FORTUNE PETROLEUM CORPORATION

                                       and

                         U.S. STOCK TRANSFER CORPORATION




                                    RIGHTS AGREEMENT

                               Dated as of March 21, 1997




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                                TABLE OF CONTENTS
                                -----------------
                                                                            Page
                                                                            ----

Section 1.   Certain Definitions...............................................1

Section 2.   Appointment of Rights Agent.......................................5

Section 3.   Issue of Right Certificates.......................................5

Section 4.   Form of Right Certificates........................................7

Section 5.   Countersignature and Registration.................................7

Section 6.   Transfer, Split Up, Combination and Exchange of Right
             Certificates; Mutilated, Destroyed, Lost or Stolen Right
             Certificates......................................................8

Section 7.   Exercise of Rights, Purchase Price; Expiration Date of Rights.....8

Section 8.   Cancellation and Destruction of Right Certificates...............10

Section 9.   Availability of Shares of Preferred Stock........................10

Section 10.  Preferred Stock Record Date......................................11

Section 11.  Adjustment of Purchase Price, Number of Shares and Number
             of Rights........................................................11

Section 12.  Certificate of Adjusted Purchase Price or Number of Shares.......19

Section 13.  Consolidation, Merger or Sale or Transfer of Assets or
             Earning Power....................................................19

Section 14.  Fractional Rights and Fractional Shares..........................22

Section 15.  Rights of Action.................................................23

Section 16.  Agreement of Right Holders.......................................24

Section 17.  Right Certificate Holder Not Deemed a Stockholder................24

Section 18.  Concerning the Rights Agent......................................24

Section 19.  Merger or Consolidation or Change of Name of Rights Agent........25

Section 20.  Duties of Rights Agent...........................................25

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Section 21.  Change of Rights Agent...........................................27

Section 22.  Issuance of New Right Certificates...............................28

Section 23.  Redemption.......................................................28

Section 24.  Exchange.........................................................29

Section 25.  Notice of Certain Events.........................................30

Section 26.  Notices..........................................................31

Section 27.  Supplements and Amendments.......................................31

Section 28.  Successors.......................................................32

Section 29.  Benefits of this Agreement.......................................32

Section 30.  Determinations and Actions by the Board of Directors.............32

Section 31.  Severability.....................................................32

Section 32.  Governing Law....................................................32

Section 33.  Counterparts.....................................................33

Section 34.  Descriptive Headings.............................................33


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                                    RIGHTS AGREEMENT
                                    ----------------


            Rights Agreement, dated as of March 21, 1997 ("Agreement"),  between
Fortune Petroleum Corporation,  a Delaware corporation (the "Company"), and U.S.
Stock Transfer Corporation, as Rights Agent (the "Rights Agent").

            The Board of Directors of the Company has  authorized and declared a
dividend of one  preferred  share  purchase  right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the Close
of Business (as defined below) on April 3, 1997 (the "Record Date"),  each Right
representing the right to purchase one one-thousandth (subject to adjustment) of
a share of Preferred Stock (as hereinafter defined),  upon the terms and subject
to the conditions herein set forth, and has further  authorized and directed the
issuance of one Right (subject to adjustment as provided herein) with respect to
each share of Common Stock that shall become outstanding between the Record Date
and the earlier of the Distribution  Date and the Expiration Date (as such terms
are  hereinafter  defined);  provided,  however,  that Rights may be issued with
respect  to shares of Common  Stock  that  shall  become  outstanding  after the
Distribution  Date and prior to the Expiration  Date in accordance  with Section
22.

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

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

            (a)  "Acquiring  Person"  shall  mean any  Person  (as such  term is
hereinafter defined) who or which shall be the Beneficial Owner (as such term is
hereinafter  defined)  of 15% or  more  of  the  shares  of  Common  Stock  then
outstanding, but shall not include an Exempt Person (as such term is hereinafter
defined);  provided,  however, that (i) if the Board of Directors of the Company
determines  in good  faith that a Person who would  otherwise  be an  "Acquiring
Person" became such inadvertently  (including,  without limitation,  because (A)
such Person was unaware that it beneficially  owned a percentage of Common Stock
that would otherwise  cause such Person to be an "Acquiring  Person" or (B) such
Person was aware of the extent of its  Beneficial  Ownership of Common Stock but
had no actual knowledge of the  consequences of such Beneficial  Ownership under
this Agreement) and without any intention of changing or influencing  control of
the Company,  and if such Person as promptly as practicable  divested or divests
itself of Beneficial  Ownership of a sufficient number of shares of Common Stock
so that such Person would no longer be an  "Acquiring  Person," then such Person
shall not be  deemed  to be or to have  become  an  "Acquiring  Person"  for any
purposes of this  Agreement;  (ii) if, as of the date hereof,  any Person is the
Beneficial Owner of 15% or more of the shares of Common Stock outstanding,  such
Person shall not be or become an "Acquiring  Person"  unless and until such time
as such Person shall become the Beneficial Owner of additional  shares of Common
Stock  (other than  pursuant to a dividend or  distribution  paid or made by the
Company on the outstanding Common Stock in shares of Common Stock or pursuant to
a split or subdivision of the outstanding Common Stock),


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<PAGE>

unless,  upon becoming the Beneficial Owner of such additional  shares of Common
Stock, such Person is not then the Beneficial Owner of 15% or more of the shares
of Common Stock then outstanding; and (iii) no Person shall become an "Acquiring
Person" as the result of an acquisition of shares of Common Stock by the Company
which, by reducing the number of shares outstanding, increases the proportionate
number of shares of Common  Stock  beneficially  owned by such  Person to 15% or
more of the shares of Common Stock then outstanding,  provided, however, that if
a Person  shall  become  the  Beneficial  Owner of 15% or more of the  shares of
Common  Stock  then  outstanding  by reason of such  share  acquisitions  by the
Company  and shall  thereafter  become the  Beneficial  Owner of any  additional
shares of Common Stock (other than pursuant to a dividend or  distribution  paid
or made by the Company on the outstanding Common Stock in shares of Common Stock
or pursuant to a split or subdivision  of the  outstanding  Common Stock),  then
such Person shall be deemed to be an "Acquiring Person" unless upon becoming the
Beneficial Owner of such additional  shares of Common Stock such Person does not
beneficially own 15% or more of the shares of Common Stock then outstanding. For
all  purposes  of this  Agreement,  any  calculation  of the number of shares of
Common Stock  outstanding  at any  particular  time,  including  for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial  Owner,  shall be made in accordance  with
the last sentence of Rule  13d-3(d)(1)(i)  of the General Rules and  Regulations
under the Securities  Exchange Act of 1934, as amended (the "Exchange  Act"), as
in effect on the date hereof.

            (b) "Affiliate" and "Associate"  shall have the respective  meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations  under
the Exchange Act, as in effect on the date hereof.

            (c) A Person  shall be deemed the  "Beneficial  Owner" of,  shall be
deemed to have  "Beneficial  Ownership" of and shall be deemed to  "beneficially
own" any securities:

                   (i) which such Person or any of such  Person's  Affiliates or
Associates is deemed to  beneficially  own,  directly or indirectly,  within the
meaning of Rule l3d-3 of the General  Rules and  Regulations  under the Exchange
Act as in effect on the date hereof;

                   (ii) which such Person or any of such Person's  Affiliates or
Associates  has (A) the right to  acquire  (whether  such  right is  exercisable
immediately  or only  after the  passage  of time)  pursuant  to any  agreement,
arrangement or understanding  (other than customary  agreements with and between
underwriters  and  selling  group  members  with  respect to a bona fide  public
offering of  securities),  or upon the exercise of conversion  rights,  exchange
rights,  rights,  warrants or options, or otherwise;  provided,  however, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially  own, (x)
securities  tendered pursuant to a tender or exchange offer made by or on behalf
of such  Person or any of such  Person's  Affiliates  or  Associates  until such
tendered securities are accepted for purchase,  (y) securities which such Person
has a right to acquire upon the exercise of Rights at any time prior to the time
that any Person becomes an Acquiring Person or (z) securities  issuable upon the
exercise of Rights from and after the time that any Person  becomes an Acquiring
Person if such  Rights  were  acquired  by such  Person or any of such  Person's
Affiliates or Associates prior to the  Distribution  Date or pursuant to Section
3(a) or Section 22 hereof  ("Original  

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<PAGE>

Rights")  or  pursuant  to  Section  11(i) or Section  11(n) with  respect to an
adjustment  to  Original  Rights;  or (B)  the  right  to vote  pursuant  to any
agreement, arrangement or understanding;  provided, however, that a Person shall
not be deemed the Beneficial  Owner of, or to beneficially  own, any security by
reason  of  such  agreement,  arrangement  or  understanding  if the  agreement,
arrangement  or  understanding  to vote such  security (1) arises  solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent  solicitation  made pursuant to, and in accordance  with, the applicable
rules and  regulations  promulgated  under the  Exchange Act and (2) is not also
then  reportable  on Schedule 13D under the Exchange Act (or any  comparable  or
successor report); or

                   (iii) which are beneficially  owned,  directly or indirectly,
by any  other  Person  and with  respect  to which  such  Person  or any of such
Person's   Affiliates  or  Associates   has  any   agreement,   arrangement   or
understanding (other than customary agreements with and between underwriters and
selling group members with respect to a bona fide public offering of securities)
for the purpose of acquiring, holding, voting (except to the extent contemplated
by the proviso to Section  1(c)(ii)(B))  or disposing of such  securities of the
Company;

provided,  however, that no Person who is an officer, director or employee of an
Exempt  Person  shall be  deemed,  solely by reason of such  Person's  status or
authority  as  such,  to be the  "Beneficial  Owner"  of,  to  have  "Beneficial
Ownership" of or to  "beneficially  own" any securities  that are  "beneficially
owned" (as defined in this Section l(c)),  including,  without limitation,  in a
fiduciary capacity,  by an Exempt Person or by any other such officer,  director
or employee of an Exempt Person.

            (d)  "Business  Day"  shall mean any day other  than a  Saturday,  a
Sunday or a day on which banking  institutions in the State of Texas or the city
in which the principal  office of the Rights Agent is located are  authorized or
obligated by law or executive order to close.

            (e)  "Close of  Business"  on any given  date  shall mean 5:00 P.M.,
Houston, Texas time, on such date; provided, however, that if such date is not a
Business  Day it  shall  mean  5:00  P.M.,  Houston,  Texas  time,  on the  next
succeeding Business Day.

            (f) "Common  Stock" when used with  reference  to the Company  shall
mean the Common  Stock,  presently  par value $.01 per  share,  of the  Company.
"Common  Stock" when used with  reference  to any Person  other than the Company
shall mean the common stock (or, in the case of an  unincorporated  entity,  the
equivalent  equity interest) with the greatest voting power of such other Person
or, if such  other  Person is a  subsidiary  of  another  Person,  the Person or
Persons which ultimately control such first-mentioned Person.

            (g) "Common Stock  Equivalents"  shall have the meaning set forth in
Section 11(a)(iii) hereof.

            (h)  "Current  Value" shall have the meaning set forth in Section 11
(a)(iii) hereof.

            (i) "Distribution  Date" shall have the meaning set forth in Section
3 hereof.

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<PAGE>

            (j) "Equivalent  Preferred  Shares" shall have the meaning set forth
in Section 11(b) hereof.

            (k) "Exempt  Person"  shall mean the Company or any  Subsidiary  (as
such term is  hereinafter  defined)  of the  Company,  in each  case  including,
without limitation,  in its fiduciary capacity,  or any employee benefit plan of
the  Company  or of any  Subsidiary  of the  Company,  or any  entity or trustee
holding  Common  Stock for or  pursuant to the terms of any such plan or for the
purpose  of  funding  any such  plan or  funding  other  employee  benefits  for
employees of the Company or of any Subsidiary of the Company.

            (l) "Exchange  Ratio" shall have the meaning set forth in Section 24
hereof.

