Exhibit 10.3


 


DEBENTURE REDEMPTION
AGREEMENT


 


This Debenture Redemption
Agreement (“Agreement”) is entered into
as of October 27, 2008 by and between                             
(“Holder”) and Iteris, Inc. (“Iteris” or the “Company”).


 


RECITALS


 


WHEREAS, Holder holds a 6%
Convertible Debenture dated May 19, 2004 in the principal amount of $                    
[and a 6% Convertible Debenture dated May 5, 2005 in the principal amount
of $                    ]
(together, the “Debentures”); and


 


WHEREAS, the parties hereto
have reached certain agreements with respect to the redemption of the
above-described debentures.


 


NOW, THEREFORE, in
consideration of the foregoing and the mutual promises and agreements contained
herein, the sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:


 


1.             Debentures
Redemption.


 


1.1.          The Company agrees to redeem from Holder, and Holder agrees
to sell back to the Company, the Debentures for an aggregate payment of                           
($                    )
(the “Redemption Price”).  In addition to the payment of the Redemption
Price, the Company shall pay at the Closing (as defined below) all accrued but
unpaid interest on the Debentures as of the date of Closing.


 


1.2.          The redemption of the Debentures (the “Redemption”)
shall take place at the offices of Dorsey & Whitney LLP, 38 Technology
Drive, Suite 100, Irvine, California 92618, at 1:00 P.M. Pacific Time
on October 27, 2008, or at such other time and place as the Company and
Holder mutually agree orally or in writing (which time and place are designated
as the “Closing”).  At the Closing, Holder shall deliver to the
Company the originals of the Debentures against payment by the Company of the
amounts set forth in Section 1.1 by check, wire transfer or any
combination thereof.  Notwithstanding the
foregoing, Holder acknowledges and agrees that, upon and as of the payment by
the Company of the amounts set forth in Section 1.1, whether or not
Holder has delivered and surrendered the originals of the Debentures to the
Company, the Debentures shall be deemed null and void and cancelled in its
entirety and Holder shall have no further rights with respect to or under the
Debentures, whether such rights shall have accrued prior to or after the date
hereof.


 


2.             Representations
and Warranties.  Holder hereby
represents, warrants and acknowledges as follows:


 


2.1.          As of the date hereof, the aggregate principal amount
outstanding under the Debentures is                           
($                    )
and the aggregate accrued but unpaid interest outstanding under the Debentures
is                           
($                    ).


 

















 


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


 


2.3.          Holder has the full right and power to enter into this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby.  The
execution, delivery and performance of this Agreement by Holder, and the
consummation of the transactions contemplated hereby, (i) have been duly
authorized by all requisite organizational action of Holder and (ii) do
not and will not conflict with any law applicable to Holder or any of its
properties or assets or any provisions of Holder’s organizational documents or
contracts, agreements or other instrument to which Holder is a party or by
which any of its properties or assets may be bound.


 


2.4.          Holder is an experienced and sophisticated investor, having
such knowledge and experience in business and financial matters and investing
as to be able to protect its own interests and assess the risks and merits of
the Redemption.  Holder has independently
determined the advisability of entering into this Agreement and is entering
into this Agreement of its own volition, and is not relying on any
representations or statements of the Company or its officers, directors,
shareholders, employees, agents, attorneys and representatives except for those
representations and statements expressly set forth herein.


 


2.5.          Holder has had the opportunity to consult with counsel of
its choice regarding the meaning and legal effect of this Agreement, and
regarding the advisability of making the agreements provided for herein, and
fully understands the same.


 


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


 


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


 


3.2.          The Releasing Parties acknowledge and agree that the
foregoing release includes in its effect all claims that they do not know or
suspect to exist in their favor as of the date hereof, and the Releasing
Parties expressly waive any statute, legal doctrine or other similar limitation
upon the effect of general releases.  In
particular, the Releasing Parties waive any and 


 


2

















 


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


 


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


 


4.             Governing Law.  This Agreement shall in all
respects be interpreted, enforced, and governed by and under the internal laws
of the State of Delaware, without giving effect to any choice of law or
conflict of law principles.


 


5.             Entire
Agreement.  This
Agreement constitutes the entire agreement between the parties with respect to
the subject matter and supersedes all prior oral or written communications,
understandings and agreements with respect thereto.


 


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


 


7.             Interpretation.  Each party has had the opportunity to
negotiate modifications to the language of this Agreement and agrees that, in
any dispute regarding the interpretation or construction of this Agreement, no
presumption shall operate in favor of or against any party by virtue of its
role in drafting or not drafting the terms and conditions set forth herein.


 


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


 


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


 


[Signature Page Follows]


 


3

















 


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


 


	
  Iteris, Inc.

  	
   

  	
  [                            ]

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  



 


 


4

















 


Schedule
for Exhibit 10.3


 


Iteris, Inc. entered
into a Debenture Redemption Agreement with the following Holders, each
substantially identical to this Exhibit 10.3 except as noted below:


 


	
  Holder

  	
   

  	
  Principal Amount

  of Debenture(s)

  	
   

  	
  Redemption Price

  	
   

  	
  Principal

  Outstanding

  	
   

  	
  Accrued But

  Unpaid Interest

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lloyd I. Miller, III

  	
   

  	
  $

  	
  500,000.00

  680,000.00

  	
   

  	
  $

  	
  1,150,500.00

  	
   

  	
  $

  	
  1,180,000.00

  	
   

  	
  $

  	
  5,222.95

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Lloyd I. Miller Trust A-4

  	
   

  	
  $

  $

  	
  500,000.00

  1,320,000.00

  	
   

  	
  $

  	
  1,774,500.00

  	
   

  	
  $

  	
  1,820,000.00

  	
   

  	
  $

  	
  8,055.74

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Milfam I, L.P.

  	
   

  	
  $

  $

  	
  500,000.00

  1,180,000.00

  	
   

  	
  $

  	
  1,638,000.00

  	
   

  	
  $

  	
  1,680,000.00

  	
   

  	
  $

  	
  7,436.07

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Milfam II, L.P.

  	
   

  	
  $

  	
  500,000.00

  	
   

  	
  $

  	
  487,500.00

  	
   

  	
  $

  	
  500,000.00

  	
   

  	
  $

  	
  2,213.11