EXHIBIT 4.1

                                RIGHTS AGREEMENT

     RIGHTS AGREEMENT, dated as of February 26, 2010 (the "Agreement"),  between
Gateway Energy Corporation, a Delaware corporation (the "Company"), and American
Stock Transfer and Trust Company, LLC, as agent (the "Rights Agent").

                              W I T N E S S E T H:
                              - - - - - - - - - -

     WHEREAS, on February 26, 2010 (the "Rights Dividend Declaration Date"), the
Board of  Directors  of the Company (the "Board of  Directors")  authorized  and
declared a dividend  distribution of one Right for each share of Common Stock of
the Company  outstanding at the Close of Business on March 10, 2010 (the "Record
Date"),  and has authorized the issuance of one (as such number may  hereinafter
be adjusted  pursuant to the  provisions of Section 11(p) hereof) Right for each
share of Common Stock issued between the Record Date (whether  originally issued
or delivered from the Company's  treasury) and the  Distribution  Date,  and, in
certain  circumstances  provided  in  Section  22 of this  Agreement,  after the
Distribution  Date,  each Right  initially  representing  on the date hereof the
right  to  purchase  one  ten-thousandth  of a share of  Preferred  Stock of the
Company  having the rights,  powers and  preferences  set forth in the Company's
Certificate  of  Incorporation,  as  amended,  upon the terms and subject to the
conditions hereinafter set forth ("Rights");

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

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

          (a)  "Acquiring  Person"  shall  mean  collectively  any Person who or
     which, together with all Affiliates and Associates of such Person, shall be
     the  Beneficial  Owner of 15% or more of the  shares of Common  Stock  then
     outstanding  (other than as a result of a  Qualifying  Offer) or was such a
     Beneficial  Owner at any time  after the date  hereof,  whether or not such
     Person together with all Affiliates or Associates of such Person  continues
     to be the Beneficial  Owner of 15% or more of the then  outstanding  Common
     Stock. Notwithstanding the foregoing:

               (i)  the  term  "Acquiring  Person"  shall  not  include  (A) the
          Company,  (B) any Subsidiary of the Company,  (C) any employee benefit
          plan of the  Company  or of any  Subsidiary  of the  Company,  (D) any
          Person or entity  organized,  appointed or  established by the Company
          for or pursuant to the terms of any such plan, (E) any Person together
          with all Affiliates and Associates of such Person who or which becomes
          the Beneficial Owner of 15% or more of the then outstanding  shares of
          Common Stock as a result of the  acquisition  of Common Stock directly
          from the Company (each of (A) through (E), an "Exempted Person");

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               (ii) no Person shall become an "Acquiring  Person" as a result of
          an acquisition  of Common Stock by the Company which,  by reducing the
          number of such shares then  outstanding,  increases the  proportionate
          number of shares  beneficially  owned by such Person together with all
          Affiliates  and  Associates  of  such  Person  to 15% or  more  of the
          outstanding Common Stock, except that if such Person, after such share
          purchases by the Company,  becomes the Beneficial  Owner of additional
          shares  of  Common  Stock  constituting  0.5%  or  more  of  the  then
          outstanding shares of Common Stock other than pursuant to a Qualifying
          Offer, such Person shall be deemed to be an "Acquiring Person;"

               (iii) if the Board of Directors of the Company determines in good
          faith that a Person,  together with all  Affiliates  and Associates of
          such Person,  who would otherwise be an "Acquiring  Person" has become
          such inadvertently,  and such Person, together with all Affiliates and
          Associates  of such  Person,  divests as  promptly  as  practicable  a
          sufficient  number  of shares  of  Common  Stock so that such  Person,
          together with all Affiliates  and Associates of such Person,  would no
          longer be an Acquiring Person, then such Person shall not be deemed to
          be an "Acquiring Person;" and

               (iv) no Person shall become an "Acquiring  Person" as a result of
          such Person,  together  with all  Affiliates  and  Associates  of such
          Person,  Beneficially  Owning as of the date of this  Agreement 15% or
          more of the shares of Common  Stock then  outstanding  so long as such
          Person,  together with all  Affiliates  and Associates of such Person,
          does not thereafter  become the Beneficial Owner of additional  shares
          of  Common  Stock  constituting  0.5% or more of the then  outstanding
          shares of Common Stock other than pursuant to a Qualifying Offer.

          Any  Person  subject to clause  (ii),  (iii) or (iv) at any time shall
     cease to be subject to such clause at such time,  if any,  as such  Person,
     together with all Affiliates  and  Associates of such Person,  ceases to be
     the  Beneficial  Owner of 15% or more of the  shares of Common  Stock  then
     outstanding. The term "outstanding," when used with reference to a Person's
     Beneficial  Ownership of shares of Common Stock or other  securities of the
     Company,  shall  mean the  number of such  shares of Common  Stock or other
     securities  then issued and  outstanding  together  with the number of such
     securities not then actually issued and outstanding which such Person would
     be deemed to beneficially own hereunder.

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

          (c)  "Adjustment  Shares"  shall have the meaning set forth in Section
     11(a)(ii) of this Agreement.

          (d) "Affiliate"  shall have the meaning set forth in Rule 12b-2 of the
     General Rules and Regulations under the Exchange Act.

          (e) "Associate"  shall have the meaning set forth in Rule 12b-2 of the
     General Rules and Regulations under the Exchange Act.