            (m) "Expiration  Date" shall have the meaning set forth in Section 7
hereof.

            (n)  "Flip-In  Event" shall have the meaning set forth in Section 11
(a)(ii) hereof.

            (o) "Final  Expiration  Date"  shall have the  meaning  set forth in
Section 7 hereof.

            (p)    "NASDAQ" shall mean The NASDAQ Stock Market.

            (q)  "New  York  Stock  Exchange"  shall  mean  the New  York  Stock
Exchange, Inc.

            (r)  "Person"  shall  mean  any   individual,   firm,   corporation,
partnership, limited liability company, trust or other entity, and shall include
any successor (by merger or otherwise) to such entity.

            (s) "Preferred  Stock" shall mean the Series A Junior  Participating
Preferred Stock, par value $1.00 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designation attached to this
Agreement as Exhibit A.

            (t)  "Principal  Party"  shall have the meaning set forth in Section
13(b) hereof.

            (u) "Redemption  Date" shall have the meaning set forth in Section 7
hereof.

            (v)  "Redemption  Price" shall have the meaning set forth in Section
23 hereof.

            (w) "Right  Certificate" shall have the meaning set forth in Section
3 hereof.

            (x)  "Securities  Act" shall  mean the  Securities  Act of 1933,  as
amended.

            (y)  "Section  11(a)(ii)  Trigger  Date"  shall have the meaning set
forth in Section 11(a)(iii) hereof.

            (z) "Spread" shall have the meaning set forth in Section  11(a)(iii)
hereof.


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<PAGE>
            (aa)  "Stock  Acquisition  Date" shall mean the first date of public
announcement  (which,  for purposes of this definition,  shall include,  without
limitation, a report filed pursuant to Section 13(d) of the Exchange Act) by the
Company or an Acquiring Person that an Acquiring Person has become such, or such
earlier date as a majority of the Board of  Directors  shall become aware of the
existence of an Acquiring Person.

            (bb)  "Subsidiary" of any Person shall mean any corporation or other
entity of which  securities or other ownership  interests having ordinary voting
power  sufficient to elect a majority of the board of directors or other persons
performing similar functions are beneficially owned, directly or indirectly,  by
such Person, and any corporation or other entity that is otherwise controlled by
such Person.

            (cc)  "Substitution  Period"  shall  have the  meaning  set forth in
Section 11(a)(iii) hereof.

            (dd) "Summary of Rights" shall have the meaning set forth in Section
3 hereof.

            (ee)  "Trading  Day"  shall  have the  meaning  set forth in Section
11(d)(i) hereof.

            Section 2.  Appointment of Rights Agent. The Company hereby appoints
the Rights  Agent to act as agent for the  Company and the holders of the Rights
(who, in accordance with Section 3 hereof,  shall prior to the Distribution Date
be the  holders of Common  Stock) in  accordance  with the terms and  conditions
hereof,  and the Rights Agent hereby accepts such  appointment.  The Company may
from time to time  appoint  such  co-Rights  Agents as it may deem  necessary or
desirable.

            Section 3.  Issue of Right Certificates.

            (a) Until the Close of  Business on the earlier of (i) the tenth day
after the Stock  Acquisition  Date or (ii) the tenth Business Day (or such later
date as may be determined by action of the Board of Directors prior to such time
as any Person becomes an Acquiring Person) after the date of the commencement by
any Person (other than an Exempt Person) of, or of the first public announcement
of the  intention of such Person  (other than an Exempt  Person) to commence,  a
tender or exchange  offer the  consummation  of which would result in any Person
(other than an Exempt Person)  becoming the Beneficial Owner of shares of Common
Stock  aggregating 15% or more of the Common Stock then outstanding (the earlier
of such dates being herein  referred to as the  "Distribution  Date",  provided,
however,  that if either of such dates occurs  after the date of this  Agreement
and on or prior to the  Record  Date,  then the  Distribution  Date shall be the
Record  Date),  (x) the Rights will be evidenced  (subject to the  provisions of
Section 3(b) hereof) by the  certificates  for Common  Stock  registered  in the
names of the holders thereof and not by separate Right Certificates, and (y) the
Rights  will be  transferable  only in  connection  with the  transfer of Common
Stock.  As soon as  practicable  after the  Distribution  Date, the Company will
prepare and execute, the Rights Agent will countersign and the Company will send
or  cause  to be sent  (and  the  Rights  Agent  will,  if  requested,  send) by
first-class,  insured,  postage-prepaid  mail,  to each record  holder of Common
Stock as of the close of  business  on the  Distribution  Date  (other  than any
Acquiring 

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<PAGE>

Person or any Associate or Affiliate of an Acquiring Person),  at the address of
such  holder  shown on the  records  of the  Company,  a Right  Certificate,  in
substantially the form of Exhibit B hereto (a "Right  Certificate"),  evidencing
one Right  (subject to adjustment  as provided  herein) for each share of Common
Stock so held. As of the Distribution  Date, the Rights will be evidenced solely
by such Right Certificates.

            (b) On the Record Date, or as soon as  practicable  thereafter,  the
Company will send a copy of a Summary of Rights to Purchase  Shares of Preferred
Stock, in substantially  the form of Exhibit C hereto (the "Summary of Rights"),
by first-class,  postage-prepaid  mail, to each record holder of Common Stock as
of the Close of Business on the Record Date (other than any Acquiring  Person or
any  Associate  or Affiliate of any  Acquiring  Person),  at the address of such
holder shown on the records of the Company.  With  respect to  certificates  for
Common Stock outstanding as of the Record Date, until the Distribution Date, the
Rights will be evidenced  by such  certificates  registered  in the names of the
holders thereof together with the Summary of Rights. Until the Distribution Date
(or, if  earlier,  the  Expiration  Date),  the  surrender  for  transfer of any
certificate  for Common Stock  outstanding on the Record Date, with or without a
copy of the Summary of Rights,  shall also constitute the transfer of the Rights
associated with the Common Stock represented thereby.

            (c)  Certificates  issued  for  Common  Stock  (including,   without
limitation,  upon transfer of  outstanding  Common Stock,  disposition of Common
Stock out of treasury  stock or issuance or  reissuance  of Common  Stock out of
authorized  but unissued  shares) after the Record Date but prior to the earlier
of the  Distribution  Date and the  Expiration  Date  shall have  impressed  on,
printed on, written on or otherwise affixed to them the following legend:

            This  certificate  also  evidences and entitles the holder hereof to
            certain rights as set forth in a Rights  Agreement  between  Fortune
            Petroleum  Corporation  (the  "Company")  and  U.S.  Stock  Transfer
            Corporation, as Rights Agent, dated as of March 21, 1997 as the same
            may be amended from time to time (the "Rights Agreement"), the terms
            of which are hereby  incorporated  herein by reference and a copy of
            which is on file at the principal  executive offices of the Company.
            Under certain  circumstances,  as set forth in the Rights Agreement,
            such Rights will be evidenced by separate  certificates  and will no
            longer be  evidenced by this  certificate.  The Company will mail to
            the  holder  of  this  certificate  a copy of the  Rights  Agreement
            without charge after receipt of a written  request  therefor.  Under
            certain circumstances,  as set forth in the Rights Agreement, Rights
            owned by or transferred to any Person who is or becomes an Acquiring
            Person (as defined in the Rights Agreement) and certain  transferees
            thereof   will   become   null  and  void  and  will  no  longer  be
            transferable.

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

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<PAGE>

except as otherwise  provided herein,  shall also constitute the transfer of the
Rights associated with the Common Stock represented  thereby.  In the event that
the Company  purchases or  otherwise  acquires any Common Stock after the Record
Date but prior to the Distribution  Date, any Rights associated with such Common
Stock shall be deemed  canceled  and  retired so that the  Company  shall not be
entitled to exercise  any Rights  associated  with the Common Stock which are no
longer outstanding.

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

            Section 4. Form of Right  Certificates.  The Right Certificates (and
the forms of election to purchase  shares and of assignment to be printed on the
reverse  thereof)  shall be  substantially  in the form set  forth in  Exhibit B
hereto  and may  have  such  marks of  identification  or  designation  and such
legends,  summaries  or  endorsements  printed  thereon as the  Company may deem
appropriate and as are not  inconsistent  with the provisions of this Agreement,
or as may be  required  to comply  with any  applicable  law or with any rule or
regulation  made  pursuant  thereto or with any rule or  regulation of any stock
exchange or  interdealer  quotation  system on which the Rights may from time to
time be listed or quoted,  or to conform to usage.  Subject to the provisions of
Sections 11, 13 and 22 hereof,  the Right Certificates shall entitle the holders
thereof to purchase such number of one  one-thousandths  of a share of Preferred
Stock as shall be set forth  therein  at the price per one  one-thousandth  of a
share of Preferred  Stock set forth  therein  (the  "Purchase  Price"),  but the
number  of such  one  one-thousandths  of a share  of  Preferred  Stock  and the
Purchase Price shall be subject to adjustment as provided herein.

            Section 5.  Countersignature and Registration.

            (a) The  Right  Certificates  shall be  executed  on  behalf  of the
Company  by the  President  of the  Company,  either  manually  or by  facsimile
signature,  shall have affixed thereto the Company's seal or a facsimile thereof
and shall be attested by the  Secretary  of the Company,  either  manually or by
facsimile signature.  The Right Certificates shall be manually  countersigned by
the Rights Agent and shall not be valid for any purpose unless countersigned. In
case  any  officer  of the  Company  who  shall  have  signed  any of the  Right
Certificates   shall   cease  to  be  such   officer  of  the   Company   before
countersignature  by the Rights  Agent and issuance and delivery by the Company,
such Right Certificates,  nevertheless, may be countersigned by the Rights Agent
and issued and delivered by the Company with the same force and effect as though
the Person who signed such Right  Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by  any  Person  who,  at the  actual  date  of  the  execution  of  such  Right
Certificate,  shall  be a proper  officer  of the  Company  to sign  such  Right
Certificate,  although at the date of the  execution of this  Agreement any such
Person was not such an officer.

            (b) Following the  Distribution  Date, the Rights Agent will keep or
cause to be kept, at an office or agency designated for such purpose,  books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall  show the names  and  addresses


                                       7
<PAGE>
                                       
of the  respective  holders  of the  Right  Certificates,  the  number of Rights
evidenced on its face by each of the Right  Certificates and the date of each of
the Right Certificates.

            Section 6.  Transfer,  Split Up,  Combination  and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates.

            (a) Subject to the provisions of Sections 7(e), 11(a)(ii), 13 and 14
hereof,  at any time  after the  Distribution  Date and prior to the  Expiration
Date, any Right Certificate or Right Certificates may be transferred,  split up,
combined or  exchanged  for another  Right  Certificate  or Right  Certificates,
entitling the registered holder to purchase a like number of one one-thousandths
of a share of Preferred  Stock as the Right  Certificate  or Right  Certificates
surrendered  then  entitled  such  holder to  purchase.  Any  registered  holder
desiring to transfer,  split up,  combine or exchange any Right  Certificate  or
Right  Certificates  shall make such request in writing  delivered to the Rights
Agent,  and shall  surrender the Right  Certificate or Right  Certificates to be
transferred,  split up,  combined  or  exchanged  at the office or agency of the
Rights  Agent  designated  for such  purpose.  Thereupon  the Rights Agent shall
countersign  and deliver to the Person entitled  thereto a Right  Certificate or
Right Certificates, as the case may be, as so requested. The Company may require
payment of a sum sufficient to cover any tax or governmental  charge that may be
imposed in connection  with any transfer,  split up,  combination or exchange of
Right Certificates.

            (b) Subject to the provisions of Section  11(a)(ii)  hereof,  at any
time after the Distribution  Date and prior to the Expiration Date, upon receipt
by the Company and the Rights Agent of evidence reasonably  satisfactory to them
of the loss, theft,  destruction or mutilation of a Right  Certificate,  and, in
case of  loss,  theft  or  destruction,  of  indemnity  or  security  reasonably
satisfactory  to them,  and,  at the  Company's  request,  reimbursement  to the
Company and the Rights Agent of all reasonable expenses incidental thereto,  and
upon surrender to the Rights Agent and cancellation of the Right  Certificate if
mutilated,  the Company  will make and deliver a new Right  Certificate  of like
tenor to the Rights Agent for delivery to the  registered  holder in lieu of the
Right Certificate so lost, stolen, destroyed or mutilated.

