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(15%) (or in the case of the Quercus Owners, thirty percent (30%)) of the outstanding shares of Common Stock become an Acquiring Person solely as a result of a reduction of thenumber of shares of outstanding Common Stock, including repurchases of outstanding sharesof Common Stock by the Company, which reduction increases the percentage of outstanding shares of Common Stock Beneficially Owned (as such term is hereinafter defined) by suchPerson; provided, however, that any subsequent increase in the amount of Common StockBeneficially Owned by such Person, together with all Affiliates and Associates of suchPerson, without the prior written approval of the Board shall cause such Person to be anAcquiring Person (unless, measured at such time, such Person would not be an AcquiringPerson);     (ii) the term Acquiring Person shall not mean: (A) the Company; (B) any Subsidiary(assuch term is hereinafter defined) of the Company; (C) any employee benefit plan of theCompany or any of its Subsidiaries; (D) any entity holding securities of the Companyorganized, appointed or established by the Company or any of its Subsidiaries for orpursuant to the terms of any such plan; or (E) any underwriter acting in good faith in afirm commitment underwriting of an offering of the Company’s securities pursuant toarrangements with the Company that have been approved by the Board (however*,*the exceptionprovided by this clause (E) shall no longer be available in the event that any suchunderwriter is otherwise an Acquiring Person on or after the date which is forty (40) daysafter the date of initial acquisition of the Company’s securities by such underwriter inconnection with such offering); and     (iii) no Person shall be deemed to be an Acquiring Person if: (A)(1) any Schedule 13Dunder the Exchange Act (as hereinafter defined), or any comparable or successor report,filed (or required to be filed) by such Person does not (or would not) state any intentionto or reserve the right to control or influence the management or policies of the Companyor engage in any of the actions specified in Item 4 (or any comparable or successor Item)of such Schedule 13D (other than the disposition of Common Stock), (2) either (x) withintwo (2) Business Days of being requested by the Company to advise the Company regarding thesame, such Person certifies in writing to the Company that such Person acquired BeneficialOwnership of fifteen percent (15%) (or in the case of the Quercus Owners, thirty percent(30%)) or more of the outstanding shares of Common Stock inadvertently or withoutknowledge of the terms of the Rights, or (y) the Board determines in good faith that suchPerson has become an Acquiring Person inadvertently, (3) such Person divests as promptly aspracticable (as determined in good faith by the Board) a sufficient number of securities sothat such Person would not be deemed to be an Acquiring Person pursuant to the firstsentence of this Section 1(a)*,*(or such other provisions of this Section 1(a) as may beapplicable) and (4) promptly following such Person’s divestiture of such securities, suchPerson certifies to the Board that such Person would no longer be deemed an AcquiringPerson as defined pursuant to the first sentence of this Section 1(a) (or such otherprovisions of this Section 1(a) as may be applicable); or (B) by reason of such Person’sBeneficial Ownership of fifteen percent
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(15%) (or in the case of the Quercus Owners, thirty percent (30%)) or more of theoutstanding shares of Common Stock on the date hereof if prior to the Record Date suchPerson notifies the Board that such Person is no longer the Beneficial Owner of fifteenpercent (15%) (or in the case of the Quercus Owners, thirty percent (30%)) or more of thethen outstanding shares of Common Stock.”     1.2. The second full paragraph of Exhibit C, entitled “Summary of Rights”, is amended andrestated in its entirety to read as follows:     “Initially, the Rights will be attached to all Common Stock certificates representing shares then outstanding, and no separate Rights certificates will be distributed. TheRights will separate from the Common Stock and a “Distribution Date” will occur upon theearliest of the following: (i) a public announcement that a person, entity or group ofaffiliated or associated persons and/or entities (an “Acquiring Person”) has acquired, orobtained the right to acquire, beneficial ownership of fifteen percent (15%) (or, in thecase of the Quercus Owners, thirty percent (30%)) or more of the outstanding shares ofCommon Stock (other than (A) as a result of repurchases of stock by the Company or certaininadvertent actions by institutional or certain other shareholders, (B) the Company, anysubsidiary of the Company or any employee benefit plan of the Company or any subsidiary,and (C) certain other instances set forth in the Rights Agreement); or (ii) ten (10)business days (unless such date is extended by the Board of Directors) following thecommencement of a tender offer or exchange offer which would result in any person, entityor group of affiliated or associated persons and/or entities becoming an Acquiring Person(unless such tender offer or exchange offer is a Permitted Offer (defined below)).”**2. Miscellaneous.**     2.1. No Further Amendments. Except as specifically amended by this Second Amendment,the Rights Agreement shall remain unmodified and in full force and effect, and the Rights Agreementis hereby ratified and affirmed in all respects.     2.2. Governing Law. This Second Amendment shall be governed by and construed inaccordance with the State of Delaware; provided, however, that all provisions regarding the rights,duties and obligations of the Rights Agent shall be governed by and construed in accordance withthe laws of the State of New York applicable to contracts made and to be performed entirely withinsuch State.
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     2.3. Counterparts. This Second Amendment may be executed in any number ofcounterparts and each of those counterparts shall for all purposes be deemed to be an original, andall of those counterparts shall together constitute one and the same instrument.     IN WITNESS WHEREOF, the parties have executed this Second Amendment as of the date firstwritten above.      ENERGY FOCUS, INC