Document:

EXHIBIT 10.2

 

CHANGE IN
CONTROL AGREEMENT

 

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

 

Section 1.                                            Term of Agreement.

 

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

 

Section 2.                                            Definitions.

 

(a)                                  “Change in
Control” shall
mean any of the following transactions effecting a change in ownership or
control of this Corporation:

 

(i)                                     a merger or consolidation of the Corporation with or into
another entity or any other corporate reorganization, if persons who were not
stockholders of the Corporation immediately prior to such merger, consolidation
or other reorganization own immediately after such merger, consolidation or
other reorganization 50% or more of the voting power of the outstanding
securities of each of (i) the continuing or surviving entity and (ii) any
direct or indirect parent corporation of such continuing or surviving entity.

 

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

 

(iii)                               the acquisition, directly or indirectly, by any person or
related group of persons (other than the Corporation or a person that directly
or indirectly controls, is controlled by or in under common control with, the
Corporation), of “beneficial ownership” as defined in Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), of securities of the
Corporation representing at least 50% of the total combined voting power
represented by the Corporation’s then outstanding voting securities.  For purposes of this subsection, the term “person” shall have
the same meaning as when used in Sections 13(d) and 14(d) of the
Exchange Act but shall exclude (i) a trustee or other fiduciary holding
securities under an associate benefit plan of the Corporation or of a Parent or
Subsidiary and (ii) a corporation owned directly or indirectly by the
stockholders of the Corporation in substantially the same proportions as their
ownership of the common stock of the Corporation.

 

Notwithstanding anything to the
contrary contained herein, a Change in Control be not be deemed to occur in
connection with any underwritten public offering of the Corporation’s
securities.

 

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

 

(i)                                     Employee’s involuntary dismissal or discharge by the
Corporation for reasons other than Willful Misconduct, or

 

(ii)                                  Employee’s voluntary resignation following (A) a change
in his position with the Corporation which materially reduces his level of
responsibility, (B) a material reduction in his level of compensation
(including base salary, fringe benefits and participation in

 

1

 

bonus or incentive programs) or (C) a
relocation of Employee’s place of employment by more than fifty (50) miles,
provided and only if such change, reduction or relocation is effected by the
Corporation without the Employee’s consent. 
Notwithstanding the foregoing, for purposes of clause (ii), an
Involuntary Termination shall only be found to exist if Employee has provided
written notice to the Corporation indicating and describing the event under
(A), (B) or (C) within 30 days of such event and the Corporation does
not cure such event within 90 days following the receipt of such notice from
Employee and the Employee resigns within 30 days after the cure period.

 

(c)                                  “Willful Misconduct”
shall mean (i) the
misappropriation of the Corporation’s funds or property, or any attempt by
Employee to secure any personal profit related to the business or business
opportunities of the Corporation without the informed, written approval of the
Audit Committee of the Corporation’s Board of Directors; (ii) any
unauthorized use or disclosure by such person of confidential information or
trade secrets of the Corporation (or any Parent or Subsidiary); (iii) gross
negligence or reckless or willful misconduct in the performance of Employee’s
duties; (iv) the failure to perform, or continuing neglect in the
performance of, duties assigned to Employee for at least ten (10) days
after receipt by Employee from the Corporation of prior written notice of such
failure or neglect; (v) the conviction of, or plea of nolo contendre to, any felony or
misdemeanor involving moral turpitude or fraud; or (vi) any other willful
misconduct by Employee that the Board determines in good faith has had a
material adverse effect upon the business or reputation of the Corporation.

 

(d)                                 “Annual
Base Pay” shall
mean Employee’s base salary at the highest rate in effect at any regularly
scheduled payroll period preceding the occurrence of the Change in Control and
does not include, for example, bonuses, overtime compensation, incentive pay,
sales commissions or expense allowances.

 

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

 

Section 3.                                            Severance Payment; Employment at Will.

