Document:

Exhibit 4.1

 

RIGHTS AGREEMENT

 

by and between

 

ITERIS, INC.

 

and

 

COMPUTERSHARE TRUST COMPANY, N.A.,

as Rights Agent

 

dated as of

 

August 20, 2009

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Certain Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights
  Agent

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issue of Right
  Certificates

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Right
  Certificates

  	
   

  	
  8

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and
  Registration

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.

  	
  Transfer, Split Up,
  Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
  Stolen Right Certificates

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Exercise of Rights:
  Purchase Price; Expiration Date of Rights

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Cancellation and
  Destruction of Right Certificates

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Reservation and
  Availability of Shares of Preferred Stock

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Preferred Stock Record
  Date

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.

  	
  Adjustment of Purchase
  Price, Number of Shares or Number of Rights

  	
   

  	
  13

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted
  Purchase Price or Number of Shares

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 13.

  	
  Consolidation, Merger
  or Sale or Transfer of Assets or Earning Power

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional Rights and
  Fractional Shares

  	
   

  	
  24

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Right
  Holders

  	
   

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Right Certificate
  Holder Not Deemed a Stockholder

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights
  Agent

  	
   

  	
  26

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger or Consolidation
  or Change of Name of Rights Agent

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
   

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
   

  	
  29

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New Right
  Certificates

  	
   

  	
  30

  

 

i

 

	
  Section 23.

  	
  Redemption

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 24.

  	
  Exchange

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notice of Certain
  Events

  	
   

  	
  32

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Notices

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Supplements and
  Amendments

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Benefits of this
  Agreement

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Determinations and
  Actions by the Board of Directors of the Company

  	
   

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Severability

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Governing Law

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Descriptive Headings;
  References

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Counterparts

  	
   

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 35.

  	
  Force Majeure

  	
   

  	
  35

  

 

Exhibit A

 

Form of Certificate
of Designations for Series A Junior Participating Preferred Stock

 

Exhibit B

 

Form of Right
Certificate

·  Right Certificate

·  Form of
Assignment

·  Form of
Election to Purchase

 

Exhibit C

 

Summary of Rights to
Purchase Preferred Stock

 

ii

 

RIGHTS
AGREEMENT

 

This Rights Agreement (this “Agreement”)
is entered into as of August 20, 2009 by and between ITERIS, INC., a
Delaware corporation (the “Company”),
and COMPUTERSHARE TRUST COMPANY, N.A., a federally chartered trust company, as
Rights Agent (the “Rights Agent”).

 

WITNESSETH:

 

WHEREAS, the Board
of Directors of the Company has authorized and declared a dividend distribution
of one preferred share purchase right (a “Right”) for
each outstanding share of Common Stock (as defined below) outstanding as of the
Close of Business on September 3, 2009 (the “Record
Date”), and has authorized the issuance of one Right (subject to
adjustment) in respect of each share of Common Stock issued between the Record
Date and the earliest to occur of the Distribution Date, the Redemption Date
and the Expiration Date (as such terms are hereinafter defined), with each
Right representing the right to purchase one one-thousandth (1/1,000th) of one
share of Series A Junior Participating Preferred Stock of the Company
having the rights and preferences set forth in the form of Certificate of
Designations attached hereto as Exhibit A, upon the terms and
subject to the conditions hereinafter set forth;

 

NOW, THEREFORE, in consideration of the
premises and the mutual agreements herein set forth, the parties hereby agree
as follows:

 

Section 1.               Certain
Definitions.  For purposes of this
Agreement, the following terms have the meanings indicated:

 

(a)           “Acquiring
Person” shall mean any Person who or that, together with all
Affiliates and Associates of such Person, shall be or become the Beneficial Owner
of fifteen percent (15%) or more of the shares of Common Stock then
outstanding, but shall not include (i) any employee benefit plan of the
Company or of any Subsidiary of the Company, or (ii) any entity organized,
appointed or established pursuant to the terms of any such plan, or (iii) the
Company or (iv) any Subsidiary of the Company.  Notwithstanding the foregoing, no Person
shall become an “Acquiring Person” as the result of an acquisition of Common
Stock by the Company or any Subsidiary of the Company that, by reducing the
number of shares outstanding, increases the proportionate number of shares
beneficially owned by a Person to  fifteen
percent (15%) or more of the Common Stock then outstanding; provided, however,
that if such Person becomes the Beneficial Owner of fifteen percent (15%) or
more of the Common Stock then outstanding by reason of share acquisitions by
the Company and its Subsidiaries and shall, after such share acquisitions by
the Company and its Subsidiaries, become the Beneficial Owner of any additional
shares of Common Stock (other than by reason of a stock dividend, stock split
or other corporate action effected by the Company), then such Person shall be
deemed to be an “Acquiring Person,” subject to the following sentence of this Section 1(a),
unless, upon consummation of the acquisition of such additional Common Stock,
such Person does not beneficially own  fifteen
percent (15%) or more of the Common Stock then outstanding.

 

 

Notwithstanding the foregoing, if  the
Board of Directors of the Company determines in good faith that a Person who
otherwise would be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this Section 1(a), became the Beneficial Owner of a
number of shares of Common Stock such that such Person would otherwise be an
Acquiring Person inadvertently (including, without limitation, because (X) such
Person was unaware that it beneficially owned a percentage of Common Stock that
would cause such Person to be an “Acquiring Person” or (Y) such Person was
aware of the extent of its beneficial ownership of Common Stock but had no
actual knowledge of the consequences of such beneficial ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, then such Person shall not be deemed to be an “Acquiring Person,” or
to have become an “Acquiring Person,” for all purposes of this Agreement (such
that, for the avoidance of doubt, under such circumstances no Distribution Date
shall be deemed to have occurred and no adjustment pursuant to Section 11(a)(ii) or
Section 13 shall be made in respect thereof) unless such Person
fails to divest itself as soon as practicable if the Company so requests (as
determined in good faith by the Board of Directors of the Company) of a
sufficient number of shares of Common Stock (or of Derivative Securities
underlying a transaction entered into by or acquired by such Person or any of
such Person’s Affiliates or Associates) so that such Person would no longer
qualify as an Acquiring Person; provided, however, that if such
Person, after such determination and divestment, becomes the Beneficial Owner
of  fifteen percent (15%) or more of the
shares of Common Stock then outstanding by reason of becoming the Beneficial
Owner of any additional shares of Common Stock, then such Person shall be
deemed to be an “Acquiring Person” unless a subsequent determination and
divestment is made.

 

(b)           “Affiliate”
shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement.

 

(c)           “Agreement”
shall have the meaning set forth in the preamble hereto.

 

(d)           “Associate,”
when used to indicate a relationship with any Person, shall mean each, any and
all of the following:

 

(i)            any firm, corporation,
limited liability company, partnership, joint venture, bank, trust or other
entity of which such Person (A) is an officer or partner or (B) is,
directly or indirectly, the Beneficial Owner of 10% or more of any class of
equity securities; provided, however, that a firm, corporation,
limited liability company, partnership, joint venture, bank, trust or other
entity described in clause (B) shall not be an “Associate” of a Person if,
and only for so long as, such Person (1) has reported beneficial ownership
of the equity securities of such firm, corporation, limited liability company,
partnership, joint venture, bank, trust or other entity on Schedule 13G under
the Exchange Act and is not required to report its ownership of such equity
securities on Schedule 13D under the Exchange Act, (2) satisfies the
criteria set forth in both Rule 13d-1(b)(1)(i) and Rule 13d-1(b)(1)(ii) of
the General Rules and Regulations under the Exchange Act, (3) is the
Beneficial Owner of less than  fifteen
percent (15%) of the 

 

2

 

shares of Common Stock
then outstanding (including any such shares that are beneficially owned by such
Person’s Affiliates and Associates after giving effect to this proviso) and (4) has
not reported and is not required to report its ownership of Common Stock on
Schedule 13D under the Exchange Act;

 

(ii)           any trust or other
estate in which such Person has a substantial beneficial interest or as to
which such Person serves as trustee or in a similar fiduciary capacity; and

 

(iii)          any relative or spouse
of such Person, or any relative of such spouse, who has the same home as such
Person.

 

(e)           A Person shall be
deemed the “Beneficial Owner” of and
shall be deemed to “beneficially own” any
securities:

 

(i)            that such Person, or
any of such Person’s Affiliates or Associates, beneficially owns, directly or
indirectly, within the meaning of Rule 13d-3 of the General Rules and
Regulations under the Exchange Act as in effect on the date of this Agreement;

 

(ii)           that such Person, or
any of such Person’s Affiliates or Associates, has (A) the right to
acquire (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding (other
than customary agreements with and between underwriters and selling group
members with respect to a bona fide public offering of securities), written or
otherwise, or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided,  however,
that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own,” securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person’s Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (B) the right to vote
pursuant to any agreement, arrangement or understanding, written or otherwise; provided,
further, that a Person shall not be deemed the “Beneficial Owner” of, or
to “beneficially own,” any security under this clause (B) if the
agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange Act and (2) is
not then reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report);

 

(iii)          that are beneficially
owned, directly or indirectly, by any other Person with which such Person, or
any of such Person’s Affiliates or Associates, has any agreement, arrangement
or understanding, whether or not in writing, for the purpose of acquiring, holding,
voting (except pursuant to a revocable proxy as described in the proviso to Section 1(e)(ii)(B))
or disposing of any securities of the Company; provided, however,
that nothing in this Section 1(e) shall cause a 

 

3

 

Person engaged in
business as an underwriter of securities to be the “Beneficial Owner” of, or to
“beneficially own,” any securities acquired through such Person’s participation
in good faith in a firm commitment underwriting until the expiration of forty
(40) days after the date of such acquisition, and then only if such securities
continue to be owned by such Person at the expiration of such forty (40)-day
period.  Notwithstanding anything in this
definition of beneficial ownership to the contrary, the phrase “then outstanding,” when used with
reference to a Person’s beneficial ownership of securities of the Company,
shall mean the number of such securities then issued and outstanding together
with the number of such securities not then actually issued and outstanding
that such Person would be deemed to beneficially own hereunder; or

 

(iv)          that are the subject of
a derivative transaction entered into by such Person or any of such Person’s
Affiliates or Associates, or derivative security acquired by such Person or any
of such Person’s Affiliates or Associates, which gives such Person or any of
such Person’s Affiliates or Associates the economic equivalent of ownership of
an amount of such securities due to the fact that the value of the derivative
is explicitly determined by reference to the price or value of such securities,
or which provides such Person or any of such Person’s Affiliates or Associates
an opportunity, directly or indirectly, to profit, or to share in any profit,
derived from any change in the value of such securities, in any case without
regard to whether (A) such derivative conveys any voting rights in such
securities to such Person or any of such Person’s Affiliates or Associates, (B) the
derivative is required to be, or capable of being, settled through delivery of
such securities, or (C) such Person or any of such Person’s Affiliates or
Associates may have entered into other transactions that hedge the economic
effect of such derivative.  In
determining the number of shares of Common Stock beneficially owned by virtue
of the operation of this Section 1(e)(iv), the subject Person shall
be deemed to beneficially own (without duplication) the notional or other
number of shares of Common Stock specified in the documentation evidencing the
derivative position as being subject to be acquired upon the exercise or
settlement of the applicable right or as the basis upon which the value or
settlement amount of such right, or the opportunity of the holder of such right
to profit or share in any profit, is to be calculated in whole or in part, and
in any case (or if no such number of shares of Common Stock is specified in
such documentation or otherwise), as determined by the Board of Directors in
good faith to be the number of shares of Common Stock to which the derivative
position relates.  Such shares of Common
Stock of the Company that are deemed so beneficially owned pursuant to the
operation of this Section 1(e)(iv) shall be referred to herein
as “Derivative Securities;”

 

provided,
however, that a Person will not be deemed to be the Beneficial Owner of,
or to beneficially own, any security if such beneficial ownership arises solely
out of such Person’s status either as a bona fide swaps dealer or as a “clearing
agency,” as defined in Section 3(a)(23) of the Exchange Act, and such
Person is acting in the ordinary course of its business and without any intent
to evade, or assist any other Person to evade, the purposes and intent of this
Agreement.

 

4

 

(f)            “Business
Day” shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of California, the State of New
York or the state in which the principal office of the Rights Agent is located
are authorized or obligated by law or executive order to close.

 

(g)           “Close
of Business” on any given date shall mean 5:00 p.m., New
York time, on such date; provided, however, that if such date is
not a Business Day it shall mean 5:00 p.m., New York time, on the next succeeding
Business Day.

 

(h)           “Common
Stock” shall mean the common stock, $0.10 par value (or as such
par value may be changed from time to time), of the Company.

 

(i)            “Common
Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii).

 

(j)            “Company”
shall have the meaning set forth in the preamble hereto.

 

(k)           “Current
Market Price Per Share” shall have the meaning set forth in Section 11(d).

 

(l)            “Current
Value” shall have the meaning set forth in Section 11(a)(iii).

 

(m)          “Distribution
Date” shall have the meaning set forth in Section 3(a).

 

(n)           “Equivalent
Preferred Stock” shall have the meaning set forth in Section 11(b).

 

(o)           “Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended.

 

(p)           “Exchange
Ratio” shall have the meaning set forth in Section 24(a).

 

(q)           “Expiration
Date” shall have the meaning set forth in Section 7(a).

 

(r)            “Invalidation
Time” shall have the meaning set forth in Section 11(a)(ii).

 

(s)           “NASDAQ”
shall mean the NASDAQ Stock Market.

 

(t)            “Person”
shall mean any individual, firm, corporation, limited liability company or
other entity, and shall include any successor (by merger or otherwise) of such
entity.

 

(u)           “Preferred
Stock” shall mean the Series A Junior Participating
Preferred Stock of the Company having the rights and preferences set forth in
the form of Certificate of Designations attached hereto as Exhibit A.

 

(v)           “Principal
Party” shall have the meaning set forth in Section 13(b).

 

(w)          “Purchase
Price” shall have the meaning set forth in Section 4.

 

5

 

(x)            “Record
Date” shall have the meaning set forth in the recitals hereof.

 

(y)           “Redemption
Date” shall have the meaning set forth in Section 7(a).

 

(z)            “Redemption
Price” shall have the meaning set forth in Section 23(a).

 

(aa)         “Right”
shall have the meaning set forth in the recitals hereof.

 

(bb)         “Right
Certificate” shall have the meaning set forth in Section 3(a).

 

(cc)         “Rights
Agent” shall have the meaning set forth in the preamble hereto.

 

(dd)         “Section 11(a)(ii) Trigger
Date” shall have the meaning set forth in Section 11(a)(iii).

 

(ee)         “Securities
Act” shall mean the Securities Act of 1933, as amended.

 

(ff)           “Security”
shall have the meaning set forth in Section 11(d).

 

(gg)         “Senior
Voting Stock” shall have the meaning set forth in Section 13(b).

 

(hh)         “Shares
Acquisition Date” shall mean the first date of public
announcement by the Company or an Acquiring Person (including, without
limitation, pursuant to a report filed or amended pursuant to Section 13(d) of
the Exchange Act) that a Person has become an “Acquiring Person” for purposes
of this Agreement, or such earlier date as a majority of the Board of Directors
shall become aware of the existence of an Acquiring Person (i.e., make a
determination that such a Person exists).

 

(ii)           “Spread”
shall have the meaning set forth in Section 11(a)(iii).

 

(jj)           “Subsidiary”  of a Person shall mean any
corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by such Person.

 

(kk)         “Substitution
Period” shall have the meaning set forth in Section 11(a)(iii).

 

(ll)           “Summary
of Rights” shall have the meaning set forth in Section 3(b).

 

(mm)       “Trading
Day” shall have the meaning set forth in Section 11(d).

 

Section 2.               Appointment of
Rights Agent.  The Company hereby
appoints the Rights Agent to act as agent for the Company in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment.  The Company may from time
to time appoint such Co-Rights Agents as it may deem necessary or desirable,
upon ten (10) days’ prior written notice to the Rights Agent.  The Rights Agent shall have no duty to
supervise, and shall in no event be liable for, the acts or omissions of any
such Co-Rights Agents.

 

6

 

Section 3.               Issue of Right
Certificates.

 

(a)           Until the Close of
Business on the tenth day after the Shares Acquisition Date (the “Distribution Date”), (i) the
Rights will be evidenced (subject to the provisions of Section 3(b))
by the certificates for the Common Stock registered in the names of the holders
thereof (which certificates shall be deemed also to be Right Certificates) and
not by separate Right Certificates, and (ii) the right to receive Right
Certificates will be transferable only in connection with the transfer of the
Common Stock.  As soon as practicable
after the Distribution Date, the Company will prepare and execute, the Rights
Agent will countersign, and the Company will send or cause to be sent (and the
Rights Agent will, if so requested by written notice and provided with a
stockholder list and all other relevant information that the Rights Agent may
reasonably request, send), by first class, postage-prepaid mail, to each record
holder of Common Stock as of the Close of Business on the Distribution Date
(other than an Acquiring Person or any Affiliate or Associate of an Acquiring
Person), at the address of such holder shown on the records of the Company, a
Right Certificate, in substantially the form of Exhibit B hereto (a “Right Certificate”), evidencing one
Right for each share of Common Stock so held. 
As of and after the Distribution Date, the Rights will be evidenced
solely by such Right Certificates.  The
Company shall promptly notify the Rights Agent in writing upon the occurrence
of the Distribution Date.  Until such
notice is received by the Rights Agent, the Rights Agent may presume
conclusively for all purposes that the Distribution Date has not occurred.

 

(b)           On the Record Date or
as soon as practicable thereafter, the Company will make available a copy of a
Summary of Rights to Purchase Preferred Stock, in substantially the form
attached hereto as Exhibit C (the “Summary
of Rights”), to any holder of Rights who may so request from
time to time prior to the Expiration Date. 
With respect to shares of Common Stock outstanding as of the Record
Date, until the Distribution Date (or the earlier of the Redemption Date or the
Expiration Date), the Rights will be evidenced by the certificates for such
shares registered in the names of the holders thereof.  Until the Distribution Date (or the earlier
of the Redemption Date or the Expiration Date), the surrender for transfer of
any certificate for Common Stock outstanding on the Record Date, with or
without a copy of the Summary of Rights, shall also constitute the transfer of
the Rights associated with the Common Stock represented thereby.

 

(c)           Rights shall be issued
in respect of all shares of Common Stock issued or disposed of (including,
without limitation, upon disposition of Common Stock out of treasury stock or
issuance or reissuance of Common Stock out of authorized but unissued shares)
after the Record Date but prior to the earliest of the Distribution Date, the
Redemption Date and the Expiration Date or, in certain circumstances provided
in Section 22, after the Distribution Date.  Certificates issued for Common Stock
(including, without limitation, upon transfer of outstanding Common Stock,
disposition of Common Stock out of treasury stock or issuance or reissuance of
Common Stock out of authorized but unissued shares) after the Record Date but
prior to the earliest of the Distribution Date, the Redemption Date and the
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend (or such other legend as the

 

7

 

Company may deem
appropriate that is not inconsistent with the provisions of this Agreement but
which does not affect the rights, duties or obligations of the Rights Agent as
set forth in this Agreement):

 

“This certificate also
evidences and entitles the holder hereof to certain Rights as set forth in the
Rights Agreement between Iteris, Inc. and Computershare Trust Company,
N.A., as Rights Agent, dated as of August 20, 2009, as the same may be
supplemented or amended from time to time (the “Rights
Agreement”), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal executive offices
of Iteris, Inc.  Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate.  Computershare Trust
Company, N.A. will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.  Under certain circumstances, as set forth in
the Rights Agreement, Rights issued to, acquired or beneficially owned by any
Person who is or becomes an Acquiring Person or any Affiliate or Associate of
an Acquiring Person (as such terms are defined in the Rights Agreement) and
their transferees will become null and void and will no longer be transferable.”

 

With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.

 

In the event that the Company purchases or acquires any shares of
Common Stock after the Record Date but prior to the Distribution Date, any
Rights associated with such shares of Common Stock shall be deemed cancelled
and retired so that the Company shall not be entitled to exercise any Rights
associated with the shares of Common Stock that are no longer outstanding.

 

Notwithstanding this Section 3(c), the omission of a legend
shall not affect the enforceability of any part of this Agreement or the rights
of any holder of the Rights.

 

Section 4.               Form of
Right Certificates.  The Right
Certificates (and the forms of election to purchase shares and of assignment to
be printed on the reverse thereof) shall be substantially the same as Exhibit B
hereto and may have such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate (but that do not affect the rights, duties or obligations of the
Rights Agent as set forth in this Agreement) and as are not inconsistent with
the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or
with any rule or regulation of any stock exchange or automated quotation
system on which the Rights may from time to time be listed or traded, or to
conform to usage.  Subject to the
provisions of Section 22, the Right Certificates, in each case, on 

 

8

 

their face shall entitle the holders thereof to purchase such number of
shares (or fraction of a share) of the Preferred Stock as shall be set forth
therein at the price per share (or fraction of a share) set forth therein (the “Purchase Price”), but the amount and
type of securities purchasable upon exercise of each Right, and the Purchase
Price, shall be subject to adjustment as provided herein.

 

Section 5.               Countersignature
and Registration.  The Right
Certificates shall be executed on behalf of the Company in the manner provided
in the By-Laws of the Company for Common Stock certificates.  The Right Certificates shall be countersigned
by the Rights Agent, either manually or by facsimile signature, and shall not
be valid for any purpose unless so countersigned.

 

In case any officer of the Company who shall have signed any of the
Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered with the same force and effect as though the person
who signed such Right Certificates had not ceased to be such officer of the
Company; and any Right Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Agreement any such person was not
such an officer.

 

Following the Distribution Date, and receipt by the Rights Agent of (i) written
notice of the Distribution Date pursuant to Section 3(a), and (ii) a
stockholder list and all relevant information reasonably requested by the
Rights Agent pursuant to Section 3(a), the Rights Agent will keep
or cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses
of the respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates and the date of each of
the Right Certificates.

 

Section 6.               Transfer, Split
Up, Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost
or Stolen Right Certificates. 
Subject to the provisions of Section 7(e) and Section 14,
at any time after the Close of Business on the Distribution Date, and prior to
the Close of Business on the earlier of the Redemption Date and the Expiration
Date, any Right Certificate or Right Certificates (other than Right
Certificates representing Rights that have become void pursuant to Section 11(a)(ii) or
that have been exchanged pursuant to Section 24) may be
transferred, split up, combined or exchanged for another Right Certificate or
Right Certificates, entitling the registered holder to purchase a like number
of shares (or fraction of a share) of the Preferred Stock (or, following an
event described in either Section 11(a)(ii) or Section 13,
Common Stock, other securities, cash or other assets, as the case may be) as
the Right Certificate or Right Certificates surrendered then entitled such
holder to purchase.  Any registered
holder desiring to transfer, split up, combine or exchange any Right
Certificate or Right Certificates shall make such request in writing delivered
to the Rights Agent, and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the office
of the Rights Agent designated for such purposes.  Thereupon the Rights Agent shall countersign
and deliver to the Person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested.  As a condition to such transfer, division,
combination or exchange, the Company may require payment by the surrendering holder
of a

 

9

 

sum sufficient to cover any tax or charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.  The Rights Agent shall
have no duty or obligation to take any action under any section of this
Agreement that requires the payment by a Rights holder of applicable taxes
and/or charges unless and until it is satisfied that all such taxes and/or
charges have been paid.

 

Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in the case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company’s request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.

 

Section 7.               Exercise of
Rights: Purchase Price; Expiration Date of Rights.

 

(a)           The registered holder
of any Right Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein) in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed, to the Rights
Agent at the office of the Rights Agent designated for such purposes, together
with payment of the Purchase Price for each one one-thousandth of one share of
the Preferred Stock (or other securities, cash or assets, as the case may be)
as to which the Rights are exercised, at or prior to the earliest of (i) the
Close of Business on August 20,  2019  (the “Expiration Date”),
or (ii) the date on, and time at, which the Rights are redeemed as
provided in Section 23 (“Redemption Date”),
or (iii) the time at which such Rights are exchanged as provided for in Section 24.

 

(b)           The Purchase Price for
each one one-thousandth of one share of the Preferred Stock pursuant to the
exercise of a Right shall initially be $7.00, shall be subject to adjustment
from time to time as provided in Section 11 and Section 13,
and shall be payable in lawful money of the United States of America in
accordance with Section 7(c).

 

(c)           Upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the Purchase Price for each
one one-thousandth of one share of the Preferred Stock (or other securities,
cash or assets, as the case may be) to be purchased and an amount equal to any
applicable tax or charge required to be paid by the holder of such Right
Certificate in accordance with Section 6 in cash, or by certified
check or cashier’s check payable to the order of the Company, the Rights Agent
shall thereupon (i) (A) promptly requisition from any transfer agent
of the Preferred Stock of the Company, or make available if the Rights Agent is
the transfer agent for the Preferred Stock, certificates for the number of
shares (or fractions thereof) of the Preferred Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) promptly requisition from the depositary agent
depositary receipts representing such number of one

 

10

 

one-thousandths of a share of Preferred Stock as are
to be purchased (in which case, certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, promptly requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14, (iii) after receipt of such
certificates or depositary receipts, promptly cause the same to be delivered to
or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder, and (iv) when
appropriate, after receipt, promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.  In the event that the Company is obligated to
issue other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof,
the Company will make all arrangements necessary so that such other securities,
cash and/or property are available for distribution by the Rights Agent, if and
when appropriate.

