Exhibit
10.1


 


CONFIDENTIAL TREATMENT


 


COOPERATIVE AGREEMENT FOR 

DEVELOPMENT, MANUFACTURE, MARKETING AND SALE OF PRODUCTS TO THE CLASS 1 AND 2
VEHICLE MARKETS INCORPORATING ITERIS’S LDWS TECHNOLOGY


between


                Iteris,
Inc., a corporation duly existing and organized under the laws of the State of
Delaware USA, having its corporate offices at 1515 S. Manchester Avenue,
Anaheim, CA 92802-2907, USA,


 


hereinafter
referred to as “ITERIS”


and


                Valeo
Schalter und Sensoren GmbH, a company duly existing and organized under the
laws of Germany, with authorized capital of 2,500,000 Euros, having its
registered office at Stuttgarter Str. 119, 74321 Bietigheim-Bissingen, Germany,
registered with the Commercial Register of Vaihingen/ Enz under the number HRB
1795-Bes,


 


hereinafter referred to as “VALEO”.


 


Background


A.            Iteris has developed and is
manufacturing, marketing, and delivering, among other items, products
incorporating its LDWS Technology for automotive and truck use.


B.            Valeo is a company of the Valeo
Group which, headquartered in Paris, is one of the top automotive suppliers
worldwide developing, manufacturing and selling a variety of products.


C.            Effective May 14, 2001, Iteris and
Valeo executed the Cooperative Agreement for
Development, Manufacturing, Marketing, and Delivery of Products Incorporating
Iteris’s AutoVueTM Sensor and Valeo’s Rain Sensor Technologies (“Previous
Agreement”) addressing Iteris’s and Valeo’s desires to cooperate with each
other to combine their respective technologies, talents, know-how, marketing
capabilities, and resources to develop, manufacture, market and sell automotive
products for various Original Equipment Manufacturers based upon Iteris’s
AutoVueTM sensor technology and Valeo’s rain sensor technology.


D.            The intent of the Parties under this
Agreement is to terminate the Previous Agreement and replace it with this
Agreement wherein Iteris will grant to Valeo, subject to the terms and
conditions herein, specific rights, including to develop, manufacture, market
and sell products incorporating Iteris’s Lane Departure Warning System (LDWS)
Technology for the worldwide Class 1 and 2 vehicle markets including OEM, Tier
1, and Aftermarket. Iteris will retain all rights for developing, marketing and
selling products incorporating Iteris’s LDWS Technology for Class 3 through 8
vehicles.


Therefore,
the Parties agree as follows:


Iteris and Valeo Proprietary
Information


 
















 


Article 1

Subject of Agreement/Supersedure


 


1.1                                 The subject of
this Agreement is the definition of the rights, obligations, terms and
conditions relative to the cooperation between the Parties for the development,
manufacture, marketing and sale of Products incorporating Iteris’s LDWS
Technology to the Class 1 and 2 vehicle markets.


1.2                                 As of September
1, 2003 (the “Effective Date”) of this Agreement, the Previous Agreement, Cooperative Agreement for Development, Manufacturing,
Marketing, and Delivery of Products Incorporating Iteris’s AutoVueTM Sensor and
Valeo’s Rain Sensor Technologies, is terminated by mutual agreement
of the Parties and is superseded by this Agreement. Purchase Orders either
existing or pending between Valeo and Iteris under the provisions of the
Previous Agreement for development labor and/or support shall be amended by
mutual agreement to only address efforts through September 1, 2003.


Article 2

Definitions


2.1                                 “Affiliate”
shall mean any company under the direct or indirect control of a Party or
having such control over such Party or being under such control jointly
together with such Party.


2.2                                 “Aftermarket”
shall mean the collective market for automotive products and services installed
or performed after manufacturing and sale to the end user or dealer is complete
by the OEM and includes, but is not limited to Tier 1 suppliers, dealers,
distributors, resellers, customers, and users of such products or services.


2.3                                 “Agreement”
shall mean this Agreement along with its Exhibits and Amendments (if any).


2.4                                 “Application
Software” shall mean software which operates in the selected host operating
system environment that implements algorithms based upon inputs received and
that provides outputs.


2.5                                 “Background
Technology” shall mean drawings, data, know-how, trade secrets, confidential
information, inventions, software, and other technical information and
technology, and any intellectual property rights to such information or
technology including, but not limited to patents, copyrights, data base rights
and trade secret rights, other than Foreground Technology.  Iteris’s Background Technology includes the
Background Technology that comprises any portion of Iteris’s LDWS Technology,
that is required to use, develop, manufacture, market, and sell Iteris’s LDWS
Technology, or that otherwise improves Iteris’s LDWS Technology, including
improvements under Article 10.1(a) below. Iteris represents that prior to signature
of this Agreement that it has provided to Valeo a schedule listing Iteris’s
Background Technology that Iteris shall update from time to time or as
reasonably requested by Valeo. Valeo has not made, and will not make, available
to Iteris any Background Technology, except with Iteris’s prior and express
written consent.


 
















 


2.6                                 “Class 1 and 2
Vehicles” shall mean automobiles and light trucks up to 10,000 pounds gross
vehicle weight and any derivative (e. g., Sport Utility Vehicle).


2.7                                 “Class 1 and 2
Vehicle Market” shall mean all Customers including OEM, Tier 1, and Aftermarket
engaged in the manufacture of Class 1 and 2 vehicles and/or systems,
assemblies, accessories or components for Class 1 and 2 vehicles.


2.8                                 “Class 3
through Class 8 Vehicles” shall mean all vehicles over 10,000 pounds gross
weight.


2.9                                 “Class 3
through Class 8 Vehicle Market” shall mean all Customers including OEM, Tier 1,
and Aftermarket engaged in the manufacture of Class 3 through Class 8 Vehicles
and/or systems, assemblies, accessories or components for Class 3 through Class
8 Vehicles.


2.10                           “Concept
Competition Phase” shall mean the phase and related efforts prior to P1
development where conceptual Products are competitively defined and marketed to
various Customers to develop sales potential.


2.11                           “Customer”
shall mean any customers to whom Products may be marketed and sold, including
the various OEM, suppliers and Aftermarket (whether involved in the independent
or original equipment arena) customers. When this Agreement refers to a
specific Customer (e.g., in defining the term of the royalty obligations in
Article 7.3(b)(ii) and the scope of the surviving license rights identified in
Article 9.3.), such references shall be limited to a business unit focusing on
a certain vehicle model or family of models, which are sold under a common
brand, such as the customer names in the following list:


 


Class 1-2 Vehicle OEM Customer List

List based upon Customer structure as of the Effective Date.






	
  NO.

  	
   

  	
  CUSTOMER NAME

  	
   

  	
  AFFILIATION

  	
   

  	
  NOTES

  
	
  01

  	
   

  	
  GM North America

  	
   

  	
  General Motors

  	
   

  	
  Includes Buick, Cadillac,
  GMC, Oldsmobile, Pontiac, & Saturn brands

  
	
  02

  	
   

  	
  GM Shang-hai

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  03

  	
   

  	
  GM Holden

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  04

  	
   

  	
  GM South America

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  05

  	
   

  	
  Opel

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  06

  	
   

  	
  Saab

  	
   

  	
  General Motors

  	
   

  	
  Independent

  
	
  07

  	
   

  	
  Fiat

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  08

  	
   

  	
  Suzuki

  	
   

  	
  General Motors

  	
   

  	
   

  






 
















 




	
  09

  	
   

  	
  Isuzu

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  10

  	
   

  	
  Fuji Heavy Industries

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  11

  	
   

  	
  SIA

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  12

  	
   

  	
  Daewoo

  	
   

  	
  General Motors

  	
   

  	
   

  
	
  13

  	
   

  	
  Chrysler

  	
   

  	
  DaimlerChrysler

  	
   

  	
  Includes Chrysler, Dodge,
  and Jeep brands

  
	
  14

  	
   

  	
  Mercedes-Benz

  	
   

  	
  DaimlerChrysler

  	
   

  	
   

  
	
  15

  	
   

  	
  Mitsubishi

  	
   

  	
  DaimlerChrysler

  	
   

  	
   

  
	
  16

  	
   

  	
  Hyundai

  	
   

  	
  DaimlerChrysler

  	
   

  	
   

  
	
  17

  	
   

  	
  Fiat

  	
   

  	
  Fiat

  	
   

  	
   

  
	
  18

  	
   

  	
  Ford North America

  	
   

  	
  Ford Motor Co.

