ITERIS, INC.
EX-10
<DOCUMENT>
<TYPE>EX-10.1
<SEQUENCE>2
<FILENAME>a06-22129_1ex10d1.htm
<DESCRIPTION>EX-10
<TEXT>
<html>

<head>






</head>

<body lang="EN-US">

<div>
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>

<p align="right" style="margin:0pt 0pt .0001pt;text-align:right;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit 10.1</font></b></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WARRANT EXERCISE
AGREEMENT</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">September 27, 2006</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Fund
III QP, L.P.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Fund
III, L.P.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Cayman
Fund, L.P.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations
Private Equity Fund, L.P.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">527 Madison Avenue, Suite
2600</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">New York, NY&#160; 10022</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Attention:&#160; Austin W. Marxe</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Dear Austin:</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Reference
is hereby made to the Purchase Agreement, dated as of August 7, 2002 (the &#147;Purchase
Agreement&#148;), among Iteris, Inc., as the successor to Odetics, Inc.
(collectively, the &#147;Company&#148;), and each of Special Situations Fund III QP,
L.P., Special Situations Fund III, L.P., Special Situations Cayman Fund, L.P.
and Special Situations Private Equity Fund, L.P., as the successors to the
funds originally party thereto (each a &#147;Fund&#148; and, collectively, the &#147;Funds&#148;).&#160; Pursuant to the terms of the Purchase
Agreement, the Funds hold Warrants (the &#147;Warrants&#148;) to purchase an aggregate of
1,250,000 shares of the Common Stock (the &#147;Warrant Shares&#148;), par value $0.10
per share, of the Company (&#147;Common Stock&#148;) at an exercise price of $1.61 per
share.&#160; The number of Warrants held by
each Fund is set forth in <u>Exhibit A</u> hereto.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Subject
to the terms and conditions set forth herein, the Funds hereby exercise their
Warrants in full effective on the Closing Date (as defined below).&#160; In consideration of such agreement to
exercise, on the Closing Date, the Company shall deliver to the Funds the
Warrant Shares, registered in the names and in the respective amounts set forth
in <u>Exhibit A</u>, and additional warrants (the &#147;New Warrants&#148;) to purchase
an aggregate of 246,250 shares of Common Stock (subject to adjustment) (the &#147;New
Warrant Shares&#148;) at an exercise price of $3.25 per share (subject to
adjustment).&#160; The New Warrants shall be
in substantially the form attached hereto as <u>Exhibit B</u> hereto. The
number of New Warrants to be issued to each Fund is set forth in <u>Exhibit A</u>
hereto.&#160; On the Closing Date, the parties
hereto will execute and deliver a Registration Rights Agreement, in
substantially the form attached hereto as <u>Exhibit C</u> (the &#147;Registration
Rights Agreement&#148;), pursuant to which the Company will provide certain
registration rights under the Securities Act of 1933, as amended (the &#147;Act&#148;),
and the rules and regulations promulgated thereunder, and applicable state
securities laws.&#160; In the event that the
Closing Date does not occur prior to the close of business on September 29,
2006, this Warrant Exercise Agreement (this &#147;Agreement&#148;) shall be null and
void.</font></p>