 

(d)           In case the registered
holder of any Right Certificate shall exercise less than all the Rights
evidenced thereby, a new Right Certificate evidencing Rights equivalent to the
Rights remaining unexercised shall be issued by the Rights Agent to the
registered holder of such Right Certificate or to such holder’s duly authorized
assigns, subject to the provisions of Section 14.

 

(e)           Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
purported transfer or exercise of Rights pursuant to Section 6 or
this Section 7 unless the registered holder shall have duly
completed and executed the form of assignment or election to purchase on the
reverse side of the Right Certificate surrendered for such transfer or exercise
and shall have provided such additional evidence of the identity of the
Beneficial Owner (or such former or proposed Beneficial Owner) thereof or such
Beneficial Owner’s Affiliates or Associates as the Company or the Rights Agent
shall reasonably request.

 

Section 8.               Cancellation and
Destruction of Right Certificates. 
All Right Certificates surrendered for the purpose of exercise,
transfer, split up, combination, redemption or exchange shall, if surrendered
to the Company or to any of its agents, be delivered to the Rights Agent for
cancellation or in cancelled form, or, if surrendered to the Rights Agent,
shall be cancelled by it, and no Right Certificates shall be issued in lieu
thereof except as expressly permitted by any of the provisions of this
Agreement.  The Company shall deliver to
the Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Company otherwise than upon the exercise thereof.  Subject
to applicable law and regulation, the Rights Agent shall maintain, in a
retrievable database, electronic records of all cancelled or destroyed stock
certificates which have been canceled or destroyed by the Rights Agent.  The Rights Agent shall maintain such
electronic records or physical records for the time period required by
applicable law and regulation.  Upon written request of the
Corporation (and at the expense of the Corporation), the Rights Agent shall provide
to the Corporation or its designee copies of such electronic records or
physical records relating to rights certificates cancelled or destroyed by the
Rights Agent.

 

11

 

Section 9.               Reservation and
Availability of Shares of Preferred Stock. 
The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued Preferred Stock, or its
authorized and issued Preferred Stock held in its treasury, the number of
shares of the Preferred Stock that will be sufficient to permit the exercise in
full of all outstanding Rights in accordance with this Agreement.

 

So long as the Preferred Stock (and, following the time that a Person
becomes an Acquiring Person, shares of Common Stock) issuable upon the exercise
of Rights may be listed or admitted to trading on any national securities
exchange, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed or admitted for trading on such exchange upon official notice of
issuance upon such exercise.

 

The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of the Preferred Stock (and, following
the time that a Person becomes an Acquiring Person, shares of Common Stock
and/or other securities) delivered upon exercise of Rights shall, at the time
of delivery of the certificates for such (subject to payment of the Purchase
Price), be duly and validly authorized and issued and fully paid and
nonassessable.

 

The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any certificates representing shares of the Preferred Stock upon the exercise
of Rights.  The Company shall not,
however, be required (a) to pay any tax or charge that may be payable in
respect of any transfer involved in the transfer or delivery of Right
Certificates or the issuance or delivery of certificates for the Preferred
Stock in a name other than that of the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or (b) to issue or
deliver any certificates for shares of the Preferred Stock upon the exercise of
any Rights until any such tax or charge shall have been paid (any such tax or
charge being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company’s satisfaction that
no such tax or charge is due.

 

The Company shall, if legally required, (i) prepare and file, as
soon as reasonably practicable following the Distribution Date, a registration
statement under the Securities Act with respect to the securities purchasable
upon exercise of or exchangeable for the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as reasonably
practicable after such filing, and (iii) cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until no longer required to do so under the Securities Act
with respect to securities purchasable upon exercise of or exchangeable for the
Rights.  The Company also shall take all
such action as may be required or as is appropriate under the securities or “blue
sky” laws of such jurisdictions as may be necessary or appropriate with respect
to the securities purchasable upon the exercise of or exchangeable for the
Rights.  The Company may temporarily
suspend, for a period not to exceed 120 days following the Distribution Date,
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. 
Upon any such suspension of exercisability of Rights referred to in this
paragraph, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.

 

12

 

Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law, or a registration
statement shall not have been declared effective.

 

Section 10.             Preferred Stock
Record Date.  Each Person in whose
name any certificate for shares of the Preferred Stock is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder
of record of the Preferred Stock represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such
Rights, together with the form of election to purchase duly completed and
executed, was duly surrendered and payment of the Purchase Price (and any
applicable taxes or charges) was made; provided, however, that if
the date of such surrender and payment is a date upon which the Preferred Stock
transfer books of the Company are closed, such Person shall be deemed to have
become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock transfer
books of the Company are open.  Prior to
the exercise of the Rights evidenced thereby, the holder of a Right Certificate
shall not be entitled to any rights of a stockholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or
to exercise any preemptive rights, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.

 

Section 11.             Adjustment of
Purchase Price, Number of Shares or Number of Rights.  The Purchase Price, the number and kind or
class of shares of stock of the Company covered by each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 11.

 

(a)           (i)            If the Company shall at any time after the
date of this Agreement (A) declare a dividend on the Preferred Stock
payable in Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares of Preferred Stock or (D) issue any shares of its capital stock in
a reclassification of the Preferred Stock (including any such reclassification
in connection with a consolidation or merger in which the Company is the
continuing or surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or reclassification,
and the number and kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive the aggregate number and kind of shares
of capital stock that, if such Right had been exercised immediately prior to
such date and at a time when the Preferred Stock transfer books of the Company
were open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of Preferred Stock issuable upon exercise of
one Right.  If an event occurs that would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii),
the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).

 

13

 

(ii)           Subject
to Section 23(a) and Section 24, in the event any
Person becomes an Acquiring Person, each holder of a Right shall thereafter have
a right to receive, upon exercise thereof at a price equal to the Purchase
Price in effect immediately prior to such Person becoming an Acquiring Person
multiplied by the number of one one-thousandths of a share of Preferred Stock
for which a Right is then exercisable, in accordance with the terms of this
Agreement and in lieu of shares of Preferred Stock, such number of shares of
Common Stock as shall equal the result obtained by (A) multiplying such
Purchase Price by the number of one one-thousandths of a share of Preferred
Stock for which a Right is then exercisable and dividing that product by (B) 50%
of the Current Market Price Per Share of the Common Stock (determined pursuant
to Section 11(d)) on the date of the occurrence of such event; provided,
however, that if the transaction that would otherwise give rise to the
adjustment is also subject to the provisions of Section 13, then
only the provisions of Section 13 shall apply and no adjustment
shall be made pursuant to this Section 11(a)(ii).  In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action that would eliminate or diminish the benefits intended to
be afforded by the Rights. 
Notwithstanding anything in this Agreement to the contrary, however,
from and after the time when any Person first becomes an Acquiring Person (such
time, the “Invalidation Time”), any
Rights that are or were acquired or beneficially owned by any Acquiring Person
(or any Affiliate or Associate of any Acquiring Person), including, without
limitation, any such Rights when held by (1) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who becomes a transferee after the
Invalidation Time, (2) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who became a transferee prior to or concurrently with
the Invalidation Time pursuant to either (x) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom it has
any continuing agreement, arrangement or understanding, written or otherwise,
regarding the transferred Rights or (y) a transfer that the Board of
Directors of the Company determines is part of a plan, arrangement or
understanding, written or otherwise, that has the purpose or effect of avoiding
the provisions of this Section 11(a)(ii), or (3) a subsequent
transferee of any Person described in the foregoing clauses (1) or (2),
shall be void without any further action and any holder of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Agreement.  The Company shall use all
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of Rights or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.  No Right Certificate shall be issued pursuant
to Section 3, Section 6 or Section 7(d) that
represents Rights beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person or any
Associate or Affiliate whose Rights would be void pursuant to the provisions of
this paragraph shall be cancelled.

 

14

 

(iii)          The Company may, at its option, substitute
for a share of Common Stock issuable upon the exercise of Rights in accordance
with Section 11(a)(ii) a number of shares of Preferred Stock
or fraction thereof such that the Current Market Price Per Share of one share
of Preferred Stock multiplied by such number or fraction is equal to the
Current Market Price Per Share of one share of Common Stock.  In the event that there shall not be
sufficient shares of Common Stock issued but not outstanding or authorized but
unissued to permit the exercise in full of the Rights in accordance with Section 11(a)(ii),
the Board of Directors of the Company shall, with respect to such deficiency,
to the extent permitted by applicable law and any material agreements then in
effect to which the Company is a party, (A) determine the excess (such
excess, the “Spread”) of (x) the
value of the shares of Common Stock issuable upon the exercise of a Right in
accordance with Section 11(a)(ii) (the “Current
Value”) over (y) the Purchase Price in effect immediately
prior to any Person becoming an Acquiring Person and (B) with respect to
each Right (other than Rights that have become void pursuant to Section 11(a)(ii)),
make adequate provision to substitute for the shares of Common Stock issuable
in accordance with Section 11(a)(ii) upon exercise of the
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in such Purchase Price, (3) shares of Preferred Stock or other
equity securities of the Company (including, without limitation, shares or
fractions of shares of preferred stock that, by virtue of having dividend,
voting and liquidation rights substantially comparable to those of the shares
of Common Stock, are deemed in good faith by the Board of Directors of the
Company to have substantially the same value as the shares of Common Stock (such
shares of Preferred Stock and shares or fractions of shares of preferred stock
are hereinafter referred to as “Common Stock Equivalents”)),
(4) debt securities of the Company, (5) other assets or (6) any
combination of the foregoing, having a value that, when added to the value of
the shares of Common Stock issued upon exercise of such Right, shall have an
aggregate value equal to the Current Value (less the amount of any reduction in
such Purchase Price), where such aggregate value has been determined by the
Board of Directors of the Company upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board of Directors of the
Company; provided, however, that if the Company shall not make
adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the date on which any Person becomes an Acquiring
Person (the date on which any Person becomes an Acquiring Person being the “Section 11(a)(ii) Trigger Date”),
then the Company shall be obligated to deliver, to the extent permitted by
applicable law and any material agreements then in effect to which the Company
is a party, upon the surrender for exercise of a Right and without requiring
payment of such Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of shares of
Preferred Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  If, upon any Person becoming an Acquiring
Person, the Board of Directors of the Company shall determine in good faith
that it is likely that sufficient additional shares of Common Stock could be
authorized for issuance upon exercise in full of the Rights, then, if the Board
of Directors of the Company so elects, the thirty (30) day period set forth
above may be extended to the extent necessary, but not more than ninety (90)
days after the Section 11(a)(ii) Trigger Date, in order that
the Company may seek stockholder approval for the authorization of such
additional shares (such thirty (30) day

 

15

 

period, as it may be extended, is herein called the “Substitution Period”).  To the extent that the Company determines
that some action need be taken pursuant to the second and/or third sentence of
this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 11(a)(ii) and the last sentence of this Section 11(a)(iii),
that such action shall apply uniformly to all outstanding Rights and (y) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such second sentence and to determine the value thereof.  In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii),
the value of the shares of Common Stock shall be the Current Market Price Per
Share (as determined pursuant to Section 11(d)) on the Section 11(a)(ii) Trigger
Date and the per share or fractional value of any Common Stock Equivalent shall
be deemed to equal the Current Market Price Per Share of the Common Stock.  The Board of Directors of the Company may,
but shall not be required to, establish procedures to allocate the right to
receive shares of Common Stock upon the exercise of the Rights among holders of
Rights pursuant to this Section 11(a)(iii).

 

(b)           If the Company shall
fix a record date for the issuance of rights, options or warrants to all
holders of Preferred Stock entitling them (for a period expiring within 45
calendar days after such record date) to subscribe for or purchase Preferred
Stock (or shares having the same rights, privileges and preferences as the
Preferred Stock (“Equivalent Preferred Stock”))
or securities convertible into Preferred Stock or Equivalent Preferred Stock at
a price per share of Preferred Stock or Equivalent Preferred Stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
Equivalent Preferred Stock) less than the Current Market Price Per Share of the
Preferred Stock (as defined in Section 11(d)) on such record date,
the Purchase Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the number of shares of
Preferred Stock outstanding on such record date plus the number of shares of
Preferred Stock that the aggregate offering price of the total number of shares
of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
Preferred Stock issuable upon exercise of one Right.  In case such subscription price may be paid
in consideration part or all of which shall be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board
of Directors of the Company, whose determination shall be described in a written
statement filed with the Rights Agent and shall be conclusive for all
purposes.  Shares of Preferred Stock
owned by or held for the account of the Company shall not be deemed outstanding
for the purpose of any such computation. 
Such adjustment shall be made successively whenever

 

16

 

such a record date is fixed; and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price that would then be in effect if such record date had
not been fixed.

 

(c)           If the Company shall
fix a record date for the making of a distribution to all holders of Preferred
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing corporation) of evidences of
indebtedness or assets (other than a regular periodic cash dividend or a
dividend payable in Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase Price
to be in effect after such record date shall be determined by multiplying the
Purchase Price in effect immediately prior to such record date by a fraction,
the numerator of which shall be the Current Market Price Per Share of the
Preferred Stock (as defined in Section 11(d)) on such record date,
less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a written
statement filed with the Rights Agent) of the portion of the assets or
evidences of indebtedness so to be distributed or of such subscription rights
or warrants applicable to one share of Preferred Stock and the denominator of
which shall be such Current Market Price Per Share of the Preferred Stock; provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of
Preferred Stock issuable upon exercise of one Right.  Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution
is not so made, the Purchase Price shall again be adjusted to be the Purchase
Price that would then be in effect if such record date had not been fixed.

 

(d)           (i) For the
purpose of any computation hereunder, the “Current Market Price Per
Share” of any security (a “Security”)
on any date shall be deemed to be the average of the daily closing prices per
share of such Security for the thirty (30) consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date; provided, however,
that in the event that the Current Market Price Per Share of the Security is
determined during the period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into shares of such Security,
or (B) any subdivision, combination or reclassification of such Security,
and prior to the expiration of thirty (30) Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
Current Market Price Per Share shall be appropriately adjusted to take into
account ex-dividend trading.  The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and ask
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low ask prices in the
over-the-counter market, as reported by

 

17

 

NASDAQ or such other system then in use, or, if on any
such date the Security is not quoted by such organization, the average of the
closing bid and ask prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the Company.  The term “Trading
Day” shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day.

 

(ii) For the purpose of any computation hereunder, the
Current Market Price Per Share of Preferred Stock shall be determined in the
same manner as set forth above for securities in Section 11(d)(i).  If the Preferred Stock is not publicly traded
or if the Current Market Price Per Share of Preferred Stock cannot be
determined in the manner provided above, the Current Market Price Per Share of
Preferred Stock shall be conclusively deemed to be the Current Market Price Per
Share of Common Stock (appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof), multiplied by
one thousand.  If neither the Common
Stock nor the Preferred Stock is publicly held or so listed or traded, the
Current Market Price Per Share of Preferred Stock shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a written statement filed with the
Rights Agent and shall be conclusive for all purposes.

 

(e)           No adjustment in the Purchase Price shall be required
unless such adjustment would require an increase or decrease of at least 1% in
the Purchase Price; provided, however, that any adjustments that
by reason of this Section 11(e) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment.  All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share (other than Preferred Stock) or ten-millionth of
a share of Preferred Stock, as the case may be. 
Notwithstanding the first sentence of this Section 11(e), any
adjustment required by this Section 11 shall be made no later than the
earlier of (A) three (3) years from the date of the transaction that mandates
such adjustment or (B) the Expiration Date.

 

(f)            If as a result of an adjustment made pursuant to Section
11(a), the holder of any Right thereafter exercised shall become entitled
to receive any shares of capital stock of the Company or of any Principal Party
other than shares of the Preferred Stock, thereafter (i) the number of such
other shares so receivable upon exercise of any Right shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares contained in Section
11(a), Section 11(b), Section 11(c), Section 11(e), Section
11(h), Section 11(i) and Section 11(m), and (ii) the
provisions of Section 7, Section 9, Section 10, Section
13 and Section 14 with respect to the shares of the Preferred Stock
shall apply on like terms to any such other shares.

 

(g)           All Rights originally issued by the Company subsequent
to any adjustment made to the Purchase Price hereunder shall evidence the right
to purchase, at the adjusted Purchase Price, the number of one one-thousandths
of a share of the Preferred Stock purchasable from time to time hereunder upon
exercise of the Rights, all subject to further adjustment as provided herein.

 

18

 

(h)           Unless the Company shall have exercised its election
as provided in Section 11(i), upon each adjustment of the Purchase Price
as a result of the calculations made in Section 11(b) and Section 11(c),
each Right outstanding immediately prior to the making of such adjustment shall
thereafter evidence the right to purchase, at the adjusted Purchase Price, that
number of one one-thousandths of a share of Preferred Stock (calculated to the
nearest ten-millionth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share of Preferred Stock covered by a Right immediately
prior to this adjustment by (y) the Purchase Price in effect immediately prior
to such adjustment of the Purchase Price and (ii) dividing the product so
obtained by the Purchase Price in effect immediately after such adjustment of
the Purchase Price.

 

(i)            The Company may elect on or after the date of any adjustment
of the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-thousandths of a share of the Preferred
Stock purchasable upon the exercise of a Right. 
Each of the Rights outstanding after such adjustment of the number of
Rights shall be exercisable for the number of one one-thousandths of a share of
Preferred Stock for which a Right was exercisable immediately prior to such
adjustment.  Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest ten-millionth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after the adjustment of the
Purchase Price.  The Company shall make a
public announcement of its election to adjust the number of Rights (with prompt
written notice thereof to the Rights Agent), indicating the record date for the
adjustment to be made and, if known at the time, the amount of the adjustment
to be made.  This record date may be the
date on which the Purchase Price is adjusted or any day thereafter, but, if the
Right Certificates have been issued, shall be at least ten (10) days later than
the date of the public announcement.  If
Right Certificates have been issued, upon each adjustment of the number of
Rights pursuant to this Section 11(i), the Company shall, as promptly as
practicable, cause to be distributed to holders of record of Right Certificates
on such record date Right Certificates evidencing, subject to Section 14,
the additional Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for the
Right Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Right Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment.  Right Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein and shall be registered in the names of the holders of record of
Right Certificates on the record date specified in the public announcement.

 

(j)            Irrespective of any adjustment or change in the
Purchase Price or the number of one one-thousandths of a share of the Preferred
Stock issuable upon the exercise of the Rights, the Right Certificates
theretofore and thereafter issued may continue to express the Purchase Price
per one one-thousandth of a share and the number 

 

19

 

of one one-thousandths of a share that were expressed
in the initial Right Certificates issued hereunder.

 

(k)           Before taking any action that would cause an
adjustment reducing the Purchase Price below one one-thousandth of the then par
value, if any, of the shares of the Preferred Stock issuable upon exercise of
the Rights, the Company shall take any corporate action that may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Preferred Stock at
such adjusted Purchase Price.

 

(l)            In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect (with prompt written
notice of such election to the Rights Agent) to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of the
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder’s right to receive such additional shares upon the occurrence of
the event requiring such adjustment.

 

(m)          Anything in this Section 11 to the contrary
notwithstanding, the Company shall be entitled to make such reductions in the
Purchase Price, in addition to those adjustments expressly required by this Section
11, as and to the extent that it, in its sole discretion, shall determine
to be advisable in order that any (i) consolidation or subdivision of the
Preferred Stock, (ii) issuance wholly for cash of any shares of the Preferred
Stock at less than the Current Market Price Per Share, (iii) issuance wholly
for cash of any shares of the Preferred Stock or securities that by their terms
are convertible into or exchangeable for Preferred Stock, (iv) dividends on the
Preferred Stock payable in Preferred Stock or (v) issuance of rights, options
or warrants referred to hereinabove in this Section 11, hereafter made
by the Company to holders of its Preferred Stock shall not be taxable to such
stockholders.

 

(n)           In the event that, at any time after the date of this
Agreement and prior to the Distribution Date, the Company shall (i) declare or
pay any dividend on the Common Stock payable in Common Stock or (ii) effect a
subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock)
into a greater or lesser number of shares of Common Stock, then, in any such
case, (A) the number of one one-thousandths of a share of Preferred Stock
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-thousandths of a share of
Preferred Stock so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (B) each
share of Common Stock outstanding immediately after such event shall have
issued with respect to 

 

20

 

it that number of Rights that each share of Common
Stock outstanding immediately prior to such event had issued with respect to
it.  The adjustments provided for in this
Section 11(n) shall be made successively whenever such a dividend is
declared or paid or such a subdivision, combination or consolidation is
effected.  If an event occurs that would
require an adjustment under Section 11(a)(ii) and this Section 11(n),
the adjustments provided for in this Section 11(n) shall be in addition
and prior to any adjustment required pursuant to Section 11(a)(ii).

 

(o)           The Company agrees that, after the Shares Acquisition
Date, it will not, except as permitted by Section 23, Section 24
or Section 27, take (or permit any Subsidiary to take) any action if, at
the time such action is taken, it is reasonably foreseeable that such action
will diminish substantially or eliminate the benefits intended to be afforded
by the Rights.

 

Section
12.             Certificate of Adjusted Purchase Price or
Number of Shares.  Whenever an adjustment is made as provided in
Section 11 and Section 13, the Company shall (a) promptly prepare
a certificate setting forth such adjustment and a brief written statement of
the facts accounting for such adjustment, (b) promptly file with the Rights
Agent and with each transfer agent for the Common Stock and the Preferred Stock
a copy of such certificate and (c) mail a brief summary thereof to each holder
of a Right Certificate (if the Distribution Date has occurred) or of a
certificate representing shares of Common Stock (if prior to the Distribution
Date) in accordance with Section 25. 
The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment or statement contained therein and shall have
no duty or liability with respect to and shall not be deemed to have knowledge
of such adjustment or event unless and until it shall have received such
certificate.

 

Section
13.             Consolidation, Merger or Sale or Transfer
of Assets or Earning Power.

 

(a)           If, following the Shares Acquisition Date, (i) the
Company shall consolidate with, or merge with and into, any other Person, (ii) any
Person shall consolidate with or merge with and into the Company and the
Company shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Stock shall be changed
into or exchanged for stock or other securities of any other Person (or the
Company) or cash or any other property, or (iii) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer), in one or more transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person (other than the Company or
one or more of its wholly owned Subsidiaries in or more transactions, each of
which complies with Section 11(o)), then, and in each such case, proper
provision shall be made so that (A) each holder of a Right (except as otherwise
provided herein) shall thereafter have the right to receive, upon the exercise
thereof at the Purchase Price in effect immediately prior to such Person
becoming an Acquiring Person multiplied by the number of one one-thousandths of
a share of Preferred Stock for which a Right is then exercisable, in accordance
with the terms of this Agreement and in lieu of shares of Preferred Stock, such
number of shares of validly issued, fully paid, non-assessable and freely
tradable Senior Voting Stock (as hereinafter defined) of the Principal 

 

21

 

Party (as hereinafter defined) (including the Company
as successor thereto or as the surviving corporation), unencumbered and not
subject to any liens, encumbrances, rights of call or first refusal or other
adverse claims, as shall be equal to the result obtained by (1) multiplying
such Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which a Right is then exercisable and dividing that product
by (2) 50% of the Current Market Price Per Share of the Senior Voting Stock of
such Principal Party (determined in the manner described in Section 11(d))
on the date of consummation of such consolidation, merger, sale or transfer; (B)
the Principal Party shall thereafter be liable for, and shall assume, by virtue
of such consolidation, merger, sale or transfer, all the obligations and duties
of the Company pursuant to this Agreement; (C) the term “Company”
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 shall apply to
such Principal Party following the occurrence of such consolidation, merger,
sale or transfer; and (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Senior Voting Stock in accordance with Section 9, with
each reference to Preferred Stock in Section 9 being deemed to be a
reference to the shares of its Senior Voting Stock) in connection with such
consummation as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the shares
of its Senior Voting Stock thereafter deliverable upon the exercise of the
Rights.

 

(b)           “Principal Party”
shall mean (i) in the case of any transaction described in Section 13(a)(i)
or Section 13(a)(ii), the Person that is the issuer of any securities
into which shares of Common Stock are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to the merger or consolidation; and (ii) in the case of any transaction
described in Section 13(a)(iii), the Person that is the other party to
such transaction or, if more than one, the Person that is the party receiving
the greatest portion of the assets or earning power transferred pursuant to
such transaction; provided, however, that, in any such case, if
the Senior Voting Stock of such Person is not at such time and has not been
continuously over the preceding 12-month period registered under Section 12 of
the Exchange Act, then (A) if such Person is a direct or indirect Subsidiary of
another Person the Senior Voting Stock of which is and has been so registered,
the term “Principal Party” shall refer to such other Person; or (B) if such
Person is a Subsidiary, directly or indirectly, of more than one Person and the
Senior Voting Stock of any two or more of such Persons is and has been so
registered, the term “Principal Party” shall refer to whichever of such Persons
is the issuer of the Senior Voting Stock having the greatest aggregate market
value of shares outstanding; or (C) if such Person is owned, directly or
indirectly, by a joint venture formed by two or more Persons that are not
owned, directly or indirectly, by the same Person, the rules set forth in
clauses (A) and (B) above shall apply to each of the owners having an interest
in such joint venture as if such joint venture were a Subsidiary of both or all
of such joint venturers and the Principal Party in each such chain shall bear
the obligations set forth in this Section 13 in the same ratio as their
direct or indirect interests in such joint venture bear to the total of such
interests.  “Senior
Voting Stock” shall mean the capital stock (or equity interest)
of the Principal Party with the greatest voting power.