 

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

 

(b)                                 Time and Amount of Payment   The Severance Payment shall be paid in one
lump sum starting with the next normally scheduled payroll date of the
Corporation following the latest of the following dates:  (i) Employee’s last day of employment, (ii) the
date the Corporation receives Employee’s signed general release of all claims
pursuant to Section 9, or (iii) the date the revocation period (if
any) specified in the general release of all claims expires.  The amount of the Severance Payment shall be
equal to the following:

 

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

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

 

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Notwithstanding the foregoing, in
the event the Involuntary Termination is the result of Employee’s voluntary
termination of employment with the Corporation and such termination does not
occur within the first six months following the completion of the transaction
giving rise to the Change in Control, Employee shall only be entitled to 50% of
Employee’s Annual Base Pay and no portion of Employee’s Target Bonus.  Payments made under this Agreement shall not
be treated as “compensation” for purposes of the 401(k) Profit Sharing
Plan.  Employee will also receive his
unpaid salary through his termination date and a lump sum payment for all
accrued and unused vacation (through the termination date) in a final paycheck
provided on his last day of work.  This
Severance Payment is intended to qualify as an involuntary separation pay
arrangement that is exempt from application of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”) because all severance payments
are treated as paid on account of an involuntary separation (including a
voluntary separation for good reason) and paid in a lump sum within the “short-term
deferral” period following the time the Employee obtains a vested right to such
payments.

 

(c)                                  Mitigation and Reemployment.   The Employee shall not be required to
mitigate the amount of any payment contemplated by this Section 3 (whether
by seeking new employment or in any other manner), nor shall any such payment
be reduced by any earnings that the Employee may receive from any other source.

 

Section 4.                                            Payments Unfunded and Non-Assignable.

 

(a)                                  No Funding.   Any payments to be made under Section 4
shall represent an unfunded and unsecured obligation of the Corporation, which
shall represent an unfunded and unsecured obligation of the Corporation’s
general assets.  The Employee shall be
considered a general creditor of the Corporation and shall have no rights to
any segregated funds or property of the Corporation.

 

(b)                                 No Assignment.   The Employee’s right to payments under this
Agreement shall not be made subject to option or assignment, either by
voluntary or involuntary assignment or by operation of law, including (without
limitation) bankruptcy, garnishment, attachment or other creditor’s process,
and any action in violation of this Section 4(b) shall be void.

 

Section 5.                                            Group Insurance Coverage.   If the Employee becomes entitled to a
Severance Payment under this Agreement, then the Corporation shall continue to
provide continued group health coverage, as otherwise required under applicable
stated continuation law and the Consolidated Omnibus Budget Reconciliation Act
of 1986, as amended and all applicable regulations (“COBRA”).  Provided that the Employee makes the
necessary COBRA elections and payments, the Corporation shall reimburse
Employee for the total applicable premium costs paid by Employee for such
health COBRA continuation coverage for Employee (and if applicable Employee’s
dependents) until the earlier of (i) twelve months after the termination
of Employee’s employment, or (ii) the maximum COBRA period.  The Corporation’s obligation to reimburse
premiums under this Section shall cease when the Employee obtains new
employment offering healthcare benefits.

 

Section 6.                                            Tax Effect of Payments.

 

(a)                                  The amount of any cash payment to be received by Employee
pursuant to Section 2 of this Agreement shall be reduced (but not below
zero) to the extent required so that no portion of any payment or benefit in
the nature of compensation received or to be received by Employee (whether
payable pursuant to the terms of this Agreement or pursuant to any other plan,
contract, agreement or arrangement with the Corporation or any other person)
(Such payments or benefits are referred to collectively as the “Total Payments”)
shall be treated as an “excess parachute payment” within the meaning of Section 280G(b)(1) of
the Code.

 

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(b)                                 The determination of whether any reduction in payments is
required pursuant to Section 6(a) of this Agreement shall be made in
writing by the Corporation’s independent public accountants, or such other
independent accounting firm or tax advisors selected by the Corporation in its
sole discretion (the “Accounting
Firm”), whose determination shall be conclusive and binding upon
Employee and the Corporation for all purposes under this Agreement.  For the 
purposes of making the calculations required by this Section 6, the
Accounting Firm may make reasonable assumptions and approximations and may rely
on reasonable, good faith interpretations concerning the application of Section 280G
and 4999 of the Code, applicable regulations and other authority.  The Corporation and the Employee shall
furnish to the Accounting Firm such information and documents as the Accounting
Firm may reasonably request in order to make a determination under this
Section.  The Accounting Firm shall
provide detailed supporting calculations, in writing, to both the Corporation
and the Employee of determinations made pursuant to this Section 6.  The Corporation shall bear all of the costs
that the Accounting Firm may reasonably incur in connection with any
calculations contemplated by this section.