<br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">As
promptly as practicable after the date hereof, the Company shall deliver to
Lowenstein Sandler PC, in trust, certificates representing the Warrant Shares
and the New Warrants, in the amounts and registered in the names set forth in <u>Exhibit
A</u>, such Warrant Shares and New Warrants to be held for release to the Funds
only upon payment in full of the aggregate exercise price of the Warrants of
$2,012,500 to the Company by the Funds.&#160;
Upon such receipt by Lowenstein Sandler PC of the certificates, each
Fund shall promptly, but no more than one business day thereafter, cause a wire
transfer in same day funds to be sent to the account of the Company as
instructed in writing by the Company, in an amount representing such Fund&#146;s pro
rata portion of the aggregate exercise price as set forth in <u>Exhibit A</u>
hereto and shall deliver their Warrants to the Company.&#160; On the date the Company receives the
aggregate exercise price and the Warrants (the &#147;Closing Date&#148;), the
certificates evidencing the Warrant Shares and the New Warrants shall be
released to the Funds (the &#147;Closing&#148;).&#160;
The Closing of the transactions contemplated hereby shall take place at
the offices of Lowenstein Sandler PC, 1251 Avenue of the Americas, 18th Floor,
New York, New York 10020, or at such other location and on such other date as
the Company and the Funds shall mutually agree.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The
Company hereby represents and warrants to the Funds that:</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite corporate power and
authority to carry on its business as now conducted and to own its properties.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The Company has full corporate power
and authority and has taken all requisite corporate action on the part of the
Company, its officers, directors and stockholders necessary for (i) the
authorization, execution and delivery of this Agreement, the New Warrants and
the Registration Rights Agreement (collectively, the &#147;Transaction Documents&#148;),
(ii) the authorization of the performance of all obligations of the Company
hereunder or thereunder, and (iii) the authorization, issuance (or reservation
for issuance) and delivery of the New Warrants and the New Warrant Shares
(collectively, the &#147;Securities&#148;).&#160; The
Transaction Documents constitute the legal, valid and binding obligations of
the Company, enforceable against the Company in accordance with their terms,
subject to (x) bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors&#146; rights generally, (y) laws relating to the availability of specific
performance, injunctive relief or other equitable remedies, and (z) the extent
the indemnification or contribution provisions contained in the Registration
Rights Agreement may be limited by applicable federal or state securities laws.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Except as disclosed in <u>Schedule 1</u>
hereto, the issuance and sale of the Securities hereunder will not obligate the
Company to issue shares of Common Stock or other securities to any other person
or entity (other than the Funds) and will not result in the adjustment of the
exercise, conversion, exchange or reset price of any outstanding security.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">2</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='2',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The New Warrants have been duly and
validly authorized.&#160; Upon the due
exercise of the New Warrants (including the payment of the exercise price
therefor as specified therein), the New Warrant Shares will be validly issued,
fully paid and non-assessable and free and clear of all encumbrances and
restrictions, except for restrictions on transfer set forth in the Transaction
Documents or imposed by applicable securities laws and except for those created
by the Funds.&#160; The Company has reserved a
sufficient number of shares of Common Stock for issuance upon the exercise of
the New Warrants, free and clear of all encumbrances and restrictions, except
for restrictions on transfer set forth in the Transaction Documents or imposed
by applicable securities laws and except for those created by the Funds.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The execution, delivery and
performance by the Company of the Transaction Documents and the offer, issuance
and sale of the Securities require no consent of, action by or in respect of,
or filing with, any person or entity, governmental body, agency, or official
other than filings to be made with the American Stock Exchange, filings that
have been made pursuant to applicable state securities laws and post-sale
filings pursuant to applicable state and federal securities laws which the
Company undertakes to file within the applicable time periods.&#160; Subject to the accuracy of the representations
and warranties of each Fund set forth herein, the Company has taken all action
necessary to exempt (i) the issuance and sale of the Securities, (ii) the
issuance of the New Warrant Shares upon due exercise of the New Warrants, and
(iii) the other transactions contemplated by the Transaction Documents from the
provisions of (A) any stockholder rights plan or other &#147;poison pill&#148;
arrangement, (B) any anti-takeover, business combination or control share law
or statute binding on the Company or to which the Company or any of its assets
and properties may be subject and (C) any provision of the Company&#146;s
Certificate of Incorporation or Bylaws, that in case of clauses (A) through (C)
above is or could reasonably be expected to become applicable to the Funds as a
result of the transactions contemplated hereby and that would restrict the
ownership, disposition or voting of the Securities by the Funds or the exercise
of any right granted to the Funds pursuant to this Agreement or the other
Transaction Documents.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The execution, delivery and
performance of the Transaction Documents by the Company and the issuance and
sale of the Securities will not conflict with or result in a breach or
violation of any of the terms and provisions of, or constitute a default under
(i) the Company&#146;s Certificate of Incorporation or the Company&#146;s Bylaws, both as
in effect on the date hereof (true and complete copies of which have been made
available to the Funds through the EDGAR system), or (ii)(A) any statute, rule,
regulation or order of any governmental agency or body or any court, domestic
or foreign, having jurisdiction over the Company, any subsidiary or any of
their respective assets or properties, or (B) any agreement or instrument to
which the Company or any subsidiary is a party or by which the Company or a
subsidiary is bound or to which any of their respective assets or properties is
subject.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; No person or entity will have, as a
result of the transactions contemplated by the Transaction Documents, any valid
right, interest or claim against or upon the Company, any subsidiary or a Fund
for any commission, fee or other</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">3</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='3',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">compensation
pursuant to any agreement, arrangement or understanding entered into by or on
behalf of the Company.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Neither the Company nor any person or
entity acting on its behalf has conducted any general solicitation or general
advertising (as those terms are used in Regulation D) in connection with the
offer or sale of any of the Securities.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Neither the Company nor any of its
affiliates, nor any person or entity acting on its or their behalf has,
directly or indirectly, made any offers or sales of any Company security or
solicited any offers to buy any security, under circumstances that would
adversely affect reliance by the Company on Section 4(2) for the exemption from
registration for the transactions contemplated hereby or would require
registration of the Securities under the Act.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(j)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Subject to the accuracy of the
representations and warranties of each Fund set forth herein, the offer and
sale of the Securities to the Funds as contemplated hereby is exempt from the
registration requirements of the Act.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Each
of the Funds hereby severally, and not jointly, represents and warrants to the
Company that:</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Such Fund is a validly existing
corporation, limited partnership or limited liability company and has all
requisite corporate, partnership or limited liability company power and
authority to enter into this Agreement and the other Transaction Documents and
to invest in the Securities pursuant to this Agreement.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The execution, delivery and
performance by such Fund of the Transaction Documents to which such Fund is a
party have been duly authorized and will each constitute the valid and legally
binding obligation of such Fund, enforceable against such Fund in accordance
with their respective terms, subject to (x) bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability,
relating to or affecting creditors&#146; rights generally, (y) laws relating to the
availability of specific performance, injunctive relief or other equitable
remedies, and (z) the extent the indemnification or contribution provisions
contained in the Registration Rights Agreement may be limited by applicable
federal or state securities laws.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; The Securities to be received by such
Fund hereunder will be acquired for such Fund&#146;s own account, not as nominee or
agent, and not with a view to the resale or distribution of any part thereof in
violation of the Act, and such Fund has no present intention of selling,
granting any participation in, or otherwise distributing the same in violation
of the Act without prejudice, however, to such Fund&#146;s right at all times to
sell or otherwise dispose of all or any part of such Securities in compliance
with applicable federal and state securities laws.&#160; Nothing contained herein shall be deemed a
representation or warranty by such Fund to hold the Securities for any period
of time.&#160; Such Fund is not a
broker-dealer registered with the Securities and Exchange</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">4</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='4',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Commission under
the Securities Exchange Act of 1934, as amended, or an entity engaged in a
business that would require it to be so registered.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Such Fund acknowledges that it can
bear the economic risk and complete loss of its investment in the Securities
and has such knowledge and experience in financial or business matters that it
is capable of evaluating the merits and risks of the investment contemplated
hereby.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Such Fund has had an opportunity to
receive all information related to the Company requested by it and to ask
questions of and receive answers from the Company regarding the Company, its
business and the terms and conditions of the offering of the Securities.&#160; Neither such inquiries nor any other due
diligence investigation conducted by such Fund shall modify, limit or otherwise
affect such Fund&#146;s right to rely on the Company&#146;s representations and
warranties contained in this Agreement.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Such Fund understands that the
Securities are characterized as &#147;restricted securities&#148; under the U.S. federal
securities laws inasmuch as they are being acquired from the Company in a
transaction not involving a public offering and that under such laws and
applicable regulations such securities may be resold without registration under
the Act only in certain limited circumstances.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; It is understood that, except as
provided below, certificates evidencing the Securities may bear the following
or any similar legend:</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;The
securities represented hereby may not be transferred unless (i) such securities
have been registered for sale pursuant to the Securities Act of 1933, as
amended, (ii) such securities may be sold pursuant to Rule 144(k), or (iii) the
Company has received an opinion of counsel reasonably satisfactory to it that
such transfer may lawfully be made without registration under the Securities
Act of 1933 or qualification under applicable state securities laws.&#148;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Such Fund is an accredited investor
as defined in Rule 501(a) of Regulation D, as amended, under the Act.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(i)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Such Fund did not learn of the
investment in the Securities as a result of any general solicitation or general
advertising.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(j)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; No person or entity will have, as a
result of the transactions contemplated by the Transaction Documents, any valid
right, interest or claim against or upon the Company, any subsidiary or a Fund
for any commission, fee or other compensation pursuant to any agreement,
arrangement or understanding entered into by or on behalf of such Fund.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Promptly
following the date hereof, the Company shall take all necessary action to cause
the New Warrant Shares to be listed on the American Stock Exchange</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">5</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='5',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">upon official
notice of issuance.&#160; Further, if the
Company applies to have its Common Stock or other securities traded on any
other principal stock exchange or market, it shall include in such application
the New Warrant Shares and will take such other action as is necessary to cause
such Common Stock to be so listed.&#160; The
Company will use commercially reasonable efforts to continue the listing and
trading of its Common Stock on the American Stock Exchange and, in accordance,
therewith, will use commercially reasonable efforts to comply in all respects
with the Company&#146;s reporting, filing and other obligations under the bylaws or
rules of such exchange.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Upon
the earlier of (i) registration for resale pursuant to the Registration Rights
Agreement or (ii) Rule 144(k) becoming available the Company shall (A) deliver
to the transfer agent for the Common Stock (the &#147;Transfer Agent&#148;) irrevocable
instructions that the Transfer Agent shall reissue a certificate representing
the New Warrant Shares without legends upon receipt by such Transfer Agent of
the legended certificates for such shares, together with either (1) a customary
representation by the applicable Fund that Rule 144(k) applies to the shares of
Common Stock represented thereby or (2) a statement by the applicable Fund that
such Fund has sold the shares of Common Stock represented thereby in accordance
with the Plan of Distribution contained in the Registration Statement, and (B)
cause its counsel to deliver to the Transfer Agent one or more blanket opinions
to the effect that the removal of such legends in such circumstances may be
effected under the Act.&#160; From and after
the earlier of such dates, upon a Fund&#146;s written request and compliance by the
Fund with the applicable provisions of clause (A)(1) or (A)(2) above, the
Company shall promptly cause certificates evidencing the Fund&#146;s Securities to
be replaced with certificates which do not bear such restrictive legends, and
New Warrant Shares subsequently issued upon due exercise of the New Warrants
shall not bear such restrictive legends provided the provisions of either
clause (i) or clause (ii) above, as applicable, are satisfied with respect to
such New Warrant Shares, and provided further that in the case of clause (i)
the Registration Statement has not been suspended (including due to an Allowed
Delay, as such term is defined in the Registration Rights Agreement) and no
stop order has been issued with respect to such Registration Statement prior to
the sale or transfer by the Fund giving rise to such transfer request.&#160; When the Company is required to cause
unlegended certificates to replace previously issued legended certificates, if
unlegended certificates are not delivered to a Fund within three (3) business
days of delivery by that Fund of legended certificate(s) to the Transfer Agent
as provided above (or to the Company, in the case of the New Warrants), the
Company shall be liable to the Fund for liquidated damages in an amount equal
to 1.0% of the aggregate exercise price paid or payable in respect of the
Securities evidenced by such certificate(s) for each thirty (30) day period (or
portion thereof) beyond such three (3) business days that the unlegended
certificates have not been so delivered.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Unless
otherwise provided, any notice required or permitted under this Agreement shall
be given in writing and shall be deemed effectively given as hereinafter
described (i) if given by personal delivery, then such notice shall be deemed
given upon such delivery, (ii) if given by telex or facsimile, then such notice
shall be deemed given upon receipt of confirmation of complete transmittal,
(iii) if given by mail, then such</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">6</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='6',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">notice shall be
deemed given upon the earlier of (A) receipt of such notice by the recipient or
(B) three days after such notice is deposited in first class mail, postage
prepaid, and (iv) if given by an internationally recognized overnight air
courier, then such notice shall be deemed given one business day after delivery
to such carrier.&#160; All notices shall be
addressed to the party to be notified at the address as follows, or at such
other address as such party may designate by ten days&#146; advance written notice
to the other party:</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If
to the Company:</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Iteris, Inc.</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1515 South Manchester
Avenue</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Anaheim, California 92802</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Attention:&#160; Jack Johnson</font></p>