 

22

 

(c)           The Company shall not consummate any such
consolidation, merger, sale or transfer unless, prior thereto the Company and
such Principal Party or Parties shall have executed and delivered to the Rights
Agent a supplemental agreement providing for the terms set forth in Section 13(a)
and Section 13(b) and further providing that, as soon as practicable
after the date of any consolidation, merger or sale or transfer of assets
mentioned in Section 13(a), the Principal Party or Parties will (i) prepare
and file a registration statement under the Securities Act with respect to the
Rights and the securities purchasable upon exercise of the Rights on an
appropriate form, will use its best efforts (A) to cause such registration
statement to become effective as soon as practicable after such filing, (B) to
cause such registration statement to remain effective (with a prospectus at all
times meeting the requirements of the Securities Act) until the date of
expiration of the Rights, and (C) to similarly comply with applicable state
securities laws, and use its best efforts to list (or continue the listing of)
the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange; and (ii) will deliver to holders of the Rights
historical financial statements for the Principal Party or Parties and each of
its Affiliates that comply in all respects with the requirements for
registration on Form 10 (or any successor form) under the Exchange Act.

 

(d)           If the Principal Party has a provision in any of its
authorized securities or in its certificate of incorporation or by-laws or
other instrument governing its affairs, which provision would have the effect
of (i) causing such Principal Party to issue (other than to holders of Rights
pursuant to this Section 13), in connection with, or as a consequence
of, the consummation of a transaction referred to in this Section 13,
shares of Senior Voting Stock or Senior Voting Stock equivalents of such
Principal Party at less than the then-Current Market Price Per Share thereof
(determined pursuant to Section 11(d)) or securities exercisable for, or
convertible into, Senior Voting Stock or Senior Voting Stock equivalents of
such Principal Party at less than such then- Current Market Price Per Share or (ii)
providing for any special payment, tax or similar provision in connection with
the issuance of the Senior Voting Stock of such Principal Party pursuant to the
provisions of this Section 13, then, in such event, the Company hereby
covenants and agrees with each holder of Rights that it shall not consummate
any such transaction unless, prior thereto, the Company and such Principal
Party shall have executed and delivered to the Rights Agent a supplemental
agreement providing that the provision in question of such Principal Party
shall have been canceled, waived or amended, or that the authorized securities
shall be redeemed, so that the applicable provision will have no effect in
connection with, or as a consequence of, the consummation of the proposed
transaction.

 

(e)           The Company covenants and agrees that it shall not, at
any time after a Person first becomes an Acquiring Person, enter into any
transaction of the kind referred to in this Section 13 if (i) at the
time of such transaction there are any rights, warrants, instruments or
securities outstanding or any agreements or arrangements that, as a result of
the consummation of such transaction, would eliminate or substantially diminish
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such transaction, the stockholders of
the Person who constitutes, or would constitute, the Principal Party for
purposes of Section 13(b) shall have received a distribution of Rights
previously owned by such Person or any of its Affiliates or Associates or (iii)
the form or nature of organization of the 

 

23

 

Principal Party would preclude or limit the
exercisability of the Rights.  The
provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers.

 

Section
14.             Fractional Rights and Fractional Shares.

 

(a)           The Company shall not be required to issue fractions
of Rights or to distribute Right Certificates that evidence fractional
Rights.  In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right
Certificates, with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right.  For the purposes
of this Section 14(a), the “current market value of a
whole Right” shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable.  The
closing price for any day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
ask prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low ask prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and ask prices as furnished by a professional market
maker making a market in the Rights, selected by the Board of Directors of the
Company.  If on any such date, no such
market maker is making a market in the Rights, the fair market value of the
Rights on such date as determined in good faith by the Board of Directors of
the Company shall be used.

 

(b)           The Company shall not be required to issue fractions
of shares of Preferred Stock (other than fractions that are integral multiples
of one one-thousandth of a share of Preferred Stock) upon exercise or exchange
of the Rights or to distribute certificates that evidence fractional shares of
Preferred Stock (other than fractions that are integral multiples of one
one-thousandth of a share of Preferred Stock). 
Fractions of shares of Preferred Stock in integral multiples of one
one-thousandth of a share of Preferred Stock may, at the election of the
Company, be evidenced by depositary receipts, pursuant to an appropriate
agreement between the Company and a depositary selected by it, provided that
such agreement shall provide that the holders of such depositary receipts shall
have all the rights, privileges and preferences to which they are entitled as
beneficial owners of shares of Preferred Stock. 
In lieu of fractional shares that are not integral multiples of one
one-thousandth of a share of Preferred Stock, the Company shall pay to the
registered holders of Right Certificates with regard to which such fractional
shares would otherwise be issuable an amount in cash equal to the same fraction
of the current market value of a whole share of Preferred Stock.  For purposes of this Section 14(b),
the “current market value of a whole share of Preferred
Stock” shall be the closing price of a share of Preferred Stock
(as determined pursuant to the 

 

24

 

second sentence of Section 11(d)(i)) for the
Trading Day immediately prior to the date of such exercise or exchange).

 

(c)           The Company shall not be required to issue fractions
of shares of Common Stock upon exercise or exchange of the Rights or to
distribute certificates that evidence fractional shares of Common Stock.  In lieu of such fractional shares, the
Company shall pay to the registered holders of Right Certificates with regard
to which such fractional shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Common Stock.  For purposes of this Section
14(c), the “current market value of a whole share of
Common Stock” shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i))
for the Trading Day immediately prior to the date of such exercise or
exchange).

 

(d)           The holder of a Right by the acceptance of the Right
expressly waives such holder’s right to receive any fractional Rights or any
fractional shares upon exercise of a Right (except as above provided).

 

Section
15.             Rights of Action. 
All rights of action in respect of this Agreement are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in such holder’s own behalf and for such holder’s own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce this Agreement, or otherwise act in respect of
such holder’s right to exercise the Rights evidenced by such Right Certificate
in the manner provided in such Right Certificate and in this Agreement.  Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.

 

Section
16.             Agreement of Right Holders. 
Every holder of a Right, by accepting the same, consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:

 

(a)           prior to the Distribution Date, the Rights will be
transferable only in connection with the transfer of the Common Stock;

 

(b)           after the Distribution Date, the Right Certificates
are transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purposes, duly endorsed
or accompanied by a proper instrument of transfer;

 

(c)           the Company and the Rights Agent may deem and treat
the Person in whose name the Right Certificate (or, prior to the Distribution
Date, the associated 

 

25

 

Common Stock certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby (notwithstanding any
notations of ownership or writing on the Right Certificates or the associated
Common Stock certificates made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent shall be affected by any notice to the contrary; and

 

(d)           notwithstanding anything in this Agreement to the
contrary, neither the Company nor the Rights Agent shall have any liability to
any holder of a Right or other Person as a result of the Company’s or the
Rights Agent’s inability to perform any of their respective obligations under
this Agreement by reason of any preliminary or permanent injunction or other
order, judgment, decree or ruling (whether interlocutory or final) issued by a
court or by a governmental, regulatory, self-regulatory or administrative
agency or commission, or any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining performance of such obligation.

 

Section
17.             Right Certificate Holder Not Deemed a
Stockholder.  No holder, as such, of any Right Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of the Preferred Stock or any other securities of the Company that may
at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting stockholders (except as provided in Section 23, Section
24 or Section 25), or to receive dividends or subscription rights,
or otherwise, until the Right or Rights evidenced by such Right Certificate
shall have been exercised in accordance with the provisions hereof.

 

Section
18.             Concerning the Rights Agent. 
The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense (including, without limitation, the reasonable fees and expenses of
legal counsel), incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance, administration
and performance of its duties under this Agreement, including the costs and
expenses of defending against any claim of liability in the premises and the
enforcement of this indemnification. 
This indemnification shall survive the termination of this Agreement,
the exercise of or expiration of the Rights and the resignation, replacement or
removal of the Rights Agent.

 

The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
connection with its administration of this Agreement in reliance upon any Right
Certificate or certificate for the Preferred Stock or for other securities of
the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it 

 

26

 

to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper person or persons or
otherwise upon the advice of counsel as set forth in Section 20.

 

Section
19.             Merger or Consolidation or Change of Name
of Rights Agent.  Any Person into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any Person resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any Person succeeding to the
applicable business of the Rights Agent or any successor Rights Agent shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21.  In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.

 

In case at any time the name of the Rights Agent shall
be changed and at such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Right Certificates so
countersigned; and in case at that time any of the Right Certificates shall not
have been countersigned, the Rights Agent may countersign such Right
Certificates either in its prior name or in its changed name; and in all such
cases such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

 

Section
20.             Duties of Rights Agent. 
The Rights Agent undertakes the duties and obligations expressly imposed
by this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their acceptance thereof,
shall be bound:

 

(a)           The Rights Agent may consult with the legal counsel
(who may be legal counsel for the Company), and the opinion of such counsel
shall be full and complete authorization and protection to the Rights Agent as
to any action taken, suffered or omitted by it in accordance with such opinion.

 

(b)           Whenever in the performance of its duties under this
Agreement the Rights Agent shall deem it necessary or desirable that any fact
or matter be proved or established by the Company prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board,
the Chief Executive Officer, the President, any Vice President, the Treasurer
or the Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full and complete authorization and protection to the

 

27

 

Rights Agent for any action taken, suffered or omitted
by it under the provisions of this Agreement in reliance upon such certificate.

 

(c)           The Rights Agent shall be liable
hereunder for only its own gross negligence, bad faith or willful misconduct.

 

(d)           The Rights Agent shall not be liable
for or by reason of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.

 

(e)           The Rights Agent shall not be under
any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Right Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the Company of any covenant or condition contained in this Agreement
or in any Right Certificate; nor shall it be responsible for any change in the
exercisability of Rights (including any Rights becoming void pursuant to Section 11(a)(ii))
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, Section 11, Section 13,
Section 23 or Section 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right Certificates after
actual notice that such change or adjustment is required); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of the Preferred Stock to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of the Preferred Stock will, when issued, be validly authorized and issued,
fully paid and nonassessable.

 

(f)            The Company agrees that it will
perform, execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Agreement.

 

(g)           The Rights Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, the Chief Executive Officer,
the President, any Vice President, the Secretary or the Treasurer of the Company,
and such instructions shall be full authorization and protection to the Rights
Agent and the Rights Agent shall not be liable for or in respect of any action
taken, suffered or omitted by it in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions.  The Rights Agent shall be fully authorized
and protected in relying upon the most recent instructions received by any such
officer.

 

(h)           The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may buy, sell or deal in any
of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the 

 

28

 

Company may be interested, or contract with or lend
interested money to the Company or otherwise act as fully and freely as though
it were not Rights Agent under this Agreement. 
Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other Person.

 

(i)            The Rights Agent may execute and
exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, and the
Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct, absent
gross negligence, bad faith or willful misconduct in the selection and continued
employment thereof.

 

(j)            If, with respect to any Right
Certificate surrendered to the Rights Agent for exercise or transfer, the
certificate attached to the form of assignment or form of election to purchase,
as the case may be, has either not been completed or indicates that the Rights
are beneficially owned by an Acquiring Person or an Affiliate or Associate
thereof, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the Company.

 

(k)           The Rights Agent shall have no
responsibility to the Company, any holders of Rights or any holders of shares
of Preferred Stock or other securities for interest or earnings on any monies
held by the Rights Agent pursuant to this Agreement, except as otherwise
specifically agreed in a separate writing by the Company and the Rights Agent.

 

(l)            The Rights Agent shall not be
required to take notice or be deemed to have notice of any event or condition
hereunder, including, but not limited to, a Distribution Date, a Redemption
Date, any adjustment of the Purchase Price, the existence of an Acquiring
Person or any other event or condition that may require action by the Rights
Agent, unless the Rights Agent shall be specifically notified in writing of such
event or condition by the Company, and all notices or other instruments
required by this Agreement to be delivered to the Rights Agent must, in order
to be effective, be received by the Rights Agent as specified in Section 26,
and in the absence of such notice so delivered, the Rights Agent may
conclusively assume no such event or condition exists.

 

Section 21.                                      Change of Rights Agent. 
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days’ notice
in writing mailed to the Company and to each transfer agent of the Common Stock
and the Preferred Stock by registered or certified mail, and, if such
resignation occurs after the Distribution Date, to the registered holders of
the Right Certificates by first class mail. 
In the event the transfer agency relationship in effect between the
Company and the Rights Agent terminates, the Rights Agent will be deemed to
have resigned automatically and be discharged from its duties under this
Agreement as of the effective date of such termination, and the Company shall
be responsible for sending any required notice. The Company may remove the
Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the

 

29

 

Common Stock and the Preferred Stock by registered or certified mail,
and, if such resignation occurs after the Distribution Date, to the registered
holders of the Right Certificates by first class mail.  If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit such holder’s Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a Person that is (i) organized
and doing business under the laws of the United States or of any state of the
United States, (ii) authorized under such laws to do business as a banking
institution and to exercise corporate trust powers or stock transfer powers, (iii) in
good standing, and (iv) subject to supervision or examination by federal
or state authority and that, in conjunction with its Affiliates, has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million.  After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or deed
necessary for the purpose.  Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock or Preferred Stock, and, if such resignation occurs after the
Distribution Date, mail a notice thereof in writing to the registered holders
of the Right Certificates.  Failure to
give any notice provided for in this Section 21, however, or any
defect therein, shall not affect the legality or validity of the resignation or
removal of the Rights Agent or the appointment of the successor Rights Agent,
as the case may be.

 

Section 22.                                      Issuance of New Right Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind
or class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance
or sale of Common Stock following the Distribution Date and prior to the
Expiration Date, the Company may, with respect to shares of Common Stock so
issued or sold pursuant to (a) the exercise of stock options, (b) under
any employee plan or arrangement, (c) the exercise, conversion or exchange
of securities, notes or debentures issued by the Company or (d) a
contractual obligation of the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale.

 

Section 23.                                      Redemption.

 

(a)           The Board of Directors of the Company
may, at its option, at any time prior to the Close of Business on the earlier
of (i) the Distribution Date or (ii) the Expiration Date, redeem all
but not less than all of the then outstanding Rights at a

 

30

 

redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the “Redemption Price”).  Notwithstanding anything in this Agreement to
the contrary, the Rights shall not be exercisable after the first occurrence of
an event described in Section 11(a)(ii) until such time as the
Company’s right of redemption under this Section 23(a) has
expired.  The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as
the Board of Directors of the Company in its sole discretion may establish.  The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Current Market
Price Per Share of the Common Stock at the time of redemption as determined
pursuant to Section 11(d)(i)) or any other form of consideration
deemed appropriate by the Board of Directors of the Company, or any combination
thereof.

 

(b)           Immediately upon the action of the
Board of Directors of the Company ordering the redemption of the Rights
pursuant to Section 23(a), without any further action and without
any notice, the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive the Redemption Price.  The Company shall promptly give public notice
of any such redemption and, within ten (10) days after such action causing
a redemption of the Rights pursuant to Section 23(a), the Company
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock.  Any
notice that is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. 
Each such notice of redemption will state the method by which the payment
of the Redemption Price will be made. 
Notwithstanding the foregoing, the failure to give, or any defect in,
any notice required to be made or given pursuant to this Section 23(b) shall
not affect the validity of the redemption of the Rights.

 

(c)           Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights
at any time in any manner other than that specifically set forth in this Section 23
or in Section 24, and other than in connection with the purchase or
repurchase by any of them of Common Stock prior to the Distribution Date.

 

Section 24.                                      Exchange.

 

(a)           The Board of Directors of the Company
may, at its option, at any time after the Shares Acquisition Date, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 11(a)(ii))
for shares of Common Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such exchange at any
time after any Acquiring Person, together with all Affiliates and Associates of
such

 

31

 

Acquiring Person, becomes the Beneficial Owner of 50%
or more of the voting power of the shares of Common Stock then
outstanding.  From and after the
occurrence of an event specified in Section 13(a), any Rights that
theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be only exercisable in accordance with Section 13 and
may not be exchanged pursuant to this Section 24(a).  The exchange of the Rights by the Board of
Directors of the Company may be made effective at such time, on such basis and
with such conditions as the Board of Directors of the Company in its sole
discretion may establish.

 

(b)           Immediately upon the effectiveness of
the action of the Board of Directors of the Company ordering the exchange of
any Rights pursuant to Section 24(a) and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange.  The Company promptly shall
mail a notice of any such exchange by first class mail to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent.  Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such
notice of exchange will state the method by which the exchange of Common Stock
for Rights will be effected and, in the event of any partial exchange, the
number of Rights that will be exchanged. 
Any partial exchange shall be effected pro rata based on the number of
Rights (other than Rights that have become void pursuant to the provisions of Section 11(a)(ii))
held by each holder of Rights.

 

(c)           The Company may, at its option,
substitute for a share of Common Stock issuable upon the exchange of Rights in
accordance with Section 24(a) a number of shares of Preferred
Stock (or Equivalent Preferred Stock) or fraction thereof such that the Current
Market Price Per Share of the Preferred Stock multiplied by such number or
fraction is equal to the Current Market Price Per Share of the Common Stock.

 

Section 25.                                      Notice of Certain Events. 
In case the Company shall propose at any time following the Distribution
Date (a) to pay any dividend payable in stock of any class to the holders of
its Preferred Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regular periodic cash dividend), (b) to
offer to the holders of its Preferred Stock rights or warrants to subscribe for
or to purchase any additional shares of the Preferred Stock or shares of stock
of any class or any other securities, rights or options, (c) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding Preferred Stock), (d) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, (e) to effect the liquidation, dissolution or winding up of
the Company or (f) to declare or pay any dividend on the shares of Common
Stock payable in shares of Common Stock or to effect a subdivision, combination
or consolidation of the shares of Common Stock (by reclassification 

 

32

 

or otherwise than by payment of dividends in shares of Common Stock),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Stock and/or the Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least ten (10) days
prior to the record date for determining holders of the Preferred Stock for
purposes of such action, and in the case of any such other action, at least ten
(10) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Stock and/or the
Preferred Stock, whichever shall be the earlier.  In case the event set forth in Section 11(a)(ii) shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right, in accordance with Section 26, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii).

 

Section 26.             Notices.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any Right
Certificate to or on the Company shall be sufficiently given or made if sent by
overnight delivery service or first class mail, postage prepaid, addressed
(until another address is filed in writing by the Company with the Rights
Agent) as follows:

 

Iteris, Inc.

1700 Carnegie Avenue, Suite 100

Santa Ana, CA 92705 

Attention:  Chief Financial Officer

 

Subject to the provisions of Section 21, any notice or
demand authorized by this Agreement to be given or made by the Company or by
the holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by overnight delivery service or first class
mail, postage prepaid, addressed (until another address is filed in writing by
the Rights Agent with the Company) as follows:

 

Computershare Trust Company, N.A.,

350 Indiana St., Suite 800

Golden, CO  80401

Attn: Iteris, Inc. Account Manager

 

Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by overnight delivery service or first class
mail, postage prepaid, addressed to such holder at the address of such holder
as shown on the registry books of the Company.

 

Section 27.             Supplements and Amendments.  Except as otherwise provided in this Section 27,
and prior to the Distribution Date, the Company may, from time to time in its
sole and absolute discretion, and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement in any respect
without the approval of any holders of

 

33

 

certificates representing shares of Common Stock.  From and after the Distribution Date, except
as otherwise provided in this Section 27, the Company may, and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
to (a) cure any ambiguity, (b) correct or supplement any provision
contained herein that may be defective or inconsistent with any other
provisions herein, (c) shorten or lengthen any time period hereunder or (d) change
or supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and which would not adversely affect the interests of
the holders of Right Certificates as such (other than any holder who is an
Acquiring Person, or an Affiliate or Associate of any Acquiring Person), but
may not cause this Agreement to become amendable other than in accordance
with this Section 27 or cause the Rights to again become
redeemable.  Upon the delivery of a certificate
from an appropriate officer of the Company that states that the proposed
supplement or amendment is in compliance with the terms of this Section 27,
the Rights Agent shall execute such supplement or amendment.

 

Notwithstanding anything contained in this Agreement to the contrary,
the Rights Agent may, but shall not be obligated to, enter into any supplement
or amendment that affects the Rights Agent’s own rights, duties, obligations or
immunities under this Agreement.

 

Section 28.             Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

 

Section 29.             Benefits of this Agreement.  Nothing in this Agreement shall be construed
to give to any Person other than the Company, the Rights Agent and the
registered holders of the Right Certificates (and, prior to the Distribution
Date, the registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Right Certificates (and, prior to the Distribution Date, the
registered holders of the Common Stock).

 

Section 30.             Determinations and Actions by
the Board of Directors of the Company. 
The Board of Directors of the Company shall have the exclusive power and
authority to administer this Agreement and to exercise the rights and powers
specifically granted to the Board of Directors of the Company or to the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power to (a) interpret
the provisions of this Agreement and (b) make all determinations deemed
necessary or advisable for the administration of this Agreement (including,
without limitation, a determination to redeem or not redeem the Rights, to
exchange or not exchange the Rights, or to amend this Agreement).  All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors of the Company in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights, as
such, and all other Persons and (y) not subject the Board of Directors of
the Company, or any of the  directors
serving on the Board of Directors, to any liability to the holders of the
Rights or any other Person.

 

34

 

For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of capital stock outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial Owner,
shall be made in accordance with the last sentence of Rule 13d-3(d)(l)(i) of
the General Rules and Regulations under the Exchange Act.

 

Section 31.             Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that, notwithstanding anything in this
Agreement to the contrary, if any such term, provision, covenant or restriction
is held by such court or authority to be invalid, void or unenforceable and the
Board of Directors determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the Close of Business on
the tenth Business Day following the date of such determination by the Board of
Directors.  Without limiting the
foregoing, if any provision requiring a specific group of directors to act is
held to by any court of competent jurisdiction or other authority to be
invalid, void or unenforceable, such determination shall then be made by the
Board of Directors in accordance with applicable law and the Company’s Restated
Certificate of Incorporation and Bylaws.

 

Section 32.             Governing Law.  This Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the State
of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state.

 

Section 33.             Descriptive Headings; References.  Descriptive headings of the several sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.  Except as otherwise specifically provided,
any reference to any section or exhibit will be deemed to refer to such section
of or exhibit to this Agreement.

 

Section 34.             Counterparts.  This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.

 

Section 35.             Force Majeure.  Notwithstanding anything to the contrary
contained herein, the Rights Agent shall not be liable for any delays or
failures in performance resulting from acts beyond its reasonable control
including, without limitation, acts of God, terrorist acts, shortage of supply,
breakdowns or malfunctions, interruptions or malfunction of computer
facilities, or loss of data due to power failures or mechanical difficulties
with information storage or retrieval systems, labor difficulties, war, or
civil unrest.

 

[Remainder of Page Intentionally Left Blank]

 

35

 

IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.

 

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ ABBAS MOHADDES

  
	
   

  	
   

  	
  Name:

  	
  Abbas Mohaddes

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPUTERSHARE TRUST COMPANY,
  N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ KELLIE GWINN

  
	
   

  	
   

  	
  Name:

  	
  Kellie Gwinn

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

36

 

EXHIBIT
A

 

Form of Certificate of Designations for

Series A Junior Participating Preferred Stock

 

(attached)

 

A-1

 

CERTIFICATE OF DESIGNATIONS

 

OF

 

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

OF

 

ITERIS, INC.

 

 

Pursuant to Section 151 of the

 

Delaware General Corporation Law

 

 

Iteris, Inc., a Delaware corporation (the “Corporation”), does
hereby certify that the following resolution was adopted by the Board of
Directors of the Corporation effective August 20, 2009, and such
resolution has not been rescinded or amended and is in full force and effect as
of the date hereof:

 

RESOLVED, that pursuant to the authority
conferred upon the Board of Directors of Iteris, Inc., a Delaware
corporation (the “Corporation”), by the provisions of the certificate of
incorporation of the Corporation, as amended to date (the “Certificate of
Incorporation”), there hereby is created, out of the authorized shares of
undesignated Preferred Stock, a series of Preferred Stock of the Corporation
consisting of One Hundred Thousand (100,000) shares, having the following
designations, preferences, relative, participating, optional and other special
rights, voting powers, qualifications, limitations and restrictions:

 

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

Section 1.                                          Designation and Amount.  The shares of
such series shall be designated as “Series A Junior Participating
Preferred Stock” (the “Series A
Preferred Stock”) and the number of shares constituting such
series shall be One Hundred Thousand (100,000). 
Such number of shares may be increased or decreased by resolution of the
Board of Directors, provided that no decrease shall reduce the number of shares
of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.

 

Section 2.                                          Dividends and
Distributions.