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

            (a) Except as  otherwise  provided  herein,  the Rights shall become
exercisable on the  Distribution  Date, and thereafter the registered  holder of
any Right  Certificate  may,  subject to Section  11(a)(ii) hereof and except as
otherwise provided herein,  exercise the Rights evidenced thereby in whole or in
part upon  surrender  of the Right  Certificate,  with the form of  election  to
purchase on the reverse side thereof duly  executed,  to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose,  together with
payment of the aggregate  Purchase Price with respect to the total number of one
one-thousandths  of a share of  Preferred  Stock (or other  securities,  cash or
other assets,  as the case may be) as to which the Rights are exercised,  at any
time  which is both  after  the  Distribution  Date and  prior to the time  (the
"Expiration Date") that is the earliest of (i) the Close of Business on February
28, 2007 (the "Final  Expiration  Date"),  (ii) the time at which the Rights are
redeemed as 

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<PAGE>

provided in Section 23 hereof (the "Redemption Date") or (iii) the time at which
such Rights are exchanged as provided in Section 24 hereof.

            (b) The  Purchase  Price  shall  be  initially  $10.00  for each one
one-thousandth  of a share of Preferred Stock purchasable upon the exercise of a
Right.  The Purchase Price and the number of one  one-thousandths  of a share of
Preferred Stock or other  securities or property to be acquired upon exercise of
a Right shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable  in lawful  money of the United  States of
America in accordance with paragraph (c) of this Section 7.

            (c) Except as  otherwise  provided  herein,  upon receipt of a Right
Certificate  representing  exercisable  Rights,  with  the form of  election  to
purchase duly executed,  accompanied by payment of the aggregate  Purchase Price
for the shares of  Preferred  Stock to be  purchased  and an amount equal to any
applicable  transfer  tax  required  to be paid  by the  holder  of  such  Right
Certificate in accordance with Section 9 hereof,  in cash or by certified check,
cashier's  check or money order payable to the order of the Company,  the Rights
Agent shall thereupon  promptly (i) (A)  requisition  from any transfer agent of
the Preferred Stock  certificates for the number of shares of Preferred Stock to
be purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests,  or (B)  requisition  from the  depositary  agent
depositary receipts representing interests in such number of one one-thousandths
of a share of Preferred Stock as are to be purchased (in which case certificates
for the Preferred  Stock  represented by such receipts shall be deposited by the
transfer  agent with the  depositary  agent) and the Company  hereby directs the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash to be paid in lieu of issuance of fractional
shares in accordance  with Section 14 hereof,  (iii)  promptly  after receipt of
such certificates or depositary  receipts,  cause the same to be delivered to or
upon the order of the registered holder of such Right Certificate, registered in
such  name  or  names  as may  be  designated  by  such  holder  and  (iv)  when
appropriate,  after receipt,  promptly deliver such cash to or upon the order of
the registered holder of such Right Certificate.

            (d) Except as  otherwise  provided  herein,  in case the  registered
holder of any  Right  Certificate  shall  exercise  less than all of the  Rights
evidenced thereby,  a new Right Certificate  evidencing Rights equivalent to the
exercisable Rights remaining  unexercised shall be issued by the Rights Agent to
the  registered  holder  of such  Right  Certificate  or to his duly  authorized
assigns, subject to the provisions of Section 14 hereof.

            (e)  Notwithstanding  anything in this  Agreement  to the  contrary,
neither the Rights Agent nor the Company  shall be  obligated  to undertake  any
action with respect to a registered  holder of Rights upon the occurrence of any
purported  transfer or  exercise of Rights  pursuant to Section 6 hereof or this
Section 7 unless such registered  holder shall have (i) completed and signed the
certificate  contained in the form of assignment or form of election to purchase
set forth on the reverse  side of the Rights  Certificate  surrendered  for such
transfer or exercise and (ii) provided such additional  evidence of the identity
of the  Beneficial  Owner (or former  Beneficial  Owner)  thereof as the Company
shall reasonably request.


                                       9
<PAGE>

            Section 8. Cancellation and Destruction of Right  Certificates.  All
Right Certificates surrendered for the purpose of exercise,  transfer, split up,
combination  or exchange  shall,  if surrendered to the Company or to any of its
agents,  be delivered to the Rights Agent for  cancellation or in canceled form,
or, if  surrendered  to the Rights Agent,  shall be canceled by it, and no Right
Certificates  shall be issued in lieu thereof  except as expressly  permitted by
any of the provisions of this Agreement. The Company shall deliver to the Rights
Agent for cancellation and retirement,  and the Rights Agent shall so cancel and
retire,  any other  Right  Certificate  purchased  or  acquired  by the  Company
otherwise  than upon the exercise  thereof.  The Rights Agent shall  deliver all
canceled Right Certificates to the Company,  or shall, at the written request of
the Company,  destroy such canceled Right  Certificates,  and in such case shall
deliver a certificate of destruction thereof to the Company.

            Section 9.  Availability of Shares of Preferred Stock.

            (a) The  Company  covenants  and  agrees  that it will  cause  to be
reserved  and kept  available  out of its  authorized  and  unissued  shares  of
Preferred  Stock or any  shares of  Preferred  Stock held in its  treasury,  the
number of shares of  Preferred  Stock  that  will be  sufficient  to permit  the
exercise in full of all outstanding Rights.

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

            (c) From and after such time as the Rights become  exercisable,  the
Company shall use its best efforts,  if then necessary to permit the issuance of
shares of Preferred  Stock upon the exercise of Rights,  to register and qualify
such shares of Preferred Stock under the Securities Act and any applicable state
securities  or "Blue  Sky"  laws (to the  extent  exemptions  therefrom  are not
available),  cause such  registration  statement  and  qualifications  to become
effective as soon as possible after such filing and keep such  registration  and
qualifications  effective  until the  earlier of the date as of which the Rights
are no longer  exercisable  for such  securities  and the  Expiration  Date. The
Company may temporarily suspend, for a period of time not to exceed 90 days, the
exercisability  of the  Rights  in order  to  prepare  and  file a  registration
statement under the Securities Act and permit it to become  effective.  Upon any
such suspension,  the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement   at  such  time  as  the   suspension  is  no  longer  in  effect.
Notwithstanding  any  provision of this  Agreement to the  contrary,  the Rights
shall not be exercisable in any jurisdiction unless the requisite  qualification
in such jurisdiction shall have been obtained and until a registration statement
under the Securities Act (if required) shall have been declared effective.

            (d) The  Company  covenants  and  agrees  that it will take all such
action  as may be  necessary  to  ensure  that all  shares  of  Preferred  Stock
delivered  upon  exercise  of  Rights


                                       10
<PAGE>

shall, at the time of delivery of the certificates  therefor (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable shares.

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

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

            Section 11. Adjustment of Purchase Price,  Number and Kind of Shares
and Number of Rights.  The  Purchase  Price,  the number of shares of  Preferred
Stock or other  securities or property  purchasable  upon exercise of each Right
and the number of Rights outstanding are subject to adjustment from time to time
as provided in this Section 11.

            (a)(i) In the event the Company  shall at any time after the date of
this Agreement (A) declare and pay a dividend on the Preferred  Stock payable in
shares of Preferred  Stock,  (B) subdivide the outstanding  Preferred Stock, (C)
combine  the  outstanding  Preferred  Stock  into a smaller  number of shares of
Preferred   Stock  or  (D)  issue  any  shares  of  its   capital   stock  in  a
reclassification of the Preferred Stock (including any such  reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving  corporation),  except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such dividend or
of the effective date of such subdivision, combination or reclassification,  and
the number and kind of shares of capital stock  issuable on such date,  shall be
proportionately  adjusted so that the holder of any Right  exercised  after

                                       11
<PAGE>

such time shall be entitled to receive the  aggregate  number and kind of shares
of capital stock which,  if such Right had been exercised  immediately  prior to
such date and at a time when the Preferred  Stock  transfer books of the Company
were open,  the holder would have owned upon such  exercise and been entitled to
receive   by   virtue   of   such   dividend,   subdivision,    combination   or
reclassification; provided, however, that in no event shall the consideration to
be paid upon the exercise of one Right be less than the  aggregate  par value of
the shares of capital stock of the Company issuable upon exercise of one Right.

            (ii)  Subject  to  Section  24 of this  Agreement,  in the event any
Person  becomes an Acquiring  Person (the first  occurrence  of such event being
referred to  hereinafter  as the "Flip-In  Event"),  then (A) the Purchase Price
shall be adjusted to be the Purchase  Price in effect  immediately  prior to the
Flip-In  Event  multiplied  by the number of one  one-thousandths  of a share of
Preferred  Stock  for which a Right was  exercisable  immediately  prior to such
Flip-In  Event,  whether  or not such Right was then  exercisable,  and (B) each
holder of a Right,  except as otherwise  provided in this Section  11(a)(ii) and
Section  11(a)(iii)  hereof,  shall  thereafter have the right to receive,  upon
exercise  thereof at a price equal to the Purchase  Price (as so  adjusted),  in
accordance  with the terms of this  Agreement and in lieu of shares of Preferred
Stock,  such number of shares of Common Stock as shall equal the result obtained
by dividing the Purchase  Price (as so adjusted) by 50% of the current per share
market price of the Common Stock  (determined  pursuant to Section 11(d) hereof)
on the date of such Flip-In Event;  provided,  however,  that the Purchase Price
(as so  adjusted)  and the number of shares of Common Stock so  receivable  upon
exercise of a Right shall,  following the Flip-In  Event,  be subject to further
adjustment   as   appropriate   in   accordance   with  Section   11(f)  hereof.
Notwithstanding  anything in this Agreement to the contrary,  however,  from and
after the  Flip-In  Event,  any Rights  that are  beneficially  owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person),  (y) a
transferee of any  Acquiring  Person (or any such  Affiliate or  Associate)  who
becomes  a  transferee  after  the  Flip-In  Event  or (z) a  transferee  of any
Acquiring  Person (or any such  Affiliate or Associate)  who became a transferee
prior to or  concurrently  with the  Flip-In  Event  pursuant  to  either  (I) a
transfer from the Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing  agreement,  arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of Directors
has  determined is part of a plan,  arrangement or  understanding  which has the
purpose or effect of avoiding the provisions of this  paragraph,  and subsequent
transferees  of such Persons,  shall be void without any further  action and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any  provision of this  Agreement.  The Company  shall use all
reasonable  efforts to ensure that the provisions of this Section  11(a)(ii) are
complied with,  but shall have no liability to any holder of Right  Certificates
or other  Person  as a result of its  failure  to make any  determinations  with
respect to an Acquiring  Person or its  Affiliates,  Associates  or  transferees
hereunder.  From and after the  Flip-In  Event,  no Right  Certificate  shall be
issued pursuant to Section 3 or Section 6 hereof that represents Rights that are
or have become void pursuant to the provisions of this paragraph,  and any Right
Certificate  delivered  to the Rights Agent that  represents  Rights that are or
have become void pursuant to the provisions of this paragraph shall be canceled.
From and after the occurrence of an event specified in Section 13(a) hereof, any
Rights  that  theretofore  have  not been  exercised  pursuant  to this  Section
11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and
not pursuant to this Section 11(a)(ii).