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

               (i) which  such  Person  or any of such  Person's  Affiliates  or
          Associates,  directly or  indirectly,  has the right or  obligation to
          acquire  (whether such right or obligation is exercisable  immediately
          or only  after the  passage  of time or  fulfillment  of a  condition)
          pursuant to any agreement,  arrangement or  understanding  (whether or
          not in writing) 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," (A)  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 or exchange,  or (B)  securities  issuable  upon
          exercise of Rights at any time prior to the occurrence of a Triggering
          Event,  or (C)  securities  issuable  upon exercise of Rights from and
          after the occurrence of a Triggering  Event which 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  Rights") or pursuant  to Section  11(i)  hereof in
          connection  with an  adjustment  made  with  respect  to any  Original
          Rights;

               (ii)  which such  Person or any of such  Person's  Affiliates  or
          Associates,  directly or indirectly,  has the right to vote or dispose
          of or has  "beneficial  ownership" of (as determined  pursuant to Rule
          13d-3 of the  General  Rules  and  Regulations  in  effect on the date
          hereof under the Exchange Act),  including  pursuant to any agreement,
          arrangement  or  understanding,  whether or not in writing;  provided,
          however,  that a Person shall not be deemed the "Beneficial Owner" of,
          or to "beneficially own," any security under this subparagraph (ii) as
          a result of an agreement,  arrangement or  understanding  to vote such
          security if such agreement,  arrangement or understanding  either: (A)
          (I) arises solely from a revocable  proxy or consent given in response
          to a public  proxy or consent  solicitation  made  pursuant to, and in
          accordance  with, the  applicable  provisions of the General Rules and
          Regulations  under  the  Exchange  Act,  and  (II)  is not  also  then
          reportable  by such Person on Schedule  13D under the Exchange Act (or
          any comparable or successor  report);  or (B) in the case of Frederick
          M.  Pevow,  Jr.  ("Pevow")  and on or prior to July 4, 2010 (I) arises
          solely  from  one or more  revocable  proxies  or  consents  given  in
          accordance  with the  applicable  provisions  of the General Rules and
          Regulations  under the Exchange Act, and (II) the aggregate  number of
          shares of Common Stock subject to such proxies or consents  would not,
          if  included  as  beneficially  owned by Pevow (or any  Affiliates  or
          Associates  of Pevow),  cause Pevow (or any Affilates or Associates of
          Pevow) to  beneficially  own 20% or more of the shares of Common Stock
          then outstanding; or

               (iii) which are beneficially  owned,  directly or indirectly,  by
          any other Person (or any  Affiliate or Associate  thereof)  with which
          such Person (or any of such Person's Affiliates or Associates) has any
          agreement,  arrangement or understanding  (whether or not in writing),

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          for the purpose of acquiring,  holding,  voting (except  pursuant to a
          revocable proxy or consent as described in the proviso to subparagraph
          (ii) of this paragraph  (f)) or disposing of any voting  securities of
          the Company;

     provided,  however, that nothing in this paragraph (f) shall cause a person
     engaged in business as an underwriter  of securities to be the  "Beneficial
     Owner" of, or to "beneficially  own," any securities  acquired through such
     person's  participation  in  good  faith  in a bona  fide  firm  commitment
     underwriting  until the  expiration  of forty  days  after the date of such
     acquisition.  Notwithstanding  anything in this  definition  of  Beneficial
     Owner to the contrary,  a Person who, prior to the Distribution  Date, is a
     member of the Board of  Directors or an officer of the Company or who is an
     Affiliate  or Associate of a member of the Board of Directors or officer of
     the Company (each, an "Excluded Person") shall not be deemed the Beneficial
     Owner of, or to "beneficially  own," shares of Common Stock held by another
     Excluded  Person  solely  by  reason  of  any  agreement,   arrangement  or
     understanding,  written or  otherwise,  entered into in  opposition  to any
     transaction or in support of a Qualifying Offer.

          (g)  "Board of  Directors"  shall mean the Board of  Directors  of the
     Company as constituted from time to time.

          (h)  "Book-Entry"  shall  mean an  uncertificated  book  entry for the
     Common Stock.

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

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

          (k) "Common  Stock" shall mean the common  stock,  par value $0.25 per
     share,  of the Company (or in the event of a  subdivision,  combination  or
     reclassification with respect to such shares of Common stock, the shares of
     Common   Stock   resulting   from   such   subdivision,    combination   or
     reclassification),  except, subject to the proviso in Section 13(b) of this
     Agreement, that "Common Stock" when used with reference to any Person other
     than the Company shall mean the capital  stock (or other equity  securities
     or equity  interests)  of such Person  with the  greatest  voting  power to
     control or direct the  management  of such  Person,  or if such Person is a
     Subsidiary  of  another  Person,  the Person or  Persons  which  ultimately
     control such first-mentioned Person.

          (l)  "Common  Stock  Equivalents"  shall have the meaning set forth in
     Section 11(a)(iii) of this Agreement.

          (m)  "Company"  shall have the meaning  set forth in the  introductory
     paragraph of this Agreement.

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          (n) "Current Market Price" shall have the meaning set forth in Section
     11(d).

          (o)  "Current  Value"  shall  have the  meaning  set forth in  Section
     11(a)(iii) of this Agreement.

          (p)  "Distribution  Date"  shall have the meaning set forth in Section
     3(a) of this Agreement.

          (q) "Equivalent  preferred  stock" shall have the meaning set forth in
     Section 11(b) of this Agreement.

          (r)  "Exchange"  shall have the meaning  set forth in Section  4(a) of
     this Agreement.

          (s) "Exchange Act" shall mean the Securities  Exchange Act of 1934, as
     amended.

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

          (u) "Excluded Person" shall have the meaning set forth in Section 1(f)
     of this Agreement.

          (v) "Exempted Person" shall have the meaning set forth in Section 1(a)
     of this Agreement.

          (w) "Expiration Date" shall have the meaning set forth in Section 7(a)
     of this Agreement.

          (x)  "Final  Expiration  Date"  shall  have the  meaning  set forth in
     Section 7(a) of this Agreement.

          (y)  "Original  Rights"  shall have the  meaning  set forth in Section
     1(f)(i) of this Agreement.

          (z)   "Person"   shall  mean  any   individual,   firm,   corporation,
     partnership, limited liability company or other entity.

          (aa) "Preferred  Stock" shall mean shares of Series A Preferred Stock,
     par  value  $1.00  per  share,  of  the  Company  (or  in  the  event  of a
     subdivision, combination or reclassification with respect to such shares of
     Preferred  Stock,  the  shares  of  Preferred  Stock  resulting  from  such
     subdivision,  combination  or  reclassification),  and,  to the extent that
     there is not a  sufficient  number of shares  of Series A  Preferred  Stock
     authorized to permit the full  exercise of the Rights,  any other series of
     preferred stock of the Company designated for such purpose containing terms
     substantially similar to the terms of the Series A Preferred Stock.