 

(A)                              Subject to the prior and superior rights
of the holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Preferred Stock, the 

 

A-2

 

holders of shares of Series A Preferred Stock, in
preference to the holders of Common Stock, par value $0.10 per share (or as
such par value may be changed from time to time), of the Corporation (the “Common Stock”) and of any
other junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on or about the last day of each of March,
June, September and December in each year (each such date being
referred to herein as a “Quarterly
Dividend Payment Date”), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (i) One Dollar ($1.00) or (ii) subject
to the provision for adjustment hereinafter set forth, One Thousand (1,000)
times the aggregate per share amount of all cash dividends, and One Thousand
(1,000) times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock.  If the Corporation shall at any time on or
after September 3, 2009 (the “Record
Date”) declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

 

(B)           The
Corporation shall declare a dividend or distribution on the Series A
Preferred Stock as provided in paragraph (A) of this Section immediately
after it declares a dividend or distribution on the Common Stock (other than a
dividend payable in shares of Common Stock); provided that, in the event no
dividend or distribution shall have been declared on the Common Stock during
the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $1.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent Quarterly
Dividend Payment Date.

 

(C)           Dividends
shall begin to accrue and be cumulative on outstanding shares of Series A
Preferred Stock from the Quarterly Dividend Payment Date next preceding the
date of issue of such shares of Series A Preferred Stock, unless the date
of issue of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall begin to
accrue from the date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Series A Preferred Stock entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall not bear
interest.  Dividends paid on the shares
of Series A Preferred Stock in an amount less than the total amount of
such dividends at the time accrued and payable on such 

 

A-3

 

shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding.  The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date fixed for
the payment thereof.

 

Section 3.                                          Voting Rights.  The holders of
shares of Series A Preferred Stock shall have the following voting rights:

 

(A)                              Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall
entitle the holder thereof to One Thousand (1,000) votes on all matters
submitted to a vote of the stockholders of the Corporation. If the Corporation
shall at any time on or after the Record Date declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

(B)                                Except as otherwise provided herein, in
the Certificate of Incorporation, in any other Certificate of Designations
creating a series of Preferred Stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.

 

(C)                                Except as set forth herein, holders of Series A
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.

 

Section 4.                                          Certain Restrictions.

 

(A)                              Whenever quarterly dividends or other
dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:

 

(i)            declare or pay
dividends on or make any other distributions on any shares of stock ranking
junior (either as to dividends or upon liquidation, dissolution or winding up)
to the Series A Preferred Stock;

 

(ii)           declare or pay
dividends on or make any other distributions on any shares of stock ranking on
a parity (either as to dividends or upon liquidation, dissolution or winding
up) with the Series A Preferred Stock, except dividends paid ratably on
the Series A Preferred Stock and all such parity stock on

 

A-4

 

which dividends are payable or in arrears in proportion to the total
amounts to which the holders of all such shares are then entitled;

 

(iii)          redeem or purchase
or otherwise acquire for consideration shares of any stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock, provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in exchange for shares of
any stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
or

 

(iv)          redeem or purchase
or otherwise acquire for consideration any shares of Series A Preferred
Stock, or any shares of stock ranking on a parity with the Series A
Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.

 

(B)                                The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.

 

Section 5.                                          Reacquired Shares.  Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof.  All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the conditions
and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.

 

Section 6.                                          Liquidation, Dissolution
or Winding Up.

 

(A)                              Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no distribution shall
be made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received One Thousand Dollars ($1,000.00) per share,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be
made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount
per share equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) One Thousand (1,000) (as appropriately adjusted
as set forth in paragraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations 

 

A-5

 

with respect to the Common Stock) (such quotient, the “Common Adjustment” and the
number in clause (ii), the “Adjustment
Number”).  Following the
payment of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A
Preferred Stock and Common Stock, respectively, holders of Series A
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in
the ratio of the Adjustment Number to One (1) with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.

 

(B)           If,
however, there are not sufficient assets available to permit payment in full of
the Series A Liquidation Preference and the liquidation preferences of all
other series of Preferred Stock, if any, which rank on a parity with the Series A
Preferred Stock, then such remaining assets shall be distributed ratably to the
holders of such parity shares (including the Series A Preferred Stock) in
proportion to their respective liquidation preferences.  If, after payment of the full Series A
Liquidation Preference, there are not sufficient assets available to permit
payment in full of the Common Adjustment, then such remaining assets shall be
distributed ratably to the holders of Common Stock.

 

(C)           If
the Corporation shall at any time after the Record Date (i) declare any
dividend on Common Stock payable in shares of Common Stock, (ii) subdivide
the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the Adjustment
Number in effect immediately prior to such event shall be adjusted by
multiplying such Adjustment Number by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

Section 7.                                          Consolidation, Merger,
Etc.  If the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of Series A
Preferred Stock shall at the same time be similarly exchanged or changed in an amount
per share (subject to the provision for adjustment hereinafter set forth) equal
to One Thousand (1,000) times the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged.  In the event the Corporation shall at any
time after the Record Date declare or pay any dividend on Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the denominator
of which is the number of shares of Common Stock that were outstanding
immediately prior to such event.

 

Section 8.                                          No Redemption.  The shares of Series A
Preferred Stock shall not be redeemable.

 

A-6

 

Section 9.              Rank. 
The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all other series
of the Preferred Stock, whether designated or issued before or after the date
of this Certificate of Designations, unless the terms of any such series shall
provide otherwise.

 

Section 10.            Fractional Shares. 
The Series A Preferred Stock may be issued in fractions of a share
that shall entitle the holder, in proportion to such holder’s fractional shares,
to exercise voting rights, receive dividends, participate in distributions and
have the benefit of all other rights of holders of the Series A Preferred
Stock.

 

Section 11.            Amendment. 
The Certificate of Incorporation shall not be amended in any manner that
would materially alter or change the powers, preferences or special rights of
the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of Series A
Preferred Stock.

 

[Remainder of Page Left Intentionally Blank]

 

A-7

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Series A Junior Participating Preferred Stock of Iteris, Inc.
to be executed this
              
day of
              ,
2009.

 

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-8

 

EXHIBIT
B

 

Form of Right Certificate

 

	
  Certificate No. R-         

  	
  Rights

  

 

NOT
EXERCISABLE AFTER AUGUST 20, 2019 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS.  THE RIGHTS ARE SUBJECT, AT THE
OPTION OF THE COMPANY, TO REDEMPTION AT $0.001 PER RIGHT OR TO EXCHANGE, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS DEFINED IN SECTION 1 OF
THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID.

 

RIGHT
CERTIFICATE

 

ITERIS,
INC.

 

This certifies that
                    
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement dated as of August 20,
2009 (the “Rights Agreement”) between
Iteris, Inc., a Delaware corporation (the “Company”),
and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to the Close of Business (as such term is defined
in the Rights Agreement) on August 20, 2019 at the office of the Rights
Agent, or its successors as Rights Agent, designated for such purposes, one
one-thousandth of one fully paid and non-assessable share of the Series A
Junior Participating Preferred Stock (the “Preferred Stock”)
of the Company, at a purchase price of $7.00 per one one-thousandth of a share
(the “Purchase Price”), upon
presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.  The
number of Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a share of Preferred Stock that may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of September 3, 2009, based on
the shares of the Preferred Stock of the Company as constituted at such date.

 

As provided in the Rights Agreement, the Purchase Price and the number
and kind or class of shares of stock of the Company that may be purchased upon
the exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.

 

This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder 

 

B-1

 

of the Rights Agent, the Company and the holders of
the Right Certificates.  Copies of the
Rights Agreement are on file at the principal executive offices of the Company
and the office of the Rights Agent.

 

This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purposes, may
be exchanged for another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares (or fractions of a share) of the Preferred Stock as the Rights
evidenced by the Right Certificate or Right Certificates surrendered shall have
entitled such holder to purchase.

 

If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may, but are not required to, be redeemed by the Company at
its option at a redemption price of $0.001 per Right at any time prior to the
earlier of the Close of Business on (i) the Distribution Date (as such
time period may be extended pursuant to the Rights Agreement), and (ii) the
Expiration Date. In addition, under certain circumstances following the Shares
Acquisition  Date, the Rights may be
exchanged, in whole or in part, for shares of Common Stock, or shares of
preferred stock of the Company having essentially the same value or economic
rights as such shares.  Immediately upon
the action of the Board of Directors authorizing any such exchange, and without
any further action or any notice, the Rights (other than Rights which are not
subject to such exchange) will terminate and the Rights will only enable
holders to receive the shares issuable upon such exchange.

 

No fractional shares of the Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions that are
integral multiples of one one-thousandth of one share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made as provided in the Rights
Agreement.

 

No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Stock or of any other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

 

This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

 

B-2

 

WITNESS the signature of the proper officers of the Company and its
corporate seal.

 

Dated
as of
                            ,
2009

 

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Countersigned:

  
	
   

  	
   

  
	
   

  	
  COMPUTERSHARE
  TRUST COMPANY, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

B-3

 

[Form of
Reverse Side of Right Certificate]

 

FORM OF
ASSIGNMENT

 

(To be
executed by the registered holder if such holder desires to transfer the Right
Certificate)

 

	
  FOR VALUE RECEIVED
                                
  hereby sells, assigns and transfers unto

  	
   

  
	
   

  
	
  (Please print name and
  address of transferee)

  

 

this
Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
                              
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.

 

	
  Dated:

  	
  , 2009

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

(Signature must conform in all respects to the name of
holder as written upon the face of this Right Certificate, without alteration
or enlargement or any change whatsoever.)

 

Signature
Medallion Guaranteed:

 

Signatures must be guaranteed by an “eligible guarantor institution” as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.

 

	
   

  
	
   

  
	
  (to be completed if
  applicable)

  

 

The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

B-4

 

FORM OF
ELECTION TO PURCHASE

 

(To be
executed by the registered holder if such holder desires to exercise the Right
Certificate)

 

TO:  ITERIS, INC.

 

The undersigned hereby irrevocably elects to exercise
                              
Rights represented by this Right Certificate to purchase the shares of the
Preferred Stock issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:

 

	
  [Please insert social
  security or other identifying number]

  	
   

  
	
   

  
	
  (Please print name and
  address)

  

 

If
such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

 

	
  [Please insert social
  security or other identifying number]

  	
   

  
	
   

  
	
  (Please print name and
  address)

  

 

	
  Dated:
                                           ,
  2009

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Signature

  

 

(Signature must conform in all respects to the name of
holder as written upon the face of this Right Certificate, without alteration
or enlargement or any change whatsoever.)

 

Signature
Medallion Guaranteed:

 

Signatures must be guaranteed by an “eligible guarantor institution” as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.

 

 

	
   

  
	
  (to be completed if
  applicable)

  

 

The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

B-5

 

EXHIBIT
C

 

Summary
of Rights to Purchase Preferred Stock

 

(attached)

 

C-1

 

ITERIS,
INC.

 

SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK

 

On August 20, 2009, the Board of Directors of Iteris, Inc.
(the “Company”) declared a dividend
distribution of one preferred stock purchase right (a “Right”)
for each outstanding share of common stock, $0.10 par value, of the Company
(the “Common Stock”).  The distribution is payable to the
stockholders of record as of September 3, 2009 (the “Record
Date”).  Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of the Company’s Series A Junior Participating Preferred Stock
(the “Preferred Stock”) at a price
of $7.00 per one one-thousandth of a share of Preferred Stock (the “Purchase Price”), subject to
adjustment.  The description and terms of
the Rights are set forth in a Rights Agreement dated August 20, 2009 (the “Rights Agreement”), between the
Company and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”).

 

A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated August 21, 2009.  Copies of
the Rights Agreement are available free of charge from the Rights Agent,
Computershare Trust Company, N.A.  The
following summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.

 

Until the Close of Business (as defined in the Rights Agreement) on the
Distribution Date, the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common Stock
certificate and this Summary of Rights. 
The “Distribution Date” will be
the tenth day following the earlier of (i) a public announcement that, or (ii) a
determination by a majority of the Company’s Board of Directors that, a person
or group of affiliated or associated persons (an “Acquiring
Person”) has acquired “beneficial ownership” (as defined in the
Rights Agreement) of fifteen percent (15%)  or more of the
outstanding shares of the Common Stock. 
For purposes of the Rights Agreement, “beneficial ownership” includes
not only the right to vote or dispose of shares of the Company’s Common Stock,
but also rights related to derivative transactions or derivative securities
which grant to the holder thereof the economic equivalent of ownership of an
amount of shares of Company Common Stock (whether or not such derivative (i) conveys
voting rights in the Company Common Stock or (ii) may be settled through
delivery of shares of Company Common Stock, and whether or not the economic
effect of such derivative has been hedged).

 

The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be
transferable only in connection with the transfer of the Common Stock.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after the Record Date, upon transfer or new issuance of the Common Stock, will
contain a notation incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any of
the Common Stock certificates outstanding as of the Record Date, with or
without a copy of this Summary of Rights, will also constitute the transfer of
the Rights associated with the Common Stock represented by such
certificate.  As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights 

 

C-2

 

(“Right Certificates”)
will be mailed to holders of record of the Common Stock as of the Close of
Business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights.

 

The Rights are not exercisable until the Distribution Date.  The Rights will expire at 5:00 p.m.
(Eastern time) on August 20, 2019 (the “Expiration
Date”), unless the Expiration Date is extended or unless earlier
redeemed or exchanged by the Company, in each case as described below.

 

If any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision will be made so that each holder of a Right,
other than Rights that were or are beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter have the right to receive upon
exercise that number of shares of Common Stock having a market value of two
times the Purchase Price.

 

If the Company is acquired in a merger or other business combination
transaction or 50% or more of its assets or earning power are sold after a
person or group has become an Acquiring Person, proper provision will be made
so that each holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the Purchase Price, that number of shares of the senior
voting stock of the acquiring company that, at the time of such transaction,
would have a market value of two times the Purchase Price.

 

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in such
Purchase Price.  No fractional shares of
Preferred Stock will be issued (other than fractions that are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at
the election of the Company, be evidenced by depositary receipts) and, in lieu
thereof, an adjustment in cash will be made based on the market price of the
Preferred Stock on the last trading date prior to the date of exercise.

 

At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group that will
have become void) in whole or in part, at an exchange ratio of one share of
Common Stock (or, if there is an insufficient number of issued but not
outstanding or authorized but unissued shares of Common Stock to permit such
exchange, then one one-thousandth of a share of Preferred Stock) per Right (subject
to adjustment).

 

At any time prior to 5:00 p.m. Eastern time on the earlier of (i) the
Distribution Date and (ii) the Expiration Date, the Board of Directors of
the Company may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right (the “Redemption Price”).

 

Immediately upon the action of the Board of Directors of the Company to
redeem or exchange the Rights, the Company shall make announcement thereof, and
upon such action, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price, or the
shares of Common Stock or Preferred Stock exchangeable for the Rights, as
applicable.

 

C-3

 

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.

 

Each share of Preferred Stock purchasable upon exercise of the Rights
will have a preferential quarterly dividend rate equal to the greater of One
Dollar ($1.00) per share or One Thousand (1,000) times the dividend declared on
one share of the Common Stock.  In the
event of liquidation, the holders of the Preferred Stock will receive a
preferential liquidation payment of One Thousand Dollars ($1,000.00) per share,
but will be entitled to receive an aggregate liquidation payment equal to One
Thousand (1,000) times the payment made on one share of Common Stock.  Each share of Preferred Stock will have One
Thousand (1,000) votes voting together with the Common Stock.  The Rights are also protected by customary
anti-dilution provisions as more fully described in the Rights Agreement.  Because of the nature of the Preferred Stock
dividend, liquidation and voting rights, the value of the one one-thousandth
interest in a share of Preferred Stock purchasable upon exercise of each Right
(subject to adjustment) should approximate the value of one share of Common
Stock.

 

Any provisions of the Rights Agreement may be amended by the Board of
Directors prior to the Distribution Date. 
After the Distribution Date, the provisions of the Rights Agreement may
be amended by the Board of Directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of an Acquiring Person or certain related parties), or
to shorten or lengthen any time period under the Rights Agreement.  The foregoing notwithstanding, no amendment
may be made to the Rights Agreement at a time when the Rights are not
redeemable, except to cure any ambiguity or correct or supplement any provision
contained in the Rights Agreement which may be defective or inconsistent with
any other provision therein.

 

C-4Exhibit 4.1

 

RIGHTS AGREEMENT

 

by and between

 

ITERIS, INC.

 

and

 

COMPUTERSHARE TRUST COMPANY, N.A.,

as Rights Agent

 

dated as of

 

August 20, 2009

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  Section 1.

  	
  Certain Definitions

  	
  1

  
	
   

  	
   

  	
   

  
	
  Section 2.

  	
  Appointment of Rights
  Agent

  	
  6

  
	
   

  	
   

  	
   

  
	
  Section 3.

  	
  Issue of Right
  Certificates

  	
  7

  
	
   

  	
   

  	
   

  
	
  Section 4.

  	
  Form of Right
  Certificates

  	
  8

  
	
   

  	
   

  	
   

  
	
  Section 5.

  	
  Countersignature and
  Registration

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 6.

  	
  Transfer, Split Up,
  Combination and Exchange of Right Certificates; Mutilated, Destroyed, Lost or
  Stolen Right Certificates

  	
  9

  
	
   

  	
   

  	
   

  
	
  Section 7.

  	
  Exercise of Rights:
  Purchase Price; Expiration Date of Rights

  	
  10

  
	
   

  	
   

  	
   

  
	
  Section 8.

  	
  Cancellation and
  Destruction of Right Certificates

  	
  11

  
	
   

  	
   

  	
   

  
	
  Section 9.

  	
  Reservation and
  Availability of Shares of Preferred Stock

  	
  12

  
	
   

  	
   

  	
   

  
	
  Section 10.

  	
  Preferred Stock Record
  Date

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 11.

  	
  Adjustment of Purchase
  Price, Number of Shares or Number of Rights

  	
  13

  
	
   

  	
   

  	
   

  
	
  Section 12.

  	
  Certificate of Adjusted
  Purchase Price or Number of Shares

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 13.

  	
  Consolidation, Merger
  or Sale or Transfer of Assets or Earning Power

  	
  21

  
	
   

  	
   

  	
   

  
	
  Section 14.

  	
  Fractional Rights and
  Fractional Shares

  	
  24

  
	
   

  	
   

  	
   

  
	
  Section 15.

  	
  Rights of Action

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 16.

  	
  Agreement of Right
  Holders

  	
  25

  
	
   

  	
   

  	
   

  
	
  Section 17.

  	
  Right Certificate
  Holder Not Deemed a Stockholder

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 18.

  	
  Concerning the Rights
  Agent

  	
  26

  
	
   

  	
   

  	
   

  
	
  Section 19.

  	
  Merger or Consolidation
  or Change of Name of Rights Agent

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 20.

  	
  Duties of Rights Agent

  	
  27

  
	
   

  	
   

  	
   

  
	
  Section 21.

  	
  Change of Rights Agent

  	
  29

  
	
   

  	
   

  	
   

  
	
  Section 22.

  	
  Issuance of New Right
  Certificates

  	
  30

  

 

i

 

	
  Section 23.

  	
  Redemption

  	
  30

  
	
   

  	
   

  	
   

  
	
  Section 24.

  	
  Exchange

  	
  31

  
	
   

  	
   

  	
   

  
	
  Section 25.

  	
  Notice of Certain
  Events

  	
  32

  
	
   

  	
   

  	
   

  
	
  Section 26.

  	
  Notices

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 27.

  	
  Supplements and
  Amendments

  	
  33

  
	
   

  	
   

  	
   

  
	
  Section 28.

  	
  Successors

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 29.

  	
  Benefits of this
  Agreement

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 30.

  	
  Determinations and
  Actions by the Board of Directors of the Company

  	
  34

  
	
   

  	
   

  	
   

  
	
  Section 31.

  	
  Severability

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 32.

  	
  Governing Law

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 33.

  	
  Descriptive Headings;
  References

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 34.

  	
  Counterparts

  	
  35

  
	
   

  	
   

  	
   

  
	
  Section 35.

  	
  Force Majeure

  	
  35

  

 

Exhibit A

 

Form of Certificate
of Designations for Series A Junior Participating Preferred Stock

 

Exhibit B

 

Form of Right
Certificate

·  Right Certificate

·  Form of Assignment

·  Form of Election to Purchase

 

Exhibit C

 

Summary of Rights to
Purchase Preferred Stock

 

ii

 

RIGHTS
AGREEMENT

 

This Rights Agreement (this “Agreement”)
is entered into as of August 20, 2009 by and between ITERIS, INC., a
Delaware corporation (the “Company”),
and COMPUTERSHARE TRUST COMPANY, N.A., a federally chartered trust company, as
Rights Agent (the “Rights Agent”).

 

WITNESSETH:

 

WHEREAS, the Board of Directors of the Company
has authorized and declared a dividend distribution of one preferred share
purchase right (a “Right”) for each outstanding
share of Common Stock (as defined below) outstanding as of the Close of
Business on September 3, 2009 (the “Record Date”),
and has authorized the issuance of one Right (subject to adjustment) in respect
of each share of Common Stock issued between the Record Date and the earliest
to occur of the Distribution Date, the Redemption Date and the Expiration Date
(as such terms are hereinafter defined), with each Right representing the right
to purchase one one-thousandth (1/1,000th) of one share of Series A Junior
Participating Preferred Stock of the Company having the rights and preferences
set forth in the form of Certificate of Designations attached hereto as Exhibit A,
upon the terms and subject to the conditions hereinafter set forth;

 

NOW, THEREFORE,
in consideration of the premises and the mutual agreements herein set forth,
the parties hereby agree as follows:

 

Section 1.               Certain Definitions.  For purposes of this Agreement, the following
terms have the meanings indicated:

 

(a)           “Acquiring Person”
shall mean any Person who or that, together with all Affiliates and Associates
of such Person, shall be or become the Beneficial Owner of fifteen percent (15%)
or more of the shares of Common Stock then outstanding, but shall not include (i) any
employee benefit plan of the Company or of any Subsidiary of the Company, or (ii) any
entity organized, appointed or established pursuant to the terms of any such
plan, or (iii) the Company or (iv) any Subsidiary of the
Company.  Notwithstanding the foregoing,
no Person shall become an “Acquiring Person” as the result of an acquisition of
Common Stock by the Company or any Subsidiary of the Company that, by reducing
the number of shares outstanding, increases the proportionate number of shares
beneficially owned by a Person to  fifteen
percent (15%) or more of the Common Stock then outstanding; provided, however,
that if such Person becomes the Beneficial Owner of fifteen percent (15%) or
more of the Common Stock then outstanding by reason of share acquisitions by
the Company and its Subsidiaries and shall, after such share acquisitions by
the Company and its Subsidiaries, become the Beneficial Owner of any additional
shares of Common Stock (other than by reason of a stock dividend, stock split
or other corporate action effected by the Company), then such Person shall be
deemed to be an “Acquiring Person,” subject to the following sentence of this Section 1(a),
unless, upon consummation of the acquisition of such additional Common Stock,
such Person does not beneficially own  fifteen
percent (15%) or more of the Common Stock then outstanding.

 

 

Notwithstanding the foregoing, if  the
Board of Directors of the Company determines in good faith that a Person who
otherwise would be an “Acquiring Person,” as defined pursuant to the foregoing
provisions of this Section 1(a), became the Beneficial Owner of a
number of shares of Common Stock such that such Person would otherwise be an
Acquiring Person inadvertently (including, without limitation, because (X) such
Person was unaware that it beneficially owned a percentage of Common Stock that
would cause such Person to be an “Acquiring Person” or (Y) such Person was
aware of the extent of its beneficial ownership of Common Stock but had no
actual knowledge of the consequences of such beneficial ownership under this
Agreement) and without any intention of changing or influencing control of the
Company, then such Person shall not be deemed to be an “Acquiring Person,” or
to have become an “Acquiring Person,” for all purposes of this Agreement (such
that, for the avoidance of doubt, under such circumstances no Distribution Date
shall be deemed to have occurred and no adjustment pursuant to Section 11(a)(ii) or
Section 13 shall be made in respect thereof) unless such Person
fails to divest itself as soon as practicable if the Company so requests (as
determined in good faith by the Board of Directors of the Company) of a
sufficient number of shares of Common Stock (or of Derivative Securities
underlying a transaction entered into by or acquired by such Person or any of
such Person’s Affiliates or Associates) so that such Person would no longer
qualify as an Acquiring Person; provided, however, that if such
Person, after such determination and divestment, becomes the Beneficial Owner
of  fifteen percent (15%) or more of the
shares of Common Stock then outstanding by reason of becoming the Beneficial
Owner of any additional shares of Common Stock, then such Person shall be
deemed to be an “Acquiring Person” unless a subsequent determination and
divestment is made.

 

(b)           “Affiliate”
shall have the meaning ascribed to such term in Rule 12b-2 of the General Rules and
Regulations under the Exchange Act, as in effect on the date of this Agreement.

 

(c)           “Agreement”
shall have the meaning set forth in the preamble hereto.