                                       12
<PAGE>

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


                                       13
<PAGE>

uniformly to all outstanding  Rights and (y) may suspend the  exercisability  of
the Rights until the expiration of the Substitution  Period in order to seek any
authorization  of  additional  shares and/or to decide the  appropriate  form of
distribution  to be made  pursuant to such second  sentence and to determine the
value thereof.  In the event of any such  suspension,  the Company shall issue a
public  announcement  stating  that the  exercisability  of the  Rights has been
temporarily  suspended,  as well as a public  announcement  at such  time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii),  the
value of the shares of Common  Stock shall be the current per share market price
(as determined  pursuant to Section  11(d)(i)) on the Section  11(a)(ii) Trigger
Date and the per share or  fractional  value of any  "Common  Stock  Equivalent"
shall be deemed to equal the current per share market price of the Common Stock.
The Board of  Directors  of the  Company  may,  but shall  not be  required  to,
establish  procedures  to allocate  the right to receive  shares of Common Stock
upon the exercise of the Rights among holders of Rights pursuant to this Section
11(a)(iii).

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


                                       14
<PAGE>

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

            (d)(i) Except as otherwise  provided herein,  for the purpose of any
computation hereunder,  the "current per share market price " of any security (a
"Security  " for the  purpose  of this  Section  11(d)(i))  on any date shall be
deemed to be the average of the daily closing  prices per share of such Security
for the 30  consecutive  Trading  Days (as  such  term is  hereinafter  defined)
immediately prior to such date;  provided,  however,  that in the event that the
current per share  market price of the  Security is  determined  during a period
following the  announcement  by the issuer of such Security of (A) a dividend or
distribution  on such Security  payable in shares of such Security or securities
convertible  into  such  shares,   or  (B)  any   subdivision,   combination  or
reclassification  of such  Security,  and prior to the  expiration of 30 Trading
Days after the ex-dividend date for such dividend or distribution, or the record
date for such subdivision,  combination or  reclassification,  then, and in each
such case, the current per share market price shall be appropriately adjusted to
reflect the current  market price per share  equivalent  of such  Security.  The
closing  price for each day shall be the last sale price,  regular  way,  or, in
case no such sale takes  place on such day,  the  average of the closing bid and
asked  prices,  regular  way,  in  either  case  as  reported  by the  principal
consolidated  transaction  reporting system with respect to securities listed or
admitted to trading on the New York Stock  Exchange  or, if the  Security is not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal  consolidated  transaction reporting system with respect to securities
listed on the principal  national  securities  exchange on which the Security is
listed or admitted  to trading or, if the  Security is not listed or admitted to
trading on any national securities exchange, the last quoted price or, if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market,  as reported by NASDAQ or such other  system then in use,  or, if on any
such date the  Security is not quoted by any such  organization,  the average of
the closing bid and asked  prices as furnished  by a  professional  market maker
making a market  in the  Security  selected  by the  Board of  Directors  of the


                                       15
<PAGE>

Company. The term "Trading Day" shall mean a day on which the principal national
securities  exchange  on which the  Security is listed or admitted to trading is
open for the  transaction  of  business  or, if the  Security  is not  listed or
admitted to trading on any national securities exchange, a Business Day.

            (ii) For the purpose of any computation hereunder,  if the Preferred
Stock is publicly traded,  the "current per share market price" of the Preferred
Stock shall be  determined  in  accordance  with the method set forth in Section
11(d)(i).  If the Preferred Stock is not publicly traded but the Common Stock is
publicly  traded,  the "current per share market price" of the  Preferred  Stock
shall be  conclusively  deemed to be the current per share  market  price of the
Common Stock as determined  pursuant to Section 11(d)(i)  multiplied by the then
applicable  Adjustment  Number (as defined in and determined in accordance  with
the Certificate of Designation for the Preferred  Stock).  If neither the Common
Stock nor the  Preferred  Stock is publicly  traded,  "current  per share market
price"  shall mean the fair value per share as  determined  in good faith by the
Board of Directors of the Company,  whose  determination shall be described in a
statement filed with the Rights Agent.

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

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

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

            (h) Unless the Company shall have exercised its election as provided
in Section 11(i),  upon each adjustment of the Purchase Price as a result of the
calculations   made


                                       16
<PAGE>

in Sections 11(b) and 11(c),  each Right  outstanding  immediately  prior to the
making of such adjustment  shall thereafter  evidence the right to purchase,  at
the adjusted  Purchase Price,  that number of one  one-thousandth  of a share of
Preferred Stock (calculated to the nearest one  hundred-thousandth of a share of
Preferred   Stock)   obtained  by  (i)   multiplying   (x)  the  number  of  one
one-thousandths  of a share purchasable upon the exercise of a Right immediately
prior to such adjustment by (y) the Purchase Price in effect  immediately  prior
to such  adjustment  of the  Purchase  Price and (ii)  dividing  the  product so
obtained by the Purchase Price in effect  immediately  after such  adjustment of
the Purchase Price.

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

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

            (k) Before taking any action that would cause an adjustment reducing
the  Purchase  Price  below  the then par  value,  if any,  of the  fraction  of
Preferred  Stock or other shares of capital  stock  issuable  upon exercise of a
Right,  the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the

                                       17
<PAGE>

Company may validly and  legally  issue fully paid and  nonassessable  shares of
Preferred Stock or other such shares at such adjusted Purchase Price.

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

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

            (n) Anything in this Agreement to the contrary  notwithstanding,  in
the event that at any time after the date of this Rights  Agreement and prior to
the Distribution Date, the Company shall (i) declare and pay any dividend on the
Common Stock payable in Common Stock or (ii) effect a  subdivision,  combination
or consolidation of the Common Stock (by  reclassification  or otherwise than by
payment of a dividend  payable in Common  Stock) into a greater or lesser number
of  shares of Common  Stock,  then,  in each  such  case,  the  number of Rights
associated  with  each  share of Common  Stock  then  outstanding,  or issued or
delivered  thereafter,  shall be proportionately  adjusted so that the number of
Rights thereafter  associated with each share of Common Stock following any such
event  shall  equal the  result  obtained  by  multiplying  the number of Rights
associated with each share of Common Stock  immediately prior to such event by a
fraction  the  numerator  of which shall be the total number of shares of Common
Stock  outstanding  immediately  prior to the  occurrence  of the  event and the
denominator  of which  shall be the total  number  of  shares  of  Common  Stock
outstanding immediately following the occurrence of such event.

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

                                       18
<PAGE>

            Section  12.  Certificate  of Adjusted  Purchase  Price or Number of
Shares.  Whenever an  adjustment is made as provided in Section 11 or 13 hereof,
the  Company  shall  promptly  (a)  prepare a  certificate  setting  forth  such
adjustment,  and a brief statement of the facts  accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common Stock
and the Preferred Stock a copy of such  certificate and (c) mail a brief summary
thereof to each holder of a Right  Certificate  in  accordance  with  Section 25
hereof (if so required under Section 25 hereof). The Rights Agent shall be fully
protected  in  relying on any such  certificate  and on any  adjustment  therein
contained  and  shall not be deemed  to have  knowledge  of any such  adjustment
unless and until it shall have received such certificate.

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

            (a) In the  event,  directly  or  indirectly,  at any time after the
Flip-In  Event (i) the Company  shall  consolidate  with or shall merge into any
other  Person,  (ii) any Person  shall  merge with and into the  Company and the
Company shall be the continuing or surviving  corporation of such merger and, in
connection  with such  merger,  all or part of the Common Stock shall be changed
into or exchanged  for stock or other  securities of any other Person (or of the
Company)  or cash or any other  property,  or (iii) the  Company  shall  sell or
otherwise  transfer (or one or more of its Subsidiaries  shall sell or otherwise
transfer), in one or more transactions,  assets or earning power aggregating 50%
or more of the  assets or  earning  power of the  Company  and its  Subsidiaries
(taken as a whole) to any other  Person  (other  than the Company or one or more
wholly-owned  Subsidiaries  of the Company),  then upon the first  occurrence of
such event,  proper  provision shall be made so that: (A) each holder of a Right
(other than Rights which have become void pursuant to Section  11(a)(ii) hereof)
shall  thereafter  have the right to receive,  upon the exercise  thereof at the
Purchase Price (as  theretofore  adjusted in accordance  with Section  11(a)(ii)
hereof), in accordance with the terms of this Agreement and in lieu of shares of
Preferred  Stock  or  Common  Stock  of the  Company,  such  number  of  validly
authorized and issued, fully paid, non-assessable and freely tradeable shares of
Common Stock of the Principal Party (as such term is hereinafter  defined),  not
subject to any liens,  encumbrances,  rights of first  refusal or other  adverse
claims,  as shall equal the result  obtained by dividing the Purchase  Price (as
theretofore  adjusted in accordance with Section 11(a)(ii) hereof) by 50% of the
current  per share  market  price of the Common  Stock of such  Principal  Party
(determined  pursuant to Section  11(d) hereof) on the date of  consummation  of
such  consolidation,  merger,  sale or  transfer;  provided,  however,  that the
Purchase Price (as  theretofore  adjusted in accordance  with Section  11(a)(ii)
hereof)  and the  number of shares of Common  Stock of such  Principal  Party so
receivable  upon  exercise of a Right shall be subject to further  adjustment as
appropriate  in  accordance  with  Section  11(f)  hereof to reflect  any events
occurring  in respect  of the Common  Stock of such  Principal  Party  after the
occurrence of such consolidation,  merger, sale or transfer;  (B) such Principal
Party  shall  thereafter  be liable  for,  and shall  assume,  by virtue of such
consolidation,  merger, sale or transfer,  all the obligations and duties of the
Company  pursuant  to this  Rights  Agreement;  (C)  the  term  "Company"  shall
thereafter be deemed to refer to such  Principal  Party;  and (D) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient  number of its shares of Common  Stock in  accordance  with Section 9
hereof) in 

                                       19
<PAGE>

connection with such consummation of any such transaction as may be necessary to
assure that the provisions  hereof shall thereafter be applicable,  as nearly as
reasonably  may be, in  relation  to the shares of its Common  Stock  thereafter
deliverable upon the exercise of the Rights;  provided that, upon the subsequent
occurrence  of any  consolidation,  merger,  sale or transfer of assets or other
extraordinary  transaction in respect of such Principal Party,  each holder of a
Right shall  thereupon  be entitled  to  receive,  upon  exercise of a Right and
payment of the  Purchase  Price as provided in this  Section  13(a),  such cash,
shares,  rights,  warrants and other  property which such holder would have been
entitled to receive had such holder, at the time of such transaction,  owned the
Common  Stock of the  Principal  Party  receivable  upon the exercise of a Right
pursuant to this Section 13(a),  and such Principal  Party shall take such steps
(including,  but not  limited  to,  reservation  of  shares  of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.

            (b)    "Principal Party" shall mean:

                   (i) in the case of any  transaction  described in (i) or (ii)
of the first sentence of Section 13(a) hereof: (A) the Person that is the issuer
of the  securities  into which the shares of Common Stock are  converted in such
merger or consolidation,  or, if there is more than one such issuer,  the issuer
the shares of Common Stock of which have the greatest  aggregate market value of
shares  outstanding,  or (B) if no securities are so issued, (x) the Person that
is the other party to the merger,  if such Person  survives said merger,  or, if
there is more than one such  Person,  the Person  the shares of Common  Stock of
which have the greatest  aggregate market value of shares  outstanding or (y) if
the Person  that is the other  party to the merger  does not survive the merger,
the Person that does survive the merger  (including  the Company if it survives)
or (z) the Person resulting from the consolidation; and

                   (ii) in the case of any transaction described in (iii) of the
first sentence in Section 13(a) hereof,  the Person that is the party  receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction  or  transactions,  or,  if each  Person  that  is a  party  to such
transaction or  transactions  receives the same portion of the assets or earning
power so  transferred  or if the Person  receiving  the greatest  portion of the
assets or earning power cannot be  determined,  whichever of such Persons is the
issuer of Common  Stock  having the  greatest  aggregate  market value of shares
outstanding;

provided,  however,  that in any such case  described  in the  foregoing  clause
(b)(i) or (b)(ii), if the Common Stock of such Person is not at such time or has
not been  continuously  over the  preceding  12-month  period  registered  under
Section 12 of the Exchange  Act, then (1) if such Person is a direct or indirect
Subsidiary  of  another  Person  the  Common  Stock  of which is and has been so
registered,  the term "Principal Party" shall refer to such other Person, or (2)
if such Person is a Subsidiary, directly or indirectly, of more than one Person,
the  Common  Stock  of all of  which  is and has  been so  registered,  the term
"Principal  Party"  shall refer to  whichever  of such  Persons is the issuer of
Common Stock having the greatest  aggregate market value of shares  outstanding,
or (3) if such  Person is owned,  directly  or  indirectly,  by a joint  venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same  Person,  the rules set forth in clauses  (1) and (2) above  shall apply to
each of the 

                                       20
<PAGE>

owners  having an interest  in the  venture as if the Person  owned by the joint
venture  was a  Subsidiary  of  both  or all of such  joint  venturers,  and the
Principal  Party in each such case shall bear the  obligations set forth in this
Section 13 in the same ratio as its  interest in such Person  bears to the total
of such interests.