 

(c)  In the event of any
uncertainty as to whether a reduction in payments to Employee is required
pursuant to Section 6(a) of this Agreement, the Corporation shall
initially make the payment to Employee, and Employee shall be required to
refund to the Corporation any amounts ultimately determined not to have been
payable under the terms of this Agreement.

 

Section 7.                                            Successors.

 

(a)                                  Corporation’s Successors.   The Corporation shall require any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Corporation’s business and/or assets to assume this Agreement and to agree
expressly and in writing to perform this Agreement in the same manner and to
the same extent as the Corporation would have been required to perform it in
the absence of a succession.  The
Corporation’s failure to obtain such an assumption prior to the effectiveness
of a succession shall be a breach of this Agreement and shall result in
Employee’s Involuntary Termination hereunder. 
For all purposes under this Agreement, the term “Corporation” shall
include any successor to the Corporation’s business and/or assets that executes
and delivers the assumption agreement described in this Section 7(a) or
that becomes bound by this Agreement by operation of law.

 

(b)                                 Employee’s Successors.   This Agreement and all rights of the
Employee hereunder shall inure to the benefit of, and be enforceable by, the
Employee’s personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees.

 

Section 8.                                            Miscellaneous Previsions

 

(a)                                  No Waivers.   No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by the Employee and by an authorized officer of
the Corporation (other than the Employee). 
No waiver by either party of any breach of, or of compliance with, any
condition or provision or of the same condition or provision at another time.

 

(b)                                 Choice of Law.   The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
California.

 

(c)                                  Severability.   The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision hereof, which shall remain in full force
and effect.

 

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(d)                                 Arbitration.   Except for responsibilities assigned to the
Accounting Firm under Section 6, and except for the right of the
Corporation and the Employee to seek injunctive relief in court, any
controversy, claim or dispute of any type arising under or relating to Employee’s
employment or the provisions of this Agreement shall be resolved in accordance
with this Section 8(d) of this Agreement, regarding resolution of
disputes, which will be the sole and exclusive procedure for the resolution of
any such disputes.  This Agreement shall
be enforced in accordance with the Federal Arbitration Act, the enforcement
provisions of which are incorporated by this reference.  Matters subject to those provisions include,
without limitation, claims or disputes based on statute, contract, common law
and tort and will include, for example, matters pertaining to termination,
discrimination, harassment, compensation and benefits.  Matters to be resolved under these procedures
also include claims and disputes arising out of statues such as the Fair Labor
Standards Act, Title VII of the Civil Rights Act, the Age Discrimination in
Employment Act, the California Labor Code, and the California Fair Employment
and Housing Act.  Nothing contained in
this provision is intended to restrict Employee from submitting any matter to
an administrative agency with jurisdiction over such matter.

 

(1)                                  Mediation.  The Corporation and Employee will make a good
faith attempt to resolve any and all claims and disputes relating to the
subject matter of this Agreement through good faith negotiations. If such
claims and disputes cannot be settled through negotiation, the Corporation and
Employee agree to submit them to mediation in Orange County, California before
resorting to arbitration or any other dispute resolution procedure.  The mediation of any such claim or dispute
must be conducted in accordance with the then current JAMS procedures for the
resolution of employment disputes by mediation, by a mediator who has both
training and experience as a mediator of general employment and commercial
matters.  If the parties to this
Agreement cannot agree on a mediator, then the mediator will be selected by
JAMS in accordance with JAMS’ strike list method.  Within thirty (30) days after the selection
of the mediator for one mediation session of at least four (4) hours.  If the claim or dispute cannot be settled
during such mediation session or mutually agreed continuation of the session,
either the Corporation or Employee may give the mediator and the other party to
the claim or dispute written notice declaring the end of the mediation
process.  All discussion connection with
this mediation provision will be confidential and treated as compromise and
settlement discussions.  Nothing
disclosed in any such discussion, which is not independently discoverable, may
be used for any purpose in any later proceeding.  The mediator’s fees will be paid in equal
portions by the Corporation and the Employee, unless the Corporation agrees to
pay all such fees.