 

(d)           “Associate,”
when used to indicate a relationship with any Person, shall mean each, any and
all of the following:

 

(i)            any firm, corporation, limited
liability company, partnership, joint venture, bank, trust or other entity of
which such Person (A) is an officer or partner or (B) is, directly or
indirectly, the Beneficial Owner of 10% or more of any class of equity
securities; provided, however, that a firm, corporation, limited
liability company, partnership, joint venture, bank, trust or other entity
described in clause (B) shall not be an “Associate” of a Person if, and
only for so long as, such Person (1) has reported beneficial ownership of
the equity securities of such firm, corporation, limited liability company,
partnership, joint venture, bank, trust or other entity on Schedule 13G under
the Exchange Act and is not required to report its ownership of such equity
securities on Schedule 13D under the Exchange Act, (2) satisfies the
criteria set forth in both Rule 13d-1(b)(1)(i) and Rule 13d-1(b)(1)(ii) of
the General Rules and Regulations under the Exchange Act, (3) is the
Beneficial Owner of less than  fifteen
percent (15%) of the 

 

2

 

shares of Common Stock
then outstanding (including any such shares that are beneficially owned by such
Person’s Affiliates and Associates after giving effect to this proviso) and (4) has
not reported and is not required to report its ownership of Common Stock on
Schedule 13D under the Exchange Act;

 

(ii)           any trust or other estate in which
such Person has a substantial beneficial interest or as to which such Person
serves as trustee or in a similar fiduciary capacity; and

 

(iii)          any relative or spouse of such Person,
or any relative of such spouse, who has the same home as such Person.

 

(e)           A Person shall be deemed the “Beneficial Owner” of and shall be
deemed to “beneficially own” any
securities:

 

(i)            that such Person, or any of such
Person’s Affiliates or Associates, beneficially owns, directly or indirectly,
within the meaning of Rule 13d-3 of the General Rules and Regulations
under the Exchange Act as in effect on the date of this Agreement;

 

(ii)           that such Person, or any of such
Person’s Affiliates or Associates, has (A) the right to acquire (whether
such right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (other than customary agreements
with and between underwriters and selling group members with respect to a bona
fide public offering of securities), written or otherwise, or upon the exercise
of conversion rights, exchange rights, rights (other than the Rights), warrants
or options, or otherwise; provided,  however, that a Person shall
not be deemed the “Beneficial Owner” of, or to “beneficially own,” securities
tendered pursuant to a tender or exchange offer made by such Person or any of
such Person’s Affiliates or Associates until such tendered securities are
accepted for purchase or exchange; or (B) the right to vote pursuant to
any agreement, arrangement or understanding, written or otherwise; provided,
further, that a Person shall not be deemed the “Beneficial Owner” of, or
to “beneficially own,” any security under this clause (B) if the
agreement, arrangement or understanding to vote such security (1) arises
solely from a revocable proxy or consent given to such Person in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange Act and (2) is
not then reportable by such Person on Schedule 13D under the Exchange Act (or
any comparable or successor report);

 

(iii)          that are beneficially owned, directly
or indirectly, by any other Person with which such Person, or any of such
Person’s Affiliates or Associates, has any agreement, arrangement or
understanding, whether or not in writing, for the purpose of acquiring,
holding, voting (except pursuant to a revocable proxy as described in the
proviso to Section 1(e)(ii)(B)) or disposing of any securities of
the Company; provided, however, that nothing in this 

 

3

 

Section 1(e) shall cause a Person engaged in
business as an underwriter of securities to be the “Beneficial Owner” of, or to
“beneficially own,” any securities acquired through such Person’s participation
in good faith in a firm commitment underwriting until the expiration of forty
(40) days after the date of such acquisition, and then only if such securities
continue to be owned by such Person at the expiration of such forty (40)-day
period.  Notwithstanding anything in this
definition of beneficial ownership to the contrary, the phrase “then outstanding,” when used with
reference to a Person’s beneficial ownership of securities of the Company,
shall mean the number of such securities then issued and outstanding together
with the number of such securities not then actually issued and outstanding that
such Person would be deemed to beneficially own hereunder; or

 

(iv)          that are the subject of a derivative
transaction entered into by such Person or any of such Person’s Affiliates or
Associates, or derivative security acquired by such Person or any of such
Person’s Affiliates or Associates, which gives such Person or any of such
Person’s Affiliates or Associates the economic equivalent of ownership of an
amount of such securities due to the fact that the value of the derivative is
explicitly determined by reference to the price or value of such securities, or
which provides such Person or any of such Person’s Affiliates or Associates an
opportunity, directly or indirectly, to profit, or to share in any profit,
derived from any change in the value of such securities, in any case without
regard to whether (A) such derivative conveys any voting rights in such
securities to such Person or any of such Person’s Affiliates or Associates, (B) the
derivative is required to be, or capable of being, settled through delivery of
such securities, or (C) such Person or any of such Person’s Affiliates or
Associates may have entered into other transactions that hedge the economic
effect of such derivative.  In
determining the number of shares of Common Stock beneficially owned by virtue
of the operation of this Section 1(e)(iv), the subject Person shall
be deemed to beneficially own (without duplication) the notional or other
number of shares of Common Stock specified in the documentation evidencing the
derivative position as being subject to be acquired upon the exercise or
settlement of the applicable right or as the basis upon which the value or
settlement amount of such right, or the opportunity of the holder of such right
to profit or share in any profit, is to be calculated in whole or in part, and
in any case (or if no such number of shares of Common Stock is specified in
such documentation or otherwise), as determined by the Board of Directors in
good faith to be the number of shares of Common Stock to which the derivative
position relates.  Such shares of Common
Stock of the Company that are deemed so beneficially owned pursuant to the
operation of this Section 1(e)(iv) shall be referred to herein
as “Derivative Securities;”

 

provided, however, that a Person will not be
deemed to be the Beneficial Owner of, or to beneficially own, any security if
such beneficial ownership arises solely out of such Person’s status either as a
bona fide swaps dealer or as a “clearing agency,” as defined in Section 3(a)(23)
of the Exchange Act, and such Person is acting in the ordinary course of its
business and without any intent to evade, or assist any other Person to evade,
the purposes and intent of this Agreement.

 

4

 

(f)            “Business
Day” shall mean any day other than a Saturday, a Sunday, or a
day on which banking institutions in the State of California, the State of New
York or the state in which the principal office of the Rights Agent is located
are authorized or obligated by law or executive order to close.

 

(g)           “Close of Business”
on any given date shall mean 5:00 p.m., New York time, on such date; provided,
however, that if such date is not a Business Day it shall mean 5:00 p.m.,
New York time, on the next succeeding Business Day.

 

(h)           “Common Stock”
shall mean the common stock, $0.10 par value (or as such par value may be
changed from time to time), of the Company.

 

(i)            “Common
Stock Equivalents” shall have the meaning set forth in Section 11(a)(iii).

 

(j)            “Company”
shall have the meaning set forth in the preamble hereto.

 

(k)           “Current Market Price Per
Share” shall have the meaning set forth in Section 11(d).

 

(l)            “Current
Value” shall have the meaning set forth in Section 11(a)(iii).

 

(m)          “Distribution Date”
shall have the meaning set forth in Section 3(a).

 

(n)           “Equivalent Preferred Stock”
shall have the meaning set forth in Section 11(b).

 

(o)           “Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.

 

(p)           “Exchange Ratio”
shall have the meaning set forth in Section 24(a).

 

(q)           “Expiration Date”
shall have the meaning set forth in Section 7(a).

 

(r)            “Invalidation
Time” shall have the meaning set forth in Section 11(a)(ii).

 

(s)           “NASDAQ”
shall mean the NASDAQ Stock Market.

 

(t)            “Person”
shall mean any individual, firm, corporation, limited liability company or
other entity, and shall include any successor (by merger or otherwise) of such
entity.

 

(u)           “Preferred Stock”
shall mean the Series A Junior Participating Preferred Stock of the
Company having the rights and preferences set forth in the form of Certificate
of Designations attached hereto as Exhibit A.

 

(v)           “Principal Party”
shall have the meaning set forth in Section 13(b).

 

(w)          “Purchase Price”
shall have the meaning set forth in Section 4.

 

5

 

(x)            “Record
Date” shall have the meaning set forth in the recitals hereof.

 

(y)           “Redemption Date”
shall have the meaning set forth in Section 7(a).

 

(z)            “Redemption
Price” shall have the meaning set forth in Section 23(a).

 

(aa)         “Right”
shall have the meaning set forth in the recitals hereof.

 

(bb)         “Right Certificate”
shall have the meaning set forth in Section 3(a).

 

(cc)         “Rights Agent”
shall have the meaning set forth in the preamble hereto.

 

(dd)         “Section 11(a)(ii) Trigger
Date” shall have the meaning set forth in Section 11(a)(iii).

 

(ee)         “Securities Act”
shall mean the Securities Act of 1933, as amended.

 

(ff)           “Security”
shall have the meaning set forth in Section 11(d).

 

(gg)         “Senior Voting Stock”
shall have the meaning set forth in Section 13(b).

 

(hh)         “Shares Acquisition Date”
shall mean the first date of public announcement by the Company or an Acquiring
Person (including, without limitation, pursuant to a report filed or amended
pursuant to Section 13(d) of the Exchange Act) that a Person has
become an “Acquiring Person” for purposes of this Agreement, or such earlier
date as a majority of the Board of Directors shall become aware of the
existence of an Acquiring Person (i.e., make a determination that such a Person
exists).

 

(ii)           “Spread”
shall have the meaning set forth in Section 11(a)(iii).

 

(jj)           “Subsidiary”  of a Person shall mean any
corporation or other entity of which a majority of the voting power of the
voting equity securities or equity interest is owned, directly or indirectly,
by such Person.

 

(kk)         “Substitution Period”
shall have the meaning set forth in Section 11(a)(iii).

 

(ll)           “Summary of Rights”
shall have the meaning set forth in Section 3(b).

 

(mm)       “Trading Day”
shall have the meaning set forth in Section 11(d).

 

Section 2.               Appointment of Rights Agent.  The Company hereby appoints the Rights Agent
to act as agent for the Company in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment.  The Company may from time to time appoint
such Co-Rights Agents as it may deem necessary or desirable, upon ten (10) days’
prior written notice to the Rights Agent. 
The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such Co-Rights Agents.

 

6

 

Section 3.               Issue of Right Certificates.

 

(a)                                  Until the Close of Business on the tenth
day after the Shares Acquisition Date (the “Distribution
Date”), (i) the Rights will be evidenced (subject to the
provisions of Section 3(b)) by the certificates for the Common
Stock registered in the names of the holders thereof (which certificates shall
be deemed also to be Right Certificates) and not by separate Right
Certificates, and (ii) the right to receive Right Certificates will be
transferable only in connection with the transfer of the Common Stock.  As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights Agent will, if so
requested by written notice and provided with a stockholder list and all other
relevant information that the Rights Agent may reasonably request, send), by
first class, postage-prepaid mail, to each record holder of Common Stock as of
the Close of Business on the Distribution Date (other than an Acquiring Person
or any Affiliate or Associate of an Acquiring Person), at the address of such
holder shown on the records of the Company, a Right Certificate, in
substantially the form of Exhibit B hereto (a “Right
Certificate”), evidencing one Right for each share of Common
Stock so held.  As of and after the
Distribution Date, the Rights will be evidenced solely by such Right
Certificates.  The Company shall promptly
notify the Rights Agent in writing upon the occurrence of the Distribution
Date.  Until such notice is received by
the Rights Agent, the Rights Agent may presume conclusively for all purposes
that the Distribution Date has not occurred.

 

(b)                                 On the Record Date or as soon as
practicable thereafter, the Company will make available a copy of a Summary of
Rights to Purchase Preferred Stock, in substantially the form attached hereto
as Exhibit C (the “Summary of Rights”),
to any holder of Rights who may so request from time to time prior to the
Expiration Date.  With respect to shares
of Common Stock outstanding as of the Record Date, until the Distribution Date
(or the earlier of the Redemption Date or the Expiration Date), the Rights will
be evidenced by the certificates for such shares registered in the names of the
holders thereof.  Until the Distribution
Date (or the earlier of the Redemption Date or the Expiration Date), the
surrender for transfer of any certificate for Common Stock outstanding on the
Record Date, with or without a copy of the Summary of Rights, shall also
constitute the transfer of the Rights associated with the Common Stock
represented thereby.

 

(c)                                  Rights shall be issued in respect of all
shares of Common Stock issued or disposed of (including, without limitation,
upon disposition of Common Stock out of treasury stock or issuance or
reissuance of Common Stock out of authorized but unissued shares) after the
Record Date but prior to the earliest of the Distribution Date, the Redemption
Date and the Expiration Date or, in certain circumstances provided in Section 22,
after the Distribution Date. 
Certificates issued for Common Stock (including, without limitation,
upon transfer of outstanding Common Stock, disposition of Common Stock out of
treasury stock or issuance or reissuance of Common Stock out of authorized but
unissued shares) after the Record Date but prior to the earliest of the
Distribution Date, the Redemption Date and the Expiration Date shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend (or such other legend as the

 

7

 

Company may deem appropriate that is not inconsistent
with the provisions of this Agreement but which does not affect the rights,
duties or obligations of the Rights Agent as set forth in this Agreement):

 

“This certificate also
evidences and entitles the holder hereof to certain Rights as set forth in the
Rights Agreement between Iteris, Inc. and Computershare Trust Company,
N.A., as Rights Agent, dated as of August 20, 2009, as the same may be
supplemented or amended from time to time (the “Rights
Agreement”), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal executive offices
of Iteris, Inc.  Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate.  Computershare Trust
Company, N.A. will mail to the holder of this certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.  Under certain circumstances, as set forth in
the Rights Agreement, Rights issued to, acquired or beneficially owned by any
Person who is or becomes an Acquiring Person or any Affiliate or Associate of
an Acquiring Person (as such terms are defined in the Rights Agreement) and
their transferees will become null and void and will no longer be transferable.”

 

With respect to such certificates containing the foregoing legend,
until the Distribution Date, the Rights associated with the Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any of such certificates shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificates.

 

In the event that the Company purchases or acquires any shares of
Common Stock after the Record Date but prior to the Distribution Date, any
Rights associated with such shares of Common Stock shall be deemed cancelled
and retired so that the Company shall not be entitled to exercise any Rights
associated with the shares of Common Stock that are no longer outstanding.

 

Notwithstanding this Section 3(c), the omission of a legend
shall not affect the enforceability of any part of this Agreement or the rights
of any holder of the Rights.

 

Section 4.               Form of Right Certificates. 
The Right Certificates (and the forms of election to purchase shares and
of assignment to be printed on the reverse thereof) shall be substantially the
same as Exhibit B hereto and may have such marks of identification
or designation and such legends, summaries or endorsements printed thereon as
the Company may deem appropriate (but that do not affect the rights, duties or
obligations of the Rights Agent as set forth in this Agreement) and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or
automated quotation system on which the Rights may from time to time be listed
or traded, or to conform to usage. 
Subject to the provisions of Section 22, the Right
Certificates, in each case, on 

 

8

 

their face shall entitle the holders thereof to purchase such number of
shares (or fraction of a share) of the Preferred Stock as shall be set forth
therein at the price per share (or fraction of a share) set forth therein (the “Purchase Price”), but the amount and
type of securities purchasable upon exercise of each Right, and the Purchase
Price, shall be subject to adjustment as provided herein.

 

Section 5.               Countersignature and Registration. 
The Right Certificates shall be executed on behalf of the Company in the
manner provided in the By-Laws of the Company for Common Stock
certificates.  The Right Certificates
shall be countersigned by the Rights Agent, either manually or by facsimile
signature, and shall not be valid for any purpose unless so countersigned.

 

In case any officer of the Company who shall have signed any of the
Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent
and issued and delivered with the same force and effect as though the person
who signed such Right Certificates had not ceased to be such officer of the
Company; and any Right Certificate may be signed on behalf of the Company by
any person who, at the actual date of the execution of such Right Certificate,
shall be a proper officer of the Company to sign such Right Certificate,
although at the date of the execution of this Agreement any such person was not
such an officer.

 

Following the Distribution Date, and receipt by the Rights Agent of (i) written
notice of the Distribution Date pursuant to Section 3(a), and (ii) a
stockholder list and all relevant information reasonably requested by the
Rights Agent pursuant to Section 3(a), the Rights Agent will keep
or cause to be kept, at its office designated for such purposes, books for
registration and transfer of the Right Certificates issued hereunder.  Such books shall show the names and addresses
of the respective holders of the Right Certificates, the number of Rights
evidenced on its face by each of the Right Certificates and the date of each of
the Right Certificates.

 

Section 6.                                            Transfer, Split Up, Combination and
Exchange of Right Certificates; Mutilated, Destroyed, Lost or Stolen Right
Certificates.  Subject to the provisions of Section 7(e) and
Section 14, at any time after the Close of Business on the
Distribution Date, and prior to the Close of Business on the earlier of the
Redemption Date and the Expiration Date, any Right Certificate or Right
Certificates (other than Right Certificates representing Rights that have
become void pursuant to Section 11(a)(ii) or that have been
exchanged pursuant to Section 24) may be transferred, split up,
combined or exchanged for another Right Certificate or Right Certificates,
entitling the registered holder to purchase a like number of shares (or
fraction of a share) of the Preferred Stock (or, following an event described
in either Section 11(a)(ii) or Section 13, Common
Stock, other securities, cash or other assets, as the case may be) as the Right
Certificate or Right Certificates surrendered then entitled such holder to
purchase.  Any registered holder desiring
to transfer, split up, combine or exchange any Right Certificate or Right
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purposes.  Thereupon
the Rights Agent shall countersign and deliver to the Person entitled thereto a
Right Certificate or Right Certificates, as the case may be, as so requested.  As a condition to such transfer, division, combination
or exchange, the Company may require payment by the surrendering holder of a

 

9

 

sum sufficient to cover any tax or charge that may be imposed in
connection with any transfer, split up, combination or exchange of Right
Certificates.  The Rights Agent shall
have no duty or obligation to take any action under any section of this
Agreement that requires the payment by a Rights holder of applicable taxes
and/or charges unless and until it is satisfied that all such taxes and/or
charges have been paid.

 

Upon receipt by the Company and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in the case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Company’s request,
reimbursement to the Company and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Company will make and deliver a new
Right Certificate of like tenor to the Rights Agent for delivery to the
registered owner in lieu of the Right Certificate so lost, stolen, destroyed or
mutilated.

 

Section 7.               Exercise of Rights: Purchase Price;
Expiration Date of Rights.

 

(a)                                  The registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
on the reverse side thereof duly executed, to the Rights Agent at the office of
the Rights Agent designated for such purposes, together with payment of the
Purchase Price for each one one-thousandth of one share of the Preferred Stock
(or other securities, cash or assets, as the case may be) as to which the
Rights are exercised, at or prior to the earliest of (i) the Close of
Business on August 20,  2019  (the “Expiration Date”),
or (ii) the date on, and time at, which the Rights are redeemed as
provided in Section 23 (“Redemption Date”),
or (iii) the time at which such Rights are exchanged as provided for in Section 24.

 

(b)                                 The Purchase Price for each one
one-thousandth of one share of the Preferred Stock pursuant to the exercise of
a Right shall initially be $7.00, shall be subject to adjustment from time to
time as provided in Section 11 and Section 13, and
shall be payable in lawful money of the United States of America in accordance
with Section 7(c).

 

(c)                                  Upon receipt of a Right Certificate
representing exercisable Rights, with the form of election to purchase duly
executed, accompanied by payment of the Purchase Price for each one
one-thousandth of one share of the Preferred Stock (or other securities, cash
or assets, as the case may be) to be purchased and an amount equal to any
applicable tax or charge required to be paid by the holder of such Right
Certificate in accordance with Section 6 in cash, or by certified
check or cashier’s check payable to the order of the Company, the Rights Agent
shall thereupon (i) (A) promptly requisition from any transfer agent
of the Preferred Stock of the Company, or make available if the Rights Agent is
the transfer agent for the Preferred Stock, certificates for the number of
shares (or fractions thereof) of the Preferred Stock to be purchased and the
Company hereby irrevocably authorizes its transfer agent to comply with all
such requests, or (B) promptly requisition from the depositary agent
depositary receipts representing such number of one

 

10

 

one-thousandths of a share of Preferred Stock as are
to be purchased (in which case, certificates for the shares of Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, promptly requisition from the
Company the amount of cash to be paid in lieu of issuance of fractional shares
in accordance with Section 14, (iii) after receipt of such
certificates or depositary receipts, promptly cause the same to be delivered to
or upon the order of the registered holder of such Right Certificate,
registered in such name or names as may be designated by such holder, and (iv) when
appropriate, after receipt, promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.  In the event that the Company is obligated to
issue other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof,
the Company will make all arrangements necessary so that such other securities,
cash and/or property are available for distribution by the Rights Agent, if and
when appropriate.

 

(d)                                 In case the registered holder of any
Right Certificate shall exercise less than all the Rights evidenced thereby, a
new Right Certificate evidencing Rights equivalent to the Rights remaining
unexercised shall be issued by the Rights Agent to the registered holder of
such Right Certificate or to such holder’s duly authorized assigns, subject to
the provisions of Section 14.

 

(e)                                  Notwithstanding anything in this
Agreement to the contrary, neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the purported transfer
or exercise of Rights pursuant to Section 6 or this Section 7
unless the registered holder shall have duly completed and executed the form of
assignment or election to purchase on the reverse side of the Right Certificate
surrendered for such transfer or exercise and shall have provided such
additional evidence of the identity of the Beneficial Owner (or such former or
proposed Beneficial Owner) thereof or such Beneficial Owner’s Affiliates or
Associates as the Company or the Rights Agent shall reasonably request.

 

Section 8.               Cancellation and Destruction of Right
Certificates.  All Right Certificates surrendered for the
purpose of exercise, transfer, split up, combination, redemption or exchange
shall, if surrendered to the Company or to any of its agents, be delivered to
the Rights Agent for cancellation or in cancelled form, or, if surrendered to
the Rights Agent, shall be cancelled by it, and no Right Certificates shall be
issued in lieu thereof except as expressly permitted by any of the provisions
of this Agreement.  The Company shall
deliver to the Rights Agent for cancellation and retirement, and the Rights Agent
shall so cancel and retire, any other Right Certificate purchased or acquired
by the Company otherwise than upon the exercise thereof.  Subject to applicable law
and regulation, the Rights Agent shall maintain, in a retrievable database,
electronic records of all cancelled or destroyed stock certificates which have
been canceled or destroyed by the Rights Agent. 
The Rights Agent shall maintain such electronic records or physical
records for the time period required by applicable law and regulation.  Upon
written request of the Corporation (and at the expense of the Corporation), the
Rights Agent shall provide to the Corporation or its designee copies of such
electronic records or physical records relating to rights certificates
cancelled or destroyed by the Rights Agent.

 

11

 

Section 9.               Reservation and Availability of Shares of
Preferred Stock.  The Company covenants and agrees that it will
cause to be reserved and kept available out of its authorized and unissued
Preferred Stock, or its authorized and issued Preferred Stock held in its
treasury, the number of shares of the Preferred Stock that will be sufficient
to permit the exercise in full of all outstanding Rights in accordance with
this Agreement.

 

So long as the Preferred Stock (and, following the time that a Person
becomes an Acquiring Person, shares of Common Stock) issuable upon the exercise
of Rights may be listed or admitted to trading on any national securities
exchange, the Company shall use its best efforts to cause, from and after such
time as the Rights become exercisable, all shares reserved for such issuance to
be listed or admitted for trading on such exchange upon official notice of
issuance upon such exercise.

 

The Company covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of the Preferred Stock (and,
following the time that a Person becomes an Acquiring Person, shares of Common
Stock and/or other securities) delivered upon exercise of Rights shall, at the
time of delivery of the certificates for such (subject to payment of the
Purchase Price), be duly and validly authorized and issued and fully paid and
nonassessable.

 

The Company further covenants and agrees that it will pay when due and
payable any and all federal and state transfer taxes and charges that may be
payable in respect of the issuance or delivery of the Right Certificates or of
any certificates representing shares of the Preferred Stock upon the exercise
of Rights.  The Company shall not,
however, be required (a) to pay any tax or charge that may be payable in
respect of any transfer involved in the transfer or delivery of Right
Certificates or the issuance or delivery of certificates for the Preferred
Stock in a name other than that of the registered holder of the Right
Certificate evidencing Rights surrendered for exercise or (b) to issue or
deliver any certificates for shares of the Preferred Stock upon the exercise of
any Rights until any such tax or charge shall have been paid (any such tax or
charge being payable by the holder of such Right Certificate at the time of
surrender) or until it has been established to the Company’s satisfaction that
no such tax or charge is due.

 

The Company shall, if legally required, (i) prepare and file, as
soon as reasonably practicable following the Distribution Date, a registration
statement under the Securities Act with respect to the securities purchasable
upon exercise of or exchangeable for the Rights on an appropriate form, (ii) cause
such registration statement to become effective as soon as reasonably
practicable after such filing, and (iii) cause such registration statement
to remain effective (with a prospectus at all times meeting the requirements of
the Securities Act) until no longer required to do so under the Securities Act
with respect to securities purchasable upon exercise of or exchangeable for the
Rights.  The Company also shall take all
such action as may be required or as is appropriate under the securities or “blue
sky” laws of such jurisdictions as may be necessary or appropriate with respect
to the securities purchasable upon the exercise of or exchangeable for the
Rights.  The Company may temporarily
suspend, for a period not to exceed 120 days following the Distribution Date,
the exercisability of the Rights in order to prepare and file such registration
statement and permit it to become effective. 
Upon any such suspension of exercisability of Rights referred to in this
paragraph, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.