  	
   

  	
  Includes Ford, Lincoln,
  & Mercury brands

  
	
  19

  	
   

  	
  Ford Europe

  	
   

  	
  Ford Motor Co.

  	
   

  	
   

  
	
  20

  	
   

  	
  Premier Auto Group

  	
   

  	
  Ford Motor Co.

  	
   

  	
  Includes Volvo, Land
  Rover, Jaguar, & Aston Martin brands

  
	
  21

  	
   

  	
  Mazda

  	
   

  	
  Ford Motor Co.

  	
   

  	
   

  
	
  22

  	
   

  	
  Nissan

  	
   

  	
  Renault Nissan

  	
   

  	
  Includes Nissan and
  Infinity brands

  
	
  23

  	
   

  	
  Renault / Renault Dacia

  	
   

  	
  Renault Nissan

  	
   

  	
   

  
	
  24

  	
   

  	
  Renault Samsung

  	
   

  	
  Renault Nissan

  	
   

  	
   

  
	
  25

  	
   

  	
  Toyota

  	
   

  	
  Toyota Motors

  	
   

  	
  Includes Toyota and Lexus
  brands

  
	
  26

  	
   

  	
  Daihatsu

  	
   

  	
  Toyota Motors

  	
   

  	
   

  
	
  27

  	
   

  	
  Honda

  	
   

  	
  Honda Motors

  	
   

  	
  Includes Honda and Acura
  brands

  
	
  28

  	
   

  	
  PSA

  	
   

  	
  PSA

  	
   

  	
  Includes Peugeot &
  Citroën brands

  
	
  29

  	
   

  	
  BMW

  	
   

  	
  BMW Group

  	
   

  	
   

  
	
  30

  	
   

  	
  Volkswagen

  	
   

  	
  Volkswagen

  	
   

  	
  Includes Volkswagen, Audi,
  SEAT, & Skoda Brands

  






 


                                                Any changes in
the scope of coverage or identity of a particular Customer identity that may
affect the rights or obligation of the Parties under this Agreement shall be
reflected 


 


 
















 


                                                at the time of
such change. The Parties agree that the above list may not be exhaustive as to
relevant Customers and should any additional Customer need to be reflected to
effect the purposes of this Agreement that the Parties will update the list in
a mutually agreeable manner.


2.12                           “Foreground
Technology” shall mean all drawings, data, know-how, trade secrets,
confidential information, inventions, software and other technical information
or technology developed within the scope of the cooperation between the Parties
under this Agreement, during its term, by Iteris, Valeo or both Parties
jointly, and any intellectual property rights to such information or technology
including, but not limited to patents, copyrights, data base rights and trade
secret rights. Foreground Technology shall not include any Background
Technology.


2.13                           “AutoVueTM
Operations” shall mean all engineering, development, manufacturing, sales, and
marketing operations, personnel and other assets (whether owned or licensed,
and if licensed, subject to the terms of such license, except to the extent any
such license provides for consideration to any Iteris Affiliate) solely or
substantially dedicated to the development, manufacture, or sale of products
for the automotive and/or truck industries that incorporate or implement
Iteris’s vision-based sensor and related technology, know-how and intellectual
property and shall include Iteris’s LDWS Technology, which Iteris may, at its
sole discretion and at any time, transfer to an Affiliate. Any costs associated
with such transfers, including charges related to the transfer or ongoing use
or license of any technology, shall be the sole responsibility of Iteris and
not chargeable to Valeo.


2.14                           “Iteris’s Lane
Departure Warning System (LDWS) Technology” shall mean the LDWS Technology
developed or acquired by Iteris that is vision-based, i.e., uses a video or
digital camera (as opposed to radar or infrared techniques) to view and analyze
a 2-dimensional image of the roadway, optical sensor image enhancement,
installation and manufacturing techniques, and software algorithms to implement
Lane Departure Warning System Technology.


2.15                           “Lane Departure
Warning System (LDWS) Technology” shall mean technology that detects and tracks
lane markings, calculates trajectory, and provides outputs based upon vehicle
position relative to the lane markings.


2.16                           “OEM” shall
mean Original Equipment Manufacturer and for the purposes of this Agreement
generally refers to the various worldwide Class 1 and 2 vehicle manufacturers.


2.17                           “Operating
System Software” shall mean software developed or otherwise provided by Iteris
that operates the system processor of the Products and that hosts the
Application Software.


2.18                           “P0, P1, P2,
and P3 Development” shall be defined as follows for the purposes of this
Agreement:


P0-                               development
activities related to a Product that is currently in series production. Support
includes activities to improve production processes, reliability, and
maintenance and to replace obsolete parts.


 
















 


P1-                               development
activities related to preparing a specific Product for series production.
Support includes activities to customize interfaces to specific Customer
products, A — D sample development, qualification testing, and sales/marketing
to current and prospective customers for the Product.


P2-                               development
activities, which are not for a specific Customer , for new generation
replacement LDWS technologies or for non-LDWS technologies.


P3-                               development
activities for general research and identification of new technologies.


2.19                           “Party” or
“Parties” are respective generic references to either Iteris or Valeo in the
singular tense or to both Iteris and Valeo in the plural tense.


2.20                           “Product” or
“Products” are equivalent names for the applications for the Class 1 and 2
Vehicle Market incorporating LDWS Technology; excluding those applications
performing functions other than those specific to LDWS Technology. Product or
Products shall not include lane departure warning applications outside the
scope of LDWS Technology, such as radar or infrared based applications.


2.21                           “Tier 1” shall
mean those manufacturers and/or suppliers recognized in the automotive industry
as direct suppliers to OEMs.


2.22                           “Unit Sales
Price” or “Unit Sales Prices” shall mean the unit price or prices for Products
paid to Valeo, its Affiliates or permitted (if any) assigns or sublicensees by
an individual Customer less all amounts attributable to (a) discounts, (b)
duties and customs charges, (c) taxes remitted to seller or required to be
charged by seller and (d) insurance, shipping and handling.


Article 3

Iteris Support for Valeo Customer-Specific Development (P1) and Concept
Competition Phase Activities


3.1                                 Valeo shall
provide funding for a minimum of the time period set forth in Article 3.3
through March 31, 2008 (the “Initial Term”) for Iteris personnel and direct
expenses for engineering, marketing, and sales support as described in Article
3.2(a) below for Valeo customer-specific development (P1) and  Concept Competition Phase activities.


3.2                                 The general
responsibilities of the Parties shall be as follows:


a.                                       Iteris will
provide engineering, marketing, and sales support under the general direction
of the Valeo Project Manager and within the funding limitations established by
the respective purchase order issued by Valeo or such increases authorized in
writing by the Valeo Project Manager. Engineering, marketing, and sales support
will include, but not necessarily be limited to:


(1)                                  Electronic
design of hardware, Operating System Software, and Application Software;


(2)                                  Adapting
electronic design to provide Product functions;


 
















 


(3)                                  Application
engineering support for LDWS Technology component of Products;


(4)                                  Implementing
customer-specific features and/or modifications in electronics design and
Application Software;


(5)                                  Supporting
Valeo Product qualification testing;


(6)                                  Providing
general engineering, marketing and sales support during the Concept Competition
Phases for various Customers; and


(7)                                  Providing P0,
P2, P3 or other support as Valeo may reasonably request within the general
scope of this Agreement or otherwise if necessary to maintain minimum team
size.