<p style="margin:0pt 0pt 12.0pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Fax:&#160; (714)
780-7857</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If
to the Funds:</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Funds</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">527 Madison Avenue, Suite
2600</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">New York, New York 10022</font></p>

<p style="margin:0pt 0pt .0001pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Attention:&#160; Austin W. Marxe</font></p>

<p style="margin:0pt 0pt 12.0pt 135.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Fax:&#160; (212)
319-6677</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The
parties hereto shall pay their own costs and expenses in connection herewith,
except that the Company shall pay the reasonable fees and expenses of
Lowenstein Sandler PC not to exceed $5,000.&#160;
Such expenses shall be paid not later than the Closing.&#160; The Company shall reimburse the Funds upon
demand for all reasonable out-of-pocket expenses incurred by the Funds,
including without limitation reimbursement of attorneys&#146; fees and
disbursements, in connection with any amendment, modification or waiver of this
Agreement or the other Transaction Documents.&#160;
In the event that legal proceedings are commenced by any party to this
Agreement against another party to this Agreement in connection with this
Agreement or the other Transaction Documents, the party or parties which do not
prevail in such proceedings shall severally, but not jointly, pay their pro
rata share of the reasonable attorneys&#146; fees and other reasonable out-of-pocket
costs and expenses incurred by the prevailing party in such proceedings.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York without regard to the choice of law principles
thereof.&#160; Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the courts of the State of
New York located in New York County and the United States District Court for
the Southern District of New York for the purpose of any suit, action,
proceeding or judgment relating to or arising out of this Agreement and the
transactions contemplated hereby.&#160;
Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">7</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='7',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">methods as are
specified for the giving of notices under this Agreement.&#160; Each of the parties hereto irrevocably
consents to the jurisdiction of any such court in any such suit, action or
proceeding and to the laying of venue in such court.&#160; Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient
forum.&#160; <b>EACH
OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY
LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.</b></font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">[Signature
Page Follows]</font></i></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">8</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='8',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If
the foregoing accurately reflects our agreement, please execute this letter in
the space provided below and return a copy to the undersigned.&#160; This letter may be executed in counterparts,
each of which shall be deemed an original and all of which together shall
constitute one and the same instrument.</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="42%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:42.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="57%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.8%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading -->ITERIS, INC.</p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="42%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:42.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="57%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.8%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="42%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:42.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="57%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.8%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="42%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:42.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.68%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="23%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:23.66%;">
  <p style="margin:0pt 0pt .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;/S/ JAMES
  S. MIELE</font></p>
  </td>
  <td width="30%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:30.46%;">
  <p style="margin:0pt 0pt .0001pt 20.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="42%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:42.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:6.06%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="51%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:51.74%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">James S. Miele</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="42%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:42.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:6.06%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="51%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:51.74%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">CFO</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="316" style="border:none;"></td>
  <td width="28" style="border:none;"></td>
  <td width="18" style="border:none;"></td>
  <td width="159" style="border:none;"></td>
  <td width="228" style="border:none;"></td>
 </tr>
</table>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ACCEPTED AND
AGREED:</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Fund
III QP, L.P.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Fund
III, L.P.</font></p>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Cayman
Fund, L.P.</font></p>

<p style="margin:0pt 0pt 24.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations
Private Equity Fund, L.P.</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="4%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:4.06%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading -->By:</p>
  </td>
  <td width="2%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:2.98%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="28%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:28.12%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">/S/ AUSTIN W. MARXE</font></p>
  </td>
  <td width="64%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:64.84%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="4%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:4.06%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:2.98%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="92%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:92.96%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Authorized Signatory</font></p>
  </td>
 </tr>
</table>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">9</font></p>
</div><br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='9',FILE='C:\Fc\3141500673_P66598CHE_1483155\22129-1-ka.htm',USER='jmsproofassembler',CD='Nov 10 01:50 2006' -->



<br clear="all" style="page-break-before:always;">

<div>
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Schedule 1</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Exceptions to the Company&#146;s</font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Representations
and Warranties</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The issuance and
sale of the Securities will result in a reduction of less than $0.01 of the
following:</font></p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the
conversion price of 25% of the outstanding face amount of the convertible debentures
issued in May 2004; and</p>

<p style="font-family:Times New Roman;font-size:10.0pt;margin:0pt 0pt 12.0pt;"><font size="2" face="Symbol" style="font-size:10.0pt;">&#183;</font>&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the
exercise prices of 25% of the warrants to purchase an aggregate of 673,883
shares of Common Stock issued in May 2004.</p>

<br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-01.htm',USER='105067',CD='Nov 14 06:41 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit
A</font></u></b></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="57%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:57.76%;">
  <p align="left" style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Fund</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="11%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Number&nbsp;of<br>
  Warrants</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="11%" colspan="2" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:11.7%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">Aggregate<br>
  Exercise&nbsp;Price</font></b></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
  <td width="11%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:8.0pt;">New<br>
  Warrants</font></b></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="font-weight:bold;line-height:8.0pt;margin:0pt 0pt .0001pt;text-align:center;"><b><font size="1" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></b></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="57%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:57.76%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" colspan="2" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.7%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="57%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.76%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Fund
  III QP, L.P.</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">651,263</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:10.7%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,048,533.43</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">128,299</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="57%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.76%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations Fund
  III, L.P.</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">57,087</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:10.7%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">335,363.00</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">11,246</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="57%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.76%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations
  Cayman Fund, L.P.</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">208,300</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:10.7%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">335,363.00</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">41,035</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="57%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.76%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;page-break-after:avoid;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Special Situations
  Private Equity Fund, L.P.</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">333,350</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:10.7%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">536,693.50</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;page-break-after:avoid;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">65,670</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr bgcolor="#CCEEFF" style="page-break-inside:avoid;">
  <td width="57%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:57.76%;">
  <p style="margin:0pt 0pt .0001pt 10.0pt;text-indent:-10.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Total</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1,250,000</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="1%" valign="bottom" style="padding:0pt 0pt 0pt 0pt;width:1.0%;">
  <p align="left" style="margin:0pt 0pt .0001pt;text-align:left;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">$</font></p>
  </td>
  <td width="10%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:10.7%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">2,012,500.00</font></p>
  </td>
  <td width="2%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:2.38%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="11%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:11.54%;">
  <p style="margin:0pt 0pt .0001pt;text-align:right;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">246,250</font></p>
  </td>
  <td width="0%" valign="bottom" style="padding:0pt .7pt 0pt 0pt;width:.34%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-01.htm',USER='105067',CD='Nov 14 06:41 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit
B</font></u></b></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Form
of New Warrant</font></b></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

</div><br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-01.htm',USER='105067',CD='Nov 14 06:41 2006' -->