 

12

 

Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law, or a registration
statement shall not have been declared effective.

 

Section 10.             Preferred Stock Record Date. 
Each Person in whose name any certificate for shares of the Preferred
Stock is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of the Preferred Stock represented thereby on,
and such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights, together with the form of election to purchase duly
completed and executed, was duly surrendered and payment of the Purchase Price
(and any applicable taxes or charges) was made; provided, however,
that if the date of such surrender and payment is a date upon which the
Preferred Stock transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
transfer books of the Company are open. 
Prior to the exercise of the Rights evidenced thereby, the holder of a
Right Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled
to receive any notice of any proceedings of the Company, except as provided
herein.

 

Section 11.             Adjustment of Purchase Price, Number of
Shares or Number of Rights.  The Purchase
Price, the number and kind or class of shares of stock of the Company covered
by each Right and the number of Rights outstanding are subject to adjustment
from time to time as provided in this Section 11.

 

(a)                                  (i)                                     If the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in
Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller number of shares of Preferred
Stock or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing or surviving
corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination or reclassification,
and the number and kind of shares of capital stock issuable on such date, shall
be proportionately adjusted so that the holder of any Right exercised after
such time shall be entitled to receive the aggregate number and kind of shares
of capital stock that, if such Right had been exercised immediately prior to
such date and at a time when the Preferred Stock transfer books of the Company
were open, the holder would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of Preferred Stock issuable upon exercise of
one Right.  If an event occurs that would
require an adjustment under both Section 11(a)(i) and Section 11(a)(ii),
the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment required pursuant to
Section 11(a)(ii).

 

13

 

(ii)                                  Subject to Section 23(a) and
Section 24, in the event any Person becomes an Acquiring Person,
each holder of a Right shall thereafter have a right to receive, upon exercise
thereof at a price equal to the Purchase Price in effect immediately prior to
such Person becoming an Acquiring Person multiplied by the number of one
one-thousandths of a share of Preferred Stock for which a Right is then
exercisable, in accordance with the terms of this Agreement and in lieu of
shares of Preferred Stock, such number of shares of Common Stock as shall equal
the result obtained by (A) multiplying such Purchase Price by the number
of one one-thousandths of a share of Preferred Stock for which a Right is then
exercisable and dividing that product by (B) 50% of the Current Market
Price Per Share of the Common Stock (determined pursuant to Section 11(d))
on the date of the occurrence of such event; provided, however,
that if the transaction that would otherwise give rise to the adjustment is
also subject to the provisions of Section 13, then only the
provisions of Section 13 shall apply and no adjustment shall be
made pursuant to this Section 11(a)(ii).  In the event that any Person shall become an
Acquiring Person and the Rights shall then be outstanding, the Company shall
not take any action that would eliminate or diminish the benefits intended to
be afforded by the Rights. 
Notwithstanding anything in this Agreement to the contrary, however,
from and after the time when any Person first becomes an Acquiring Person (such
time, the “Invalidation Time”), any
Rights that are or were acquired or beneficially owned by any Acquiring Person
(or any Affiliate or Associate of any Acquiring Person), including, without
limitation, any such Rights when held by (1) a transferee of any Acquiring
Person (or any such Affiliate or Associate) who becomes a transferee after the
Invalidation Time, (2) a transferee of any Acquiring Person (or any such
Affiliate or Associate) who became a transferee prior to or concurrently with
the Invalidation Time pursuant to either (x) a transfer from the Acquiring
Person to holders of its equity securities or to any Person with whom it has
any continuing agreement, arrangement or understanding, written or otherwise,
regarding the transferred Rights or (y) a transfer that the Board of
Directors of the Company determines is part of a plan, arrangement or
understanding, written or otherwise, that has the purpose or effect of avoiding
the provisions of this Section 11(a)(ii), or (3) a subsequent
transferee of any Person described in the foregoing clauses (1) or (2),
shall be void without any further action and any holder of such Rights shall
thereafter have no right to exercise such Rights under any provision of this
Agreement.  The Company shall use all
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) are
complied with, but shall have no liability to any holder of Rights or other
Person as a result of its failure to make any determinations with respect to an
Acquiring Person or its Affiliates, Associates or transferees hereunder.  No Right Certificate shall be issued pursuant
to Section 3, Section 6 or Section 7(d) that
represents Rights beneficially owned by an Acquiring Person whose Rights would
be void pursuant to the preceding sentence or any Associate or Affiliate
thereof; no Right Certificate shall be issued at any time upon the transfer of
any Rights to an Acquiring Person whose Rights would be void pursuant to the
preceding sentence or any Associate or Affiliate thereof or to any nominee of
such Acquiring Person, Associate or Affiliate; and any Right Certificate
delivered to the Rights Agent for transfer to an Acquiring Person or any
Associate or Affiliate whose Rights would be void pursuant to the provisions of
this paragraph shall be cancelled.

 

14

 

(iii)                               The Company may, at its option, substitute for a share
of Common Stock issuable upon the exercise of Rights in accordance with Section 11(a)(ii) a
number of shares of Preferred Stock or fraction thereof such that the Current
Market Price Per Share of one share of Preferred Stock multiplied by such
number or fraction is equal to the Current Market Price Per Share of one share
of Common Stock.  In the event that there
shall not be sufficient shares of Common Stock issued but not outstanding or
authorized but unissued to permit the exercise in full of the Rights in
accordance with Section 11(a)(ii), the Board of Directors of the
Company shall, with respect to such deficiency, to the extent permitted by
applicable law and any material agreements then in effect to which the Company
is a party, (A) determine the excess (such excess, the “Spread”) of (x) the value of
the shares of Common Stock issuable upon the exercise of a Right in accordance
with Section 11(a)(ii) (the “Current
Value”) over (y) the Purchase Price in effect immediately
prior to any Person becoming an Acquiring Person and (B) with respect to
each Right (other than Rights that have become void pursuant to Section 11(a)(ii)),
make adequate provision to substitute for the shares of Common Stock issuable
in accordance with Section 11(a)(ii) upon exercise of the
Right and payment of the applicable Purchase Price, (1) cash, (2) a
reduction in such Purchase Price, (3) shares of Preferred Stock or other
equity securities of the Company (including, without limitation, shares or
fractions of shares of preferred stock that, by virtue of having dividend,
voting and liquidation rights substantially comparable to those of the shares
of Common Stock, are deemed in good faith by the Board of Directors of the
Company to have substantially the same value as the shares of Common Stock
(such shares of Preferred Stock and shares or fractions of shares of preferred
stock are hereinafter referred to as “Common Stock Equivalents”)),
(4) debt securities of the Company, (5) other assets or (6) any
combination of the foregoing, having a value that, when added to the value of
the shares of Common Stock issued upon exercise of such Right, shall have an
aggregate value equal to the Current Value (less the amount of any reduction in
such Purchase Price), where such aggregate value has been determined by the
Board of Directors of the Company upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board of Directors of the
Company; provided, however, that if the Company shall not make
adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the date on which any Person becomes an Acquiring
Person (the date on which any Person becomes an Acquiring Person being the “Section 11(a)(ii) Trigger Date”),
then the Company shall be obligated to deliver, to the extent permitted by
applicable law and any material agreements then in effect to which the Company
is a party, upon the surrender for exercise of a Right and without requiring
payment of such Purchase Price, shares of Common Stock (to the extent
available), and then, if necessary, such number or fractions of shares of
Preferred Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  If, upon any Person becoming an Acquiring
Person, the Board of Directors of the Company shall determine in good faith
that it is likely that sufficient additional shares of Common Stock could be authorized
for issuance upon exercise in full of the Rights, then, if the Board of
Directors of the Company so elects, the thirty (30) day period set forth above
may be extended to the extent necessary, but not more than ninety (90) days
after the Section 11(a)(ii) Trigger Date, in order that the
Company may seek stockholder approval for the authorization of such additional
shares (such thirty (30) day

 

15

 

period, as it may be extended, is herein called the “Substitution Period”).  To the extent that the Company determines
that some action need be taken pursuant to the second and/or third sentence of
this Section 11(a)(iii), the Company (x) shall provide,
subject to Section 11(a)(ii) and the last sentence of this Section 11(a)(iii),
that such action shall apply uniformly to all outstanding Rights and (y) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares
and/or to decide the appropriate form of distribution to be made pursuant to
such second sentence and to determine the value thereof.  In the event of any such suspension, the
Company shall issue a public announcement stating that the exercisability of
the Rights has been temporarily suspended, as well as a public announcement at
such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii),
the value of the shares of Common Stock shall be the Current Market Price Per
Share (as determined pursuant to Section 11(d)) on the Section 11(a)(ii) Trigger
Date and the per share or fractional value of any Common Stock Equivalent shall
be deemed to equal the Current Market Price Per Share of the Common Stock.  The Board of Directors of the Company may,
but shall not be required to, establish procedures to allocate the right to
receive shares of Common Stock upon the exercise of the Rights among holders of
Rights pursuant to this Section 11(a)(iii).

 

(b)                                 If the Company shall fix a record date
for the issuance of rights, options or warrants to all holders of Preferred
Stock entitling them (for a period expiring within 45 calendar days after such
record date) to subscribe for or purchase Preferred Stock (or shares having the
same rights, privileges and preferences as the Preferred Stock (“Equivalent Preferred Stock”)) or
securities convertible into Preferred Stock or Equivalent Preferred Stock at a
price per share of Preferred Stock or Equivalent Preferred Stock (or having a
conversion price per share, if a security convertible into Preferred Stock or
Equivalent Preferred Stock) less than the Current Market Price Per Share of the
Preferred Stock (as defined in Section 11(d)) on such record date,
the Purchase Price to be in effect after such record date shall be determined
by multiplying the Purchase Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the number of shares of
Preferred Stock outstanding on such record date plus the number of shares of
Preferred Stock that the aggregate offering price of the total number of shares
of Preferred Stock and/or Equivalent Preferred Stock so to be offered (and/or
the aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current market price and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date plus the number of additional shares of Preferred Stock and/or
Equivalent Preferred Stock to be offered for subscription or purchase (or into
which the convertible securities so to be offered are initially convertible); provided,
however, that in no event shall the consideration to be paid upon the
exercise of one Right be less than the aggregate par value of the shares of Preferred
Stock issuable upon exercise of one Right. 
In case such subscription price may be paid in consideration part or all
of which shall be in a form other than cash, the value of such consideration
shall be as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a written statement filed with the
Rights Agent and shall be conclusive for all purposes.  Shares of Preferred Stock owned by or held
for the account of the Company shall not be deemed outstanding for the purpose
of any such computation.  Such adjustment
shall be made successively whenever

 

16

 

such a record date is fixed; and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price that would then be in effect if such record date had
not been fixed.

 

(c)                                  If the Company shall fix a record date
for the making of a distribution to all holders of Preferred Stock (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of indebtedness
or assets (other than a regular periodic cash dividend or a dividend payable in
Preferred Stock) or subscription rights or warrants (excluding those referred
to in Section 11(b)), the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Price Per Share of the Preferred Stock (as defined
in Section 11(d)) on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a written statement filed with the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Preferred Stock and the denominator of which shall be such Current Market
Price Per Share of the Preferred Stock; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right
be less than the aggregate par value of the shares of Preferred Stock issuable
upon exercise of one Right.  Such
adjustments shall be made successively whenever such a record date is fixed;
and in the event that such distribution is not so made, the Purchase Price
shall again be adjusted to be the Purchase Price that would then be in effect
if such record date had not been fixed.

 

(d)                                 (i) For the purpose of any
computation hereunder, the “Current Market Price Per
Share” of any security (a “Security”)
on any date shall be deemed to be the average of the daily closing prices per
share of such Security for the thirty (30) consecutive Trading Days (as such
term is hereinafter defined) immediately prior to such date; provided, however,
that in the event that the Current Market Price Per Share of the Security is
determined during the period following the announcement by the issuer of such
Security of (A) a dividend or distribution on such Security payable in
shares of such Security or securities convertible into shares of such Security,
or (B) any subdivision, combination or reclassification of such Security,
and prior to the expiration of thirty (30) Trading Days after the ex-dividend
date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
Current Market Price Per Share shall be appropriately adjusted to take into
account ex-dividend trading.  The closing
price for each day shall be the last sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid and ask
prices, regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the Security is
listed or admitted to trading or, if the Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not
so quoted, the average of the high bid and low ask prices in the
over-the-counter market, as reported by

 

17

 

NASDAQ or such other system then in use, or, if on any
such date the Security is not quoted by such organization, the average of the
closing bid and ask prices as furnished by a professional market maker making a
market in the Security selected by the Board of Directors of the Company.  The term “Trading
Day” shall mean a day on which the principal national securities
exchange on which the Security is listed or admitted to trading is open for the
transaction of business or, if the Security is not listed or admitted to
trading on any national securities exchange, a Business Day.

 

(ii) For the purpose of any computation
hereunder, the Current Market Price Per Share of Preferred Stock shall be
determined in the same manner as set forth above for securities in Section 11(d)(i).  If the Preferred Stock is not publicly traded
or if the Current Market Price Per Share of Preferred Stock cannot be
determined in the manner provided above, the Current Market Price Per Share of
Preferred Stock shall be conclusively deemed to be the Current Market Price Per
Share of Common Stock (appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof), multiplied by
one thousand.  If neither the Common
Stock nor the Preferred Stock is publicly held or so listed or traded, the
Current Market Price Per Share of Preferred Stock shall mean the fair value per
share as determined in good faith by the Board of Directors of the Company,
whose determination shall be described in a written statement filed with the
Rights Agent and shall be conclusive for all purposes.

 

(e)                                  No adjustment in the Purchase Price shall
be required unless such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any
adjustments that by reason of this Section 11(e) are not
required to be made shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share (other than Preferred Stock) or ten-millionth of
a share of Preferred Stock, as the case may be. 
Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later
than the earlier of (A) three (3) years from the date of the
transaction that mandates such adjustment or (B) the Expiration Date.

 

(f)                                    If as a result of an adjustment made
pursuant to Section 11(a), the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company or of any Principal Party other than shares of the Preferred Stock,
thereafter (i) the number of such other shares so receivable upon exercise
of any Right shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the shares contained in Section 11(a), Section 11(b), Section 11(c),
Section 11(e), Section 11(h), Section 11(i) and
Section 11(m), and (ii) the provisions of Section 7,
Section 9, Section 10, Section 13 and Section 14
with respect to the shares of the Preferred Stock shall apply on like terms to
any such other shares.

 

(g)                                 All Rights originally issued by the
Company subsequent to any adjustment made to the Purchase Price hereunder shall
evidence the right to purchase, at the adjusted Purchase Price, the number of
one one-thousandths of a share of the Preferred Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment
as provided herein.

 

18

 

(h)                                 Unless the Company shall have exercised
its election as provided in Section 11(i), upon each adjustment of
the Purchase Price as a result of the calculations made in Section 11(b) and
Section 11(c), each Right outstanding immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Purchase Price, that number of one one-thousandths of a share of
Preferred Stock (calculated to the nearest ten-millionth) obtained by (i) multiplying
(x) the number of one one-thousandths of a share of Preferred Stock
covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the Purchase
Price and (ii) dividing the product so obtained by the Purchase Price in
effect immediately after such adjustment of the Purchase Price.

 

(i)                                     The Company may elect on or after the
date of any adjustment of the Purchase Price to adjust the number of Rights, in
substitution for any adjustment in the number of one one-thousandths of a share
of the Preferred Stock purchasable upon the exercise of a Right.  Each of the Rights outstanding after such
adjustment of the number of Rights shall be exercisable for the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such adjustment. 
Each Right held of record prior to such adjustment of the number of
Rights shall become that number of Rights (calculated to the nearest
ten-millionth) obtained by dividing the Purchase Price in effect immediately prior
to adjustment of the Purchase Price by the Purchase Price in effect immediately
after the adjustment of the Purchase Price. 
The Company shall make a public announcement of its election to adjust
the number of Rights (with prompt written notice thereof to the Rights Agent),
indicating the record date for the adjustment to be made and, if known at the
time, the amount of the adjustment to be made. 
This record date may be the date on which the Purchase Price is adjusted
or any day thereafter, but, if the Right Certificates have been issued, shall
be at least ten (10) days later than the date of the public
announcement.  If Right Certificates have
been issued, upon each adjustment of the number of Rights pursuant to this Section 11(i),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Right Certificates on such record date Right Certificates
evidencing, subject to Section 14, the additional Rights to which
such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. 
Right Certificates so to be distributed shall be issued, executed and
countersigned in the manner provided for herein and shall be registered in the
names of the holders of record of Right Certificates on the record date
specified in the public announcement.

 

(j)                                     Irrespective of any adjustment or change
in the Purchase Price or the number of one one-thousandths of a share of the
Preferred Stock issuable upon the exercise of the Rights, the Right
Certificates theretofore and thereafter issued may continue to express the
Purchase Price per one one-thousandth of a share and the number of one
one-thousandths of a share that were expressed in the initial Right
Certificates issued hereunder.

 

19

 

(k)                                  Before taking any action that would cause
an adjustment reducing the Purchase Price below one one-thousandth of the then
par value, if any, of the shares of the Preferred Stock issuable upon exercise
of the Rights, the Company shall take any corporate action that may, in the
opinion of its counsel, be necessary in order that the Company may validly and
legally issue fully paid and nonassessable shares of such Preferred Stock at
such adjusted Purchase Price.

 

(l)                                     In any case in which this Section 11
shall require that an adjustment in the Purchase Price be made effective as of
a record date for a specified event, the Company may elect (with prompt written
notice of such election to the Rights Agent) to defer until the occurrence of
such event the issuing to the holder of any Right exercised after such record
date the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of the
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall
deliver to such holder a due bill or other appropriate instrument evidencing
such holder’s right to receive such additional shares upon the occurrence of
the event requiring such adjustment.

 

(m)                               Anything in this Section 11
to the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it, in its
sole discretion, shall determine to be advisable in order that any (i) consolidation
or subdivision of the Preferred Stock, (ii) issuance wholly for cash of
any shares of the Preferred Stock at less than the Current Market Price Per
Share, (iii) issuance wholly for cash of any shares of the Preferred Stock
or securities that by their terms are convertible into or exchangeable for
Preferred Stock, (iv) dividends on the Preferred Stock payable in
Preferred Stock or (v) issuance of rights, options or warrants referred to
hereinabove in this Section 11, hereafter made by the Company to
holders of its Preferred Stock shall not be taxable to such stockholders.

 

(n)                                 In the event that, at any time after the
date of this Agreement and prior to the Distribution Date, the Company shall (i) declare
or pay any dividend on the Common Stock payable in Common Stock or (ii) effect
a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock)
into a greater or lesser number of shares of Common Stock, then, in any such
case, (A) the number of one one-thousandths of a share of Preferred Stock
purchasable after such event upon proper exercise of each Right shall be
determined by multiplying the number of one one-thousandths of a share of
Preferred Stock so purchasable immediately prior to such event by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately before such event and the denominator of which is the number of
shares of Common Stock outstanding immediately after such event, and (B) each
share of Common Stock outstanding immediately after such event shall have
issued with respect to 

 

20

 

it that number of Rights that each share of Common
Stock outstanding immediately prior to such event had issued with respect to
it.  The adjustments provided for in this
Section 11(n) shall be made successively whenever such a
dividend is declared or paid or such a subdivision, combination or
consolidation is effected.  If an event
occurs that would require an adjustment under Section 11(a)(ii) and
this Section 11(n), the adjustments provided for in this Section 11(n) shall
be in addition and prior to any adjustment required pursuant to Section 11(a)(ii).

 

(o)                                 The Company agrees that, after the Shares
Acquisition Date, it will not, except as permitted by Section 23, Section 24
or Section 27, take (or permit any Subsidiary to take) any action
if, at the time such action is taken, it is reasonably foreseeable that such action
will diminish substantially or eliminate the benefits intended to be afforded
by the Rights.

 

Section 12.                                      Certificate of Adjusted Purchase Price or
Number of Shares.  Whenever an adjustment is made as provided in
Section 11 and Section 13, the Company shall (a) promptly
prepare a certificate setting forth such adjustment and a brief written
statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Common Stock and the
Preferred Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate (if the Distribution Date has
occurred) or of a certificate representing shares of Common Stock (if prior to
the Distribution Date) in accordance with Section 25.  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment or statement contained
therein and shall have no duty or liability with respect to and shall not be
deemed to have knowledge of such adjustment or event unless and until it shall
have received such certificate.

 

Section 13.                                      Consolidation, Merger or Sale or Transfer
of Assets or Earning Power.

 

(a)                                  If, following the Shares Acquisition
Date, (i) the Company shall consolidate with, or merge with and into, any
other Person, (ii) any Person shall consolidate with or merge with and
into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the Common Stock shall be changed into or exchanged for stock or other
securities of any other Person (or the Company) or cash or any other property,
or (iii) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more of its wholly owned
Subsidiaries in or more transactions, each of which complies with Section 11(o)),
then, and in each such case, proper provision shall be made so that (A) each
holder of a Right (except as otherwise provided herein) shall thereafter have
the right to receive, upon the exercise thereof at the Purchase Price in effect
immediately prior to such Person becoming an Acquiring Person multiplied by the
number of one one-thousandths of a share of Preferred Stock for which a Right
is then exercisable, in accordance with the terms of this Agreement and in lieu
of shares of Preferred Stock, such number of shares of validly issued, fully
paid, non-assessable and freely tradable Senior Voting Stock (as hereinafter
defined) of the Principal 

 

21

 

Party (as hereinafter defined) (including the Company
as successor thereto or as the surviving corporation), unencumbered and not
subject to any liens, encumbrances, rights of call or first refusal or other
adverse claims, as shall be equal to the result obtained by (1) multiplying
such Purchase Price by the then number of one one-thousandths of a share of
Preferred Stock for which a Right is then exercisable and dividing that product
by (2) 50% of the Current Market Price Per Share of the Senior Voting
Stock of such Principal Party (determined in the manner described in Section 11(d))
on the date of consummation of such consolidation, merger, sale or transfer; (B) the
Principal Party shall thereafter be liable for, and shall assume, by virtue of
such consolidation, merger, sale or transfer, all the obligations and duties of
the Company pursuant to this Agreement; (C) the term “Company”
shall thereafter be deemed to refer to such Principal Party, it being
specifically intended that the provisions of Section 11 shall apply
to such Principal Party following the occurrence of such consolidation, merger,
sale or transfer; and (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of
shares of its Senior Voting Stock in accordance with Section 9,
with each reference to Preferred Stock in Section 9 being deemed to
be a reference to the shares of its Senior Voting Stock) in connection with
such consummation as may be necessary to assure that the provisions hereof
shall thereafter be applicable, as nearly as reasonably may be, in relation to
the shares of its Senior Voting Stock thereafter deliverable upon the exercise
of the Rights.

 

(b)                                 “Principal Party”
shall mean (i) in the case of any transaction described in Section 13(a)(i) or
Section 13(a)(ii), the Person that is the issuer of any securities
into which shares of Common Stock are converted in such merger or
consolidation, and if no securities are so issued, the Person that is the other
party to the merger or consolidation; and (ii) in the case of any
transaction described in Section 13(a)(iii), the Person that is the
other party to such transaction or, if more than one, the Person that is the
party receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction; provided, however, that, in any
such case, if the Senior Voting Stock of such Person is not at such time and
has not been continuously over the preceding 12-month period registered under Section 12
of the Exchange Act, then (A) if such Person is a direct or indirect
Subsidiary of another Person the Senior Voting Stock of which is and has been
so registered, the term “Principal Party” shall refer to such other Person; or (B) if
such Person is a Subsidiary, directly or indirectly, of more than one Person
and the Senior Voting Stock of any two or more of such Persons is and has been
so registered, the term “Principal Party” shall refer to whichever of such
Persons is the issuer of the Senior Voting Stock having the greatest aggregate
market value of shares outstanding; or (C) if such Person is owned,
directly or indirectly, by a joint venture formed by two or more Persons that
are not owned, directly or indirectly, by the same Person, the rules set
forth in clauses (A) and (B) above shall apply to each of the owners
having an interest in such joint venture as if such joint venture were a
Subsidiary of both or all of such joint venturers and the Principal Party in
each such chain shall bear the obligations set forth in this Section 13
in the same ratio as their direct or indirect interests in such joint venture
bear to the total of such interests.  “Senior Voting Stock” shall mean the
capital stock (or equity interest) of the Principal Party with the greatest voting
power.

 

22

 

(c)                                  The Company shall not consummate any such
consolidation, merger, sale or transfer unless, prior thereto the Company and
such Principal Party or Parties shall have executed and delivered to the Rights
Agent a supplemental agreement providing for the terms set forth in Section 13(a) and
Section 13(b) and further providing that, as soon as
practicable after the date of any consolidation, merger or sale or transfer of
assets mentioned in Section 13(a), the Principal Party or Parties
will (i) prepare and file a registration statement under the Securities
Act with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, will use its best efforts (A) to cause
such registration statement to become effective as soon as practicable after
such filing, (B) to cause such registration statement to remain effective
(with a prospectus at all times meeting the requirements of the Securities Act)
until the date of expiration of the Rights, and (C) to similarly comply
with applicable state securities laws, and use its best efforts to list (or
continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on a national securities exchange; and (ii) will
deliver to holders of the Rights historical financial statements for the
Principal Party or Parties and each of its Affiliates that comply in all
respects with the requirements for registration on Form 10 (or any
successor form) under the Exchange Act.