          (bb)  "Principal  Party"  shall have the  meaning set forth in Section
     13(b) of this Agreement.

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          (cc) "Purchase Price" shall have the meaning set forth in Section 4(a)
     of this Agreement.

          (dd) "Qualifying  Offer" shall mean an acquisition of shares of Common
     Stock pursuant to a tender offer or an exchange  offer for all  outstanding
     shares of Common  Stock at a price  and on terms  determined  by at least a
     majority of the members of the Board of Directors,  after receiving  advice
     from  one or  more  investment  banking  firms  selected  by the  Board  of
     Directors,  to be (a) fair to stockholders (taking into account all factors
     which  the  Board  of  Directors  may  deem  relevant  including,   without
     limitation, prices which could reasonably be achieved if the Company or its
     assets were sold on an orderly basis designed to realize maximum value) and
     (b)  otherwise in the best  interests  of the Company and its  stockholders
     (other  than the  Person or any  Affiliate  or  Associate  thereof on whose
     behalf the offer is being made)  taking into  account all factors  that the
     Board of Directors  may deem  relevant;  provided,  however,  that (i) such
     determination  is made by the Board of  Directors  prior to the purchase of
     shares  under such tender offer or exchange  offer,  and (ii) a majority of
     the  members  of the  Board  of  Directors  are not  Acquiring  Persons  or
     Affiliates, Associates, nominees or representatives of an Acquiring Person.

          (ee)  "Redemption  Date"  shall have the  meaning set forth in Section
     7(a) of this Agreement.

          (ff) "Redemption Price" shall have the meaning set forth in Section 23
     of this Agreement.

          (gg) "Rights" shall have the meaning set forth in the "WHEREAS" clause
     at the beginning of this Agreement.

          (hh)  "Rights   Agent"  shall  have  the  meaning  set  forth  in  the
     introductory paragraph of this Agreement.

          (ii) "Rights Certificates" shall have the meaning set forth in Section
     3(a) of this Agreement.

          (jj)  "Rights  Dividend  Declaration  Date" shall have the meaning set
     forth in the "WHEREAS" clause at the beginning of this Agreement.

          (kk)  "Section  11(a)(ii)  Event"  shall have the meaning set forth in
     Section 11(a)(ii) of this Agreement.

          (ll) "Section 11(a)(ii) Trigger Date" shall have the meaning set forth
     in Section 11(a)(iii) of this Agreement.

          (mm) "Section 13 Event" shall mean any event described in clauses (x),
     (y) or (z) of Section 13(a) of this Agreement.

          (nn) "Spread"  shall have the meaning set forth in Section  11(a)(iii)
     of this Agreement.

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          (oo)  "Stock  Acquisition  Date" shall mean the earlier of the date of
     (i) the public announcement (which, for purposes of this definition,  shall
     include,  without limitation, a report filed under the Exchange Act) by the
     Company or an Acquiring  Person that an Acquiring Person has become such or
     (ii) the public  disclosure of facts by the Company or an Acquiring  Person
     indicating  that an  Acquiring  Person  has  become  an  Acquiring  Person;
     provided,  however,  that if such  Person  is  determined  by the  Board of
     Directors  not to have  become an  Acquiring  Person  pursuant  to  Section
     1(a)(iii)  hereof,  then no Stock  Acquisition Date shall be deemed to have
     occurred.

          (pp)  "Subsidiary"  shall mean,  with  reference  to any  Person,  any
     corporation  or other  Person  of  which an  amount  of  voting  securities
     sufficient  to elect at least a majority of the  directors or others having
     similar  authority over such  corporation  or other Person is  beneficially
     owned,  directly or indirectly,  by such first-named  Person,  or otherwise
     controlled by such first-named Person.

          (qq) "Substitution Period" shall have the meaning set forth in Section
     11(a)(iii) of this Agreement.

          (rr)  "Summary of Rights"  shall have the meaning set forth in Section
     3(b) of this Agreement.

          (ss)  "Trading  Day"  shall  have the  meaning  set  forth in  Section
     11(d)(i) of this Agreement.

          (tt) "Triggering  Event" shall mean any Section 11(a)(ii) Event or any
     Section 13 Event.

          (uu) "Vote"  shall mean,  with  respect to any entity,  the ability to
     cast a vote at a  stockholders',  members'  or  comparable  meeting of such
     entity with respect to the election of directors, managers or other members
     of  such  entity's  governing  body,  or the  ability  to  cast  a  general
     partnership or comparable vote.

          (vv) "Voting  Power" shall mean,  with respect to any entity as at any
     date, the aggregate number of Votes  outstanding as at such date in respect
     of such entity.

          (ww)  "Voting  Securities"  shall mean the Common  Stock and any other
     securities  of the  Company  the  holders of which are  ordinarily,  in the
     absence of  contingencies,  entitled to Vote, even though the right to such
     Vote has been suspended by the happening of such a contingency.

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

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     Section 3. Issue of Rights Certificates.