Throughout
the Initial Term, Valeo will assume responsibility for the above services in a
mutually acceptable manner and timeframe.


b.                                      Valeo will
provide a Project Manager to manage the customer-specific development and
Concept Competition Phase projects, to provide general direction of Iteris
activities within the funding limitations established by the respective purchase
order and to review and authorize, if appropriate, increases to funding as
needed to achieve development schedules and goals. Valeo may locate the Project
Manager at its convenience (including on-site) and substitute the Project
Manager at its discretion.  In addition
Valeo will:


(1)                                  Provide
mechanical design of Product housing and physical interface to vehicle;


(2)                                  Provide
production Engineering/Quality Control;


(3)                                  Provide
technical support to Iteris as necessary for separately developed or acquired
features (if any) to be included in a Product;


(4)                                  Lead Product
qualification testing for Customers;


(5)                                  Manufacture and
distribute Products;


(6)                                  Serve as
primary liaison with Customers; and


(7)                                  Use
commercially reasonable efforts to market and sell Products incorporating
Iteris’s LDWS Technology to Customers in the Class 1 and 2 Vehicle Market.


(8)                                  Develop, in
consultation with Iteris, a marketing plan to promote Valeo’s sales of Iteris’s
LDWS Technology to Customers in the Class 1 and 2 Vehicle Market, which
marketing plan shall be updated as needed from time to time.


 
















 


3.3                                 Minimum Iteris
team sizes and billing rates:




	
   

  	
   

  	
  Equivalent

  	
   

  	
  Billing

  
	
  Year

  	
   

  	
  No. of
  Persons

  	
   

  	
  Rate

  
	
  1: 09/01/03—03/31/04*

  	
   

  	
  8

  	
   

  	
  US$†/hour (equivalent to $† per year per employee)

  
	
  2: 04/01/04—03/31/05

  	
   

  	
  7

  	
   

  	
  US$†/hour (equivalent to $† per year per employee)

  
	
  3: 04/01/05—03/31/06

  	
   

  	
  6***

  	
   

  	
  US$†**/hour

  
	
  4: 04/01/0 —03/31/07

  	
   

  	
  5***

  	
   

  	
  US$†**/hour

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5: 04/01/07—03/31/08

  	
   

  	
  4***

  	
   

  	
  US$†**/hour

  














*For
purposes of this Agreement, Year 1 is a 7 month term.


**
Rates per hour in years 3 through 5 are subject to negotiation. Re-evaluation
will be based on Iteris average yearly salary increase, provided that if such
increases exceed the local market norms that the Parties will mutually evaluate
the circumstances justifying such increases.


***
Minimum team sizes for years 3, 4 and 5 are indicative numbers and subject to
review 6 months prior to start of each respective year.


3.4                                 Valeo purchase
orders issued to provide the funding specified in this Article 3 shall be
issued annually on a time and material basis to fund at least the minimum level
of effort specified in Article 3.3 above each year plus an allowance for other
direct expenses such as material and travel. All non-labor direct expenditures
(including material and travel) in excess of such allowance shall require the
advance written approval of the Valeo Project Manager prior to being
incurred.  All labor shall be
level-loaded by month. Any increased level of effort authorized by the Valeo
Project Manager that results in a projected increase in the annual amount shall
be supported by an increase in authorized funding to avoid gaps in funding the
minimum level of effort in later months.


3.5                                 Articles 3.3
and 3.4 above provide an agreed minimum level of effort for Iteris support for
the Initial Term, subject to the annual assessment as stated in Article 3.3.
The agreed minimum level of effort shall be subject to the following reviews
and adjustments:










† In accordance with Rule 24b-2 under the Securities Exchange
Act of 1934, this confidential information has been omitted from this exhibit
pursuant to a request for confidential treatment, and has been filed separately
with the Securities and Exchange Commission.


 
















 


 




	
  Review
  Date

  	
   

  	
  Milestone

  	
   

  	
  Adjustments

  
	
  September 2003

  	
   

  	
  Customer A (Zeus)
  Production Order 1

  	
   

  	
  If milestone is not
  achieved, funding will remain unchanged but efforts may be redirected to
  focus on other opportunities.

  
	
  March 2004

  	
   

  	
  Customer B Letter of
  Intent/Production Commitment

  	
   

  	
  If milestone is not
  achieved, funding will remain unchanged but efforts may be redirected to
  focus on other opportunities.

  
	
  June 2004

  	
   

  	
  Customer C Letter of
  Intent/Production Commitment Customer A (Zeus) Production Order 2

  	
   

  	
  If milestone is not
  achieved, funding will remain unchanged but efforts may be redirected to
  focus on other opportunities.

  
	
  September 2004

  	
   

  	
  Continued Strong Market
  Potential

  	
   

  	
  If milestone is not
  achieved, funding reduction will be considered to be effective April 2005.

  
	
  September 2005

  	
   

  	
  Continued Strong Market
  Potential

  	
   

  	
  If milestone is not
  achieved, funding reduction will be considered to be effective April 2006.

  
	
  September 2006

  	
   

  	
  Continued Strong Market
  Potential

  	
   

  	
  If milestone is not
  achieved, funding reduction will be considered to be effective April 2007.

  
	
  April 2007 and subsequent
  annual periods

  	
   

  	
  Continued Strong Market
  Potential

  	
   

  	
  Evaluate current market
  and negotiate funding for extension of agreement.

  






 


3.6                                 Iteris will
submit monthly invoices for labor and other direct expenses on a time and
material basis as follows: (a) at the hourly rates for labor specified in
Article 3.3 and (b)†. Payment from Valeo to Iteris will be in US
dollars, net 30 days after receipt of invoice. 
Payment shall be by electronic transfer of funds through a major U. S.
correspondent bank to:


†

†

†

†


 


†

†

†

†










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed
separately with the Securities and Exchange Commission.


 
















 


Article 4

Responsibility for Costs


Except
for Valeo funding of Iteris Support for Valeo Customer-Specific Development
(P1) and Concept Competition Phase Activities, each Party shall bear its own
costs and expenses that it incurs in connection with this Agreement.


Article 5

Relationship Between Parties


5.1                                 This Agreement
shall not constitute, create, give effect to or otherwise be construed as a
joint venture, pooling arrangement, partnership or formal business organization
of any kind.  The Parties shall be deemed
to be independent contractors and the employees of one shall not be deemed to
be employees or agents of the other. Neither Party shall be entitled to act in
the name or on behalf of the other Party.


5.2                                 All Iteris
employees involved in the implementation of this Agreement shall be employees
of Iteris and not considered employees or co-employees of Valeo for any reason
(including compensation, benefits, unemployment coverage and any employment
related rights).


5.3                                 Each Party
shall obligate all of its employees and outside contractors to acknowledge in
writing the confidentiality of all information relevant to the scope of such
employee or contractor’s services and require, to the greatest extent permitted
by law, that all such information be protected and maintained in confidence and
not disclosed or used other than in connection with the employment or outside
contractor relationship with the Party.


5.4                                 The Parties
agree, without charge to the other Party, to execute, and to have their
respective employees concerned execute, all lawful documents and to make, and
to have their respective employees concerned make, all lawful oaths (including
any necessary assignments or other property transfer documents) required to
prepare, file and prosecute applications for protecting Foreground Technology,
and to cooperate, and to have their respective employees concerned cooperate,
to provide such truthful evidence and testimony as may be required to support
such applications and the granting and maintenance of any rights in Foreground
Technology.  Each Party warrants that its
employees involved in the activities controlled by this Agreement are under
obligation to comply with the terms of this Article.


5.5                                 The Parties each
will be responsible for all obligations (including obligations for compensation
for inventions) in relation to their own employees, employees of their
respective Affiliates and all contractors or consultants engaged by such Party
and named as an inventor in any Foreground or Background Technology.