 

(d)                                 If the Principal Party has a provision in
any of its authorized securities or in its certificate of incorporation or
by-laws or other instrument governing its affairs, which provision would have
the effect of (i) causing such Principal Party to issue (other than to
holders of Rights pursuant to this Section 13), in connection with,
or as a consequence of, the consummation of a transaction referred to in this Section 13,
shares of Senior Voting Stock or Senior Voting Stock equivalents of such
Principal Party at less than the then-Current Market Price Per Share thereof
(determined pursuant to Section 11(d)) or securities exercisable
for, or convertible into, Senior Voting Stock or Senior Voting Stock
equivalents of such Principal Party at less than such then- Current Market
Price Per Share or (ii) providing for any special payment, tax or similar
provision in connection with the issuance of the Senior Voting Stock of such
Principal Party pursuant to the provisions of this Section 13, then,
in such event, the Company hereby covenants and agrees with each holder of
Rights that it shall not consummate any such transaction unless, prior thereto,
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that
the authorized securities shall be redeemed, so that the applicable provision
will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.

 

(e)                                  The Company covenants and agrees that it
shall not, at any time after a Person first becomes an Acquiring Person, enter
into any transaction of the kind referred to in this Section 13 if (i) at
the time of such transaction there are any rights, warrants, instruments or
securities outstanding or any agreements or arrangements that, as a result of
the consummation of such transaction, would eliminate or substantially diminish
the benefits intended to be afforded by the Rights, (ii) prior to,
simultaneously with or immediately after such transaction, the stockholders of
the Person who constitutes, or would constitute, the Principal Party for
purposes of Section 13(b) shall have received a distribution
of Rights previously owned by such Person or any of its Affiliates or
Associates or (iii) the form or nature of organization of the Principal
Party would preclude or limit the exercisability of the Rights.  The provisions of this Section 13
shall similarly apply to successive mergers or consolidations or sales or other
transfers.

 

23

 

Section 14.                                      Fractional Rights and Fractional Shares.

 

(a)                                  The Company shall not be required to
issue fractions of Rights or to distribute Right Certificates that evidence
fractional Rights.  In lieu of such
fractional Rights, there shall be paid to the registered holders of the Right
Certificates, with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right.  For the purposes
of this Section 14(a), the “current market value of a
whole Right” shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable.  The
closing price for any day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
ask prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the Rights are not
listed or admitted to trading on the New York Stock Exchange, as reported in
the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or admitted
to trading on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low ask prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and ask prices as furnished by a professional market
maker making a market in the Rights, selected by the Board of Directors of the
Company.  If on any such date, no such market
maker is making a market in the Rights, the fair market value of the Rights on
such date as determined in good faith by the Board of Directors of the Company
shall be used.

 

(b)                                 The Company shall not be required to
issue fractions of shares of Preferred Stock (other than fractions that are
integral multiples of one one-thousandth of a share of Preferred Stock) upon
exercise or exchange of the Rights or to distribute certificates that evidence
fractional shares of Preferred Stock (other than fractions that are integral
multiples of one one-thousandth of a share of Preferred Stock).  Fractions of shares of Preferred Stock in
integral multiples of one one-thousandth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to
an appropriate agreement between the Company and a depositary selected by it,
provided that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they
are entitled as beneficial owners of shares of Preferred Stock.  In lieu of fractional shares that are not
integral multiples of one one-thousandth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates with regard
to which such fractional shares would otherwise be issuable an amount in cash
equal to the same fraction of the current market value of a whole share of
Preferred Stock.  For purposes of this Section 14(b),
the “current market value of a whole share of Preferred
Stock” shall be the closing price of a share of Preferred Stock
(as determined pursuant to the second

 

24

 

sentence of Section 11(d)(i)) for the
Trading Day immediately prior to the date of such exercise or exchange).

 

(c)                                  The Company shall not be required to
issue fractions of shares of Common Stock upon exercise or exchange of the
Rights or to distribute certificates that evidence fractional shares of Common
Stock.  In lieu of such fractional
shares, the Company shall pay to the registered holders of Right Certificates
with regard to which such fractional shares would otherwise be issuable an
amount in cash equal to the same fraction of the current market value of a
whole share of Common Stock.  For
purposes of this Section 14(c), the “current
market value of a whole share of Common Stock” shall be the
closing price of a share of Common Stock (as determined pursuant to the second
sentence of Section 11(d)(i)) for the Trading Day immediately prior
to the date of such exercise or exchange).

 

(d)                                 The holder of a Right by the acceptance
of the Right expressly waives such holder’s right to receive any fractional
Rights or any fractional shares upon exercise of a Right (except as above
provided).

 

Section 15.                                      Rights of Action. 
All rights of action in respect of this Agreement are vested in the
respective registered holders of the Right Certificates (and, prior to the
Distribution Date, the registered holders of the Common Stock); and any
registered holder of any Right Certificate (or, prior to the Distribution Date,
of the Common Stock), without the consent of the Rights Agent or of the holder
of any other Right Certificate (or, prior to the Distribution Date, of the
Common Stock), may, in such holder’s own behalf and for such holder’s own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce this Agreement, or otherwise act in respect of
such holder’s right to exercise the Rights evidenced by such Right Certificate
in the manner provided in such Right Certificate and in this Agreement.  Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.

 

Section 16.                                      Agreement of Right Holders. 
Every holder of a Right, by accepting the same, consents and agrees with
the Company and the Rights Agent and with every other holder of a Right that:

 

(a)                                  prior to the Distribution Date, the
Rights will be transferable only in connection with the transfer of the Common
Stock;

 

(b)                                 after the Distribution Date, the Right
Certificates are transferable only on the registry books of the Rights Agent if
surrendered at the office of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer;

 

25

 

(c)                                  the Company and the Rights Agent may deem
and treat the Person in whose name the Right Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Right Certificates or the
associated Common Stock certificates made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the
Rights Agent shall be affected by any notice to the contrary; and

 

(d)                                 notwithstanding anything in this
Agreement to the contrary, neither the Company nor the Rights Agent shall have
any liability to any holder of a Right or other Person as a result of the
Company’s or the Rights Agent’s inability to perform any of their respective
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, judgment, decree or ruling (whether interlocutory or
final) issued by a court or by a governmental, regulatory, self-regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation.

 

Section 17.                                      Right Certificate Holder Not Deemed a
Stockholder.  No holder, as such, of any Right Certificate
shall be entitled to vote, receive dividends or be deemed for any purpose the
holder of the Preferred Stock or any other securities of the Company that may
at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Right Certificate be construed to
confer upon the holder of any Right Certificate, as such, any of the rights of
a stockholder of the Company or any right to vote for the election of directors
or upon any matter submitted to stockholders at any meeting thereof, or to give
or withhold consent to any corporate action, or to receive notice of meetings
or other actions affecting stockholders (except as provided in Section 23,
Section 24 or Section 25), or to receive dividends or
subscription rights, or otherwise, until the Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.

 

Section 18.                                      Concerning the Rights Agent. 
The Company agrees to pay to the Rights Agent reasonable compensation
for all services rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Agreement
and the exercise and performance of its duties hereunder.  The Company also agrees to indemnify the
Rights Agent for, and to hold it harmless against, any loss, liability, or
expense (including, without limitation, the reasonable fees and expenses of
legal counsel), incurred without gross negligence, bad faith or willful
misconduct on the part of the Rights Agent, for any action taken, suffered or
omitted by the Rights Agent in connection with the acceptance, administration
and performance of its duties under this Agreement, including the costs and expenses
of defending against any claim of liability in the premises and the enforcement
of this indemnification.  This
indemnification shall survive the termination of this Agreement, the exercise
of or expiration of the Rights and the resignation, replacement or removal of
the Rights Agent.

 

The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with
its administration of this Agreement in reliance upon any Right Certificate or
certificate for the Preferred Stock or for other securities of the Company,
instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper person or persons or
otherwise upon the advice of counsel as set forth in Section 20.

 

26

 

Section 19.                                      Merger or Consolidation or Change of Name
of Rights Agent.  Any Person into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any Person resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any Person succeeding to the
applicable business of the Rights Agent or any successor Rights Agent shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties
hereto, provided that such Person would be eligible for appointment as a
successor Rights Agent under the provisions of Section 21.  In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such
successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Right Certificates so countersigned; and in case at that
time any of the Right Certificates shall not have been countersigned, any
successor Rights Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the successor Rights
Agent; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.

 

In case at any time the name of the Rights Agent shall be changed and
at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign such Right Certificates either in its prior name or in
its changed name; and in all such cases such Right Certificates shall have the
full force provided in the Right Certificates and in this Agreement.

 

Section 20.             Duties of Rights Agent. 
The Rights Agent undertakes the duties and obligations expressly imposed
by this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Right Certificates, by their acceptance thereof,
shall be bound:

 

(a)                                  The Rights Agent may consult with the
legal counsel (who may be legal counsel for the Company), and the opinion of
such counsel shall be full and complete authorization and protection to the
Rights Agent as to any action taken, suffered or omitted by it in accordance
with such opinion.

 

(b)                                 Whenever in the performance of its duties
under this Agreement the Rights Agent shall deem it necessary or desirable that
any fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board, the Chief Executive Officer, the President, any Vice
President, the Treasurer or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full and complete authorization and
protection to the

 

27

 

Rights Agent for any action taken, suffered or omitted
by it under the provisions of this Agreement in reliance upon such certificate.

 

(c)                                  The Rights Agent shall be liable
hereunder for only its own gross negligence, bad faith or willful misconduct.

 

(d)                                 The Rights Agent shall not be liable for
or by reason of any of the statements of fact or recitals contained in this
Agreement or in the Right Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals are and
shall be deemed to have been made by the Company only.

 

(e)                                  The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution
and delivery hereof (except the due execution hereof by the Rights Agent) or in
respect of the validity or execution of any Right Certificate (except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Right Certificate; nor shall it be responsible for any change in the
exercisability of Rights (including any Rights becoming void pursuant to Section 11(a)(ii))
or any adjustment in the terms of the Rights (including the manner, method or
amount thereof) provided for in Section 3, Section 11, Section 13,
Section 23 or Section 24, or the ascertaining of the
existence of facts that would require any such change or adjustment (except
with respect to the exercise of Rights evidenced by Right Certificates after
actual notice that such change or adjustment is required); nor shall it by any
act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any shares of the Preferred Stock to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of the Preferred Stock will, when issued, be validly authorized and issued,
fully paid and nonassessable.

 

(f)                                    The Company agrees that it will perform,
execute, acknowledge and deliver or cause to be performed, executed,
acknowledged and delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for the carrying
out or performing by the Rights Agent of the provisions of this Agreement.

 

(g)                                 The Rights Agent is hereby authorized and
directed to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Secretary or the Treasurer of the Company,
and such instructions shall be full authorization and protection to the Rights
Agent and the Rights Agent shall not be liable for or in respect of any action
taken, suffered or omitted by it in accordance with instructions of any such
officer or for any delay in acting while waiting for those instructions.  The Rights Agent shall be fully authorized
and protected in relying upon the most recent instructions received by any such
officer.

 

(h)                                 The Rights Agent and any stockholder,
director, officer or employee of the Rights Agent may buy, sell or deal in any
of the Rights or other securities of the Company or become pecuniarily
interested in any transaction in which the 

 

28

 

Company may be interested, or contract with or lend
interested money to the Company or otherwise act as fully and freely as though
it were not Rights Agent under this Agreement. 
Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other Person.

 

(i)                                     The Rights Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents, and the Rights Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys or agents or for any loss to the Company
resulting from any such act, default, neglect or misconduct, absent gross
negligence, bad faith or willful misconduct in the selection and continued
employment thereof.

 

(j)                                     If, with respect to any Right Certificate
surrendered to the Rights Agent for exercise or transfer, the certificate
attached to the form of assignment or form of election to purchase, as the case
may be, has either not been completed or indicates that the Rights are
beneficially owned by an Acquiring Person or an Affiliate or Associate thereof,
the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

 

(k)                                  The Rights Agent shall have no
responsibility to the Company, any holders of Rights or any holders of shares
of Preferred Stock or other securities for interest or earnings on any monies
held by the Rights Agent pursuant to this Agreement, except as otherwise
specifically agreed in a separate writing by the Company and the Rights Agent.

 

(l)                                     The Rights Agent shall not be required to
take notice or be deemed to have notice of any event or condition hereunder,
including, but not limited to, a Distribution Date, a Redemption Date, any
adjustment of the Purchase Price, the existence of an Acquiring Person or any
other event or condition that may require action by the Rights Agent, unless
the Rights Agent shall be specifically notified in writing of such event or
condition by the Company, and all notices or other instruments required by this
Agreement to be delivered to the Rights Agent must, in order to be effective,
be received by the Rights Agent as specified in Section 26, and in
the absence of such notice so delivered, the Rights Agent may conclusively
assume no such event or condition exists.

 

Section 21.             Change of Rights Agent. 
The Rights Agent or any successor Rights Agent may resign and be
discharged from its duties under this Agreement upon thirty (30) days’ notice
in writing mailed to the Company and to each transfer agent of the Common Stock
and the Preferred Stock by registered or certified mail, and, if such
resignation occurs after the Distribution Date, to the registered holders of
the Right Certificates by first class mail. 
In the event the transfer agency relationship in effect between the
Company and the Rights Agent terminates, the Rights Agent will be deemed to
have resigned automatically and be discharged from its duties under this
Agreement as of the effective date of such termination, and the Company shall
be responsible for sending any required notice. The Company may remove the
Rights Agent or any successor Rights Agent upon thirty (30) days’ notice in
writing, mailed to the Rights Agent or successor Rights Agent, as the case may
be, and to each transfer agent of the

 

29

 

Common Stock and the Preferred Stock by registered or certified mail,
and, if such resignation occurs after the Distribution Date, to the registered
holders of the Right Certificates by first class mail.  If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. 
If the Company shall fail to make such appointment within a period of
thirty (30) days after giving notice of such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Right Certificate (who shall,
with such notice, submit such holder’s Right Certificate for inspection by the
Company), then the registered holder of any Right Certificate may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a Person that is (i) organized
and doing business under the laws of the United States or of any state of the
United States, (ii) authorized under such laws to do business as a banking
institution and to exercise corporate trust powers or stock transfer powers, (iii) in
good standing, and (iv) subject to supervision or examination by federal
or state authority and that, in conjunction with its Affiliates, has at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $50 million.  After appointment,
the successor Rights Agent shall be vested with the same powers, rights, duties
and responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and
transfer to the successor Rights Agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for the purpose.  Not
later than the effective date of any such appointment, the Company shall file
notice thereof in writing with the predecessor Rights Agent and each transfer agent
of the Common Stock or Preferred Stock, and, if such resignation occurs after
the Distribution Date, mail a notice thereof in writing to the registered
holders of the Right Certificates. 
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

 

Section 22.             Issuance of New Right Certificates. 
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Company may, at its option, issue new Right Certificates
evidencing Rights in such form as may be approved by its Board of Directors to
reflect any adjustment or change in the Purchase Price and the number or kind or
class of shares or other securities or property purchasable under the Right
Certificates made in accordance with the provisions of this Agreement.  In addition, in connection with the issuance
or sale of Common Stock following the Distribution Date and prior to the
Expiration Date, the Company may, with respect to shares of Common Stock so
issued or sold pursuant to (a) the exercise of stock options, (b) under
any employee plan or arrangement, (c) the exercise, conversion or exchange
of securities, notes or debentures issued by the Company or (d) a
contractual obligation of the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale.

 

Section 23.             Redemption.

 

(a)                                  The Board of Directors of the Company
may, at its option, at any time prior to the Close of Business on the earlier
of (i) the Distribution Date or (ii) the Expiration Date, redeem all
but not less than all of the then outstanding Rights at 

 

30

 

a redemption price of $0.001 per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such redemption price being hereinafter
referred to as the “Redemption Price”).  Notwithstanding anything in this Agreement to
the contrary, the Rights shall not be exercisable after the first occurrence of
an event described in Section 11(a)(ii) until such time as the
Company’s right of redemption under this Section 23(a) has
expired.  The redemption of the Rights
may be made effective at such time, on such basis and with such conditions as
the Board of Directors of the Company in its sole discretion may establish.  The Company may, at its option, pay the
Redemption Price in cash, shares of Common Stock (based on the Current Market
Price Per Share of the Common Stock at the time of redemption as determined
pursuant to Section 11(d)(i)) or any other form of consideration
deemed appropriate by the Board of Directors of the Company, or any combination
thereof.

 

(b)                                 Immediately upon the action of the Board
of Directors of the Company ordering the redemption of the Rights pursuant to Section 23(a),
without any further action and without any notice, the right to exercise the
Rights will terminate and each Right will thereafter represent only the right
to receive the Redemption Price.  The
Company shall promptly give public notice of any such redemption and, within
ten (10) days after such action causing a redemption of the Rights
pursuant to Section 23(a), the Company shall mail a notice of
redemption to all the holders of the then outstanding Rights at their last
addresses as they appear upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock.  Any notice that is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.  Notwithstanding the
foregoing, the failure to give, or any defect in, any notice required to be
made or given pursuant to this Section 23(b) shall not affect
the validity of the redemption of the Rights.

 

(c)                                  Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights
at any time in any manner other than that specifically set forth in this Section 23
or in Section 24, and other than in connection with the purchase or
repurchase by any of them of Common Stock prior to the Distribution Date.

 

Section 24.             Exchange.

 

(a)                                  The Board of Directors of the Company
may, at its option, at any time after the Shares Acquisition Date, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 11(a)(ii))
for shares of Common Stock at an exchange ratio of one share of Common Stock
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”).  Notwithstanding the foregoing, the Board of
Directors of the Company shall not be empowered to effect such exchange at any
time after any Acquiring Person, together with all Affiliates and Associates of
such

 

31

 

Acquiring Person, becomes the Beneficial Owner of 50%
or more of the voting power of the shares of Common Stock then
outstanding.  From and after the
occurrence of an event specified in Section 13(a), any Rights that
theretofore have not been exchanged pursuant to this Section 24(a) shall
thereafter be only exercisable in accordance with Section 13 and
may not be exchanged pursuant to this Section 24(a).  The exchange of the Rights by the Board of
Directors of the Company may be made effective at such time, on such basis and
with such conditions as the Board of Directors of the Company in its sole
discretion may establish.

 

(b)                                 Immediately upon the effectiveness of the
action of the Board of Directors of the Company ordering the exchange of any
Rights pursuant to Section 24(a) and without any further
action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such
Rights held by such holder multiplied by the Exchange Ratio.  The Company shall promptly give public notice
of any such exchange; provided, however, that the failure to
give, or any defect in, such notice shall not affect the validity of such
exchange.  The Company promptly shall
mail a notice of any such exchange by first class mail to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent.  Any notice that is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such
notice of exchange will state the method by which the exchange of Common Stock
for Rights will be effected and, in the event of any partial exchange, the
number of Rights that will be exchanged. 
Any partial exchange shall be effected pro rata based on the number of
Rights (other than Rights that have become void pursuant to the provisions of Section 11(a)(ii))
held by each holder of Rights.

 

(c)                                  The Company may, at its option,
substitute for a share of Common Stock issuable upon the exchange of Rights in
accordance with Section 24(a) a number of shares of Preferred
Stock (or Equivalent Preferred Stock) or fraction thereof such that the Current
Market Price Per Share of the Preferred Stock multiplied by such number or
fraction is equal to the Current Market Price Per Share of the Common Stock.

 

Section 25.             Notice of Certain Events. 
In case the Company shall propose at any time following the Distribution
Date (a) to pay any dividend payable in stock of any class to the holders
of its Preferred Stock or to make any other distribution to the holders of its
Preferred Stock (other than a regular periodic cash dividend), (b) to
offer to the holders of its Preferred Stock rights or warrants to subscribe for
or to purchase any additional shares of the Preferred Stock or shares of stock
of any class or any other securities, rights or options, (c) to effect any
reclassification of its Preferred Stock (other than a reclassification
involving only the subdivision of outstanding Preferred Stock), (d) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person, (e) to effect the liquidation, dissolution or winding up of
the Company or (f) to declare or pay any dividend on the shares of Common
Stock payable in shares of Common Stock or to effect a subdivision, combination
or consolidation of the shares of Common Stock (by reclassification 

 

32

 

or otherwise than by payment of dividends in shares of Common Stock),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the Common Stock and/or the Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (a) or (b) above at least ten (10) days
prior to the record date for determining holders of the Preferred Stock for
purposes of such action, and in the case of any such other action, at least ten
(10) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the Common Stock and/or the
Preferred Stock, whichever shall be the earlier.  In case the event set forth in Section 11(a)(ii) shall
occur, then the Company shall as soon as practicable thereafter give to each
holder of a Right, in accordance with Section 26, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii).

 

Section 26.             Notices.  Notices or
demands authorized by this Agreement to be given or made by the Rights Agent or
by the holder of any Right Certificate to or on the Company shall be
sufficiently given or made if sent by overnight delivery service or first class
mail, postage prepaid, addressed (until another address is filed in writing by
the Company with the Rights Agent) as follows:

 

Iteris, Inc.

1700
Carnegie Avenue, Suite 100

Santa
Ana, CA 92705 

Attention:  Chief Financial Officer

 

Subject to the provisions of Section 21, any notice or
demand authorized by this Agreement to be given or made by the Company or by
the holder of any Right Certificate to or on the Rights Agent shall be
sufficiently given or made if sent by overnight delivery service or first class
mail, postage prepaid, addressed (until another address is filed in writing by
the Rights Agent with the Company) as follows:

 

Computershare Trust
Company, N.A.,

350 Indiana St., Suite 800

Golden, CO  80401

Attn: Iteris, Inc.
Account Manager

 

Notices or demands authorized by this Agreement to be given or made by
the Company or the Rights Agent to the holder of any Right Certificate shall be
sufficiently given or made if sent by overnight delivery service or first class
mail, postage prepaid, addressed to such holder at the address of such holder
as shown on the registry books of the Company.

 

Section 27.             Supplements and Amendments. 
Except as otherwise provided in this Section 27, and prior
to the Distribution Date, the Company may, from time to time in its sole and
absolute discretion, and the Rights Agent shall, if the Company so directs,
supplement or amend any provision of this Agreement in any respect without the
approval of any holders of

 

33

 

certificates representing shares of Common Stock.  From and after the Distribution Date, except
as otherwise provided in this Section 27, the Company may, and the
Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
to (a) cure any ambiguity, (b) correct or supplement any provision
contained herein that may be defective or inconsistent with any other
provisions herein, (c) shorten or lengthen any time period hereunder or (d) change
or supplement the provisions hereunder in any manner that the Company may deem
necessary or desirable and which would not adversely affect the interests of
the holders of Right Certificates as such (other than any holder who is an
Acquiring Person, or an Affiliate or Associate of any Acquiring Person), but
may not cause this Agreement to become amendable other than in accordance
with this Section 27 or cause the Rights to again become
redeemable.  Upon the delivery of a
certificate from an appropriate officer of the Company that states that the
proposed supplement or amendment is in compliance with the terms of this Section 27,
the Rights Agent shall execute such supplement or amendment.

 

Notwithstanding anything contained in this Agreement to the contrary,
the Rights Agent may, but shall not be obligated to, enter into any supplement
or amendment that affects the Rights Agent’s own rights, duties, obligations or
immunities under this Agreement.

 

Section 28.                                      Successors.  All the
covenants and provisions of this Agreement by or for the benefit of the Company
or the Rights Agent shall bind and inure to the benefit of their respective
successors and assigns hereunder.

 

Section 29.                                      Benefits of this Agreement. 
Nothing in this Agreement shall be construed to give to any Person other
than the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock) any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Rights Agent and the registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of
the Common Stock).

 

Section 30.                                      Determinations and Actions by the Board
of Directors of the Company.  The Board of
Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (a) interpret the provisions of
this Agreement and (b) make all determinations deemed necessary or
advisable for the administration of this Agreement (including, without
limitation, a determination to redeem or not redeem the Rights, to exchange or
not exchange the Rights, or to amend this Agreement).  All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) that are done or made by the Board
of Directors of the Company in good faith, shall (x) be final, conclusive
and binding on the Company, the Rights Agent, the holders of the Rights, as
such, and all other Persons and (y) not subject the Board of Directors of
the Company, or any of the  directors
serving on the Board of Directors, to any liability to the holders of the
Rights or any other Person.

 

34

 

For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of capital stock outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial Owner,
shall be made in accordance with the last sentence of Rule 13d-3(d)(l)(i) of
the General Rules and Regulations under the Exchange Act.