          (a)  Until  the  earlier  of (i) the  Close of  Business  on the tenth
     Business  Day  after  the  Stock  Acquisition  Date,  or (ii) the  Close of
     Business  on the tenth  Business  Day (or such  later  date as the Board of
     Directors shall determine) after the date of the earlier of commencement by
     any  Person  (other  than an  Exempted  Person)  of,  or the  first  public
     announcement of the intention of any Person (other than an Exempted Person)
     to commence,  a tender or exchange  offer the  consummation  of which would
     result in any Person  becoming an Acquiring  Person (the earlier of (i) and
     (ii) being herein referred to as the "Distribution  Date"),  (x) the Rights
     will be  evidenced  (subject  to the  provisions  of  Section  3(c) of this
     Agreement)  by the  certificates  or  Book-Entries  for  the  Common  Stock
     registered  in the names of the record  holders of the Common  Stock (which
     certificates  for Common Stock shall be deemed also to be certificates  for
     Rights) and not by separate  certificates or  Book-Entries,  and the record
     holders  of  the  Common  Stock   represented  by  such   certificates   or
     Book-Entries shall be the record holders of Rights represented thereby, and
     (y) the Rights will be transferable only in connection with the transfer of
     the  underlying  shares  of  Common  Stock  (including  a  transfer  to the
     Company);  provided,  however,  that  if a  tender  or  exchange  offer  is
     terminated  prior  to  the  occurrence  of a  Distribution  Date,  then  no
     Distribution Date shall occur as a result of such tender or exchange offer.
     The Board of  Directors  may defer the date set forth in clause (ii) of the
     preceding  sentence to a specified  later date or to an  unspecified  later
     date, each to be determined by action of the Board of Directors. As soon as
     practicable  after the  Distribution  Date,  the Company  shall prepare and
     execute  and the  Rights  Agent  will  countersign  and,  at the  Company's
     expense, send by first-class, insured, postage prepaid mail, to each record
     holder of the Common Stock as of the Close of Business on the  Distribution
     Date,  at the address of such holder  shown on the  registry  books for the
     Common  Stock  of  the  Company,  one  or  more  rights  certificates,   in
     substantially  the form of Exhibit B hereto  (the  "Rights  Certificates"),
     evidencing  one Right for each  share of Common  Stock so held,  subject to
     adjustment  as  provided  herein.  In the event that an  adjustment  in the
     number of  Rights  per share of  Common  Stock  has been made  pursuant  to
     Section  11(p)  hereof,   at  the  time  of   distribution  of  the  Rights
     Certificates, the Company shall make the necessary and appropriate rounding
     adjustments  (in  accordance  with  Section  14(a)  hereof) so that  Rights
     Certificates  representing only whole numbers of Rights are distributed and
     cash  is  paid  in  lieu of any  fractional  Rights.  As of and  after  the
     Distribution  Date,  the Rights  will be  evidenced  solely by such  Rights
     Certificates.

          (b) Commencing as promptly as  practicable  following the Record Date,
     the  Company  will  make  available  a copy  of a  Summary  of  Rights,  in
     substantially  the form  attached  hereto  as  Exhibit A (the  "Summary  of
     Rights"),  to any  holder of Rights  who may so  request  from time to time
     prior to the Expiration  Date. With respect to certificates or Book-Entries
     for  the  Common  Stock  outstanding  as of  the  Record  Date,  until  the
     Distribution  Date,  the Rights will be evidenced by such  certificates  or
     Book-Entries  for the  Common  Stock and the  record  holders of the Common
     Stock shall also be the record holders of the associated Rights.  Until the
     earlier of the Distribution  Date or the Expiration  Date,  transfer on the
     Company's direct  registration  system of any Common Stock represented by a
     Book-Entry  or the  surrender  for transfer of any  certificate  for Common
     Stock shall  constitute  the  surrender for transfer of the Right or Rights
     associated  with  the  Common  Stock  evidenced  thereby,  whether  or  not
     accompanied by a copy of the Summary of Rights.

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          (c) Rights  shall be issued in  respect of all shares of Common  Stock
     which are issued (whether originally issued or from the Company's treasury)
     prior to the earlier of the Distribution  Date or the Expiration Date, and,
     in certain  circumstances  provided in Section 22 of this Agreement,  after
     the Distribution Date. Rights issued prior to the Distribution Date will be
     evidenced  by   certificates   or   Book-Entries   for  the  Common  Stock.
     Certificates  for Common Stock and  confirmations  evidencing  Book-Entries
     which become outstanding after the Record Date but prior to the earliest of
     the  Distribution  Date, the Redemption  Date or the Final  Expiration Date
     shall bear the following legend (with appropriate modifications in the case
     of confirmations):

     This  certificate  also evidences and entitles the holder hereof to certain
     Rights  as set  forth  in  the  Rights  Agreement  between  Gateway  Energy
     Corporation  (the "Company") and American Stock Transfer and Trust Company,
     LLC (the  "Rights  Agent"),  dated as of  February  26,  2010 (the  "Rights
     Agreement"), the terms of which are hereby incorporated herein by reference
     and a copy of which is on file at the  principal  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,  as in effect on the date of
     mailing,  without  charge,  promptly  after  receipt  of a written  request
     therefor.  Under certain  circumstances  set forth in the Rights Agreement,
     Rights  issued  to,  or held by,  any  Person  who is,  was or  becomes  an
     Acquiring  Person or any Affiliate or Associate  thereof (as such terms are
     defined in the Rights Agreement), whether currently held by or on behalf of
     such Person or by any subsequent holder, may become null and void.

With respect to such  certificates  containing the foregoing  legend,  until the
earlier of the Distribution  Date or the Expiration Date, the Rights  associated
with the Common Stock  represented  by such  certificates  shall be evidenced by
such  certificates  alone and record  holders of Common  Stock shall also be the
record  holders  of the  associated  Rights,  and  the  transfer  of any of such
certificates  shall also  constitute the transfer of the Rights  associated with
the Common  Stock  represented  by such  certificates.  In the event the Company
purchases  or acquires  any Common  Stock 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 Rights Certificates.

          (a) The Rights Certificates (and the forms of election to purchase and
     of  assignment  to be  printed  on  the  reverse  thereof)  shall  each  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

                                       9

<PAGE>


     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 quotation system  ("Exchange") on which or with whom the Rights may from
     time to time be listed or quoted,  or to  conform to usage.  Subject to the
     provisions  of Section 11 and Section 22 hereof,  the Rights  Certificates,
     whenever distributed,  shall entitle the record holders thereof to purchase
     such number of one  ten-thousandths  of a share of Preferred Stock as shall
     be set forth therein at the price set forth therein  (such  exercise  price
     per one  ten-thousandth of a share, the "Purchase  Price"),  but the amount
     and the type of securities  purchasable upon the exercise of each Right and
     the  Purchase  Price  thereof  shall be subject to  adjustment  as provided
     herein.