<br clear="all" style="page-break-before:always;">

<div>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
ACT OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">SUBJECT
TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00
P.M. EASTERN TIME ON SEPTEMBER 28, 2011 (THE &#147;EXPIRATION DATE&#148;).</font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">ITERIS, INC.</font></b></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">WARRANT TO PURCHASE &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
SHARES OF<br>
COMMON STOCK, PAR VALUE $0.10 PER SHARE</font></b></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For VALUE RECEIVED,&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
(&#147;Warrantholder&#148;), is entitled to purchase, subject to the provisions of this
Warrant, from Iteris, Inc., a Delaware corporation (&#147;Company&#148;), at any time not
later than 5:00 P.M., Eastern time, on the Expiration Date (as defined above),
at an exercise price per share equal to $3.25 (the exercise price in effect
being herein called the &#147;Warrant Price&#148;), &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares (&#147;Warrant Shares&#148;) of the Company&#146;s Common Stock, par value $0.10 per
share (&#147;Common Stock&#148;).&#160; The number of
Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time as described herein.&#160; This Warrant is being issued pursuant to the
terms of a Warrant Exercise Agreement among the Company, the initial
Warrantholder and the initial holders of the Company Warrants (as defined
below) (the &#147;Warrant Exercise Agreement&#148;).</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 1.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Registration</u>.&#160; The Company shall maintain books for the
transfer and registration of the Warrant.&#160;
Upon the initial issuance of this Warrant, the Company shall issue and
register the Warrant in the name of the Warrantholder.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 2.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Transfers</u>.&#160; As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the &#147;Securities Act&#148;), or an exemption from
such registration.&#160; Subject to such
restrictions, the Company shall transfer this Warrant from time to time upon
the books to be maintained by the Company for that purpose, upon surrender
hereof for transfer, properly endorsed or accompanied by appropriate
instructions for transfer and such other documents as may be reasonably
required by the Company, including, if required by the Company, an opinion of
counsel to the Warrantholder to the effect that such transfer is exempt from
the registration requirements of the Securities Act, to establish that such
transfer is being made in accordance with the terms hereof, and a new Warrant
shall be issued to the transferee and the surrendered Warrant shall be canceled
by the Company.</font></p>

<br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 3.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Exercise
of Warrant</u>.&#160; Subject to the
provisions hereof, the Warrantholder may exercise this Warrant, in whole or in
part, at any time prior to its expiration upon surrender of the Warrant,
together with delivery of a duly executed Warrant exercise form, in the form
attached hereto as Appendix A (the &#147;Exercise Agreement&#148;), and payment by cash,
certified check or wire transfer of funds (or, in certain circumstances, by
cashless exercise as provided below) of the aggregate Warrant Price for that
number of Warrant Shares then being purchased, to the Company during normal
business hours on any business day at the Company&#146;s principal executive offices
(or such other office or agency of the Company as it may designate by notice to
the Warrantholder).&#160; The Warrant Shares
so purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder&#146;s designee, as the record owner of such shares, as of the close
of business on the date on which this Warrant shall have been surrendered (or
the date evidence of loss, theft or destruction thereof and security or
indemnity satisfactory to the Company has been provided to the Company), the
Warrant Price shall have been paid and the completed Exercise Agreement shall
have been delivered.&#160; Certificates for
the Warrant Shares so purchased shall be delivered to the Warrantholder within
a reasonable time, not exceeding three (3) business days, after this Warrant
shall have been so exercised.&#160; The
certificates so delivered shall be in such denominations as may be requested by
the Warrantholder and shall be registered in the name of the Warrantholder or
such other name as shall be designated by the Warrantholder, as specified in
the Exercise Agreement.&#160; If this Warrant
shall have been exercised only in part, then, unless this Warrant has expired,
the Company shall, at its expense, at the time of delivery of such
certificates, deliver to the Warrantholder a new Warrant representing the right
to purchase the number of shares with respect to which this Warrant shall not
then have been exercised.&#160; As used
herein, &#147;business day&#148; means a day, other than a Saturday or Sunday, on which
banks in New York City are open for the general transaction of business.&#160; Each exercise hereof shall constitute the re-affirmation
by the Warrantholder that the representations and warranties contained in the
Warrant Exercise Agreement are true and correct in all material respects with
respect to the Warrantholder as of the time of such exercise.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 4.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Compliance
with the Securities Act of 1933</u>. Subject to the terms of the Warrant
Exercise Agreement, the Company may cause the legend set forth on the first
page of this Warrant to be set forth on each Warrant, and a similar legend on
any security issued or issuable upon exercise of this Warrant, unless counsel
for the Company is of the opinion as to any such security that such legend is
unnecessary.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 5.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Payment
of Taxes</u>.&#160; The Company will pay any
documentary stamp taxes attributable to the initial issuance of Warrant Shares
issuable upon the exercise of the Warrant; provided, however, that the Company
shall not be required to pay any tax or taxes which may be payable in respect
of any transfer involved in the issuance or delivery of any certificates for
Warrant Shares in a name other than that of the Warrantholder in respect of
which such shares are issued, and in such case, the Company shall not be
required to issue or deliver any certificate for Warrant Shares or any Warrant
until the person requesting the same has paid to the Company the amount of such
tax or has established to the Company&#146;s reasonable satisfaction that such tax
has been paid.&#160; The Warrantholder shall
be responsible for income taxes due under federal, state or other law, if any
such tax is due.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">2</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='2',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 6.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Mutilated
or Missing Warrants</u>.&#160; In case this
Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue
in exchange and substitution of and upon surrender and cancellation of the
mutilated Warrant, or in lieu of and substitution for the Warrant lost, stolen
or destroyed, a new Warrant of like tenor and for the purchase of a like number
of Warrant Shares, but only upon receipt of evidence reasonably satisfactory to
the Company of such loss, theft or destruction of the Warrant, and with respect
to a lost, stolen or destroyed Warrant, reasonable indemnity or bond with
respect thereto, if requested by the Company.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 7.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Reservation
of Common Stock</u>.&#160; The Company hereby
represents and warrants that there have been reserved, and the Company shall at
all applicable times keep reserved until issued (if necessary) as contemplated
by this Section 7, out of the authorized and unissued shares of Common Stock,
sufficient shares to provide for the exercise of the rights of purchase represented
by this Warrant.&#160; The Company agrees that
all Warrant Shares issued upon due exercise of the Warrant shall be, at the
time of delivery of the certificates for such Warrant Shares, duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock of the
Company.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 8.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Adjustments</u>.&#160; Subject and pursuant to the provisions of
this Section 8, the Warrant Price and number of Warrant Shares subject to this
Warrant shall be subject to adjustment from time to time as set forth hereinafter.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(a)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; If
the Company shall, at any time or from time to time while this Warrant is
outstanding, pay a dividend or make a distribution on its Common Stock in
shares of Common Stock, subdivide its outstanding shares of Common Stock into a
greater number of shares or combine its outstanding shares of Common Stock into
a smaller number of shares or issue by reclassification of its outstanding
shares of Common Stock any shares of its capital stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then (i) the Warrant Price in effect
immediately prior to the date on which such change shall become effective shall
be adjusted by multiplying such Warrant Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding immediately
prior to such change and the denominator of which shall be the number of shares
of Common Stock outstanding immediately after giving effect to such change and
(ii) the number of Warrant Shares purchasable upon exercise of this Warrant
shall be adjusted by multiplying the number of Warrant Shares purchasable upon
exercise of this Warrant immediately prior to the date on which such change
shall become effective by a fraction, the numerator of which is shall be the
Warrant Price in effect immediately prior to the date on which such change
shall become effective and the denominator of which shall be the Warrant Price
in effect immediately after giving effect to such change, calculated in
accordance with clause (i) above.&#160; Such
adjustments shall be made successively whenever any event listed above shall
occur.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(b)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; If
any capital reorganization, reclassification of the capital stock of the
Company, consolidation or merger of the Company with another corporation in
which the Company is not the survivor, or sale, transfer or other disposition
of all or substantially all of the Company&#146;s assets to another corporation
shall be effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">3</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='3',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">and
adequate provision shall be made whereby each Warrantholder shall thereafter
have the right to purchase and receive upon the basis and upon the terms and
conditions herein specified and in lieu of the Warrant Shares immediately
theretofore issuable upon exercise of the Warrant, such shares of stock,
securities or assets as would have been issuable or payable with respect to or
in exchange for a number of Warrant Shares equal to the number of Warrant
Shares immediately theretofore issuable upon exercise of the Warrant, had such
reorganization, reclassification, consolidation, merger, sale, transfer or
other disposition not taken place, and in any such case appropriate provision
shall be made with respect to the rights and interests of each Warrantholder to
the end that the provisions hereof (including, without limitation, provision
for adjustment of the Warrant Price) shall thereafter be applicable, as nearly
equivalent as may be practicable in relation to any shares of stock, securities
or assets thereafter deliverable upon the exercise hereof.&#160; The Company shall not effect any such
consolidation, merger, sale, transfer or other disposition unless prior to or
simultaneously with the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation or merger, or the
corporation purchasing or otherwise acquiring such assets or other appropriate
corporation or entity shall assume the obligation to deliver to the
Warrantholder, at the last address of the Warrantholder appearing on the books
of the Company, such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the Warrantholder may be entitled to purchase,
and the other obligations under this Warrant.&#160;
The provisions of this paragraph (b) shall similarly apply to successive
reorganizations, reclassifications, consolidations, mergers, sales, transfers
or other dispositions.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(c)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; In
case the Company shall fix a payment date for the making of a distribution to
all holders of Common 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 cash dividends
or cash distributions payable out of consolidated earnings or earned surplus or
dividends or distributions referred to in Section 8(a)), or subscription rights
or warrants, the Warrant Price to be in effect after such payment date shall be
determined by multiplying the Warrant Price in effect immediately prior to such
payment date by a fraction, the numerator of which shall be the total number of
shares of Common Stock outstanding multiplied by the Market Price (as defined
below) per share of Common Stock immediately prior to such payment date, less
the fair market value (as determined by the Company&#146;s Board of Directors in
good faith) of said assets or evidences of indebtedness so distributed, or of
such subscription rights or warrants, and the denominator of which shall be the
total number of shares of Common Stock outstanding multiplied by such Market
Price per share of Common Stock immediately prior to such payment date.&#160; &#147;Market Price&#148; as of a particular date (the
&#147;Valuation Date&#148;) shall mean the following: (i) if the Common Stock is then
listed on a national stock exchange, the closing sale price of one share of
Common Stock on such exchange on the last trading day prior to the Valuation
Date; (ii) if the Common Stock is then quoted on, the National Association of
Securities Dealers, Inc. OTC Bulletin Board (the &#147;Bulletin Board&#148;), the Pink
Sheets, LLC (the &#147;Pink Sheets&#148;) or such similar quotation system or
association, the closing sale price of one share of Common Stock on the
Bulletin Board, the Pink Sheets or such other quotation system or association
on the last trading day prior to the Valuation Date or, if no such closing sale
price is available, the average of the high bid and the low asked price quoted
thereon on the last trading day prior to the Valuation Date; or (iii) if the
Common Stock is not then listed on a national stock exchange or quoted on such
other quotation system or association,</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">4</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='4',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">the
fair market value of one share of Common Stock as of the Valuation Date, as
determined in good faith by the Board of Directors of the Company and the
Warrantholder.&#160; If the Common Stock is
not then listed on a national securities exchange, the Bulletin Board, the Pink
Sheets or such other quotation system or association, the Board of Directors of
the Company shall respond promptly, in writing, to an inquiry by the
Warrantholder prior to the exercise hereunder as to the fair market value of a
share of Common Stock as determined by the Board of Directors of the Company.&#160; In the event that the Board of Directors of
the Company and the Warrantholder are unable to agree upon the fair market
value in respect of clause (iii) of this paragraph, the Company and the
Warrantholder shall jointly select an appraiser, who is experienced in such
matters.&#160; The decision of such appraiser
shall be final and conclusive, and the cost of such appraiser shall be borne
equally by the Company and the Warrantholder.&#160;
Such adjustment shall be made successively whenever such a payment date
is fixed.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(d)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; An adjustment
to the Warrant Price shall become effective immediately after the payment date
in the case of each dividend or distribution and immediately after the
effective date of each other event which requires an adjustment.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(e)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; In the event that, as a result of an
adjustment made pursuant to this Section 8, the Warrantholder shall become
entitled to receive any shares of capital stock of the Company other than
shares of Common Stock, the number of such other shares so receivable upon
exercise of this Warrant shall be subject thereafter to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Warrant.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Except
as provided in subsection (g) hereof, if and whenever the Company shall issue
or sell, or is, in accordance with any of subsections (f)(l) through (f)(7)
hereof, deemed to have issued or sold, any Additional Shares of Common Stock
for no consideration or for a consideration per share less than the Warrant
Price in effect immediately prior to the time of such issue or sale, then and
in each such case (a &#147;<u>Trigger Issuance</u>&#148;) the then-existing Warrant
Price, shall be reduced, as of the close of business on the effective date of
the Trigger Issuance, to a price determined as follows:</font></p>