            (c) The Company shall not consummate any consolidation, merger, sale
or transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal  Party  involved  therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections 13(a)
and (b) hereof shall  promptly be performed in  accordance  with their terms and
that such consolidation,  merger, sale or transfer of assets shall not result in
a default by the  Principal  Party under this  Agreement  as the same shall have
been assumed by the Principal  Party  pursuant to Sections  13(a) and (b) hereof
and providing  that,  as soon as  practicable  after  executing  such  agreement
pursuant to this Section 13, the Principal Party will:

                   (i)  prepare  and file a  registration  statement  under  the
Securities  Act, if  necessary,  with  respect to the Rights and the  securities
purchasable  upon exercise of the Rights on an  appropriate  form,  use its best
efforts to cause such  registration  statement  to become  effective  as soon as
practicable   after  such  filing  and  use  its  best  efforts  to  cause  such
registration  statement  to remain  effective  (with a  prospectus  at all times
meeting the  requirements  of the Securities  Act) until the Expiration Date and
similarly comply with applicable state securities laws;

                   (ii)  use  its  best  efforts,  if the  Common  Stock  of the
Principal  Party  shall be listed or  admitted  to trading on the New York Stock
Exchange or on another national securities exchange, to list or admit to trading
(or  continue  the listing of) the Rights and the  securities  purchasable  upon
exercise  of the  Rights  on the New  York  Stock  Exchange  or such  securities
exchange,  or, if the Common Stock of the Principal Party shall not be listed or
admitted  to  trading on the New York Stock  Exchange  or a national  securities
exchange, to cause the Rights and the securities receivable upon exercise of the
Rights to be authorized  for quotation on NASDAQ or on such other system then in
use;

                   (iii) deliver to holders of the Rights  historical  financial
statements  for the  Principal  Party  which  comply  in all  respects  with the
requirements  for  registration  on Form 10 (or any  successor  form)  under the
Exchange Act; and

                   (iv)  obtain  waivers  of any  rights  of  first  refusal  or
preemptive  rights in respect of the Common Stock of the Principal Party subject
to purchase upon exercise of outstanding Rights.

            (d)  In  case  the  Principal  Party  has  provision  in  any of its
authorized securities or in its certificate of incorporation or by-laws or other
instrument  governing  its corporate  affairs,  which  provision  would have the
effect of (i) causing  such  Principal  Party to issue (other than to holders of
Rights pursuant to this Section 13), in connection with, or as a consequence of,
the  consummation  of a  transaction  referred to in this Section 13,  shares of
Common Stock or Common Stock  Equivalents of such  Principal  Party at less than
the then 

                                       21
<PAGE>

current  market price per share  thereof  (determined  pursuant to Section 11(d)
hereof) or securities  exercisable  for, or  convertible  into,  Common Stock or
Common Stock  Equivalents of such Principal Party at less than such then current
market  price,  or  (ii)  providing  for any  special  payment,  tax or  similar
provision in connection  with the issuance of the Common Stock of such Principal
Party pursuant to the provisions of Section 13, then, in such event, the Company
hereby agrees with each holder of Rights that it shall not  consummate  any such
transaction unless prior thereto the Company and such Principal Party shall have
executed and delivered to the Rights Agent a  supplemental  agreement  providing
that the provision in question of such Principal Party shall have been canceled,
waived or amended, or that the authorized  securities shall be redeemed, so that
the  applicable  provision  will  have no  effect in  connection  with,  or as a
consequence of, the consummation of the proposed transaction.

            (e) The Company  covenants and agrees that it shall not, at any time
after the Flip-In  Event,  enter into any  transaction  of the type described in
clauses  (i)  through  (iii) of  Section  13(a)  hereof if (i) at the time of or
immediately  after  such   consolidation,   merger,   sale,  transfer  or  other
transaction  there are any rights,  warrants or other  instruments or securities
outstanding  or  agreements  in effect  which  would  substantially  diminish or
otherwise  eliminate  the benefits  intended to be afforded by the Rights,  (ii)
prior to,  simultaneously with or immediately after such consolidation,  merger,
sale,  transfer  or  other  transaction,  the  stockholders  of the  Person  who
constitutes,  or would  constitute,  the Principal Party for purposes of Section
13(b) hereof shall have received a distribution  of Rights  previously  owned by
such Person or any of its  Affiliates  or Associates or (iii) the form or nature
of   organization   of  the  Principal   Party  would   preclude  or  limit  the
exercisability of the Rights.

            Section 14.  Fractional Rights and Fractional Shares.

            (a) The Company  shall not be required to issue  fractions of Rights
or to distribute Right  Certificates  which evidence  fractional  Rights (except
prior to the Distribution Date in accordance with Section 11(n) hereof). In lieu
of such fractional Rights,  there shall be paid to the registered holders of the
Right  Certificates  with regard to which such fractional Rights would otherwise
be issuable,  an amount in cash equal to the same fraction of the current market
value of a whole  Right.  For the purposes of this  Section  14(a),  the current
market  value of a whole Right shall be the closing  price of the Rights for the
Trading Day immediately  prior to the date on which such fractional Rights would
have been  otherwise  issuable.  The closing price for any day shall be the last
sale price,  regular  way, or, in case no such sale takes place on such day, the
average of the  closing  bid and asked  prices,  regular  way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities  listed or admitted to trading on the New York Stock  Exchange or,
if the  Rights  are not  listed or  admitted  to  trading  on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national  securities exchange
on which the Rights are listed or  admitted to trading or, if the Rights are not
listed or  admitted to trading on any  national  securities  exchange,  the last
quoted  price or, if not so  quoted,  the  average of the high bid and low asked
prices in the  over-the-counter  market,  as  reported  by NASDAQ or such  other
system then in use or, if on any such date the Rights are not quoted by any such
organization,  the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights 

                                       22
<PAGE>

selected by the Board of Directors  of the Company.  If on any such date no such
market  maker is making a market in the Rights,  the fair value of the Rights on
such date as  determined  in good faith by the Board of Directors of the Company
shall be used.

            (b)  The  Company  shall  not be  required  to  issue  fractions  of
Preferred  Stock  (other than  fractions  which are  integral  multiples  of one
one-thousandth  of a share of  Preferred  Stock) or to  distribute  certificates
which evidence  fractional shares of Preferred Stock (other than fractions which
are integral multiples of one one-thousandth of a share of Preferred Stock) upon
the exercise or exchange of Rights. Interests in fractions of Preferred Stock in
integral  multiples of one  one-thousandth of a share of Preferred Stock may, at
the election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate  agreement  between  the Company  and a  depositary  selected by it;
provided,  that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled  as  beneficial  owners  of the  Preferred  Stock  represented  by such
depositary  receipts.  In lieu of fractional  shares of Preferred Stock that are
not integral  multiples of one one-thousandth of a share of Preferred Stock, the
Company shall pay to the registered  holders of Right  Certificates  at the time
such Rights are  exercised  or  exchanged  as herein  provided an amount in cash
equal to the same  fraction  of the  current  market  value of a whole  share of
Preferred  Stock (as determined in accordance with Section 14(a) hereof) for the
Trading Day immediately prior to the date of such exercise or exchange.

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

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

            Section  15.  Rights of  Action.  All rights of action in respect of
this  Agreement,  excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective  registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock);  and any registered holder of any Right Certificate (or, prior to
the Distribution  Date, of the Common Stock),  without the consent of the Rights
Agent  or of the  holder  of any  other  Right  Certificate  (or,  prior  to the
Distribution  Date,  of the  Common  Stock),  on his own  behalf and for his own
benefit,  may  enforce,  and may  institute  and  maintain  any suit,  action or
proceeding  against the Company to enforce,  or otherwise act in respect of, his
right to exercise the Rights  evidenced by such Right  Certificate (or, prior to
the Distribution  Date, such Common Stock) in the manner provided therein and in
this Agreement.  Without limiting the foregoing or any remedies available to the
holders of Rights,  it is specifically  acknowledged  that the holders of Rights
would not have an 

                                       23
<PAGE>

adequate  remedy at law for any breach of this Agreement and will be entitled to
specific  performance of the obligations  under,  and injunctive  relief against
actual or threatened  violations  of, the  obligations  of any Person subject to
this Agreement.

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

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

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

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

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

            Section 18.  Concerning the Rights Agent.

            (a)  The  Company  agrees  to  pay to the  Rights  Agent  reasonable
compensation  for all services  rendered by it hereunder and, from time to time,
on demand of the Rights  Agent,  its  reasonable  expenses  and counsel fees and
other  disbursements  incurred  in the  administration  and  execution  of  this
Agreement and the exercise and performance of its duties hereunder.  The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless  against,
any loss,  liability  or  expense,  incurred  without  negligence,  bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights 

                                       24
<PAGE>

Agent in connection  with the acceptance and  administration  of this Agreement,
including  the costs and  expenses of  defending  against any claim of liability
arising therefrom, directly or indirectly.

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

            Section  19.  Merger  or  Consolidation  or Change of Name of Rights
Agent.

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

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

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

                                       25
<PAGE>

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

            (b) Whenever in the  performance  of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or  established  by the Company  prior to taking or suffering  any action
hereunder,  such fact or matter  (unless  other  evidence in respect  thereof be
herein  specifically  prescribed)  may be deemed to be  conclusively  proved and
established  by a  certificate  signed by the President and the Secretary of the
Company and delivered to the Rights Agent;  and such  certificate  shall be full
authorization to the Rights Agent for any action taken or suffered in good faith
by it under the provisions of this Agreement in reliance upon such certificate.

            (c) The Rights  Agent shall be liable  hereunder  to the Company and
any other Person only for its own negligence, bad faith or willful misconduct.

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

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

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

            (g) The Rights  Agent is hereby  authorized  and  directed to accept
instructions  with respect to the  performance of its duties  hereunder from any
person reasonably believed by the Rights Agent to be one of the President or the
Secretary  of the  Company,  and  to  apply  

                                       26
<PAGE>

to such officers for advice or instructions  in connection with its duties,  and
it shall not be liable for any action  taken or  suffered by it in good faith in
accordance  with  instructions  of any such  officer  or for any delay in acting
while waiting for those  instructions.  Any  application by the Rights Agent for
written  instructions  from the Company may, at the option of the Rights  Agent,
set forth in writing  any action  proposed  to be taken or omitted by the Rights
Agent under this  Agreement and the date on and/or after which such action shall
be taken or such  omission  shall be  effective.  The Rights  Agent shall not be
liable for any action taken by, or omission  of, the Rights Agent in  accordance
with a proposal  included in any such application on or after the date specified
in such application  (which date shall not be less than five Business Days after
the date any officer of the Company actually  receives such  application  unless
any such officer  shall have  consented in writing to an earlier  date)  unless,
prior  to  taking  any  such  action  (or the  effective  date in the case of an
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.