 

(2)                                  Arbitration.  If a claim or dispute relating to the subject
matter of this Agreement has not been resolved in accordance with Section 8(d)(1) above,
then the claim or dispute will be determined by arbitration in accordance with
the then current JAMS employment arbitration rules and procedures, except
as modified herein.  The arbitration will
be conducted in Orange County, California by a sole neutral arbitrator who has
training and experience as an arbitrator of general employment and commercial
matters.  If the Corporation and Employee
cannot agree on an arbitrator, then the arbitrator will be selected by JAMS in
accordance with Rule 12 of the JAMS employment arbitration rules and
procedures.  No person who has served as
a mediator under the mediation provision above, however, may be selected as the
arbitrator for the same claim or dispute. 
Reasonable discovery will be permitted and the arbitrator may decide any
issue as to discovery.  The arbitrator
may decide any issue as to whether or as to the extent to which any dispute is
subject to the dispute resolution provisions in Section 8, and the
arbitrator may award any relief permitted by law.  The arbitrator must base the arbitration
award on the provisions of Section 8 of this Agreement and applicable law
and must render the award in writing, including an explanation of the reasons
for the award.  Judgment upon the award
may be entered by any court having jurisdiction of the matter, and the decision
of the arbitrator will be final and binding. 
The parties hereto hereby waive to the fullest extent permitted by law
any rights to appeal or to review such award by any court.  The statute of limitations applicable to the
commencement of a lawsuit will apply to the commencement of an arbitration
under Section 8(d)(2) of the Agreement.  A the request of any party, the arbitrator,
attorneys, parties to the arbitration, witnesses, experts, court reporters or
other persons present at the arbitration shall agree in writing to maintain the
strict confidentiality of the arbitration proceedings.  The arbitrator’s fees will be paid in full by
the Corporation, unless Employee agrees in writing to pay some or all of such
fees.

 

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Section 9.                                            Release and Waiver of Claims.  In consideration for Employee’s receipt of
the Severance Payments or other benefits as specified in this Agreement, to
which Employee is not otherwise entitled, Employee agrees to sign and agree to
the terms of a broad, confidential release of all claims, causes of action, judgments,
damages, liabilities, demands or any other claims Employee or Employee’s heirs,
assigns and agents may now or hereafter have against the Corporation, its
subsidiaries and other related entities, and their respective employees,
stockholders, directors, attorneys, accountants, successors and assigns or
other agents in the form and manner required by the Corporation (the “Release”).  Execution of the Release is a condition
precedent for qualifying to receive any Severance Payments or other benefits as
set forth in this Agreement.  Employee
further understands and acknowledges that if Employee refuses to sign the
Release provided by the Corporation, or attempts to revoke such a Release, to
the extent permitted by its terms, Employee shall be disqualified from
receiving Severance Payments or any other benefits provided by this Agreement.

 

Section 10.                                      Notices.  All notices, demands and other communications
required or permitted to be sent or given hereunder shall be in writing and
will be duly given and effective (i) if delivered in person or by a
reputable courier service, upon such deliver; (ii) if sent by first class
US mail, on the fourth business day following its mailing, certified mail,
postage prepaid and return receipt requested; or (iii) if sent by
overnight mail, on the business day following its mailing provided that the
delivery charges are prepaid.  The
addresses of the parties for the purposes of notice are set forth below.  Each party may change its address from time
to time upon ten days prior notice given in accordance with this Section.

 

	
  Notice to the Corporation:

  	
  Iteris, Inc.

  
	
   

  	
  1700 Carnegie Avenue,
  Suite 100

  
	
   

  	
  Santa Ana, CA 92705-5551

  
	
   

  	
  Attn: Chief Executive Officer

  
	
   

  	
   

  
	
  Notice to Employee:

  	
  Abbas Mohaddes

  
	
   

  	
  3432 Seaglen Drive

  
	
   

  	
  Rancho Palos Verdes, CA 90275

  

 

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IN WITNESS WHEREOF, each of the
parties has executed this Agreement, in the case of the Corporation by its duly
authorized officer, as of the day and year first above written.