<p style="margin:0pt 0pt .0001pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Adjusted Warrant
Price = <u>(A x B) + D</u></font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:190.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A+C</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">where</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;A&#148; equals the
number of shares of Common Stock outstanding, including Additional Shares of
Common Stock (as defined below) deemed to be issued hereunder, immediately
preceding such Trigger Issuance;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;B&#148; equals the
Warrant Price in effect immediately preceding such Trigger Issuance;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;C&#148; equals the
number of Additional Shares of Common Stock issued or deemed issued hereunder
as a result of the Trigger Issuance; and</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">5</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='5',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#147;D&#148; equals the
aggregate consideration, if any, received or deemed to be received by the
Company upon such Trigger Issuance;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">provided, however,
that in no event shall the Warrant Price after giving effect to such Trigger
Issuance be greater than the Warrant Price in effect prior to such Trigger
Issuance.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For purposes of this subsection (f), &#147;Additional
Shares of Common Stock&#148; shall mean all shares of Common Stock issued by the
Company or deemed to be issued pursuant to this subsection (f), other than
Excluded Issuances (as defined in subsection (g) hereof).</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">For purposes of this subsection (f), the following
subsections (f)(l) to (f)(7) shall also be applicable:</font></p>

<p style="margin:0pt 0pt 12.0pt 72.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)(1)&#160; Issuance of Rights or Options.&#160; In case at any time the Company shall in any
manner grant (directly and not by assumption in a merger or otherwise) any
warrants or other rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or options being called
&#147;Options&#148; and such convertible or exchangeable stock or securities being called
&#147;Convertible Securities&#148;) whether or not such Options or the right to convert
or exchange any such Convertible Securities are immediately exercisable, and
the price per share for which Common Stock is issuable upon the exercise of
such Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (z), in the case of such Options which
relate to Convertible Securities, the aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Warrant
Price in effect immediately prior to the time of the granting of such Options,
then the total number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to have been issued for such price per share as of the date of granting
of such Options or the issuance of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Warrant Price.&#160; Except as otherwise provided in subsection
8(f)(3), no adjustment of the Warrant Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">6</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='6',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt 72.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)(2)&#160; Issuance of Convertible Securities.&#160; In case the Company shall in any manner issue
(directly and not by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount received or receivable by the Company as
consideration for the issue or sale of such Convertible Securities, plus (y)
the aggregate amount of additional consideration, if any, payable to the
Company upon the conversion or exchange thereof, by (ii) the total number of
shares of Common Stock issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the Warrant Price in effect
immediately prior to the time of such issue or sale, then the total maximum
number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued for such price
per share as of the date of the issue or sale of such Convertible Securities and
thereafter shall be deemed to be outstanding for purposes of adjusting the
Warrant Price, provided that (a) except as otherwise provided in subsection
8(f)(3), no adjustment of the Warrant Price shall be made upon the actual
issuance of such Common Stock upon conversion or exchange of such Convertible
Securities and (b) no further adjustment of the Warrant Price shall be made by
reason of the issue or sale of Convertible Securities upon exercise of any
Options to purchase any such Convertible Securities for which adjustments of
the Warrant Price have been made pursuant to the other provisions of subsection
8(f).</font></p>