          (b) Any Rights  Certificate issued pursuant to Section 3(a) or Section
     22 hereof that represents  Rights  beneficially  owned by: (i) an Acquiring
     Person  or any  Associate  or  Affiliate  of an  Acquiring  Person,  (ii) a
     transferee of an Acquiring  Person (or of any such  Associate or Affiliate)
     who becomes a transferee  after the Acquiring Person becomes such, or (iii)
     a transferee of an Acquiring Person (or of any such Associate or Affiliate)
     who becomes a transferee prior to or concurrently with the Acquiring Person
     becoming  such and receives  such Rights  pursuant to either (A) a transfer
     (whether or not for consideration)  from the Acquiring Person to holders of
     equity  interests in such Acquiring  Person or to any Person with whom such
     Acquiring Person has any continuing agreement, arrangement or understanding
     regarding  the  transferred  Rights  or (B) a  transfer  which the Board of
     Directors of the Company has  determined is part of a plan,  arrangement or
     understanding which has as a primary purpose or effect avoidance of Section
     7(e) hereof,  and any Rights  Certificate  issued  pursuant to Section 6 or
     Section 11 hereof upon transfer, exchange, replacement or adjustment of any
     other Rights  Certificate  referred to in this sentence,  shall contain (to
     the extent feasible) the following legend:

               The Rights  represented  by this Rights  Certificate  are or were
          beneficially  owned by a Person who was or became an Acquiring  Person
          or an Affiliate or Associate of an Acquiring Person (as such terms are
          defined in the Rights Agreement). Accordingly, this Rights Certificate
          and the Rights  represented  hereby may  become,  or may have  already
          become,  null and void in the circumstances  specified in Section 7(e)
          of such Agreement.

     The provisions of Section 7(e) of this Agreement shall be operative whether
or not the foregoing legend is contained in any such Rights Certificate.

     Section 5. Countersignature and Registration.

          (a) The Rights Certificates shall be executed on behalf of the Company
     by its Chairman of the Board,  its President or any Vice President,  either
     manually or by  facsimile  signature,  and shall have  affixed  thereto the
     Company's  seal or a  facsimile  thereof  which  shall be  attested  by the
     Secretary or an Assistant  Secretary of the Company,  either manually or by

                                       10

<PAGE>


     facsimile  signature.  The Rights Certificates shall be countersigned by an
     authorized  signatory of the Rights Agent,  either manually or by facsimile
     signature,  and shall not be valid for any purpose unless so countersigned.
     In case any  officer of the Company who shall have signed any of the Rights
     Certificates  shall  cease  to  be  such  officer  of  the  Company  before
     countersignature  by the Rights  Agent and  issuance  and  delivery  by the
     Company, such Rights Certificates, nevertheless, may be countersigned by an
     authorized  signatory of the Rights  Agent and issued and  delivered by the
     Company with the same force and effect as though the person who signed such
     Rights  Certificates had not ceased to be such officer of the Company.  Any
     Rights  Certificates  may be signed on behalf of the  Company by any person
     who, at the actual date of the execution of such Rights Certificate,  shall
     be a  proper  officer  of the  Company  to sign  such  Rights  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 its  principal  office or offices  designated  as the
     appropriate  place for  surrender of Rights  Certificates  upon exercise or
     transfer,  books for registration  and transfer of the Rights  Certificates
     issued  hereunder.  Such books  shall show the names and  addresses  of the
     respective record holders of the Rights Certificates,  the number of Rights
     evidenced  on its face by each of the Rights  Certificates  and the date of
     each of the Rights Certificates.  The Company and Rights Agent may deem and
     treat the  person in whose  name any  Rights  Certificate  (or prior to the
     Distribution  Date, the associated Common Stock Certificate) is recorded on
     the books for the  registration  and  transfer  of Rights  (or,  the Common
     Stock) as the absolute  owner  thereof,  for all purposes  whatsoever,  and
     neither the Company nor the Rights Agent shall be affected by any notice to
     the contrary.

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

          (a)  Subject to the  provisions  of  Section  4(b),  Section  7(e) and
     Section  14  hereof,  at any  time  after  the  Close  of  Business  on the
     Distribution  Date,  and  at or  prior  to the  Close  of  Business  on the
     Expiration Date, any Rights Certificate or Certificates may be transferred,
     split  up,  combined  or  exchanged  for  another  Rights   Certificate  or
     Certificates,  entitling the record holder to purchase a like number of one
     ten-thousandths  of a share of Preferred Stock (or,  following a Triggering
     Event,  Common Stock,  other securities,  cash or other assets, as the case
     may be) as the Rights Certificate or Certificates surrendered then entitled
     such holder (or former  holder in the case of a transfer) to purchase.  Any
     record  holder  desiring to  transfer,  split up,  combine or exchange  any
     Rights  Certificate or Certificates shall make such request in writing in a
     form acceptable and delivered to the Rights Agent,  and shall surrender the
     Rights Certificate or Certificates to be transferred, split up, combined or
     exchanged at the office or offices of the Rights Agent  designated for such
     purpose.  Neither the Rights  Agent nor the Company  shall be  obligated to
     take  any  action  whatsoever  with  respect  to the  transfer  of any such
     surrendered Rights Certificate until the record holder shall have completed
     and signed  the  certificate  contained  in the form of  assignment  on the
     reverse  side of such  Rights  Certificate  and shall  have  provided  such
     additional  evidence  of the  identity of the  Beneficial  Owner (or former
     Beneficial Owner) or Affiliates or Associates  thereof as the Company shall
     reasonably  request.  Thereupon the Rights Agent shall,  subject to Section
     4(b),  Section 7(e) and Section 14 hereof,  countersign  and deliver to the

                                       11

<PAGE>


     Person entitled thereto a Rights Certificate or Rights Certificates, as the
     case may be, as so requested. The Company may require payment by the record
     holder  of a Rights  Certificate  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 Rights Certificates.

          (b)  Subject to the  provisions  of  Section  4(b),  Section  7(e) and
     Section 14 hereof,  upon receipt by the Rights Agent of evidence reasonably
     satisfactory  to it of the loss,  theft,  destruction  or  mutilation  of a
     Rights  Certificate,  and,  in case  of  loss,  theft  or  destruction,  of
     indemnity  or  security  to the  Rights  Agent and the  Company  reasonably
     satisfactory to the Rights Agent and  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 Rights  Certificate,
     if mutilated, the Company will execute and deliver a new Rights Certificate
     of like tenor to the Rights Agent for  countersignature and delivery to the
     record holder in lieu of the Rights Certificate so lost, stolen,  destroyed
     or mutilated.