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  

  
	
   

  	
   

  	
  Kevin C Daly,

  
	
   

  	
   

  	
  Chairman, Compensation Committee

  
	
   

  	
   

  	
  Iteris, Inc. Board of
  Directors

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  /s/ ABBAS MOHADDES

  
	
   

  	
  ABBAS MOHADDES

  

 

7EXHIBIT 10.3

 

ITERIS, INC.

RESTRICTED STOCK UNIT AWARD AGREEMENT

 

This
RESTRICTED 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 to
the terms and conditions set forth in this Agreement and in the Iteris, Inc.
2007 Omnibus Incentive Plan (the “Plan”).  Capitalized terms used but not otherwise
defined herein shall have the meaning ascribed to such terms in the Plan.

 

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

 

2.                                       Vesting.  Except as otherwise provided in this
Agreement, 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 on
Transfer.  The Units
may not be sold, assigned, transferred or pledged, other than by will or the
laws of descent and distribution, and any such attempted transfer shall be
void.

 

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

 

5.                                       Issuance of
Shares.  As soon as administratively
practicable following the Participant’s vesting date under Section 2
or Section 8 hereof, as applicable, and the Participant’s
satisfaction of any required tax withholding obligations (but in no event later
than 60 days following the vesting date), the Company shall cause to be issued
and delivered to the Participant a certificate or certificates evidencing
Shares registered in the name of the Participant (or in the name of the
Participant’s legal representatives, beneficiaries or heirs, as the case may
be) or to instruct the Company’s transfer agent to electronically deliver such
shares to the respective 

 

 

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

 

6.                                       Rights as
Shareholder.  Units are
not actual Shares, and only represent a right to receive Shares according to
the terms and conditions set forth herein and the terms of the Plan.  Accordingly, the issuance of a Unit shall not
entitle the Participant to any of the rights or benefits generally accorded to
stockholders unless and until a Share is actually issued under Section 5
hereof.

 

7.                                       Taxes.  The Participant hereby agrees to make
adequate provision for any sums required to satisfy the applicable federal,
state, local or foreign employment, social insurance, payroll, income or other
tax withholding obligations (the “Withholding Obligations”)
that arise in connection with this Agreement. 
The Company may establish procedures to ensure satisfaction of all
applicable Withholding Obligations arising in connection with this Agreement,
including any means described in Section 8 of the Plan.  The Participant hereby authorizes the
Company, at its sole discretion and subject to any limitations under applicable
law, to satisfy any such Withholding Obligations by (a) withholding from
the wages and other cash compensation payable to the Participant, (b) causing
the Participant to tender a cash payment to the Company, (c) delivering to
the Company for cancellation shares of the Company’s Common Stock already owned
by the Participant, or (d) selling on the Participant’s behalf (using any
brokerage firm determined acceptable to the Company for such purpose) a portion
of the Shares issued in payment of the vested Units as the Company determines
to be appropriate to generate cash proceeds sufficient to satisfy the
Withholding Obligations, in connection with which the Participant shall
concurrently provide, if necessary or applicable, irrevocable instructions (i) to
the brokerage firm to effect the immediate sale of some or all of the Vested
Shares and remit to the Company, out of the sale proceeds available on the settlement
date, sufficient funds to satisfy the Withholding Obligations and (ii) to
the Company to deliver the certificates for the Shares directly to such
brokerage firm in order to complete the sale. 
The Participant shall be responsible for all brokerage fees and other
costs of sale, and the Participant further agrees to indemnify and hold the
Company harmless from any losses, costs, damages or expenses relating to any
such sale.  The Company may refuse to
deliver Shares if the Participant fails to comply with the Participant’s
obligations in connection with the Withholding Obligations described in this
paragraph.