<p style="margin:0pt 0pt 12.0pt 72.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)(3) Change in
Option Price or Conversion Rate.&#160; Upon
the happening of any of the following events, namely, if the purchase price
provided for in any Option referred to in subsection 8(f)(l) hereof, the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in subsections 8(f)(l) or 8(f)(2), or
the rate at which Convertible Securities referred to in subsections 8(f)(l) or
8(f)(2) are convertible into or exchangeable for Common Stock shall change at
any time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Warrant Price in effect
at the time of such event shall forthwith be readjusted to the Warrant Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.&#160; On
the termination of any Option for which any adjustment was made pursuant to
this subsection 8(f) or any right to convert or exchange Convertible Securities
for which any adjustment was made pursuant to this subsection 8(f) (including
without limitation upon the redemption or purchase for consideration of such
Convertible Securities by the Company), the Warrant Price then in effect
hereunder shall forthwith be changed to the Warrant Price which would have been
in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">7</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='7',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt 72.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)(4) Stock
Dividends.&#160; Subject to the provisions of
this Section 8(f), in case the Company shall declare or pay a dividend or make
any other distribution upon any stock of the Company (other than the Common
Stock) payable in Common Stock, Options or Convertible Securities, then any
Common Stock, Options or Convertible Securities, as the case may be, issuable
in payment of such dividend or distribution shall be deemed to have been issued
or sold without consideration.</font></p>

<p style="margin:0pt 0pt 12.0pt 72.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)(5)
Consideration for Stock.&#160; In case any
shares of Common Stock, Options or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the
net amount received by the Company therefor, after deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith.&#160;
In case any shares of Common Stock, Options or Convertible Securities
shall be issued or sold for a consideration other than cash, the amount of the
consideration other than cash received by the Company shall be deemed to be the
fair value of such consideration as determined in good faith by the Board of
Directors of the Company, after deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith.&#160; In case any
Options shall be issued in connection with the issue and sale of other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued for such
consideration as determined in good faith by the Board of Directors of the
Company.&#160; If Common Stock, Options or
Convertible Securities shall be issued or sold by the Company and, in connection
therewith, other Options or Convertible Securities (the &#147;Additional Rights&#148;)
are issued, then the consideration received or deemed to be received by the
Company shall be reduced by the fair market value of the Additional Rights (as
determined using the Black-Scholes option pricing model or another method
mutually agreed to by the Company and the Warrantholder).&#160; The Board of Directors of the Company shall
respond promptly, in writing, to an inquiry by the Warrantholder as to the fair
market value of the Additional Rights.&#160;
In the event that the Board of Directors of the Company and the
Warrantholder are unable to agree upon the fair market value of the Additional
Rights, the Company and the Warrantholder shall jointly select an appraiser,
who is experienced in such matters.&#160; The
decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne evenly by the Company and the Warrantholder.</font></p>

<p style="margin:0pt 0pt 12.0pt 72.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)(6) Record
Date.&#160; In case the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them (i)
to receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">8</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='8',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt 72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">declaration of
such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.</font></p>

<p style="margin:0pt 0pt 12.0pt 72.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(f)(7) Treasury
Shares.&#160; The number of shares of Common
Stock outstanding at any given time shall not include shares owned or held by
or for the account of the Company or any of its wholly-owned subsidiaries, and
the disposition of any such shares (other than the cancellation or retirement
thereof) shall be considered an issue or sale of Common Stock for the purpose
of this subsection (f).</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(g)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of
the Warrant Price in the case of the issuance of (A) capital stock, Options or
Convertible Securities issued to directors, officers, employees or consultants
of the Company in connection with their service as directors of the Company,
their employment by the Company or their retention as consultants by the
Company pursuant to an equity compensation program or other agreement or
arrangement approved by the Board of Directors of the Company or the
compensation committee of the Board of Directors of the Company, (B) shares of
Common Stock issued upon the conversion or exercise of Options or Convertible
Securities issued prior to the date hereof, provided such securities are not
amended after the date hereof to increase the number of shares of Common Stock
issuable thereunder or to lower the exercise or conversion price thereof, and
(C) shares of Common Stock issued or issuable by reason of a dividend, stock
split or other distribution on shares of Common Stock (but only to the extent
that such a dividend, split or distribution results in an adjustment in the
Warrant Price pursuant to the other provisions of this Warrant) (collectively,
&#147;Excluded Issuances&#148;).</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:72.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(h)&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; Upon any adjustment to the Warrant
Price pursuant to Section 8(f) above, the number of Warrant Shares purchasable
hereunder shall be adjusted by multiplying such number by a fraction, the
numerator of which shall be the Warrant Price in effect immediately prior to
such adjustment and the denominator of which shall be the Warrant Price in
effect immediately thereafter.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 9.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Fractional
Interest</u>.&#160; The Company shall not be
required to issue fractions of Warrant Shares upon the exercise of this
Warrant.&#160; If any fractional share of
Common Stock would, except for the provisions of the first sentence of this
Section 9, be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising Warrantholder an
amount in cash equal to the Market Price of such fractional share of Common
Stock on the date of exercise.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 10.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Extension
of Expiration Date</u>.&#160; If the Company
fails to cause any Registration Statement covering Registrable Securities
(unless otherwise defined herein, capitalized terms are as defined in the
Registration Rights Agreement relating to the Warrant Shares (the &#147;Registration
Rights Agreement&#148;)) to be declared effective prior to the applicable dates set
forth therein, or if any of the events specified in Section 2(c)(ii) of the
Registration Rights Agreement occurs, and the Blackout Period (whether alone,
or in combination with any other Blackout Period) continues for more than 60
days in any 12 month period, or for more than </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">9</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='9',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">a
total of 90 days, then the Expiration Date of this Warrant shall be extended
one day for each day beyond the 60-day or 90-day limits, as the case may be,
that the Blackout Period continues.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 11.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Benefits</u>.&#160; Nothing in this Warrant shall be construed to
give any person, firm or corporation (other than the Company and the Warrantholder)
any legal or equitable right, remedy or claim, it being agreed that this
Warrant shall be for the sole and exclusive benefit of the Company and the
Warrantholder.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 12.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notices
to Warrantholder</u>.&#160; Upon the happening
of any event requiring an adjustment of the Warrant Price, the Company shall
promptly give written notice thereof to the Warrantholder at the address
appearing in the records of the Company, stating the adjusted Warrant Price and
the adjusted number of Warrant Shares resulting from such event and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.&#160; Failure to
give such notice to the Warrantholder or any defect therein shall not affect the
legality or validity of the subject adjustment.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 13.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Identity
of Transfer Agent</u>.&#160; The Transfer
Agent for the Common Stock is U.S. Stock Transfer Corporation.&#160; Upon the appointment of any subsequent
transfer agent for the Common Stock or other shares of the Company&#146;s capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant, the Company will mail to the Warrantholder a statement setting forth
the name and address of such transfer agent.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 14.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Notices</u>.&#160; Unless otherwise provided, any notice required
or permitted under this Warrant shall be given in writing and shall be deemed
effectively given as hereinafter described (i) if given by personal delivery,
then such notice shall be deemed given upon such delivery, (ii) if given by
telex or facsimile, then such notice shall be deemed given upon receipt of
confirmation of complete transmittal, (iii) if given by mail, then such notice
shall be deemed given upon the earlier of (A) receipt of such notice by the
recipient or (B) three days after such notice is deposited in first class mail,
postage prepaid, and (iv) if given by an internationally recognized overnight
air courier, then such notice shall be deemed given one business day after
delivery to such carrier.&#160; All notices
shall be addressed as follows: if to the Warrantholder, at its address as set
forth in the Company&#146;s books and records and, if to the Company, at the address
as follows, or at such other address as the Warrantholder or the Company may
designate by ten days&#146; advance written notice to the other:</font></p>