            (h) The  Rights  Agent and any  stockholder,  director,  officer  or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the  Company  may be  interested,  or  contract  with or lend money to the
Company or otherwise  act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

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

            (j) If, with respect to any Rights  Certificate  surrendered  to the
Rights Agent for exercise or transfer,  the certificate contained in the form of
assignment or the form of election to purchase set forth on the reverse thereof,
as the case may be,  has not been  completed  to  certify  the  holder is not an
Acquiring Person (or an Affiliate or Associate thereof),  the Rights Agent shall
not take any further action with respect to such requested  exercise or transfer
without first consulting with the Company.

            Section  21.  Change  of  Rights  Agent.  The  Rights  Agent  or any
successor  Rights Agent may resign and be discharged  from its duties under this
Agreement  upon 30 days'  notice in writing  mailed to the  Company  and to each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail,  and,  following  the  Distribution  Date,  to the  holders  of the  Right
Certificates by first-class mail. The Company may remove the Rights Agent or any
successor  Rights  Agent upon 30 days'  notice in writing,  mailed to the Rights
Agent or successor  Rights Agent, as the case may be, and to each transfer agent
of the Common Stock or Preferred  Stock by  registered or certified  mail,  and,
following the  Distribution  Date, to the holders of the Right  Certificates  by
first-class  mail.  If the  Rights  Agent  shall  resign or be  removed or shall
otherwise become  incapable of acting,  the Company 

                                       27
<PAGE>

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

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

            Section 23.  Redemption.

            (a) The Board of  Directors of the Company may, at any time prior to
the Flip-In Event,  redeem all but not less than all the then outstanding Rights
at a redemption price of $.01 per Right,  appropriately  adjusted to reflect any
stock split,  stock  dividend or similar  transaction  occurring  after the date
hereof (the redemption  price being  hereinafter  referred to as the "Redemption
Price").  The  redemption  of the Rights may be made  effective at such 

                                       28
<PAGE>

time,  on such basis and with such  conditions  as the Board of Directors in its
sole  discretion may establish.  The Redemption  Price shall be payable,  at the
option of the Company,  in cash,  shares of Common Stock,  or such other form of
consideration as the Board of Directors shall determine.

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

            Section 24.  Exchange.

            (a) The Board of Directors of the Company may, at its option, at any
time after the Flip-In Event,  exchange all or part of the then  outstanding and
exercisable  Rights  (which  shall not  include  Rights  that have  become  void
pursuant to the provisions of Section  11(a)(ii)  hereof) for Common Stock at an
exchange ratio of one share of Common Stock per Right, appropriately adjusted to
reflect any stock split, stock dividend or similar  transaction  occurring after
the date  hereof  (such  amount per Right being  hereinafter  referred to as the
"Exchange Ratio").  Notwithstanding the foregoing,  the Board of Directors shall
not be empowered to effect such  exchange at any time after an Acquiring  Person
shall have become the Beneficial Owner of shares of Common Stock aggregating 50%
or more of the  shares  of Common  Stock  then  outstanding.  From and after the
occurrence  of an event  specified  in Section  13(a)  hereof,  any Rights  that
theretofore  have  not been  exchanged  pursuant  to this  Section  24(a)  shall
thereafter  be  exercisable  only in  accordance  with Section 13 and may not be
exchanged  pursuant to this  Section  24(a).  The  exchange of the Rights by the
Board of Directors  may be made  effective at such time,  on such basis and with
such conditions as the Board of Directors in its sole discretion may establish.

            (b) Immediately upon the effectiveness of the action of the Board of
Directors  of the  Company  ordering  the  exchange  of any Rights  pursuant  to
paragraph (a) of this Section 24 and without any further  action and without any
notice,  the right to exercise  such Rights shall  terminate  and the only right
thereafter  of a holder of such Rights shall be to receive that number of shares
of  Common  Stock  equal  to the  number  of such  Rights  held  by such  holder
multiplied by the Exchange Ratio.  The Company shall promptly give public notice
of any 

                                       29
<PAGE>

such exchange;  provided,  however,  that the failure to give, or any defect in,
such notice shall not affect the validity of such  exchange.  The Company  shall
promptly  mail a notice of any such exchange to all of the holders of the Rights
so exchanged at their last  addresses as they appear upon the registry  books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange  will state the method by which the exchange of the shares of Common
Stock for Rights will be effected and, in the event of any partial exchange, the
number of Rights which will be exchanged. Any partial exchange shall be effected
pro rata based on the number of Rights (other than Rights which have become void
pursuant to the provisions of Section  11(a)(ii)  hereof) held by each holder of
Rights.

            (c) The Company may at its option substitute, and, in the event that
there shall not be sufficient  shares of Common Stock issued but not outstanding
or  authorized  but unissued to permit an exchange of Rights for Common Stock as
contemplated in accordance with this Section 24, the Company shall substitute to
the  extent of such  insufficiency,  for each  share of Common  Stock that would
otherwise be issuable upon exchange of a Right,  a number of shares of Preferred
Stock or  fraction  thereof (or  equivalent  preferred  shares,  as such term is
defined  in  Section  11(b))  such  that the  current  per  share  market  price
(determined  pursuant to Section 11(d)  hereof) of one share of Preferred  Stock
(or equivalent  preferred share)  multiplied by such number or fraction is equal
to the current per share market  price of one share of Common Stock  (determined
pursuant to Section 11(d) hereof) as of the date of such exchange.

            Section 25.  Notice of Certain Events.

            (a) In case the  Company  shall at any time after the earlier of the
Distribution  Date or the Stock Acquisition Date propose (i) to pay any dividend
payable in stock of any class to the holders of its  Preferred  Stock or to make
any other  distribution  to the  holders of its  Preferred  Stock  (other than a
regular quarterly cash dividend),  (ii) to offer to the holders of its Preferred
Stock rights or warrants to subscribe for or to purchase any  additional  shares
of  Preferred  Stock or shares  of stock of any  class or any other  securities,
rights or options,  (iii) to effect any  reclassification of its Preferred Stock
(other than a reclassification  involving only the subdivision or combination of
outstanding  Preferred  Stock),  (iv) to effect the liquidation,  dissolution or
winding  up of the  Company,  or (v) to pay any  dividend  on the  Common  Stock
payable in Common Stock or to effect a subdivision, combination or consolidation
of the  Common  Stock (by  reclassification  or  otherwise  than by  payment  of
dividends in Common  Stock),  then, in each such case, the Company shall give to
each holder of a Right  Certificate,  in  accordance  with Section 26 hereof,  a
notice of such  proposed  action,  which  shall  specify the record date for the
purposes of such stock dividend,  or distribution of rights or warrants,  or the
date on which such  liquidation,  dissolution or winding up is to take place and
the date of  participation  therein by the  holders of the Common  Stock  and/or
Preferred  Stock,  if any such date is to be fixed,  and such notice shall be so
given in the case of any action  covered by clause (i) or (ii) above at least 10
days prior to the record date for determining holders of the Preferred Stock for
purposes of such action,  and in the case of any such other action,  at least 10
days  prior to the date of the  taking  of such  proposed  action or the date of
participation 

                                       30
<PAGE>

therein by the holders of the Common Stock  and/or  Preferred  Stock,  whichever
shall be the earlier.

            (b) In case any event  described in Section  11(a)(ii) or Section 13
shall occur then the Company  shall as soon as  practicable  thereafter  give to
each holder of a Right  Certificate (or if occurring  prior to the  Distribution
Date, the holders of the Common Stock) in accordance  with Section 26 hereof,  a
notice of the  occurrence of such event,  which notice shall describe such event
and the consequences of such event to holders of Rights under Section  11(a)(ii)
and Section 13 hereof.

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

                          Fortune Petroleum Corporation
                          One Commerce Green
                          515 West Greens Road, Suite 720
                          Houston, TX  77067
                          Attention: Dean W. Drulias, General Counsel

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

                          U.S. Stock Transfer Corporation
                          1745 Gardena Avenue
                          Glendale, California  91204
                          Attention:  Mr. James D. Hunter

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

            Section 27.  Supplements and  Amendments.  Except as provided in the
penultimate  sentence  of this  Section  27,  for so long as the Rights are then
redeemable,  the Company may in its sole and absolute discretion, and the Rights
Agent shall if the Company so directs, supplement or amend any provision of this
Agreement in any respect  without the approval of any holders of the Rights.  At
any time when the Rights are no longer  redeemable,  except as  provided  in the
penultimate  sentence of this  Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval  of any  holders  of  Rights in order to (i) cure any  ambiguity,  (ii)
correct or supplement any provision  contained  herein which may be defective or
inconsistent with any other provision herein, (iii) shorten or lengthen any time
period hereunder,  or (iv) change or 

                                       31
<PAGE>

supplement  the  provisions  hereunder  in any manner which the Company may deem
necessary or  desirable;  provided that no such  supplement  or amendment  shall
adversely  affect the  interests of the holders of Rights as such (other than an
Acquiring  Person or an Affiliate or Associate of an Acquiring  Person),  and no
such  amendment  may cause the Rights  again to become  redeemable  or cause the
Agreement again to become amendable other than in accordance with this sentence.
Notwithstanding  anything  contained  in  this  Agreement  to the  contrary,  no
supplement or amendment shall be made which changes the Redemption  Price.  Upon
the delivery of a certificate  from an appropriate  officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.

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

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

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

            Section  31.  Severability.  If any  term,  provision,  covenant  or
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority  to be invalid,  void or  unenforceable,  the  remainder of the
terms, provisions,  covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.

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

                                       32
<PAGE>

            Section  33.  Counterparts.  This  Agreement  may be executed in any
number of counterparts and each of such  counterparts  shall for all purposes be
deemed to be an original,  and all such counterparts  shall together  constitute
but one and the same instrument.

            Section  34.  Descriptive  Headings.  Descriptive  headings  of  the
several  Sections of this Agreement are inserted for convenience  only and shall
not  control or affect  the  meaning or  construction  of any of the  provisions
hereof.


                                       33
<PAGE>

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

                          FORTUNE PETROLEUM CORPORATION


                          By: /s/ Tyrone J. Fairbanks
                              -----------------------
                          Name:  Tyrone J. Fairbanks
                          Title: President and CEO



                          U.S. STOCK TRANSFER CORPORATION
                          as Rights Agent



                          By: /s/ James Hunter
                              -----------------------
                          Name:  James Hunter
                          Title: Vice President and Assistant Secretary


                                       34
<PAGE>

                                                                       Exhibit A
                                     FORM OF
                           CERTIFICATE OF DESIGNATION

                                           of

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

                                           of

                          FORTUNE PETROLEUM CORPORATION

                    Pursuant to Section 151 of the General Corporation Law
                            of the State of Delaware

            Fortune Petroleum Corporation,  a corporation organized and existing
under the General  Corporation Law of the State of Delaware,  in accordance with
the provisions of Section 103 thereof, DOES HEREBY CERTIFY:

            That pursuant to the  authority  vested in the Board of Directors in
accordance with the provisions of the Certificate of  Incorporation  of the said
Corporation,  the said Board of  Directors  on  February  28,  1997  adopted the
following  resolution  creating  a series  of 5000  shares  of  Preferred  Stock
designated as "Series A Junior Participating Preferred Stock":

                   RESOLVED,  that pursuant to the authority vested in the Board
            of Directors of this  Corporation in accordance  with the provisions
            of the Certificate of  Incorporation,  a series of Preferred  Stock,
            par value  $1.00 per  share,  of the  Corporation  be and  hereby is
            created,  and that the  designation and number of shares thereof and
            the   voting   and   other   powers,   preferences   and   relative,
            participating, optional or other rights of the shares of such series
            and the qualifications,  limitations and restrictions thereof are as
            follows:

                  SERIES A JUNIOR PARTICIPATING PREFERRED STOCK

            1.  DESIGNATION  AND AMOUNT.  There  shall be a series of  Preferred
Stock  that shall be  designated  as  "Series A Junior  Participating  Preferred
Stock," and the number of shares  constituting  such series shall be 5000.  Such
number of shares may be increased or  decreased  by  resolution  of the Board of
Directors; provided, however, that no decrease shall reduce the number of shares
of Series A Junior  Participating  Preferred  Stock to less  than the  number of
shares  then  issued and  outstanding  plus the number of shares  issuable  upon
exercise  of  outstanding  rights,  options or warrants  or upon  conversion  of
outstanding securities issued by the Corporation.

