Exhibit 10.42
CHANGE IN CONTROL AGREEMENT
THIS CHANGE IN
CONTROL AGREEMENT (the “ Agreement ”) is entered into as
of June 11, 2008 (the “ Effective Date ”), by and between
James S. Miele (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.
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(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 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 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, an
Involuntary Termination shall only be found to exist if Employee
has provided written notice to the Corporation within 90 days of
the existence of an event under (A), (B) or (C), and the
Corporation does not cure such event within 30 days following the
receipt of such notice from Employee. For avoidance of doubt,
a 5% reduction in the combined level of base salary and annual
target bonus opportunity shall constitute a material reduction for
purposes of (A) above.
(c)
“ 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 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 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
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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
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 25% 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.
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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
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