<p style="margin:0pt 0pt 12.0pt;page-break-after:avoid;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">If to the Company:</font></p>

<p style="margin:0pt 0pt .0001pt 144.0pt;page-break-after:avoid;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Iteris, Inc.</font></p>

<p style="margin:0pt 0pt .0001pt 144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">1515 South Manchester
Avenue</font></p>

<p style="margin:0pt 0pt .0001pt 144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Anaheim, California 92802</font></p>

<p style="margin:0pt 0pt .0001pt 144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Attention:&#160; Jack Johnson</font></p>

<p style="margin:0pt 0pt 12.0pt 144.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Fax:&#160; (714)
780-7857</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 15.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Registration
Rights</u>.&#160; The initial Warrantholder is
entitled to the benefit of certain registration rights with respect to the
shares of Common Stock issuable upon the exercise </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">10</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='10',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">of
this Warrant as provided in the Registration Rights Agreement, and any
subsequent Warrantholder may be entitled to such rights.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 16.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Successors</u>.&#160; All the covenants and provisions hereof by or
for the benefit of the Warrantholder shall bind and inure to the benefit of its
respective successors and assigns hereunder.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 17.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial</u>.&#160; This Warrant shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to the choice of law provisions thereof.&#160; The Company and, by accepting this Warrant,
the Warrantholder, each irrevocably submits to the exclusive jurisdiction of
the courts of the State of New York located in New York County and the United
States District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of this
Warrant and the transactions contemplated hereby.&#160; Service of process in connection with any
such suit, action or proceeding may be served on each party hereto anywhere in
the world by the same methods as are specified for the giving of notices under
this Warrant.&#160; The Company and, by
accepting this Warrant, the Warrantholder, each irrevocably consents to the
jurisdiction of any such court in any such suit, action or proceeding and to
the laying of venue in such court.&#160; The
Company and, by accepting this Warrant, the Warrantholder, each irrevocably
waives any objection to the laying of venue of any such suit, action or
proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in
an inconvenient forum. <b>&#160;EACH OF THE COMPANY AND, BY ITS ACCEPTANCE
HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN
ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL HAS
BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.</b></font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 18.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Call Provision</u>.&#160; Notwithstanding any other provision contained
in this Warrant to the contrary, in the event that the closing bid price per
share of Common Stock as traded on the American Stock Exchange (or such other
exchange or stock market on which the Common Stock may then be listed or
quoted) equals or exceeds $6.50 (appropriately adjusted for any stock split,
reverse stock split, stock dividend or other reclassification or combination of
the Common Stock occurring after the date hereof) for any twenty (20)
consecutive trading days commencing after the Registration Statement (as
defined in the Registration Rights Agreement) has been declared effective, the
Company, upon thirty (30) days prior written notice (the &#147;<u>Notice Period</u>&#148;)
given to the Warrantholder within one (1) business day immediately following
the end of such twenty (20) trading day period, may call this Warrant, in whole
but not in part, at a redemption price equal to $0.01 per share of Common Stock
then purchasable pursuant to this Warrant; provided that (i) the Company
simultaneously calls all Company Warrants (as defined below) on the same terms,
(ii) all of the shares of Common Stock issuable hereunder either (A) are
registered pursuant to an effective Registration Statement (as defined in the
Registration Rights Agreement) which is not suspended and for which no stop
order is in effect, and pursuant to which the Warrantholder is able to sell
such shares of Common Stock at all times during the Notice Period or (B) no longer
constitute Registrable Securities (as defined in the Registration Rights
Agreement) and (iii) this Warrant is fully exercisable for the full amount of
Warrant </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">11</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='11',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Shares covered
hereby.&#160; Notwithstanding any such notice
by the Company, the Warrantholder shall have the right to exercise this Warrant
prior to the end of the Notice Period.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 19.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Cashless
Exercise.</u>&#160; Notwithstanding any other
provision contained herein to the contrary, from and after the first
anniversary of the Closing Date (as defined in the Warrant Exercise Agreement)
and so long as the Company is required under the Registration Rights Agreement
to have effected and keep effective the registration of the Warrant Shares for
resale to the public pursuant to a Registration Statement (as such term is
defined in the Registration Rights Agreement), if the Warrant Shares may not be
freely sold to the public because such shares are not covered by an effective
Registration Statement which is not suspended and for which no stop order is in
effect, then during such period in which the Warrant Shares may not be freely
sold to the public (but excluding the period of any Allowed Delay (as defined
in the Registration Rights Agreement)), the Warrantholder may elect to receive,
without the payment by the Warrantholder of the aggregate Warrant Price in
respect of the shares of Common Stock to be acquired, shares of Common Stock of
equal value to the value of this Warrant, or any specified portion hereof, by
the surrender of this Warrant (or such portion of this Warrant being so
exercised) together with a Net Issue Election Notice, in the form annexed
hereto as Appendix B, duly executed, to the Company.&#160; Thereupon, the Company shall issue to the
Warrantholder such number of fully paid, validly issued and nonassessable
shares of Common Stock as is computed using the following formula:</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">X = <u>Y (A - B)</u></font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&#160;&#160;&#160;&#160;&#160;&#160; A</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">where</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">X =&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the number of shares of Common Stock
to which the Warrantholder is entitled upon such cashless exercise;</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Y =&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the total number of shares of Common
Stock covered by this Warrant for which the Warrantholder has surrendered
purchase rights at such time for cashless exercise (including both shares to be
issued to the Warrantholder and shares as to which the purchase rights are to
be canceled as payment therefor);</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">A =&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the &#147;Market Price&#148; of one share of
Common Stock as of the date the net issue election is made; and</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:108.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">B =&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; the
Warrant Price in effect under this Warrant at the time the net issue election
is made.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 20.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>No Rights as Stockholder</u>.&#160; Prior to the exercise of this Warrant, the
Warrantholder shall not have or exercise any rights as a stockholder of the
Company by virtue of its ownership of this Warrant.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 21.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Amendment; Waiver</u>.&#160; This Warrant is one of a series of Warrants
of like tenor issued by the Company pursuant to the Warrant Exercise Agreement
and initially covering </font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">12</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='12',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">an aggregate of 246,250
shares of Common Stock (collectively, the &#147;<u>Company Warrants</u>&#148;).&#160; Any term of this Warrant may be amended or
waived (including the adjustment provisions included in Section 8 of this
Warrant) upon the written consent of the Company and the holders of Company
Warrants representing at least 50% of the number of shares of Common Stock then
subject to all outstanding Company Warrants (the &#147;<u>Majority Holders</u>&#148;); <u>provided</u>,
that (x) any such amendment or waiver must apply to all Company Warrants; and
(y) the number of Warrant Shares subject to this Warrant, the Warrant Price and
the Expiration Date may not be amended, and the right to exercise this Warrant
may not be altered or waived, without the written consent of the Warrantholder.</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Section 22.&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160;&#160; <u>Section Headings</u>.&#160; The section headings in this Warrant are for
the convenience of the Company and the Warrantholder and in no way alter,
modify, amend, limit or restrict the provisions hereof.</font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><i><font size="2" face="Times New Roman" style="font-size:10.0pt;font-style:italic;">[Signature
Page Follows]</font></i></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">13</font></p> <br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='13',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">IN WITNESS WHEREOF, the Company has caused this
Warrant to be duly executed, as of the 28th day of September, 2006.</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.44%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading --></p>
  </td>
  <td width="50%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ITERIS, INC.</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:6.68%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="43%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="24%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:24.72%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="24%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:24.72%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:6.68%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="43%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.7%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">By:</font></p>
  </td>
  <td width="24%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:24.92%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="21%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:21.94%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:6.68%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name:</font></p>
  </td>
  <td width="43%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">James S. Miele</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="6%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:6.68%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Title:</font></p>
  </td>
  <td width="43%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:43.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Chief Financial Officer</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="185" style="border:none;"></td>
  <td width="185" style="border:none;"></td>
  <td width="28" style="border:none;"></td>
  <td width="22" style="border:none;"></td>
  <td width="164" style="border:none;"></td>
  <td width="164" style="border:none;"></td>
 </tr>
</table>