 










 








Article 6

Proprietary Information


It
is recognized that in the event the Parties desire to exchange information,
technology or other items pursuant hereto, such exchange may be subject to each
Party’s ability to obtain export license therefor from its respective
government. Each Party shall comply with such requirements and obtain and
maintain approvals under each Party’s respective government’s export
regulations (if any) in meeting the objective of this Agreement. Exchange of
proprietary or confidential information between the Parties shall be in
accordance with the obligations of confidentiality set forth in the Mutual
Nondisclosure Agreement executed between the Parties effective June 30, 2000,
which is incorporated herein by reference to the extent consistent with this
Agreement, provided both Parties shall be entitled to disclose Information
received from the other Party to any of its Affiliates (provided that such
disclosure is consistent with applicable government requirements and such
Affiliates comply with the obligations contained in said Mutual Non-Disclosure
Agreement). The Parties agree to extend the term of the Mutual Non-Disclosure
Agreement to the expiration or termination of this Agreement; provided that all
disclosures covered by the Mutual Nondisclosure Agreement shall be subject to
the terms of such agreement for ten years subsequent to initial disclosure or
five years from termination of this Agreement, which ever is shorter.


The
Parties shall not disclose in any patent application, or in the course of
prosecuting any patent application, any proprietary or confidential information
of the other Party that is confidential except with prior written permission of
the other Party. Notwithstanding the above, the Parties will cooperate with
each other to assure that the best mode provision of 35 U.S.C. Section 112 is
met as to any patent application.


Article 7

Results of R & D Work, Intellectual Property Rights, Licensing


The
following provisions shall apply to the rights and obligations of the Parties
with respect to the results of the development work under this Agreement:


7.1                                 Background Technology


Each
Party shall retain ownership of its Background Technology; and unless otherwise
specifically provided herein, neither Party grants the other any license to its
Background Technology. For purposes of clarification, without limitation,
neither Party shall be permitted to use the other Party’s Background Technology
to manufacture, use or sell Products, except as expressly provided otherwise
herein.


7.2           Foreground
Technology


a.                                       From the
Effective Date and thereafter, all Foreground Technology shall be jointly owned
by Iteris and Valeo.


b.                                      The Parties
will reasonably pursue registered protection of the Foreground Technology,
including patent protection to protect inventions, and will each consult with
the other Party to determine whether and in which countries 


 
















 


                                                protection
shall be sought, which Party shall bear the responsibility (including any expense)
for pursuing the protection and maintaining any resulting right (e.g., patent),
the desired scope of protection, and which Party shall control prosecution of
any application for such right.


c.                                       If it is
determined that only one Party wishes to file or maintain an application to
protect Foreground Technology in a country, then the non-filing Party will
assign its interest in the rights following from such filed or maintained
application in that country to the other (who shall own it exclusively) with the
non-filing Party retaining a non-exclusive license (with the right to
sub-license within the scope of this Agreement) under any resulting right in
such country.  Royalties payable  shall be as set forth in Article
7.3(b).  Where only one Party files an
application under this part, that Party shall bear all expenses.


d.                                      During the term
of this Agreement, the Parties agree that they will not grant any license or
right under or otherwise alienate or encumber their respective interest in any
jointly owned Foreground Technology, without the prior written approval of the
other joint owner except that Iteris may license, alienate or encumber rights
that do not cover applications for Class 1 and 2 Vehicles and Valeo may
license, alienate or encumber rights that do not cover applications for Class 3
through 8 Vehicles. Either Party may, without prior written approval, in a
limited license, grant to its Affiliates the right to use Foreground Technology
to the extent that the licensing Party itself is permitted to use the
Foreground Technology under this Agreement, subject to all limitations and
restrictions (including, but not limited to, obligations related to accounting
and royalties).  In the absence of an
agreement otherwise, which the Parties agree to negotiate in good faith, any
royalties paid by any third party for a license to any jointly owned Foreground
Technology for which the written approval of the other Party is required will
be shared equally by the Parties. Royalties paid by any third party for a
license to any jointly owned Foreground Technology for which the written
approval of the other Party is not required or any royalties paid specifically
for any exclusively owned rights in Foreground Technology under Article 7.2(c),
will not be shared or accounted for as between the Parties. Following the
expiration or any termination of this Agreement, each Party may use and enforce
its rights in the jointly owned Foreground Technology without restriction and
without any reporting or accounting obligation to the other Party.


e.                                     No Party shall
abandon the prosecution or maintenance of any patent or patent application with
respect to any Foreground Technology under its control, without notifying the
other Party of such fact in reasonable time, and in no event less than
forty-five (45) days prior to any relevant deadline for filing or other action,
for the other Party to assume prosecution or maintenance of such patent or
patent application if it so desires. If such other Party assumes prosecution or
maintenance of such patent or patent application, it shall thereafter have the
same rights and obligations relative to such patent or patent application as
the exclusive owner and such patent or patent application shall be assigned to
such other Party, subject 


 
















 


                                                only to a
royalty free, non-exclusive license (with rights to sub-license limited to
purposes related to Class 1 and 2 Vehicles only for Valeo and Class 3 through 8
Vehicles for Iteris) to the assigning Party under any resulting right.


f.                                         Representatives
of the Parties shall meet in person at least once each calendar quarter, during
the term of this Agreement to review intellectual property issues that may
require attention under this Agreement, including but not limited to the
identification of any new inventions, the status of prosecution of intellectual
property rights, the identification of any third party intellectual property
rights that may require attention, the coordination and development of an
intellectual property strategy, the identification of any disputes or potential
disputes with third parties, the identification of any requirements for
designing around intellectual property rights of a third party, and the status
of any other matters reasonably relating to the above matters. The designated
representatives of the Parties shall make necessary and appropriate
recommendations to the Parties in order that the Parties can take reasonable
measures pursuant to this Article 7.2(f).


                                                The designated
representatives shall jointly recommend selection of appropriate legal counsel
for performing or otherwise taking any necessary or appropriate legal action.


                                                The designated
representatives shall jointly recommend a fair and equitable allocation of
expense sharing to assure timely and reasonable payment of expenses incurred in
connection with the execution of any intellectual property strategy (including
but not limited to the prosecution and maintenance of individually or jointly
owned intellectual property rights, and the cost of procuring legal advice to
help assure freedom to practice technology in view of third party patents).


7.3                                 Licenses to Technology


a.                                       Iteris hereby
grants to Valeo a nontransferable, worldwide license under Iteris’s Background
Technology to use, develop, manufacture, have manufactured, market and sell,
the Products in the Class 1 and 2 Vehicle Market (the “Iteris License”). Except
to the extent the Iteris License is rescinded or revoked by earlier termination
of this Agreement as specified in Article 9 below, the Iteris License shall be
Exclusive to Valeo for the period of the Initial Term, where “Exclusive” means
that Iteris shall not, with respect to the Class 1 and 2 Vehicle Market, use,
develop, manufacture, have manufactured, market or sell Products that include
Iteris’s Background Technology, nor shall Iteris license its Affiliates or
third parties to use Iteris’s Background Technology in a manner prohibited to
Iteris; provided that during the period of the Initial Term, Iteris shall
retain (i) only the rights to use and develop Iteris’s Background Technology
solely with respect to fulfilling its obligations to Valeo under this Agreement
and (ii) unrestricted rights to use, develop, manufacture, market and sell
Iteris’s Background Technology solely with respect to Products in the Class 3 through
8 Vehicle Market and any other products that do not compete with Products in
the Class 1 and 2 Vehicle 


 
















 


                                                Market.  Upon payment in full of the Worldwide
Technology Access Fee as described in Articles 7.3(d) or 9.3(a) below and
subject to Article 7.3(e) below, the Iteris License shall become Exclusive to
Valeo in perpetuity.


b.                                      Valeo shall pay
to Iteris a Product royalty†.