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

          (a) Subject to Section  7(e) hereof,  the record  holder of any Rights
     Certificate may exercise the Rights evidenced  thereby (except as otherwise
     provided  herein  including,   without  limitation,   the  restrictions  on
     exercisability set forth in Section 9(c), Section 11(a)(iii), Section 23(a)
     and  Section  24(b)  hereof)  in  whole or in part at any  time  after  the
     Distribution Date upon surrender of the Rights  Certificate,  with the form
     of election to purchase  and the  certificate  on the reverse  side thereof
     duly  executed,  to the Rights Agent at the office or offices of the Rights
     Agent  designated  for such purpose,  along with a signature  guarantee and
     such other and further  documentation  as the Rights  Agent may  reasonably
     request, together with payment of the aggregate Purchase Price with respect
     to the total number of one  ten-thousandths  of a share of Preferred  Stock
     (or, following the occurrence of a Triggering Event,  Common Stock or other
     securities,  cash or other  assets,  as the  case may be) as to which  such
     surrendered Rights are then exercisable,  at or prior to the earlier of (i)
     the Close of  Business  on the tenth  anniversary  of the date  hereof (the
     "Final Expiration Date"), (ii) the time at which the Rights are redeemed as
     provided in Section 23 hereof (the  "Redemption  Date"),  (iii) the time at
     which such Rights are  exchanged as provided in Section 24 hereof,  or (iv)
     the consummation of a transaction contemplated by Section 13(d) hereof (the
     earliest  of (i),  (ii),  (iii) and (iv) being  herein  referred  to as the
     "Expiration Date").

          (b) The  Purchase  Price  for  each one  ten-thousandth  of a share of
     Preferred  Stock  pursuant to the  exercise of a Right shall  initially  be
     $1.87,  and shall be subject to adjustment from time to time as provided in
     Sections  11 and 13(a)  hereof  and shall be  payable  in  accordance  with
     paragraph (c) below.

          (c) Upon  receipt  of a Rights  Certificate  representing  exercisable
     Rights,  with the form of  election to purchase  and the  certificate  duly
     executed,  accompanied by payment, with respect to each Right so exercised,
     of the Purchase Price per one  ten-thousandth of a share of Preferred Stock
     (or other shares, securities,  cash or other assets, as the case may be) to
     be  purchased  as set forth  below and an  amount  equal to any  applicable

                                       12

<PAGE>


     transfer tax  required to be paid by the holder of such Rights  Certificate
     in  accordance  with Section 9 hereof,  the Rights Agent shall,  subject to
     Section  20(k)  hereof,  thereupon  promptly (i) (A)  requisition  from any
     transfer agent of the shares of Preferred Stock (or make available,  if the
     Rights Agent is the transfer  agent for such shares)  certificates  for the
     total number of one  ten-thousandths  of a share of  Preferred  Stock to be
     purchased, and the Company hereby irrevocably authorizes its transfer agent
     to comply with all such requests,  or (B) if the Company shall have elected
     to deposit the total  number of shares of  Preferred  Stock  issuable  upon
     exercise of the Rights hereunder with a depositary agent,  requisition from
     the depositary agent depositary  receipts  representing  such number of one
     ten-thousandths  of a share of Preferred  Stock as are to be purchased  (in
     which case  certificates  for the shares of Preferred Stock  represented by
     such receipts  shall be deposited by the transfer agent with the depositary
     agent) and the Company will direct the depositary agent to comply with such
     request,  (ii)  requisition from the Company the amount of cash, if any, to
     be paid in lieu 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 record holder of
     such  Rights  Certificate,  registered  in  such  name or  names  as may be
     designated by such holder, and (iv) after receipt thereof, promptly deliver
     such cash, if any, to or upon the order of the record holder of such Rights
     Certificate.  The  payment  of the  Purchase  Price (as such  amount may be
     reduced pursuant to Section  11(a)(iii) hereof) shall be made in cash or by
     certified bank check or bank draft payable to the order of the Company.  In
     the  event  that  the  Company  is  obligated  to  issue  other  securities
     (including  Common Stock) of the Company,  pay cash and/or distribute other
     property  pursuant  to Section  11(a)  hereof,  the  Company  will make all
     arrangements  necessary  so that such other  securities,  cash and/or other
     property are available for  distribution  by the Rights Agent,  if and when
     appropriate.  The  Company  reserves  the  right to  require,  prior to the
     occurrence  of a  Triggering  Event that,  upon any  exercise of Rights,  a
     number of Rights be exercised so that only whole shares of Preferred  Stock
     would be issued.

          (d) In case the record holder of any Rights Certificate shall exercise
     less  than all the  Rights  evidenced  thereby,  a new  Rights  Certificate
     evidencing Rights  equivalent to the Rights remaining  unexercised shall be
     issued by the  Rights  Agent and  delivered  to, or upon the order of,  the
     record holder of such Rights Certificate,  registered in such name or names
     as may be designated by such holder,  subject to the  provisions of Section
     14 hereof.

          (e) Notwithstanding  anything in this Agreement to the contrary,  from
     and after the first  occurrence of a Section  11(a)(ii)  Event,  any Rights
     beneficially  owned by (i) an Acquiring Person or an Affiliate or Associate
     of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
     such Associate or Affiliate)  who becomes a transferee  after the Acquiring
     Person  becomes such,  or (iii) a transferee of an Acquiring  Person (or of
     any such  Associate  or  Affiliate)  who becomes a  transferee  prior to or
     concurrently  with the  Acquiring  Person  becoming  such and receives such
     Rights pursuant to either (A) a transfer (whether or not for consideration)
     from the Acquiring  Person to holders of equity interests in such Acquiring
     Person or to any Person with whom the Acquiring  Person has any  continuing
     agreement, arrangement or understanding regarding the transferred Rights or
     (B) a transfer  which the Board of Directors  has  determined  is part of a