<p style="margin:0pt 0pt .0001pt;text-indent:216.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>


 <p style="font-size:10.0pt;margin:24.0pt 0pt .0001pt;text-align:center;"><font face="Times New Roman">14</font></p>
</div><br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='14',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-03.htm',USER='105067',CD='Nov 14 06:48 2006' -->



<br clear="all" style="page-break-before:always;">

<div>
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">APPENDIX A</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ITERIS, INC.</font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">WARRANT EXERCISE FORM</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To Iteris, Inc.:</font></p>

<p style="margin:0pt 0pt 20.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The
undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant (&#147;Warrant&#148;) for, and to purchase thereunder
by the payment of the Warrant Price and surrender of the Warrant, &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
shares of Common Stock (&#147;Warrant Shares&#148;) provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="25%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:25.58%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading --></p>
  </td>
  <td width="37%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="25%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:25.58%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name</font></p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="25%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:25.58%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="25%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:25.58%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Address</font></p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="25%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:25.58%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="25%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:25.58%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="25%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:25.58%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="37%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Federal Tax ID
  or Social Security No.</font></p>
  </td>
  <td width="37%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:37.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="30%" colspan="3" valign="top" style="padding:0pt .7pt 0pt 0pt;width:30.08%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading --></p>
  </td>
  <td width="69%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:69.92%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="10%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:10.46%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:16.4%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">and delivered by:</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font></p>
  </td>
  <td width="69%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:69.92%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;certified
  mail to the above address, or</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="10%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:10.46%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="16%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:16.4%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">(check one)</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font></p>
  </td>
  <td width="69%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:69.92%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;electronically (provide DWAC Instructions:&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;),
  or</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="26%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:26.86%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="3%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:3.2%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Wingdings" style="font-size:10.0pt;">o</font></p>
  </td>
  <td width="69%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:69.92%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;other
  (specify): &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;.</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="30%" colspan="3" valign="top" style="padding:0pt .7pt 0pt 0pt;width:30.08%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="69%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:69.92%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>

 </tr>
</table>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">and, if the number
of Warrant Shares shall not be all the Warrant Shares purchasable upon exercise
of the Warrant, that a new Warrant for the balance of the Warrant Shares
purchasable upon exercise of this Warrant be registered in the name of the
undersigned Warrantholder or the undersigned&#146;s Assignee as below indicated and
delivered to the address stated below.</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="5%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:5.96%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading -->Dated:</p>
  </td>
  <td width="18%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:18.82%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="0%" valign="top" style="padding:0pt .7pt 0.375pt 0pt;width:.84%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">,</font></p>
  </td>
  <td width="5%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:5.72%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="18%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:18.22%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="50%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Note: The
  signature must correspond with</font></p>
  </td>
  <td width="8%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:8.94%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Signature:</font></p>
  </td>
  <td width="31%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:31.8%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="9%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:9.7%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">the name of the
  Warrantholder as written</font></p>
  </td>
  <td width="50%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">on the first
  page of the Warrant in every</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">particular,
  without alteration or enlargement</font></p>
  </td>
  <td width="50%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name (please print)</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">or any change
  whatever, unless the Warrant</font></p>
  </td>
  <td width="50%" colspan="4" valign="top" style="padding:0pt .7pt 0pt 0pt;width:50.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">has been
  assigned.</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Address</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Federal
  Identification or</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Social Security
  No.</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Assignee:</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="49%" colspan="5" valign="top" style="padding:0pt .7pt 0pt 0pt;width:49.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="36%" colspan="2" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:36.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="13%" colspan="2" valign="top" style="padding:0pt .7pt 0pt 0pt;width:13.88%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr height="0">
  <td width="45" style="border:none;"></td>
  <td width="141" style="border:none;"></td>
  <td width="6" style="border:none;"></td>
  <td width="43" style="border:none;"></td>
  <td width="136" style="border:none;"></td>
  <td width="67" style="border:none;"></td>
  <td width="207" style="border:none;"></td>
  <td width="31" style="border:none;"></td>
  <td width="73" style="border:none;"></td>
 </tr>
</table>

<p style="margin:0pt 0pt .0001pt;text-indent:252.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-05.htm',USER='105067',CD='Nov 14 06:44 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">APPENDIX B</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">ITERIS, INC.</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">NET ISSUE ELECTION NOTICE</font></p>

<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">To: Iteris, Inc.</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Date:[&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]</font></p>

<p style="margin:0pt 0pt 12.0pt;text-indent:36.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">The undersigned
hereby elects under <u>Section 19</u> of this Warrant to surrender the right to
purchase [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
shares of Common Stock pursuant to this Warrant and hereby requests the
issuance of [&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;]
shares of Common Stock.&#160; The
certificate(s) for the shares issuable upon such net issue election shall be
issued in the name of the undersigned or as otherwise indicated below.</font></p>

<table border="0" cellspacing="0" cellpadding="0" width="100%" style="border-collapse:collapse;font-family:Times New Roman;width:100.0%;">
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="font-size:10.0pt;margin:0pt 0pt .0001pt;"><!-- SET mrlNoTableShading --></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Signature</font></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Name for
  Registration</font></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="border:none;border-bottom:solid windowtext 1.0pt;padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>
  </td>
 </tr>
 <tr style="page-break-inside:avoid;">
  <td width="40%" valign="top" style="border:none;padding:0pt .7pt 0pt 0pt;width:40.44%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">Mailing Address</font></p>
  </td>
  <td width="59%" valign="top" style="padding:0pt .7pt 0pt 0pt;width:59.56%;">
  <p style="margin:0pt 0pt .0001pt;"><font size="2" face="Times New Roman" style="font-size:1.0pt;">&nbsp;</font></p>
  </td>
 </tr>
</table>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-05.htm',USER='105067',CD='Nov 14 06:44 2006' -->
<br clear="all" style="page-break-before:always;">
 <p style="margin:0pt 0pt .0001pt;text-align:center;"></p>


<p align="center" style="margin:0pt 0pt .0001pt;text-align:center;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><u><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Exhibit
C</font></u></b></p>

<p align="center" style="margin:0pt 0pt 12.0pt;text-align:center;"><b><font size="2" face="Times New Roman" style="font-size:10.0pt;font-weight:bold;">Registration
Rights Agreement</font></b></p>

<p style="margin:0pt 0pt 12.0pt;"><font size="2" face="Times New Roman" style="font-size:10.0pt;">&nbsp;</font></p>

</div><br><hr size="3" width="100%" noshade color="#010101" align="center">

<!-- SEQ.=1,FOLIO='',FILE='C:\JMS\rganesa\06-22129-1\task1495086\22129-1-ka-05.htm',USER='105067',CD='Nov 14 06:44 2006' -->


</body>

</html>
</TEXT>
</DOCUMENT>