                                                Such royalties
shall be paid:†


To the extent the Product is
part of a module or system that performs functions other than those directly
the result of LDWS Technology, the Parties will negotiate in good faith to
determine an appropriate portion of the module or system price for purposes of
establishing Unit Sales Price for calculation of the royalty.


There shall only be a single
royalty for Iteris’s LDWS Technology due for sale of a Product even if a
Product is covered by more than one intellectual property right. In this
Agreement, Valeo shall not have any obligation to pay Iteris a royalty for any
lane departure warning applications other than vision-based LDWS Technology
(e.g., radar or infrared).  Iteris agrees
not to enforce any intellectual property rights it may own against Valeo’s Affiliates, suppliers and
customers for any uses or applications of intellectual property that result
from rights granted by Valeo within
the scope of the Iteris License.


Product royalty payments by
Valeo to Iteris shall be payable †. Each Product royalty payment shall be
supported by written documentation certified by an authorized Valeo representative
showing calculation of royalty amount owed. Iteris shall have the right to
audit at reasonable times and upon at least ten-(10) days advance notice and
subject to an obligation of confidentiality calculations and underlying
documentation for a period of two (2) years after receipt of payment. Unless
otherwise notified in writing, payment by Valeo shall be by electronic transfer
as described in Article 3.6 above.


c.                                       Intentionally
omitted.


d.                                      As compensation
for the perpetual and Exclusive rights to the Iteris License as provided in
Article 7.3(a) above, Valeo shall pay to Iteris a Worldwide Technology Access
Fee (“WTAF”) in the amount of $†. Payment provides for access to and use by
Valeo to Iteris’s executable object code and complete source code (including
algorithms) in accordance with the following milestones. Valeo may only use
executable object code, source code and algorithms within the scope of the
licenses and ownership allocation provided in this Agreement and on the
conditions that such use will, if Products are sold, result in payment of
royalties to Iteris under this Agreement. Unless otherwise notified in writing,
payment by Valeo shall be by electronic transfer as described in Article 3.6
above (subject to the termination provisions set forth below).  In connection with such access, 










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed separately
with the Securities and Exchange Commission.


 
















 


                                                Valeo shall
receive at least electronic copies of each deliverable together with any other
information as may be necessary for Valeo to successfully employ such code. 


	
  Description/deliverable

  	
   

  	
  Amount

  	
   

  	
  Payment
  /Delivery date

  



 


Worldwide Technology Access Fee:


†


 


†


 


†


 


†


Upon
receipt of the respective payments, Iteris will provide to Valeo software code
as it existed ten (10) days before the specified delivery date, consisting of
Foreground Technology developed under this Agreement and Background Technology
that (i) comprises or constitutes Iteris’s LDWS Technology, (ii) is required to
use Iteris’s LDWS Technology, or (iii) improves Iteris’s LDWS Technology,
including improvements under Article 10.1(a) below.  Iteris agrees to provide reasonable technical
services to Valeo after the delivery date to allow Valeo to access the provided
code for its intended purpose.  The Parties
intend that Iteris will provide Valeo with the most up to date version of the
code at each delivery date.  At each
delivery of executable object code, Iteris agrees to supply the underlying
source code to a mutually agreeable software escrow.  Costs associated with the escrow shall be
born by Valeo.


e.                                       If at any time
Valeo (i) abandons the development, manufacture, sale, or distribution of
Products for a period in excess of four (4) months (provided such manufacture,
sale or distribution had already commenced and that abandonment shall not
include interruption caused by a third party or an event beyond Valeo’s
control); (ii) commences manufacture, sales or distribution of Products
incorporating vision-based LDWS Technology other than Iteris’s LDWS Technology,
or (iii) otherwise fails for a continual period of four (4) months to use its
commercially reasonable efforts to develop, market and sell Products
incorporating Iteris’s LDWS Technology, the Iteris License granted by Iteris
under Article 7.3(a) above shall become non-exclusive and Iteris shall be free
to develop, market, sell and distribute Products incorporating Iteris’s LDWS
Technology for the Class 1 and 2 Vehicle Market and/or license others to do so.
To implement this Article 7.3(e), Iteris must notify Valeo in writing of the
alleged occurrence of such event (i), (ii) or (iii) and Valeo must fail to cure
such alleged occurrence within thirty (30) days of receipt of such notice. The occurrence of the 










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed
separately with the Securities and Exchange Commission.


 
















 


                events
described in (i) and (iii) above during the term of this Agreement shall be
considered as a basis for terminating this Agreement pursuant to Article
9.2(c)(1).


f.                                         If the Iteris
License becomes non-exclusive for any reason under this Agreement, the
applicable Product royalty payable by Valeo for any remaining obligations
thereafter shall be the lower of †


g.                                    In the event
that any intellectual property rights accrue to one Party, which are not
specifically contemplated by the Agreement herein and which would literally or
by equivalents cover subject matter that is being developed and/or
commercialized by the other Party, the Parties agree to enter into good faith
negotiations regarding a non-exclusive license under such intellectual property
rights at a reasonable royalty for the purpose of affording the continued
development and/or commercialization of Foreground Technology by such other
Party. In any event, to the extent that a Party already pays a royalty to
another Party for any such subject matter, no additional royalty shall be owed.


The Parties acknowledge that the right to use
Foreground Technology is limited to circumstances where a license to Background
Technology of the other Party is not required. Valeo’s right to use Iteris’s
Background Technology is solely governed by the Iteris License.


7.4.                              Enforcement.


                                                In the event
that it is believed that any third party is infringing rights in any of the
Background Technology or the Foreground Technology then, before either Party
confronts the third party, the Parties agree to meet and negotiate in good
faith a strategy for enforcement of the rights, to determine the roles and
responsibilities of the Parties, to determine expense sharing, to determine
allocation of sharing of proceeds and other matters related to such
enforcement. In the event that the Parties are unable to reach an agreement
based upon such meeting, then the right to enforce rights in Background
Technology or the Foreground Technology for Class 1 and 2 Vehicle applications
shall reside primarily in Valeo, and the right to enforce rights in Background
Technology or the Foreground Technology for Class 3 through 8 Vehicle
applications shall reside primarily in Iteris. Further, absent an agreement,
the Parties shall share in any recovery on a pro rata basis relative to the pro
rata portion of litigation expenses paid by each Party. The Parties agree to
provide reasonable assistance and cooperation in any proceeding.
Notwithstanding the above, in the event that enforcement is sought to be
undertaken while Valeo is a non-exclusive licensee under rights in the
Background Technology, then the right to enforce such rights shall reside
entirely in Iteris, and Valeo shall be entitled to no share of Iteris’s
recovery; provided that Valeo may, at its own expense, make a claim against an
infringer for any damages that it may have suffered separate and apart from
Iteris’s damages. Iteris agrees to reasonably cooperate with Valeo’s efforts to
make such a claim. Nothing herein shall require a Party in which the primary
right of enforcement










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed
separately with the Securities and Exchange Commission.


 
















 


                                                resides to
pursue any enforcement, and if such Party elects not to enforce rights, then
the other Party shall be entitled to enforce rights at its sole expense and
shall be entitled to the entirety of any recovery.  Valeo shall be entitled to register this
agreement in those countries that require license registration for
participation in litigation.


7.5                                 The parties
agree to negotiate in good faith regarding the use of the AutoVueTM trademark by
Valeo.


Article 8

Liability/Indemnity/Representations


8.1                                 The employees
or representatives of each Party shall obey all pertinent rules and regulations
of the other Party while on the premises of the other Party.  Each Party shall defend,  indemnify and hold harmless (including for
reasonable attorney’s fees and costs) the other Party against all claims for
bodily injuries, including health, or damage to property caused by a negligent
act or omission of the indemnifying Party or its employees arising under or in
connection with this Agreement, provided that the indemnifying Party is
promptly notified of such claims, given all evidence in the indemnified Party’s
possession, and given reasonable assistance in and sole control of the defense
and all negotiations for settlement or compromise thereof.