            2.     DIVIDENDS AND DISTRIBUTION.


                                       A-1
<PAGE>

                   (A) Subject to the prior and  superior  rights of the holders
of any shares of any class or series of stock of the  Corporation  ranking prior
and superior to the shares of Series A Junior Participating Preferred Stock with
respect to  dividends,  the  holders of shares of Series A Junior  Participating
Preferred  Stock,  in preference to the holders of shares of any class or series
of stock of the Corporation ranking junior to the Series A Junior  Participating
Preferred Stock in respect thereof,  shall be entitled to receive,  when, as and
if declared by the Board of Directors  out of funds  legally  available  for the
purpose,  quarterly  dividends  payable in cash on the last day of March,  June,
September and December, in each year (each such date being referred to herein as
a "Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment  Date  after the first  issuance  of a share or  fraction  of a share of
Series A Junior  Participating  Preferred Stock, in an amount per share (rounded
to the  nearest  cent)  equal to the  greater  of (a) $10 or (b) the  Adjustment
Number (as  defined  below)  times the  aggregate  per share  amount of all cash
dividends,  and the  Adjustment  Number  times the  aggregate  per share  amount
(payable in kind) of all non-cash dividends or other  distributions other than a
dividend  payable in shares of Common Stock or a subdivision of the  outstanding
shares of Common  Stock (by  reclassification  or  otherwise),  declared  on the
Common Stock,  par value $.01 per share, of the Corporation (the "Common Stock")
since the  immediately  preceding  Quarterly  Dividend  Payment  Date,  or, with
respect to the first Quarterly  Dividend  Payment Date, since the first issuance
of any share or fraction of a share of Series A Junior  Participating  Preferred
Stock.  The  "Adjustment  Number"  shall  initially  be 1000.  In the  event the
Corporation  shall at any time after  March 21,  1997 (the  "Rights  Declaration
Date") (i) declare and pay any  dividend  on Common  Stock  payable in shares of
Common Stock,  (ii) subdivide the outstanding  Common Stock or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the  Adjustment  Number  in  effect  immediately  prior to such  event  shall be
adjusted by multiplying  such  Adjustment  Number by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the  denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

                   (B) The Corporation  shall declare a dividend or distribution
on the Series A Junior  Participating  Preferred  Stock as provided in paragraph
(A) above immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock).

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

                                       A-2
<PAGE>

and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.  The Board of Directors may fix a
record  date for the  determination  of  holders  of  shares  of Series A Junior
Participating  Preferred  Stock  entitled  to receive  payment of a dividend  or
distribution  declared thereon,  which record date shall be no more than 60 days
prior to the date fixed for the payment thereof.

            3.  VOTING  RIGHTS.  The  holders  of  shares  of  Series  A  Junior
Participating Preferred Stock shall have the following voting rights:

                   (A) Each  share of  Series A Junior  Participating  Preferred
Stock  shall  entitle  the  holder  thereof  to a number  of votes  equal to the
Adjustment  Number on all matters submitted to a vote of the stockholders of the
Corporation.

                   (B)  Except as  required  by law and by  Section  10  hereof,
holders of Series A Junior  Participating  Preferred Stock shall have no special
voting rights and their consent shall not be required (except to the extent they
are  entitled  to vote with  holders of Common  Stock as set forth  herein)  for
taking any corporate action.

            4.     CERTAIN RESTRICTIONS.

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

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

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

                          (iii) purchase or otherwise acquire for consideration 
any shares of Series A Junior Participating Preferred Stock, or any shares of 
stock ranking on a parity with the Series A Junior Participating Preferred 
Stock, except in accordance with a purchase offer made in writing or by 
publication (as determined by the Board of Directors) to all holders of Series A
Junior Participating Preferred Stock, or to such holders and holders of any 
such shares ranking on a parity therewith, upon such terms as the Board of 
Directors, after consideration of the respective annual dividend rates and other
relative rights and preferences of the respective series and classes, shall 
determine in good faith will result in fair and equitable treatment among the 
respective series or classes.
    
                                       A-3

<PAGE>

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

            5. REACQUIRED  SHARES.  Any shares of Series A Junior  Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever  shall be retired  promptly after the acquisition  thereof.  All such
shares shall upon their  retirement  become  authorized  but unissued  shares of
Preferred  Stock and may be reissued as part of a new series of Preferred  Stock
to be created by resolution or resolutions of the Board of Directors, subject to
any conditions and restrictions on issuance set forth herein.

            6. LIQUIDATION, DISSOLUTION OR WINDING UP. (A) Upon any liquidation,
dissolution  or  winding  up of the  Corporation,  voluntary  or  otherwise,  no
distribution  shall be made to the  holders  of shares of stock  ranking  junior
(either as to dividends or upon  liquidation,  dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior  Participating  Preferred Stock shall have received
an amount per share (the "Series A Liquidation Preference") equal to the greater
of  (i)  $10  plus  an  amount  equal  to  accrued  and  unpaid   dividends  and
distributions thereon,  whether or not declared, to the date of such payment, or
(ii) the  Adjustment  Number  times the per  share  amount of all cash and other
property to be distributed in respect of the Common Stock upon such liquidation,
dissolution or winding up of the Corporation.

                   (B) In the  event,  however,  that  there are not  sufficient
assets  available  to  permit  payment  in  full  of the  Series  A  Liquidation
Preference  and the  liquidation  preferences of all other classes and series of
stock of the Corporation, if any, that rank on a parity with the Series A Junior
Participating  Preferred Stock in respect thereof, then the assets available for
such  distribution  shall be distributed  ratably to the holders of the Series A
Junior  Participating  Preferred  Stock and the holders of such parity shares in
proportion to their respective liquidation preferences.

                   (C) Neither the merger or  consolidation  of the  Corporation
into or with another  corporation nor the merger or  consolidation  of any other
corporation  into or with the  Corporation  shall be deemed to be a liquidation,
dissolution or winding up of the Corporation  within the meaning of this Section
6.

            7.  CONSOLIDATION,  MERGER, ETC. In case the Corporation shall enter
into any  consolidation,  merger,  combination or other transaction in which the
outstanding shares of Common Stock are exchanged for or changed into other stock
or securities,  cash and/or any other property, then in any such case each share
of  Series A Junior  Participating  Preferred  Stock  shall at the same  time be
similarly  exchanged  or changed in an amount per share equal to the  Adjustment
Number times the aggregate  amount of stock,  securities,  cash and/or any other
property  (payable  in kind),  as the case may be,  into which or for which each
share of Common Stock is changed or exchanged.

                                      A-4

<PAGE>

            8. NO REDEMPTION.  Shares of Series A Junior Participating Preferred
Stock shall not be subject to redemption by the Company.

            9. RANKING. The Series A Junior Participating  Preferred Stock shall
rank  junior to all other  series of the  Preferred  Stock as to the  payment of
dividends and as to the distribution of assets upon liquidation,  dissolution or
winding up,  unless the terms of any such series shall  provide  otherwise,  and
shall rank senior to the Common Stock as to such matters.

            10.  AMENDMENT.  At any time  that  any  shares  of  Series A Junior
Participating  Preferred  Stock are  outstanding,  the Restated  Certificate  of
Incorporation of the Corporation  shall not be amended in any manner which would
materially  alter or change the  powers,  preferences  or special  rights of the
Series A Junior  Participating  Preferred  Stock so as to affect them  adversely
without the  affirmative  vote of the holders of two-thirds  of the  outstanding
shares of Series A Junior Participating  Preferred Stock, voting separately as a
class.

            11. FRACTIONAL SHARES. Series A Junior Participating Preferred Stock
may be  issued in  fractions  of a share  that  shall  entitle  the  holder,  in
proportion  to such  holder's  fractional  shares,  to exercise  voting  rights,
receive  dividends,  participate in distributions and to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.

            IN WITNESS  WHEREOF,  the undersigned has executed this  Certificate
this __ day of March, 1997.

                                         FORTUNE PETROLEUM CORPORATION



                                         By:
                                         Name:
                                         Title:


                                      A-5
<PAGE>

                                                                       Exhibit B

                            Form of Right Certificate

Certificate No. R-______

            NOT EXERCISABLE  AFTER FEBRUARY 28, 2007 OR EARLIER IF REDEMPTION OR
            EXCHANGE  OCCURS.  THE RIGHTS ARE SUBJECT TO  REDEMPTION AT $.01 PER
            RIGHT  AND TO  EXCHANGE  ON  THE  TERMS  SET  FORTH  IN  THE  RIGHTS
            AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES,  AS SET FORTH IN THE RIGHTS
            AGREEMENT,  RIGHTS OWNED BY OR  TRANSFERRED  TO ANY PERSON WHO IS OR
            BECOMES AN ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) AND
            CERTAIN  TRANSFEREES  THEREOF  WILL BECOME NULL AND VOID AND WILL NO
            LONGER BE TRANSFERABLE.


                                RIGHT CERTIFICATE

                          FORTUNE PETROLEUM CORPORATION

            This  certifies  that   ____________________________  or  registered
assigns,  is the registered owner of the number of Rights set forth above,  each
of which  entitles  the owner  thereof,  subject  to the terms,  provisions  and
conditions of the Rights Agreement,  dated as of March 21, 1997, as the same may
be amended from time to time (the "Rights Agreement"), between Fortune Petroleum
Corporation,  a Delaware  corporation (the  "Company"),  and U.S. Stock Transfer
Corporation,  as Rights Agent (the "Rights Agent"), to purchase from the Company
at any time after the  Distribution  Date (as such term is defined in the Rights
Agreement) and prior to 5:00 P.M., Houston,  Texas time, on February 28, 2007 at
the office or agency of the Rights Agent designated for such purpose,  or of its
successor as Rights Agent,  one  one-thousandth  of a fully paid  non-assessable
share of Series A Junior  Participating  Preferred  Stock,  par value  $1.00 per
share (the "Preferred Stock"), of the Company at a purchase price of $10 per one
one-thousandth  of a share of  Preferred  Stock  (the  "Purchase  Price"),  upon
presentation  and surrender of this Right  Certificate with the Form of Election
to  Purchase  duly  executed.  The  number of Rights  evidenced  by this  Rights
Certificate (and the number of one one-thousandths of a share of Preferred Stock
which may be purchased upon exercise  hereof) set forth above,  and the Purchase
Price set forth above,  are the number and Purchase  Price as of March 21, 1997,
based on the  Preferred  Stock as  constituted  at such date. As provided in the
Rights  Agreement,  the Purchase Price, the number of one  one-thousandths  of a
share of  Preferred  Stock  (or  other  securities  or  property)  which  may be
purchased upon the exercise of the Rights and the number of Rights  evidenced by
this Right  Certificate  are subject to  modification  and  adjustment  upon the
happening of certain events.
                                      B-1

<PAGE>

            This Right  Certificate  is subject to all of the terms,  provisions
and conditions of the Rights Agreement,  which terms,  provisions and conditions
are hereby  incorporated herein by reference and made a part hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights Agent, the Company and the holders of the Right  Certificates.  Copies of
the  Rights  Agreement  are on file at the  principal  executive  offices of the
Company  and the  above-mentioned  office  or agency of the  Rights  Agent.  The
Company will mail to the holder of this Right  Certificate  a copy of the Rights
Agreement without charge after receipt of a written request therefor.

            This Right  Certificate,  with or without other Right  Certificates,
upon  surrender at the office or agency of the Rights Agent  designated for such
purpose, may be exchanged for another Right Certificate or Right Certificates of
like tenor and date  evidencing  Rights  entitling the holder to purchase a like
aggregate  number of shares of  Preferred  Stock as the Rights  evidenced by the
Right  Certificate or Right  Certificates  surrendered  shall have entitled such
holder to purchase.  If this Right  Certificate  shall be exercised in part, the
holder  shall be  entitled  to  receive  upon  surrender  hereof  another  Right
Certificate or Right Certificates for the number of whole Rights not exercised.

