’s outstanding securities pursuant to a tender orexchange offer made directly to the Company’s stockholders.

 

9.                                       CapitalAdjustments and Reorganization.  Should any change be made to the Common Stockby reason of any stock split, reverse stock split, stock dividend,recapitalization, combination of shares, exchange of shares or other changeaffecting the outstanding Common Stock as a class without the Company’s receiptof consideration, appropriate adjustments shall be made to the number and/orclass of securities subject to this Award in order to reflect such change andthereby preclude a dilution or enlargement of benefits hereunder.

 

10.                                 Miscellaneous.

 

(a)                                  Subject to Plan.  This Award is subject to the terms andconditions of the Plan, but the terms of the Plan shall not be considered anenlargement of any benefits under this Agreement.  In addition, this Award is subject to therules and regulations promulgated pursuant to the Plan, now or hereafterin effect.  A copy of the Plan will befurnished upon request of the Participant.

 

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(b)                                 No Right to ContinuedService.  This Agreement shall notconfer on the Participant any right with respect to continuance of service tothe Company, nor will it interfere in any way with the right of the Company toterminate such service at any time.

 

(c)                                  Governing Law.  The validity, construction and effect of thePlan and the Agreement, and any rules and regulations relating to the Planand the Agreement, shall be determined in accordance with the internal laws,and not the law of conflicts, of the State of Delaware.

 

(d)                                 Severability.  If any provision of the Agreement is orbecomes or is deemed to be invalid, illegal or unenforceable in anyjurisdiction or would disqualify the Agreement under any law deemed applicableby the Committee, such provision shall be construed or deemed amended toconform to applicable laws, or if it cannot be so construed or deemed amendedwithout, in the determination of the Committee, materially altering the purposeor intent of the Plan or the Agreement, such provision shall be stricken as tosuch jurisdiction or the Agreement, and the remainder of the Agreement shallremain in full force and effect.

 

(e)                                  No Trust or Fund Created.  Neither the Plan nor the Agreement shallcreate or be construed to create a trust or separate fund of any kind or afiduciary relationship between the Company or any Affiliate and Participant orany other person.

 

(f)                                    Section 409A Provisions.  The issuance of Shares under this Agreementare intended to be exempt from the application of section 409A of the InternalRevenue Code, as amended (“*Section 409A*”)by reason of the short-term deferral exemption set forth in Treasury Regulation§1.409A-1(b)(4).  Notwithstandinganything in the Plan or this Agreement to the contrary, to the extent that anyamount or benefit hereunder that constitutes “deferred compensation” to theParticipant under section 409A of the Internal Revenue Code, as amended (“*Section 409A*”) and applicable guidance thereunder isotherwise payable or distributable to the Participant under the Plan or thisAgreement solely by reason of the occurrence of a Change in Control or due tothe Participant’s disability or termination of employment, such amount orbenefit will not be payable or distributable to the Participant by reason ofsuch circumstance unless the Committee determines in good faith that (i) thecircumstances giving rise to such Change in Control, disability or separationfrom service meet the definition of a change in ownership or control,disability, or separation from service, as the case may be, in Section 409A(a)(2)(A) ofthe Code and applicable final regulations, or (ii) the payment or distributionof such amount or benefit would be exempt from the application of Section 409Aby reason of the short-term deferral exemption or otherwise (including, but notlimited to, a payment made pursuant to an involuntary separation arrangementthat is exempt from Section 409A under the “short-term deferral”exception).  Any payment or distributionthat otherwise would be made to a Participant who is a specified employee asdefined in Section 409A(a)(2)(B) of the Code on account of separationfrom service may not be made before the date which is six months after the dateof the specified employee’s separation from service (or if earlier, upon thespecified employee’s death) unless the payment or distribution is exempt fromthe application of Section 409A by reason of the short term deferralexemption or otherwise.

 

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(g)                                 Headings.  Headings are given to the Sections andsubsections of the Agreement solely as a convenience to facilitatereference.  Such headings shall not bedeemed in any way material or relevant to the construction or interpretation ofthe Agreement or any provision thereof.

 

**IN WITNESS WHEREOF**, the Company andParticipant have executed this Agreement on the date set forth in the firstparagraph.

 
|       | **ITERIS, INC.** |
|------------|-----------------------|
|       | ** **            |
|       | ** **            |
| ** ** | By:                   |   |
| ** ** | Name:                 |   |
| ** ** | Title:                |   |
| ** ** |                  |
| ** ** |                  |
| ** ** | **PARTICIPANT**       |
| ** ** |                  |
| ** ** |                  |
| ** ** |                  |
| ** ** | Print  Name:          |   |
|            |                       |  |  |

 

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