8.2                                 Each Party (the
“Indemnifying Party”) shall defend, indemnify and hold harmless the other Party
(the “Indemnified Party”) from and against any losses, damages or claims
(including reasonable attorneys fees and costs) (“Losses”) arising out of or
related to any breach of any representation, warranty or covenant under this
Agreement by the Indemnifying Party, provided that the Indemnifying Party is
timely notified of such claims and given reasonable assistance in and sole
control of the defense and all negotiations for settlement or compromise
thereof.


8.3                                 In the event a
claim is received by one Party that alleges the Products or any part thereof
infringes upon the patent, copyright, trademark or proprietary rights of
others, the receiving Party shall immediately notify the other Party in writing
of such claim. The Party who has developed the Background or Foreground
Technology that is the subject of the claim shall be authorized the sole power
to defend or settle such claim, and exercise its reasonable commercial efforts
to procure for the other Party the right to use the Products or modify or
replace the Products to avoid infringement. The other Party will cooperate, at
its own expense, in the defense of any such claims as reasonably requested by
the defending Party. The Party who has developed the Background or Foreground
Technology that is the subject of the claim shall defend, indemnify and hold
the other Party harmless from any damages resulting from a final judgment of
infringement. In the event jointly developed Foreground Technology is the
subject of the claim, the Parties shall agree on who shall assume the defense
and how any costs relating to the defense as well as any damages shall be
shared among the Parties.


8.4                                 Each Party
shall be liable under this Agreement to the extent of its contributory actual
liability, regardless of the form of action giving rise to such liability
(whether in contract, tort or otherwise). IN NO EVENT WILL EITHER PARTY BE
LIABLE FOR ANY 


 
















 


                                                INDIRECT,
PUNITIVE, EXEMPLARY, CONSEQUENTIAL, INCIDENTAL OR SPECIAL DAMAGES OF THE OTHER
PARTY OR ANY THIRD PARTY EVEN IF THE PARTY HAS BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES AND WHETHER OR NOT SUCH DAMAGES ARE FORESEEABLE OR ARE CAUSED
AS A CONSEQUENCE OF THE NEGLIGENCE OF THE PARTY OR OTHERWISE.


8.5                                 EXCEPT AS
EXPRESSLY SET FORTH HEREIN, NEITHER PARTY MAKES ANY WARRANTIES OF ANY KIND,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, IMPLIED WARRANTIES OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT. VALEO
AGREES THAT IT WILL NOT MAKE ANY REPRESENTATIONS OR WARRANTIES WITH RESPECT TO
ITERIS’S LDWS TECHNOLOGY OTHER THAN THOSE WHICH ARE SPECIFICALLY APPROVED BY
ITERIS IN WRITING; PROVIDED THAT ITERIS SHALL NOT UNREASONABLY WITHHOLD SUCH
APPROVAL.


8.6                                 Iteris
representations, warranties and covenants:


a.                                       Iteris
represents and warrants that it is the owner of the entire, right, title and
interest in the Iteris’s LDWS Technology, or has otherwise acquired rights to
license  all intellectual property
rights to Valeo  that are
necessary for the purposes of this Agreement, including but not limited to the
United States and foreign copyrights and patent applications corresponding
thereto and in the inventions described and claimed therein.  Iteris has complete and unrestricted
authority, and, except for the jointly-owned patents/patent applications with †, the sole authority, to
issue licenses under Iteris’s LDWS Technology, and Iteris has not knowingly
granted licenses thereunder to any other entity that would restrict rights
granted to Valeo. Iteris/† jointly-owned patents/patent applications that are part of Iteris’s
LDWS Technology are as follows: †.  Iteris represents and warrant that
is has all necessary rights to license the Iteris /† jointly-owned patents / patent applications
under this Agreement.


b.                                      Iteris
represents and warrants that it has no knowledge of any actual or potential
infringement of any intellectual property rights of a third party that might
result from the proposed practice by Valeo of Iteris’s LDWS Technology, and no
claims have been asserted against Iteris that Iteris’s LDWS Technology violates
any intellectual property rights of any third party.


c.                                       Iteris shall
use commercially reasonably efforts to respect to the valid and enforceable
intellectual property rights of third parties and to design around any patent
that is reasonably believed to pose a risk to the freedom of Valeo to practice
Iteris’s LDWS Technology and to reasonably apprise Valeo of any intellectual
property right issued to a third party that may pose a risk to the freedom of
Valeo to practice Iteris’s LDWS Technology.










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed
separately with the Securities and Exchange Commission.


 
















 


8.7                                 In connection
with the mutual obligations of the Parties hereunder, each Party shall maintain
insurance coverage in amounts not less than the following: (a) Comprehensive
General Liability (including Products/Completed Operations and Blanket
Contractual Liability) limits in the amounts of $1,000,000 combined bodily
injury and property damage per occurrence; and (b) Commercial Umbrella limits
in the amount of $5,000,000 per occurrence and $10,000,000 annual aggregate.  In addition, Iteris shall maintain
Information Technology Errors and Omissions insurance coverage with limits not
less than $10,000,000 per claim and aggregate of claims. Upon request, each
Party shall furnish certificates of insurance to the other Party setting forth
the amounts of coverage, policy numbers and dates of expiration for insurance
maintained pursuant to this paragraph. Such certificates shall provide that the
other Party will receive thirty (30) days prior written notification from the
insurer of any cancellation or termination.


Article 9

Term of Agreement


9.1                                 This Agreement
shall be effective as of the Effective Date and shall remain in force for an
Initial Term ending March 31, 2008 unless this Agreement is terminated upon the
earliest of the conditions of termination listed in Article 9.2. The term of
this Agreement shall be automatically extended in one (1) year increments
except upon written notice by either Party to the other not less than ninety
(90) days prior to the end of the current term.


9.2                                 Conditions of Termination


                                                The conditions
of termination of this Agreement are as follows.


a.                                       Mutual Agreement


                                                Upon mutual
written agreement of the Parties;


b.                                      Convenience


                                                (1)           A Party that has a right to terminate
this Agreement under this Section 9.2(b) is referred to as a “Terminating
Party.” †, then the
Terminating Party may terminate this Agreement for its sole convenience upon
three (3) months prior written notice to the other of its intent to terminate
this Agreement; provided, that over such 3-month period both parties shall
continue performance in compliance with this Agreement. For purposes of Article
9.2(b)(1), DC Ventures GmbH and its successors shall not be deemed a †; provided that its
Affiliates shall not be subject to such exclusion.


                                                (2)           Except as provided in Article
9.2(b)(1) above: (i) With respect to the commitments made herein for the first
two (2) years or for a one-year extended term once it has commenced, this
Agreement may not be 










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed
separately with the Securities and Exchange Commission.


 
















 


                                                                terminated for the sole
convenience of either Party; and (ii) With respect to termination of
commitments made herein for years 3, 4, 5, 
either Party may terminate this Agreement for its sole convenience upon
twelve (12) months prior  written notice
to the other of its intent to terminate this Agreement provided over such 12
months period both Parties shall continue performance in compliance with this
Agreement.


c.                                       Default


                                                Upon notice in
writing by one Party to the other if:


(1)                                  the other Party
fails to perform or observe any material term of this Agreement and, in the
case of a remediable breach, fails to remedy such breach or present a mutually
agreeable plan to remedy such breach, within 
thirty (30) days of receipt of notification requiring it to do so;


(2)                                  the other Party
ceases to carry on its business for more than 30 consecutive days  except in the case of Force Majeure events as
set forth in Article 11.11; or


(3)                                  any action,
application or proceeding is taken in respect to the other Party, which
materially prevents or restricts the terminating Party from receiving the
benefits of this Agreement, for (a) a voluntary arrangement or composition or
reconstruction of its debts; (b) the presentation of an administrative
petition; (c) its winding up or dissolution; (d) the appointment of a
liquidator, trustee, receiver, administrative receiver or similar officer; (e)
a petition for a bankruptcy order or an application for a voluntary
arrangement; or (f) any similar action, application or proceeding in any
jurisdiction to which it is subject.