 

8.                                       Change in
Control.

 

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

 

2

 

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

 

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

 

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

 

(e)                                  For purposes of this
Agreement, “Change in Control” shall mean a change
in ownership or control of the Company effected through any of the following
transactions: (i) a merger, consolidation or other reorganization unless
securities representing more than 50% of the total combined voting power of the
voting securities of the successor corporation are immediately thereafter
beneficially owned, directly or indirectly and in substantially the same
proportion, by the persons who beneficially owned the Company’s outstanding
voting securities immediately prior to such transaction; (ii) a sale,
transfer or other disposition of all or substantially all of the Company’s
assets; or (iii) the acquisition, directly or indirectly, by any person or
related group of persons (other than the Company or a person that directly or
indirectly controls, is controlled by, or is under common control with, the
Company), of beneficial ownership (within the meaning of Rule 13d-3 of the
Exchange Act) of securities possessing more than 50% of the total combined
voting power of the Company’s outstanding securities pursuant to a tender or
exchange offer made directly to the Company’s stockholders.

 

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

 

10.                                 Miscellaneous.

 

(a)                                  Subject to Plan.  This Award is subject to the terms and
conditions of the Plan, but the terms of the Plan shall not be considered an
enlargement of any benefits under this Agreement.  In addition, this Award is subject to the
rules and regulations promulgated pursuant to the Plan, now or hereafter
in effect.  A copy of the Plan will be
furnished upon request of the Participant.

 

3

 

(b)                                 No Right to Continued
Service.  This Agreement shall not
confer on the Participant any right with respect to continuance of service to
the Company, nor will it interfere in any way with the right of the Company to
terminate such service at any time.

 

(c)                                  Governing Law.  The validity, construction and effect of the
Plan and the Agreement, and any rules and regulations relating to the Plan
and 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 or
becomes or is deemed to be invalid, illegal or unenforceable in any
jurisdiction or would disqualify the Agreement under any law deemed applicable
by the Committee, such provision shall be construed or deemed amended to
conform to applicable laws, or if it cannot be so construed or deemed amended
without, in the determination of the Committee, materially altering the purpose
or intent of the Plan or the Agreement, such provision shall be stricken as to
such jurisdiction or the Agreement, and the remainder of the Agreement shall
remain in full force and effect.

 

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

 

(f)                                    Section 409A Provisions.  The issuance of Shares under this Agreement
are intended to be exempt from the application of section 409A of the Internal
Revenue Code, as amended (“Section 409A”)
by reason of the short-term deferral exemption set forth in Treasury Regulation
§1.409A-1(b)(4).  Notwithstanding
anything in the Plan or this Agreement to the contrary, to the extent that any
amount or benefit hereunder that constitutes “deferred compensation” to the
Participant under section 409A of the Internal Revenue Code, as amended (“Section 409A”) and applicable guidance thereunder is
otherwise payable or distributable to the Participant under the Plan or this
Agreement solely by reason of the occurrence of a Change in Control or due to
the Participant’s disability or termination of employment, such amount or
benefit will not be payable or distributable to the Participant by reason of
such circumstance unless the Committee determines in good faith that (i) the
circumstances giving rise to such Change in Control, disability or separation
from 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) of
the Code and applicable final regulations, or (ii) the payment or distribution
of such amount or benefit would be exempt from the application of Section 409A
by reason of the short-term deferral exemption or otherwise (including, but not
limited to, a payment made pursuant to an involuntary separation arrangement
that is exempt from Section 409A under the “short-term deferral”
exception).  Any payment or distribution
that otherwise would be made to a Participant who is a specified employee as
defined in Section 409A(a)(2)(B) of the Code on account of separation
from service may not be made before the date which is six months after the date
of the specified employee’s separation from service (or if earlier, upon the
specified employee’s death) unless the payment or distribution is exempt from
the application of Section 409A by reason of the short term deferral
exemption or otherwise.

 

4

 

(g)                                 Headings.  Headings are given to the Sections and
subsections of the Agreement solely as a convenience to facilitate
reference.  Such headings shall not be
deemed in any way material or relevant to the construction or interpretation of
the Agreement or any provision thereof.

 

IN WITNESS WHEREOF, the Company and
Participant have executed this Agreement on the date set forth in the first
paragraph.

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:
  

  	
   

  
	
   

  	
  Name:
  

  	
   

  
	
   

  	
  Title:
  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PARTICIPANT 

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Print
  Name:

  	
   

  
				

 

5

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