                                       13

<PAGE>


     plan, arrangement or understanding which has as a primary purpose or effect
     the avoidance of this Section 7(e),  shall become null and void without any
     further  action,  and no record holder of such Rights shall have any rights
     whatsoever with respect to such Rights, whether under any provision of this
     Agreement or  otherwise.  The Company shall use all  reasonable  efforts to
     ensure that the provisions of this Section 7(e) and Section 4(b) hereof are
     complied  with, but neither the Rights Agent nor the Company shall have any
     liability to any record holder of Rights  Certificates or other Person as a
     result of the Company's failure to make any determinations  with respect to
     an Acquiring Person or its Affiliates, Associates or transferees hereunder.
     The Company may require (or cause the Rights Agent or any transfer agent of
     the Company to require) any Person who submits a Rights  Certificate  (or a
     certificate  representing shares of Common Stock that evidences, or but for
     the provisions of this Section 7(e) would evidence, Rights) for transfer on
     the  registry  books or to  exercise  the  Rights  represented  thereby  to
     establish to the  satisfaction  of the Company in its sole  discretion that
     such  Rights have not become null and void  pursuant to the  provisions  of
     this Section 7(e).

          (f)  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 record  holder  upon the  occurrence  of any
     purported  exercise as set forth in this Section 7 unless such holder shall
     have (i)  completed  and signed the  certificate  contained  in the form of
     election  to  purchase  set  forth  on  the  reverse  side  of  the  Rights
     Certificate   surrendered  for  such  exercise,   and  (ii)  provided  such
     additional  evidence  of the  identity of the  Beneficial  Owner (or former
     Beneficial Owner) or Affiliates or Associates  thereof as the Company shall
     reasonably request.

     Section 8. Cancellation and Destruction of Rights Certificates.  All Rights
Certificates  surrendered  for the  purpose  of  exercise,  transfer,  split up,
combination  or  exchange  shall,  if  surrendered  to the Company or 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 Rights
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  Rights  Certificate  purchased  or  acquired  by the Company
otherwise  than upon the  exercise  thereof.  The Rights  Agent shall  deliver a
certificate  of  cancellation  to the Company and shall  destroy  such  canceled
Rights Certificates in accordance with applicable law and regulations.

     Section 9. Reservation and Availability of Capital 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 (and,  following  the  occurrence of a Triggering  Event,  out of its
     authorized and unissued  shares of Common Stock and/or other  securities or
     out of its authorized  and issued shares held in its treasury),  the number
     of shares of Preferred Stock (and, following the occurrence of a Triggering
     Event,  Common  Stock and/or other  securities)  that,  as provided in this
     Agreement,  including  Section  11(a)(iii)  hereof,  will be  sufficient to
     permit the exercise in full of all outstanding Rights.

                                       14

<PAGE>


          (b) So long as the  shares of  Preferred  Stock  (and,  following  the
     occurrence  of a Triggering  Event,  Common Stock and/or other  securities)
     issuable and  deliverable  upon the exercise of the Rights may be listed on
     any national  securities  exchange or national automated  quotation system,
     the Company  shall use its best efforts to cause,  from and after such time
     as the  Rights  become  exercisable  (but  only  to the  extent  that it is
     reasonably  likely that the Rights will be exercised),  all shares reserved
     for such  issuance to be listed on such exchange or authorized to be quoted
     on such  quotation  system  upon  official  notice  of  issuance  upon such
     exercise.

          (c) The  Company  shall use its best  efforts to (i) file,  as soon as
     practicable  following  the earliest  date after the first  occurrence of a
     Section  11(a)(ii) Event on which the  consideration to be delivered by the
     Company upon exercise of the Rights has been  determined in accordance with
     Section  11(a)(iii)  hereof,  a registration  statement  under the Act with
     respect to the  securities  purchasable  upon  exercise of the Rights on an
     appropriate  form,  (ii)  cause  such  registration   statement  to  become
     effective as soon as  practicable  after such filing,  and (iii) cause such
     registration  statement to remain effective (with a prospectus at all times
     meeting the  requirements  of the Act) until the earlier of (A) the date as
     of which the Rights are no longer exercisable for such securities,  and (B)
     the  Expiration  Date.  The  Company  will also take such  action as may be
     appropriate  under, or to ensure  compliance  with, the securities or "blue
     sky" laws of the various states in connection  with the  exercisability  of
     the Rights. The Company may temporarily  suspend,  for a period of time not
     to exceed  ninety  (90) days  after the date set forth in clause (i) of the
     first  sentence of this Section 9(c), the  exercisability  of the Rights in
     order to  prepare  and file such  registration  statement  and permit it to
     become effective. Upon any such suspension, the Company shall make a public
     announcement,  and shall  give  simultaneous  written  notice to the Rights
     Agent,  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. In addition,  if the Company shall determine that a
     registration  statement is required  following the  Distribution  Date, the
     Company may temporarily suspend the exercisability of the Rights until such
     time  as  a   registration   statement   has   been   declared   effective.
     Notwithstanding any provision of this Agreement to the contrary, the Rights
     shall not be exercisable in any jurisdiction if the requisite qualification
     in such  jurisdiction  shall not have been obtained,  the exercise  thereof
     shall not be permitted  under  applicable law or a  registration  statement
     shall not have been declared effective.

          (d) The Company covenants and agrees that it will take all such action
     as may be  necessary to ensure that all one  ten-thousandths  of a share of
     Preferred  Stock (and,  following  the  occurrence  of a Triggering  Event,
     Common Stock and/or other  securities,  as the case may be) delivered  upon
     exercise of Rights shall, at the time of delivery of the  certificates  for
     such shares, Common Stock, or other securities, as the case may be (subject
     to payment of the  Purchase  Price),  be duly and  validly  authorized  and
     issued,  and fully paid and nonassessable  including,  without  limitation,
     effecting  such  changes to the accounts of the Company as may be necessary
     to accomplish the foregoing purposes.