9.3           Results of Termination


                                                The provisions
contained in this Agreement which by their terms or operation are intended to
survive any termination of this Agreement (including, Articles 4, 6, 7.1, 7.2,
7.3, 8, 10.1(a), 10.1(c) and 11.6 and any obligations for payments between the
Parties that have accrued before the effective date of the termination  ) shall survive any such termination. In
addition, unless otherwise agreed in a mutual termination agreement under
Article 9.2(a):


a.                                       If termination
occurs after payment of the WTAF, then the Iteris License shall become a
perpetual and Exclusive license.


b.                                      If termination
occurs before payment of the WTAF and termination is effected by: (1) mutual
agreement under Article 9.2(a); (2) Valeo for its convenience under Article
9.2(b)(1); (3) Iteris for its convenience under Article 9.2(b)(2); or (4) Valeo
for default by Iteris under Article 9.2(c), then Valeo may accelerate payment
on the balance of the WTAF prior to the termination date and, once Iteris has
received the balance of the WTAF, the Iteris License shall become a perpetual
and Exclusive license.


 
















 


c.                                       If termination
occurs before payment of the WTAF and termination is effected by: (1) Iteris
for its convenience under Article 9.2(b)(1); (2) Valeo for its convenience
under Article 9.2(b)(2); or (3) Iteris for default by Valeo under Article
9.2(c), then the Iteris License shall become a perpetual and non-exclusive
license for Customers for which Valeo has commenced production.  Also, the Iteris License shall become a
non-exclusive license for Customers for which Valeo has received, at time of
termination, an executed letter of intent for development leading to
production.  If the letter of intent
leads to production before expiration of the letter (and any extensions), then
the Iteris License shall become a perpetual and non-exclusive license for that
Customer.  If the letter of intent does
not lead to production, then the Iteris License shall terminate upon expiration
of the letter of intent for that Customer.  The Iteris License shall otherwise terminate.


d.                                      If termination
occurs before payment of the WTAF and termination is effected by: (1) Valeo for
its convenience under Article 9.2(b)(1); (2) Iteris for its convenience under
Article 9.2(b)(2); or (3) Valeo for default by Iteris under Article 9.2(c),
then the Iteris License shall become a perpetual and Exclusive license for
Customers for which Valeo has commenced production.  Also, the Iteris License shall become an Exclusive
license for Customers for which Valeo has received, at time of termination, an
executed letter of intent for development leading to production.  If the letter of intent leads to production
before expiration of the letter (and any extensions), then the Iteris License
shall become a perpetual and Exclusive license for that Customer.  If the letter of intent does not lead to
production, the Iteris License shall become a perpetual and non-exclusive
license upon expiration of the letter of intent for that Customer.  The Iteris License shall otherwise become a
perpetual and non-exclusive license.


e.                                       The licenses
under Articles 9.3(a-d) shall be subject to Articles 7.3(b) and 7.3(e) (but for
its last sentence). The definition of “Exclusive” in Article 7.3(a) shall apply
to Article 9.3 generally.


f.                                         If termination
occurs before payment of the WTAF, Valeo chooses not to accelerate payment on
the balance of the WTAF prior to the termination date and the termination is
effected by mutual agreement under Article 9.2(a), then the Parties shall
negotiate in good faith the terms of the Iteris License.


g.                                      For the Iteris
License surviving termination, (i) if Valeo breaches by failing to perform or
observe any material term surviving termination, then Iteris may terminate the
Iteris License; provided that in the case of a remediable breach, within four
(4) months of receipt of notification of the breach, Valeo may remedy the
breach or present a mutually agreeable plan to remedy the breach; and (ii) if
Iteris breaches by failing to perform or observe any term surviving termination
that dilutes Valeo’s rights under the surviving Iteris License in any material
respect or impairs Valeo’s ability to sell Products pursuant to the terms of
the surviving Iteris License in any material respect, then the Iteris License shall
become royalty-free; provided that in the case of a remediable breach, within
four (4) months of receipt of notification of the breach, Iteris may remedy the
breach or 


 
















 


                                                present a
mutually agreeable plan to remedy the breach. 
If Iteris remedies the breach or presents a mutually agreeable plan
within the four (4) month period, then the Iteris License shall become royalty
bearing at the end of the four (4) month period.  If Iteris fails to remedy the breach or present
a mutually agreeable plan within the four (4) month period, then the Iteris
License shall become perpetually royalty free. 
The Iteris License of this Article shall be subject to Article 7.3(e)
(but for its last sentence).


h.                                      Upon
termination of this Agreement, each Party shall promptly return to the other
Party all equipment, tooling and other materials owned, purchased by, or
purchased on behalf of the other Party that is in its possession or control or
the possession or control of third parties on its behalf.


Article 10

Special Provisions


10.1                           Obligations of
the Parties regarding LDWS Technology


a.                                       Throughout the
term of this Agreement, Iteris shall undertake and support improvements of
Iteris Background  Technology at its own
expense in order to optimize the performance and cost competitiveness of the
Products. After any expiration or termination of this Agreement, Iteris shall
provide the foregoing support on commercially reasonable mutually agreeable
terms.


b.                                      During the term
of this Agreement, Iteris shall not engage, directly or indirectly (including
through consultants or contractors) in the development of vision-based LDWS
Technology, including Iteris’s LDWS Technology, for Class 1 and 2 vehicles
other than for use by Valeo pursuant to the terms of this Agreement.


c.                                       Valeo shall not
sublicense or otherwise authorize any third party, including its Affiliates, to
sell Products to any Customer(s) if such sublicense or other authorization
avoids or otherwise reduces the Product royalty that would be payable to Iteris
if Valeo were to sell directly to the same Customer(s).


 










 








10.2                           †


At any time in its sole
discretion, Iteris may seek third party investment specifically for the
development of or other participation in development of automotive functions
involving Iteris technologies other than vision-based LDWS Technology. †


10.3         †


a.                                       If Iteris
decides, including through its shareholders or directors, to decrease
significantly or cease the development of the AutoVueTM Operations, †


b.                                      At any time in
its sole discretion, Iteris may seek to sell its AutoVueTM Operations. †


(i)                                     †


(ii)                                  †


(iii)                               †


(iv)                              †


(v)                                 †


c.                                       †


d.                                    †


e.                                       †


10.4                           Both Parties
recognize that parallel development of products incorporating Iteris’s LDWS
Technology for their respective markets (Valeo—Class 1 and 2; Iteris—Class 3
through 8) could result in opportunities to reduce manufacturing costs through
quantity purchases of common parts such as cameras, lens, etc. To the maximum
extent reasonably commercially practical, the Parties agree to cooperate in
such procurements by pooling purchases or reselling one to the other so that
the Parties achieve the benefits of quantity purchases.


 










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed
separately with the Securities and Exchange Commission.


 










 








Article 11

Miscellaneous Provisions


11.1                           Contacts are as
listed below or as either Party may designate and notify the other Party in
writing.


Iteris


Project/Technical                 †

†

Iteris, Inc.

1515 S. Manchester Avenue

Anaheim, CA 92802-2907

†

†


Contract                                  †

Iteris, Inc.

1515 S. Manchester Avenue

Anaheim, CA 92802-2907

†

†


Valeo


Project/Technical                                                   †

†

Valeo Schalter und Sensoren GmbH

Stuttgarter Str.