 

Section 31.                                      Severability. 
If any term, provision, covenant or restriction of this Agreement is
held by a court of competent jurisdiction or other authority to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated; provided, however,
that, notwithstanding anything in this Agreement to the contrary, if any such
term, provision, covenant or restriction is held by such court or authority to
be invalid, void or unenforceable and the Board of Directors determines in its
good faith judgment that severing the invalid language from this Agreement would
adversely affect the purpose or effect of this Agreement, the right of
redemption set forth in Section 23 hereof shall be reinstated and
shall not expire until the Close of Business on the tenth Business Day
following the date of such determination by the Board of Directors.  Without limiting the foregoing, if any
provision requiring a specific group of directors to act is held to by any
court of competent jurisdiction or other authority to be invalid, void or
unenforceable, such determination shall then be made by the Board of Directors
in accordance with applicable law and the Company’s Restated Certificate of
Incorporation and Bylaws.

 

Section 32.                                      Governing Law. 
This Agreement and each Right Certificate issued hereunder shall be
deemed to be a contract made under the laws of the State of Delaware and for
all purposes shall be governed by and construed in accordance with the laws of
such state applicable to contracts to be made and performed entirely within
such state.

 

Section 33.                                      Descriptive Headings; References. 
Descriptive headings of the several sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof. 
Except as otherwise specifically provided, any reference to any section
or exhibit will be deemed to refer to such section of or exhibit to this
Agreement.

 

Section 34.                                      Counterparts. 
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.

 

Section 35.                                      Force Majeure. 
Notwithstanding anything to the contrary contained herein, the Rights
Agent shall not be liable for any delays or failures in performance resulting
from acts beyond its reasonable control including, without limitation, acts of
God, terrorist acts, shortage of supply, breakdowns or malfunctions,
interruptions or malfunction of computer facilities, or loss of data due to
power failures or mechanical difficulties with information storage or retrieval
systems, labor difficulties, war, or civil unrest.

 

[Remainder of Page Intentionally Left Blank]

 

35

 

IN WITNESS WHEREOF, the parties hereto have caused this Rights
Agreement to be duly executed as of the day and year first above written.

 

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /S/ ABBAS MOHADDES

  
	
   

  	
   

  	
  Name:

  	
  Abbas Mohaddes

  
	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPUTERSHARE TRUST COMPANY,
  N.A.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /S/ KELLIE GWINN

  
	
   

  	
   

  	
  Name:

  	
  Kellie Gwinn

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  

 

36

 

EXHIBIT
A

 

Form of Certificate of Designations for

Series A Junior Participating Preferred Stock

 

(attached)

 

A-1

 

CERTIFICATE OF DESIGNATIONS

 

OF

 

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

OF

 

ITERIS, INC.

 

 

Pursuant to Section 151 of the

 

Delaware General Corporation Law

 

 

Iteris, Inc., a Delaware corporation (the “Corporation”), does
hereby certify that the following resolution was adopted by the Board of
Directors of the Corporation effective August 20, 2009, and such
resolution has not been rescinded or amended and is in full force and effect as
of the date hereof:

 

RESOLVED, that pursuant to the authority
conferred upon the Board of Directors of Iteris, Inc., a Delaware
corporation (the “Corporation”), by the provisions of the certificate of
incorporation of the Corporation, as amended to date (the “Certificate of
Incorporation”), there hereby is created, out of the authorized shares of
undesignated Preferred Stock, a series of Preferred Stock of the Corporation
consisting of One Hundred Thousand (100,000) shares, having the following
designations, preferences, relative, participating, optional and other special
rights, voting powers, qualifications, limitations and restrictions:

 

SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

 

Section 1.                                         Designation and Amount.  The shares of
such series shall be designated as “Series A Junior Participating
Preferred Stock” (the “Series A
Preferred Stock”) and the number of shares constituting such
series shall be One Hundred Thousand (100,000). 
Such number of shares may be increased or decreased by resolution of the
Board of Directors, provided that no decrease shall reduce the number of shares
of Series A Preferred Stock to a number less than the number of shares
then outstanding plus the number of shares reserved for issuance upon the
exercise of outstanding options, rights or warrants or upon the conversion of
any outstanding securities issued by the Corporation convertible into Series A
Preferred Stock.

 

Section 2.                                         Dividends and
Distributions.

 

(A)                            Subject to the prior and superior rights
of the holders of any shares of any series of Preferred Stock ranking prior and
superior to the shares of Series A Preferred Stock, the 

 

A-2

 

holders of shares of Series A Preferred Stock, in
preference to the holders of Common Stock, par value $0.10 per share (or as
such par value may be changed from time to time), of the Corporation (the “Common Stock”) and of any
other junior stock, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on or about the last day of each of March,
June, September and December in each year (each such date being
referred to herein as a “Quarterly
Dividend Payment Date”), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or fraction of a
share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (i) One Dollar ($1.00) or (ii) subject
to the provision for adjustment hereinafter set forth, One Thousand (1,000)
times the aggregate per share amount of all cash dividends, and One Thousand
(1,000) times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in shares of
Common Stock or a subdivision of the outstanding shares of Common Stock (by
reclassification or otherwise), declared on the Common Stock since the
immediately preceding Quarterly Dividend Payment Date or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Preferred Stock.  If the Corporation shall at any time on or
after September 3, 2009 (the “Record
Date”) declare or pay any dividend on the Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount to which holders of shares of Series A Preferred Stock were
entitled immediately prior to such event under clause (ii) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction,
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

 

(B)                              The Corporation shall declare a dividend
or distribution on the Series A Preferred Stock as provided in paragraph (A) of
this Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend Payment Date, a
dividend of $1.00 per share on the Series A Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend Payment Date.

 

(C)                              Dividends shall begin to accrue and be
cumulative on outstanding shares of Series A Preferred Stock from the
Quarterly Dividend Payment Date next preceding the date of issue of such shares
of Series A Preferred Stock, unless the date of issue of such shares is
prior to the record date for the first Quarterly Dividend Payment Date, in
which case dividends on such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly Dividend
Payment Date or is a date after the record date for the determination of
holders of shares of Series A Preferred Stock entitled to receive a
quarterly dividend and before such Quarterly Dividend Payment Date, in either
of which events such dividends shall begin to accrue and be cumulative from
such Quarterly Dividend Payment Date. 
Accrued but unpaid dividends shall not bear interest.  Dividends paid on the shares of Series A
Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such 

 

A-3

 

shares shall be allocated pro rata on a share-by-share
basis among all such shares at the time outstanding.  The Board of Directors may fix a record date
for the determination of holders of shares of Series A Preferred Stock
entitled to receive payment of a dividend or distribution declared thereon,
which record date shall be not more than 60 days prior to the date fixed for
the payment thereof.

 

Section 3.                                         Voting Rights.  The holders of
shares of Series A Preferred Stock shall have the following voting rights:

 

(A)                            Subject to the provision for adjustment
hereinafter set forth, each share of Series A Preferred Stock shall
entitle the holder thereof to One Thousand (1,000) votes on all matters
submitted to a vote of the stockholders of the Corporation. If the Corporation
shall at any time on or after the Record Date declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the number of votes per share to which holders of shares of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the number
of shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

(B)                              Except as otherwise provided herein, in
the Certificate of Incorporation, in any other Certificate of Designations
creating a series of Preferred Stock, or by law, the holders of shares of Series A
Preferred Stock and the holders of shares of Common Stock and any other capital
stock of the Corporation having general voting rights shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.

 

(C)                              Except as set forth herein, holders of Series A
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.

 

Section 4.                                         Certain Restrictions.

 

(A)                            Whenever quarterly dividends or other
dividends or distributions payable on the Series A Preferred Stock as
provided in Section 2 are in arrears, thereafter and until all
accrued and unpaid dividends and distributions, whether or not declared, on
shares of Series A Preferred Stock outstanding shall have been paid in
full, the Corporation shall not:

 

(i)                                     declare or pay dividends on or make any
other distributions on any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;

 

(ii)                                  declare or pay dividends on or make any
other distributions on any shares of stock ranking on a parity (either as to dividends
or upon liquidation, dissolution or winding up) with the Series A
Preferred Stock, except dividends paid ratably on the Series A Preferred
Stock and all such parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all such shares are
then entitled;

 

A-4

 

(iii)                               redeem or purchase or otherwise acquire
for consideration shares of any stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A Preferred
Stock, provided that the Corporation may at any time redeem, purchase or
otherwise acquire shares of any such junior stock in exchange for shares of any
stock of the Corporation ranking junior (either as to dividends or upon
dissolution, liquidation or winding up) to the Series A Preferred Stock;
or

 

(iv)                              redeem or purchase or otherwise acquire
for consideration any shares of Series A Preferred Stock, or any shares of
stock ranking on a parity with the Series A Preferred Stock, except in
accordance with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such shares upon such
terms as the Board of Directors, after consideration of the respective annual
dividend rates and other relative rights and preferences of the respective
series and classes, shall determine in good faith will result in fair and
equitable treatment among the respective series or classes.

 

(B)                              The Corporation shall not permit any
subsidiary of the Corporation to purchase or otherwise acquire for
consideration any shares of stock of the Corporation unless the Corporation
could, under paragraph (A) of this Section 4, purchase or
otherwise acquire such shares at such time and in such manner.

 

Section 5.                                         Reacquired Shares.  Any shares of Series A
Preferred Stock purchased or otherwise acquired by the Corporation in any
manner whatsoever shall be retired and cancelled promptly after the acquisition
thereof.  All such shares shall upon
their cancellation become authorized but unissued shares of Preferred Stock and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Certificate of
Incorporation, or in any other Certificate of Designations creating a series of
Preferred Stock or any similar stock or as otherwise required by law.

 

Section 6.                                         Liquidation, Dissolution
or Winding Up.

 

(A)                            Upon any liquidation (voluntary or
otherwise), dissolution or winding up of the Corporation, no distribution shall
be made to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received One Thousand Dollars ($1,000.00) per share,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the “Series A Liquidation Preference”).  Following the payment of the full amount of
the Series A Liquidation Preference, no additional distributions shall be
made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount
per share equal to the quotient obtained by dividing (i) the Series A
Liquidation Preference by (ii) One Thousand (1,000) (as appropriately
adjusted as set forth in paragraph (C) below to reflect such events as
stock splits, stock dividends and recapitalizations 

 

A-5

 

with respect to the Common Stock) (such quotient, the “Common Adjustment” and the
number in clause (ii), the “Adjustment
Number”).  Following the
payment of the full amount of the Series A Liquidation Preference and the
Common Adjustment in respect of all outstanding shares of Series A
Preferred Stock and Common Stock, respectively, holders of Series A
Preferred Stock and holders of shares of Common Stock shall receive their ratable
and proportionate share of the remaining assets to be distributed in the ratio
of the Adjustment Number to One (1) with respect to such Preferred Stock
and Common Stock, on a per share basis, respectively.

 

(B)                              If, however, there are not sufficient assets
available to permit payment in full of the Series A Liquidation Preference
and the liquidation preferences of all other series of Preferred Stock, if any,
which rank on a parity with the Series A Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of such parity
shares (including the Series A Preferred Stock) in proportion to their
respective liquidation preferences.  If,
after payment of the full Series A Liquidation Preference, there are not
sufficient assets available to permit payment in full of the Common Adjustment,
then such remaining assets shall be distributed ratably to the holders of
Common Stock.

 

(C)                              If the Corporation shall at any time
after the Record Date (i) declare any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine
the outstanding Common Stock into a smaller number of shares, then in each such
case the Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after
such event and the denominator of which is the number of shares of Common Stock
that were outstanding immediately prior to such event.

 

Section 7.                                         Consolidation, Merger,
Etc.  If the Corporation shall enter into any
consolidation, merger, combination or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, then in any such case the shares of Series A
Preferred Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment hereinafter set
forth) equal to One Thousand (1,000) times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or
exchanged.  In the event the Corporation
shall at any time after the Record Date declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

 

Section 8.                                         No Redemption.  The shares of Series A
Preferred Stock shall not be redeemable.

 

A-6

 

Section 9.                                         Rank. 
The Series A Preferred Stock shall rank, with respect to the
payment of dividends and the distribution of assets, junior to all other series
of the Preferred Stock, whether designated or issued before or after the date
of this Certificate of Designations, unless the terms of any such series shall
provide otherwise.

 

Section 10.                                  Fractional Shares. 
The Series A Preferred Stock may be issued in fractions of a share
that shall entitle the holder, in proportion to such holder’s fractional
shares, to exercise voting rights, receive dividends, participate in
distributions and have the benefit of all other rights of holders of the Series A
Preferred Stock.

 

Section 11.                                  Amendment. 
The Certificate of Incorporation shall not be amended in any manner that
would materially alter or change the powers, preferences or special rights of
the Series A Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority of the outstanding shares of Series A
Preferred Stock.

 

[Remainder of Page Left Intentionally Blank]

 

A-7

 

IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Designations of Series A Junior Participating Preferred Stock of Iteris, Inc.
to be executed this
              
day of
              ,
2009.

 

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-8

 

EXHIBIT
B

 

Form of Right Certificate

 

	
  Certificate No. R-                   

  	
   

  	
                  Rights

  

 

NOT
EXERCISABLE AFTER AUGUST 20, 2019 OR EARLIER IF REDEMPTION OR EXCHANGE
OCCURS.  THE RIGHTS ARE SUBJECT, AT THE
OPTION OF THE COMPANY, TO REDEMPTION AT $0.001 PER RIGHT OR TO EXCHANGE, ON THE
TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT,
RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS DEFINED IN SECTION 1 OF
THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME
NULL AND VOID.

 

RIGHT
CERTIFICATE

 

ITERIS,
INC.

 

This certifies that
                    
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Rights Agreement dated as of August 20,
2009 (the “Rights Agreement”) between
Iteris, Inc., a Delaware corporation (the “Company”),
and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to the Close of Business (as such term is defined
in the Rights Agreement) on August 20, 2019 at the office of the Rights
Agent, or its successors as Rights Agent, designated for such purposes, one
one-thousandth of one fully paid and non-assessable share of the Series A
Junior Participating Preferred Stock (the “Preferred Stock”)
of the Company, at a purchase price of $7.00 per one one-thousandth of a share
(the “Purchase Price”), upon
presentation and surrender of this Right Certificate with the Form of
Election to Purchase duly executed.  The
number of Rights evidenced by this Right Certificate (and the number of one
one-thousandths of a share of Preferred Stock that may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of September 3, 2009, based on
the shares of the Preferred Stock of the Company as constituted at such date.

 

As provided in the Rights Agreement, the Purchase Price and the number
and kind or class of shares of stock of the Company that may be purchased upon
the exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.

 

This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder 

 

B-1

 

of the Rights Agent, the Company and the holders of
the Right Certificates.  Copies of the
Rights Agreement are on file at the principal executive offices of the Company
and the office of the Rights Agent.

 

This Right Certificate, with or without other Right Certificates, upon
surrender at the office of the Rights Agent designated for such purposes, may
be exchanged for another Right Certificate or Right Certificates of like tenor
and date evidencing Rights entitling the holder to purchase a like aggregate
number of shares (or fractions of a share) of the Preferred Stock as the Rights
evidenced by the Right Certificate or Right Certificates surrendered shall have
entitled such holder to purchase.

 

If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

 

Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may, but are not required to, be redeemed by the Company at
its option at a redemption price of $0.001 per Right at any time prior to the
earlier of the Close of Business on (i) the Distribution Date (as such
time period may be extended pursuant to the Rights Agreement), and (ii) the
Expiration Date. In addition, under certain circumstances following the Shares
Acquisition  Date, the Rights may be
exchanged, in whole or in part, for shares of Common Stock, or shares of
preferred stock of the Company having essentially the same value or economic
rights as such shares.  Immediately upon
the action of the Board of Directors authorizing any such exchange, and without
any further action or any notice, the Rights (other than Rights which are not
subject to such exchange) will terminate and the Rights will only enable
holders to receive the shares issuable upon such exchange.

 

No fractional shares of the Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions that are
integral multiples of one one-thousandth of one share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts), but
in lieu thereof a cash payment will be made as provided in the Rights
Agreement.

 

No holder of this Right Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the Preferred
Stock or of any other securities of the Company that may at any time be
issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in the Rights Agreement), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by this Right Certificate shall
have been exercised as provided in the Rights Agreement.

 

This Right Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.

 

B-2

 

WITNESS the signature of the proper officers of the Company and its
corporate seal.

 

Dated
as of
                            ,
2009

 

 

	
   

  	
  ITERIS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Countersigned:

  
	
   

  	
   

  
	
   

  	
  COMPUTERSHARE
  TRUST COMPANY, N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

B-3

 

[Form of
Reverse Side of Right Certificate]

 

FORM OF
ASSIGNMENT

 

(To be
executed by the registered holder if such holder desires to transfer the Right
Certificate)

 

	
  FOR VALUE RECEIVED
                                          
  hereby sells, assigns and transfers unto

  	
   

  
	
   

  

(Please print name and
address of transferee)

 

this
Right Certificate, together with all right, title and interest therein, and
does hereby irrevocably constitute and appoint
                              
Attorney, to transfer the within Right Certificate on the books of the
within-named Company, with full power of substitution.

 

Dated: 
                    ,
2009

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

 

(Signature must conform in all respects to the name of
holder as written upon the face

of this Right Certificate, without alteration or enlargement or any change
whatsoever.)

 

Signature
Medallion Guaranteed:

 

Signatures must be guaranteed by an “eligible guarantor institution” as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.

 

	
   

  
	
  (to be completed if
  applicable)

  

 

The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

B-4

 

FORM OF
ELECTION TO PURCHASE

 

(To be
executed by the registered holder if such holder desires to exercise the Right
Certificate)

 

TO:  ITERIS, INC.

 

The undersigned hereby irrevocably elects to exercise
                              
Rights represented by this Right Certificate to purchase the shares of the
Preferred Stock issuable upon the exercise of such Rights and requests that
certificates for such shares be issued in the name of:

 

	
  [Please insert social security or other identifying
  number]

  	
   

  
	
   

  
	
  (Please print name and
  address)

  

 

If
such number of Rights shall not be all the Rights evidenced by this Right
Certificate, a new Right Certificate for the balance remaining of such Rights
shall be registered in the name of and delivered to:

 

	
  [Please insert social security or other identifying
  number]

  	
   

  
	
   

  
	
  (Please print name and
  address)

  

 

Dated:
                    ,
2009

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

 

(Signature must conform in all respects to the name of
holder as written upon the face

of this Right Certificate, without alteration or enlargement or any change
whatsoever.)

 

Signature
Medallion Guaranteed:

 

Signatures must be guaranteed by an “eligible guarantor institution” as
defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.

 

	
   

  
	
  (to be completed if
  applicable)

  

 

The undersigned hereby certifies that the Rights evidenced by this
Right Certificate are not beneficially owned by an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).

 

 

	
   

  	
   

  
	
   

  	
  Signature

  

 

B-5

 

EXHIBIT
C

 

Summary
of Rights to Purchase Preferred Stock

 

(attached)

 

C-1

 

ITERIS,
INC.

 

SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK

 

On August 20, 2009, the Board of Directors of Iteris, Inc.
(the “Company”) declared a dividend
distribution of one preferred stock purchase right (a “Right”)
for each outstanding share of common stock, $0.10 par value, of the Company
(the “Common Stock”).  The distribution is payable to the
stockholders of record as of September 3, 2009 (the “Record
Date”).  Each Right
entitles the registered holder to purchase from the Company one one-thousandth
of a share of the Company’s Series A Junior Participating Preferred Stock
(the “Preferred Stock”) at a price
of $7.00 per one one-thousandth of a share of Preferred Stock (the “Purchase Price”), subject to
adjustment.  The description and terms of
the Rights are set forth in a Rights Agreement dated August 20, 2009 (the “Rights Agreement”), between the
Company and Computershare Trust Company, N.A., as Rights Agent (the “Rights Agent”).

 

A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A
dated August 21, 2009.  Copies of
the Rights Agreement are available free of charge from the Rights Agent,
Computershare Trust Company, N.A.  The
following summary description of the Rights does not purport to be complete and
is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.

 

Until the Close of Business (as defined in the Rights Agreement) on the
Distribution Date, the Rights will be evidenced, with respect to any of the
Common Stock certificates outstanding as of the Record Date, by such Common
Stock certificate and this Summary of Rights. 
The “Distribution Date” will be
the tenth day following the earlier of (i) a public announcement that, or (ii) a
determination by a majority of the Company’s Board of Directors that, a person
or group of affiliated or associated persons (an “Acquiring
Person”) has acquired “beneficial ownership” (as defined in the
Rights Agreement) of fifteen percent (15%)  or more of the
outstanding shares of the Common Stock. 
For purposes of the Rights Agreement, “beneficial ownership” includes
not only the right to vote or dispose of shares of the Company’s Common Stock,
but also rights related to derivative transactions or derivative securities
which grant to the holder thereof the economic equivalent of ownership of an
amount of shares of Company Common Stock (whether or not such derivative (i) conveys
voting rights in the Company Common Stock or (ii) may be settled through
delivery of shares of Company Common Stock, and whether or not the economic
effect of such derivative has been hedged).

 

The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be
transferable only in connection with the transfer of the Common Stock.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after the Record Date, upon transfer or new issuance of the Common Stock, will
contain a notation incorporating the Rights Agreement by reference.  Until the Distribution Date (or earlier
redemption or expiration of the Rights), the surrender for transfer of any of
the Common Stock certificates outstanding as of the Record Date, with or
without a copy of this Summary of Rights, will also constitute the transfer of
the Rights associated with the Common Stock represented by such
certificate.  As soon as practicable
following the Distribution Date, separate certificates evidencing the Rights 

 

C-2

 

(“Right Certificates”)
will be mailed to holders of record of the Common Stock as of the Close of
Business on the Distribution Date and such separate Right Certificates alone
will evidence the Rights.

 

The Rights are not exercisable until the Distribution Date.  The Rights will expire at 5:00 p.m.
(Eastern time) on August 20, 2019 (the “Expiration
Date”), unless the Expiration Date is extended or unless earlier
redeemed or exchanged by the Company, in each case as described below.

 

If any person or group of affiliated or associated persons becomes an
Acquiring Person, proper provision will be made so that each holder of a Right,
other than Rights that were or are beneficially owned by the Acquiring Person
(which will thereafter be void), will thereafter have the right to receive upon
exercise that number of shares of Common Stock having a market value of two
times the Purchase Price.

 

If the Company is acquired in a merger or other business combination
transaction or 50% or more of its assets or earning power are sold after a
person or group has become an Acquiring Person, proper provision will be made
so that each holder of a Right will thereafter have the right to receive, upon
the exercise thereof at the Purchase Price, that number of shares of the senior
voting stock of the acquiring company that, at the time of such transaction,
would have a market value of two times the Purchase Price.

 

With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price.  No fractional
shares of Preferred Stock will be issued (other than fractions that are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts) and,
in lieu thereof, an adjustment in cash will be made based on the market price
of the Preferred Stock on the last trading date prior to the date of exercise.

 

At any time after any person or group becomes an Acquiring Person and
prior to the acquisition by such person or group of 50% or more of the
outstanding shares of Common Stock, the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such person or group that will
have become void) in whole or in part, at an exchange ratio of one share of
Common Stock (or, if there is an insufficient number of issued but not
outstanding or authorized but unissued shares of Common Stock to permit such
exchange, then one one-thousandth of a share of Preferred Stock) per Right
(subject to adjustment).

 

At any time prior to 5:00 p.m. Eastern time on the earlier of (i) the
Distribution Date and (ii) the Expiration Date, the Board of Directors of
the Company may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right (the “Redemption Price”).

 

Immediately upon the action of the Board of Directors of the Company to
redeem or exchange the Rights, the Company shall make announcement thereof, and
upon such action, the right to exercise the Rights will terminate and the only
right of the holders of Rights will be to receive the Redemption Price, or the
shares of Common Stock or Preferred Stock exchangeable for the Rights, as
applicable.

 

C-3

 

Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the
right to vote or to receive dividends.

 

Each share of Preferred Stock purchasable upon exercise of the Rights
will have a preferential quarterly dividend rate equal to the greater of One
Dollar ($1.00) per share or One Thousand (1,000) times the dividend declared on
one share of the Common Stock.  In the
event of liquidation, the holders of the Preferred Stock will receive a
preferential liquidation payment of One Thousand Dollars ($1,000.00) per share,
but will be entitled to receive an aggregate liquidation payment equal to One
Thousand (1,000) times the payment made on one share of Common Stock.  Each share of Preferred Stock will have One
Thousand (1,000) votes voting together with the Common Stock.  The Rights are also protected by customary
anti-dilution provisions as more fully described in the Rights Agreement.  Because of the nature of the Preferred Stock
dividend, liquidation and voting rights, the value of the one one-thousandth
interest in a share of Preferred Stock purchasable upon exercise of each Right
(subject to adjustment) should approximate the value of one share of Common
Stock.

 

Any provisions of the Rights Agreement may be amended by the Board of
Directors prior to the Distribution Date. 
After the Distribution Date, the provisions of the Rights Agreement may be
amended by the Board of Directors in order to cure any ambiguity, to make
changes which do not adversely affect the interests of holders of Rights
(excluding the interests of an Acquiring Person or certain related parties), or
to shorten or lengthen any time period under the Rights Agreement.  The foregoing notwithstanding, no amendment
may be made to the Rights Agreement at a time when the Rights are not
redeemable, except to cure any ambiguity or correct or supplement any provision
contained in the Rights Agreement which may be defective or inconsistent with
any other provision therein.

 

C-4

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