            Subject  to the  provisions  of the  Rights  Agreement,  the  Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be  exchanged in whole or in part for shares
of the Company's  Common Stock, par value $.01 per share, or shares of Preferred
Stock.

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

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

                                      B-2
<PAGE>

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

            WITNESS  the  facsimile  signature  of the  proper  officers  of the
Company and its corporate seal. Dated as of March 21, 1997.

                                         FORTUNE PETROLEUM CORPORATION



                                         By:__________________________________
                                                [Title]
ATTEST:



------------------------------------
[Title]


Countersigned:


U.S. STOCK TRANSFER CORPORATION, as Rights Agent



By__________________________________
     [Title]

                                      B-3
<PAGE>

                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

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

      FOR VALUE RECEIVED _________________________ hereby sells, assigns and
transfers unto _________________________________________________________________
________________________________________________________________________________
(Please print name and address of transferee)
__________________________________________________________________________Rights
represented by this Right Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint
_________________ Attorney, to transfer said Rights on the books of the
within-named Company, with full power of substitution.

Dated:  ____________________________


                                                ________________________________
                                                       Signature

Signature Guaranteed:


            Signatures  must be guaranteed  by a bank,  trust  company,  broker,
dealer or other eligible  institution  participating  in a recognized  signature
guarantee medallion program.

 ................................................................................
                                (To be completed)

            The undersigned  hereby  certifies that the Rights evidenced by this
Right  Certificate  are not  beneficially  owned by,  were not  acquired  by the
undersigned  from,  and are not  being  assigned  to an  Acquiring  Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement).


                                                ________________________________
                                                       Signature

                                      B-4


<PAGE>
              Form of Reverse Side of Right Certificate - continued

                          FORM OF ELECTION TO PURCHASE

                  (To be executed if holder desires to exercise
                  Rights represented by the Rights Certificate)

To FORTUNE PETROLEUM CORPORATION:

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

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

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

Please insert social security
or other identifying number

--------------------------------------------------------------------------------
                         (Please print name and address)

--------------------------------------------------------------------------------

Dated: ___________________


                                                ________________________________
                                                       Signature
        (Signature must conform to holder specified on Right Certificate)

Signature Guaranteed:

            Signature  must be  guaranteed  by a bank,  trust  company,  broker,
dealer or other eligible  institution  participating  in a recognized  signature
guarantee medallion program.

                                      B-5

<PAGE>


              Form of Reverse Side of Right Certificate - continued

--------------------------------------------------------------------------------
                                (To be completed)

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


                                               _________________________________
                                                       Signature

--------------------------------------------------------------------------------


                                     NOTICE
                                     ------

            The  signature  in the Form of  Assignment  or Form of  Election  to
Purchase,  as the case may be, must conform to the name as written upon the face
of this Right Certificate in every particular, without alteration or enlargement
or any change whatsoever.

            In the  event  the  certification  set  forth  above  in the Form of
Assignment  or the Form of  Election  to  Purchase,  as the case may be,  is not
completed, such Assignment or Election to Purchase will not be honored.


                                      B-6


<PAGE>
                                                                       Exhibit C

            UNDER CERTAIN  CIRCUMSTANCES,  AS SET FORTH IN THE RIGHTS AGREEMENT,
            RIGHTS  OWNED BY OR  TRANSFERRED  TO ANY PERSON WHO IS OR BECOMES AN
            ACQUIRING  PERSON (AS DEFINED IN THE RIGHTS  AGREEMENT)  AND CERTAIN
            TRANSFEREES  THEREOF WILL BECOME NULL AND VOID AND WILL NO LONGER BE
            TRANSFERABLE.

                          SUMMARY OF RIGHTS TO PURCHASE
                          SHARES OF PREFERRED STOCK OF
                          FORTUNE PETROLEUM CORPORATION

            On March 21,  1997,  the Board of  Directors  of  Fortune  Petroleum
Corporation (the "Company")  declared a dividend of one preferred share purchase
right (a "Right") for each outstanding share of common stock, par value $.01 per
share, of the Company (the "Common Stock").  The dividend is payable on April 3,
1997 (the "Record Date") to the  stockholders of record on that date. Each Right
entitles the registered  holder to purchase from the Company one  one-thousandth
of a share of Series A Junior Participating Preferred Stock, par value $1.00 per
share,  of the  Company  (the  "Preferred  Stock")  at a  price  of $10  per one
one-thousandth of a share of Preferred Stock (the "Purchase Price"),  subject to
adjustment.  The  description  and terms of the Rights are set forth in a Rights
Agreement  dated as of March 21,  1997,  as the same may be amended from time to
time (the  "Rights  Agreement"),  between the Company  and U.S.  Stock  Transfer
Corporation, as Rights Agent (the "Rights Agent").

            Until  the  earlier  to  occur  of (i) 10 days  following  a  public
announcement  that a person or group of affiliated  or associated  persons (with
certain exceptions,  an "Acquiring Person") has acquired beneficial ownership of
15% or more of the  outstanding  shares of Common Stock or (ii) 10 business days
(or such later  date as may be  determined  by action of the Board of  Directors
prior to such  time as any  person or group of  affiliated  persons  becomes  an
Acquiring Person) following the commencement of, or announcement of an intention
to make, a tender offer or exchange offer the consummation of which would result
in the  beneficial  ownership  by a  person  or  group  of 15%  or  more  of the
outstanding  shares of Common  Stock (the earlier of such dates being called the
"Distribution  Date"), the Rights will be evidenced,  with respect to any of the
Common Stock  certificates  outstanding  as of the Record  Date,  by such Common
Stock certificate together with a copy of this Summary of Rights.

            The Rights Agreement  provides that, until the Distribution Date (or
earlier expiration of the Rights),  the Rights will be transferred with and only
with the Common Stock. Until the Distribution Date (or earlier expiration of the
Rights),  new  Common  Stock  certificates  issued  after the  Record  Date upon
transfer or new issuances of Common Stock will contain a notation  incorporating
the Rights  Agreement  by  reference.  Until the  Distribution  Date (or earlier
expiration of the Rights),  the surrender for transfer of any  certificates  for
shares of Common  Stock  outstanding  as of the Record  Date,  even without such
notation or a copy of this Summary of Rights,  will also constitute the transfer
of the Rights  associated  with the shares of Common Stock  represented  by such
certificate.  As soon as practicable  following the Distribution Date,  separate
certificates  evidencing  the Rights  ("Right  Certificates")  will be mailed to
holders  of  record  of the  Common  Stock as of the  close of  business  on the
Distribution Date and such separate Right  Certificates  alone will evidence the
Rights.

                                      C-1
<PAGE>

            The Rights are not  exercisable  until the  Distribution  Date.  The
Rights will expire on February 28, 2007 (the "Final  Expiration  Date"),  unless
the Final  Expiration  Date is  advanced  or  extended  or unless the Rights are
earlier redeemed or exchanged by the Company, in each case as described below.

            The Purchase  Price  payable,  and the number of shares of Preferred
Stock or other securities or property  issuable,  upon exercise of the Rights is
subject to adjustment from time to time to prevent  dilution (i) in the event of
a stock dividend on, or a subdivision,  combination or reclassification  of, the
Preferred  Stock,  (ii)  upon the grant to  holders  of the  Preferred  Stock of
certain  rights or warrants to subscribe  for or purchase  Preferred  Stock at a
price, or securities  convertible into Preferred Stock with a conversion  price,
less than the then-current market price of the Preferred Stock or (iii) upon the
distribution  to holders of the Preferred  Stock of evidences of indebtedness or
assets  (excluding  regular  periodic  cash  dividends or  dividends  payable in
Preferred  Stock)  or of  subscription  rights or  warrants  (other  than  those
referred to above).

            The number of  outstanding  Rights is subject to  adjustment  in the
event of a stock  dividend on the Common Stock payable in shares of Common Stock
or subdivisions,  consolidations  or combinations of the Common Stock occurring,
in any such case, prior to the Distribution Date.

            Shares of Preferred  Stock  purchasable  upon exercise of the Rights
will not be redeemable. Each share of Preferred Stock will be entitled, when, as
and if declared, to a minimum preferential quarterly dividend payment of $10 per
share but will be entitled to an  aggregate  dividend of 1000 times the dividend
declared per share of Common Stock. In the event of liquidation,  dissolution or
winding up of the Company,  the holders of the Preferred  Stock will be entitled
to a minimum  preferential payment of $10 per share (plus any accrued but unpaid
dividends)  but will be  entitled  to an  aggregate  payment  of 1000  times the
payment made per share of Common Stock.  Each share of Preferred Stock will have
1000 votes, voting together with the Common Stock.  Finally, in the event of any
merger, consolidation or other transaction in which outstanding shares of Common
Stock are converted or exchanged, each share of Preferred Stock will be entitled
to receive  1000  times the amount  received  per share of Common  Stock.  These
rights are protected by customary antidilution provisions.

               Because  of  the  nature  of  the  Preferred   Stock's  dividend,
liquidation and voting rights, the value of the one one-thousandth interest in a
share  of  Preferred  Stock  purchasable  upon  exercise  of each  Right  should
approximate the value of one share of Common Stock.
                                      C-2
<PAGE>

               In the event that any person or group of affiliated or associated
persons becomes an Acquiring Person,  each holder of a Right,  other than Rights
beneficially  owned by the Acquiring  Person (which will thereupon become void),
will  thereafter  have the right to receive upon exercise of a Right that number
of shares of Common Stock having a market value of two times the exercise  price
of the Right.

               In the  event  that,  after a  person  or  group  has  become  an
Acquiring  Person,  the  Company  is  acquired  in a merger  or  other  business
combination  transaction  or 50% or more of its  consolidated  assets or earning
power are sold,  proper  provisions  will be made so that each holder of a Right
(other than Rights  beneficially  owned by an  Acquiring  Person which will have
become  void) will  thereafter  have the right to receive upon the exercise of a
Right that number of shares of common  stock of the person with whom the Company
has engaged in the  foregoing  transaction  (or its parent)  that at the time of
such  transaction  have a market  value of two times the  exercise  price of the
Right.

               At any time after any person or group becomes an Acquiring Person
and  prior  to  the  earlier  of one of the  events  described  in the  previous
paragraph  or the  acquisition  by such  Acquiring  Person of 50% or more of the
outstanding  shares of Common  Stock,  the Board of Directors of the Company may
exchange the Rights (other than Rights owned by such Acquiring Person which will
have become void),  in whole or in part, for shares of Common Stock or Preferred
Stock (or a series of the Company's  preferred stock having  equivalent  rights,
preferences and privileges),  at an exchange ratio of one share of Common Stock,
or a fractional share of Preferred Stock (or other preferred  stock)  equivalent
in value thereto, per Right.

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

               At any time prior to the time an Acquiring  Person  becomes such,
the Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption  Price").  The redemption of
the  Rights  may be made  effective  at such  time,  on such basis and with such
conditions  as the Board of  Directors  in its sole  discretion  may  establish.
Immediately upon any redemption of the Rights,  the right to exercise the Rights
will  terminate  and the only right of the  holders of Rights will be to receive
the Redemption Price.

               For so long as the Rights are then  redeemable,  the Company may,
except with respect to the redemption  price,  amend the Rights Agreement in any
manner. After the Rights are no longer redeemable,  the Company may, except with
respect to the redemption  price,  amend the Rights Agreement in any manner that
does not adversely affect the interests of holders of the Rights.


                                      C-3
<PAGE>

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

               A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to a Registration Statement on Form 8-A. A
copy of the Rights Agreement is available free of charge from the Company.  This
summary  description  of the  Rights  does not  purport  to be  complete  and is
qualified in its entirety by reference to the Rights Agreement,  as the same may
be amended from time to time, which is hereby incorporated herein by reference.


                                      C-4