74321 Bietigheim-Bissingen

Germany


†

†


Contract                                                                                                  †

†

†


†

†


11.2                           Except as
otherwise provided herein, all notices, requests and demands to or upon a Party
hereto, to be effective, shall be in writing and shall be sent by personal
delivery against receipt, by prepaid express courier, or by facsimile, confirmed
by hard copy sent by mail or courier, and shall be deemed to have been validly
served, given or delivered 










† In accordance with Rule 24b-2 under the Securities
Exchange Act of 1934, this confidential information has been omitted from this
exhibit pursuant to a request for confidential treatment, and has been filed
separately with the Securities and Exchange Commission.


 
















 


                                                immediately
when delivered personally against receipt, at the date and time of delivery
recorded by the courier if delivery is by express courier, or, in the case of
facsimile notice, when sent and receipt is confirmed by a valid transmission
report.


11.3                           This Agreement
shall not be amended or modified, nor shall any waiver of any right hereunder
be effective unless set forth in a document executed by duly authorized
representatives of both Parties.  The
failure of a Party to insist on strict performance of any term, covenant or
condition herein contained shall not be deemed to be a waiver of such term,
covenant or condition or of any subsequent breach of the same.


11.4                           Should any one
or several of the provisions of this Agreement be or become invalid, illegal,
unenforceable, or in conflict with any law this shall not affect the validity
of the other provisions.  The Parties agree
to replace the legally invalid provision, if possible, by an effective
provision whose economic effect is as similar as possible to the original
provision, and the Parties agree that this new provision shall be deemed to
have been agreed upon from the time when the original provision became invalid.


11.5                           Each Party’s
obligations hereunder shall be subject to all applicable export control
regulations  and each Party agrees not to
export any item resulting from this Agreement for ultimate delivery to those
areas to which delivery would be forbidden under applicable law.


11.6                           This Agreement
is based on mutual trust and confidence. 
The Parties to this Agreement shall try to settle any disputes amicably
through their management representatives. 
The responsible managers of the signatory Parties to the Agreement shall
first meet in person and make a good faith attempt to resolve any such
dispute.  If after such good faith
attempt, the responsible managers cannot otherwise settle or resolve the claim
or controversy, the senior executive management representatives of each Party
shall meet in person and make a good faith attempt to resolve or settle the
matter.


a.                                       In the event of
any disputes over whether a patent or other intellectual property is deemed
Background or Foreground Technology under this Agreement, the Parties, patent
counsel for the Parties, or both shall meet in person in a good faith effort to
resolve the dispute (which resolution may call for the submission of the
dispute to a neutral third party for facilitative mediation), within one month
of notification of the dispute.  If such
meeting does not result in an agreement, then within one month the Parties
shall submit the dispute to arbitration by a panel of three independent third
party patent attorneys each having at least 7 years of experience, who shall
make the determination.  Each Party shall
select one panelist with the final panelist selected by the two initially
selected panelists.  The determination
shall be made by the panel based upon the submission of a written brief by each
Party (not to exceed 20 pages) with any necessary attachments, and a hearing
consisting of a maximum of one hour per side of oral argument, with no
testifying witnesses.  The briefing and
hearing shall occur no later than two months from the date of selection of the
panel. The panel shall be required to render a decision within one month of the
hearing.  Parties agree that the decision
of the panel shall be final and binding upon the Parties hereto. Judgment upon
such an award may 


 
















 


                                                be entered in
any court of competent jurisdiction. 
Unless the Parties agree otherwise, two-thirds of the expenses of the
panel shall be borne by the losing Party and the remaining one-third of the
expenses of panel shall be borne by the winning Party.  The arbitration shall be carried out in
accordance with the Rules of Reconciliation and Arbitration of the
International Chamber of Commerce and in English.


b.                                      Unless the
Parties first cannot agree to attempt resolution by a non-binding facilitative
mediation, any other dispute between the Parties arising out of this Agreement,
not covered by the foregoing provision, shall be solely and finally settled by
a court of arbitration consisting of three arbitrators, unless the Parties
agree on arbitration with one arbitrator only, in accordance with the Rules of
Reconciliation and Arbitration of the International Chamber of Commerce and
done in the English language.  The
Parties agree that in the event that such an arbitration requires interpretation
of the claims or validity of any patent at least one of the arbitrators shall
be a mutually agreeable independent third party patent attorney, having at
least 10 years of relevant patent experience. The place of arbitration shall be
in New York, New York. The award thereof shall be final and binding upon the
Parties hereto. Judgment upon such an award may be entered in any court of
competent jurisdiction.  Either Party may
call for arbitration by providing thirty days written notice of intent to refer
any matter to arbitration under this Agreement


11.7                           This Agreement
shall be subject to the laws of the State of New York, except for its conflict
of laws rules and excluding any International Convention regarding the
International Sale of Goods.


11.8                           Neither this
Agreement nor any interest herein may be assigned, in whole or in part, by
either Party hereto without the prior written consent of the other Party
hereto, except that without securing such prior consent, either Party hereto
shall have the right to assign this Agreement, in whole or in part, to any of
its Affiliates or to any successor by way of merger or consolidation or the
acquisition of substantially all of the business and assets of such Party
relating to the subject matter of this Agreement, provided that such successor
shall expressly assume all of the obligations and liabilities of such Party
under this Agreement to the extent assigned, and provided further, that such
Party shall remain liable and responsible to the other Party hereto for the
performance and observance of all such obligations.


11.9                           Any news
release, public announcement, advertisement or publicity (“Release”) proposed
to be released by either Party concerning the specific rights or obligations of
the other Party in connection with this Agreement or non-public information
involving the other Party shall be subject to the approval of the other Party
prior to release. Further, any Release by one Party involving the application
of LDWS Technology to the vehicle market identified to the other Party (Class 1
and Class 2 Vehicles for Valeo and Class 3 through Class 8 Vehicles for Iteris)
shall be subject to the approval of the other Party prior to Release.  However, either Party may, without the approval
of the other Party, issue any Release that is of a general nature or that
promotes or advocates application of 


 
















 


                                                LDWS
Technology, and such Releases may include general references to the other
Party, the cooperation between the Parties, and the respective markets for
which each Party is responsible.


11.10                     During the period that this
Agreement is in effect and through completion of any resulting contract or
subcontract arrangement, both Parties agree not to solicit for employment any
technical or professional employees from the other Party without the prior
written authorization of the other Party.


11.11                     Force Majeure — Neither
Party shall be deemed to be in default of any provision of this Agreement for
failures in performance resulting from acts or events beyond the reasonable
control of such Party; including, but not limited to, acts of God, civil or
military authority, civil disturbances, wars, strikes, fires, or catastrophes.
If however, such condition persists for more than 90 days, the other Party may
initiate termination of this Agreement in accordance with Article 9.


11.12                     This Agreement constitutes
the entire understanding and agreement of and between the Parties with respect
to the subject matter hereof and supersedes all prior representations and
agreements. The Article and paragraph headings herein are for convenience only
and shall not limit in any way the scope of any provision of this Agreement.


 


IN WITNESS, WHEREOF, the Parties hereto have
executed this Agreement in duplicate as of the date herein above indicated.


 


	
  Valeo Schalter und Sensoren GmbH

  	
   

  	
  Iteris, Inc.

  
	
   

  	
   

  	
   

  
	
  By: †

  	
   

  	
  By: †

  
	
   

  	
   

  	
   

  
	
  Name: †

  	
   

  	
  Name: †

  
	
   

  	
   

  	
   

  
	
  Title: †

  	
   

  	
  Title: †

  
	
   

  	
   

  	
   

  
	
  Date: September 29, 2003

  	
   

  	
  Date: September 29, 2003

  



 










† In accordance
with Rule 24b-2 under the Securities Exchange Act of 1934, this confidential
information has been omitted from this exhibit pursuant to a request for
confidential treatment, and has been filed separately with the Securities and
Exchange Commission.