          (e) The Company further covenants and agrees that it will pay when due
     and payable any and all U.S.  federal and state  transfer taxes and charges
     which may be payable in respect of the  issuance  or delivery of the Rights

                                       15

<PAGE>


     Certificates and of any certificates for a number of one ten-thousandths of
     a share of  Preferred  Stock (or Common Stock or other  securities,  as the
     case may be) upon the  exercise  of the  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 Rights  Certificates  to a Person
     other than,  or the  issuance or delivery  of  certificates  or  depositary
     receipts for a number of one  ten-thousandths of a share of Preferred Stock
     (or Common Stock and/or other securities, as the case may be) in respect of
     a name other than that of,  the  record  holder of the Rights  Certificates
     evidencing  Rights  surrendered  for  exercise  or to issue or deliver  any
     certificates  for a number of one  ten-thousandths  of a share of Preferred
     Stock (or, following the occurrence of a Triggering Event,  Common Stock or
     other  securities,  as the case may be) in a name  other  than  that of the
     record  holder upon the  exercise  of any Rights  until such tax shall have
     been  paid  (any  such tax  being  payable  by the  holder  of such  Rights
     Certificate  at the time of surrender) or until it has been  established to
     the Company's satisfaction that no such tax is due.

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

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

          (a) (i) In the event the  Company  shall at any time after the date of
     this  Agreement  (A) declare 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, 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)

                                       16

<PAGE>


     and Section  7(e) hereof,  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
     Preferred  Stock or capital  stock,  as the case may be,  issuable  on such
     date,  shall be  proportionately  adjusted so that the record holder of any
     Right exercised after such time shall be entitled to receive,  upon payment
     of the  Purchase  Price then in effect,  the  aggregate  number and kind of
     shares of Preferred  Stock or capital stock,  as the case may be, 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, he would
     have owned upon such  exercise  and been  entitled  to receive by virtue of
     such dividend,  subdivision,  combination or reclassification.  If an event
     occurs which would require an adjustment  under both this Section  11(a)(i)
     and Section 11(a)(ii) hereof,  the adjustment  provided for in this Section
     11(a)(i)  shall  be in  addition  to,  and  shall  be made  prior  to,  any
     adjustment required pursuant to Section 11(a)(ii) hereof.

          (ii) Subject to Section 24 hereof, in the event any Person (other than
     the Company,  any Subsidiary of the Company,  any employee  benefit plan of
     the Company or of any  Subsidiary  of the Company,  or any Person or entity
     organized,  appointed or  established by the Company for or pursuant to the
     terms of any  such  plan),  alone  or  together  with  its  Affiliates  and
     Associates,  shall, at any time after the Rights Dividend Declaration Date,
     become an Acquiring Person,  unless such person becomes an Acquiring Person
     pursuant to a transaction  set forth in Section 13(a) hereof (such an event
     being referred to herein as a "Section  11(a)(ii) Event"),  then,  promptly
     following the occurrence of such Section 11(a)(ii) Event,  proper provision
     shall be made by the  Company  so that each  holder of a Right  (except  as
     provided below and in Section 7(e) hereof) shall  thereafter have the right
     to receive,  upon exercise  thereof at the then current  Purchase  Price in
     accordance  with the  terms of this  Agreement,  in lieu of a number of one
     ten-thousandths  of a share of  Preferred  Stock,  such number of shares of
     Common  Stock of the  Company  as shall  equal the result  obtained  by (x)
     multiplying  the then  current  Purchase  Price by the then  number  of one
     ten-thousandths  of a share  of  Preferred  Stock  for  which  a Right  was
     exercisable (or, if the Distribution  Date shall not have occurred prior to
     the date of such Section 11(a)(ii) Event, the number of one ten-thousandths
     of a share of Preferred Stock for which a Right would have been exercisable
     if the  Distribution  Date had  occurred on the  Business  Day  immediately
     preceding the date of such Section  11(a)(ii) Event)  immediately  prior to
     the first  occurrence of a Section  11(a)(ii)  Event, and (y) dividing that
     product  (which,  following  such first  occurrence,  shall  thereafter  be
     referred to as the "Purchase  Price" for each Right and for all purposes of
     this Agreement) by 50% of the Current Market Price (determined  pursuant to
     Section  11(d)  hereof) per share of Common Stock on the date of such first
     occurrence  (such  number of shares  being  referred to as the  "Adjustment
     Shares").

          (iii)  Subject to such  limitations  existing as of the date hereof as
     are necessary to prevent a default under any agreement to which the Company
     is a party,  in the event that the number of shares of Common  Stock  which

                                       17

<PAGE>


     are  authorized  by the  Company's  certificate  of  incorporation  but not
     outstanding  or reserved for issuance for purposes other than upon exercise
     of the Rights are not  sufficient  to permit  the  exercise  in full of the
     Rights in accordance with the foregoing  subparagraph  (ii) of this Section
     11(a),  the Company,  acting by resolution of its Board of Directors  shall
     (A) determine the excess of (x) the value of the Adjustment Shares issuable
     upon the exercise of a Right  determined  as set forth below (the  "Current
     Value"),  over (y) the Purchase Price (such excess, the "Spread"),  and (B)
     with respect to each Right (subject to Section 7(e) hereof),  make adequate
     provision to substitute for the Adjustment  Shares,  upon the exercise of a
     Right and  payment  of the  applicable  Purchase  Price,  (1)  cash,  (2) a
     reduction  in  the  Purchase  Price,  (3)  Common  Stock  or  other  equity
     securities of the Company (including,  without limitation,  shares or units
     of shares of preferred stock, such as the Preferred Stock,  which the Board
     of  Directors  has deemed to have  essentially  the same value or  economic
     rights as shares of Common Stock (such  shares of preferred  stock or other
     equity  securities being referred to as "Common Stock  Equivalents")),  (4)
     debt securities of the Company, (5) other assets, or (6) any combination of
     the foregoing,  having an aggregate  value equal to the Current Value (less
     the amount of any reduction in the Purchase  Price),  where such  aggregate
     value has been  determined by the Board of Directors  based upon the advice
     of an investment banking firm selected by the Board of Directors; provided,
     however,  that if the Company  shall not have made  adequate  provision  to
     deliver  value  pursuant  to  clause  (B)  above  within  thirty  (30) days
     following the date on which the Company's  right of redemption  pursuant to
     Section 23(a)  expires (such date being  referred to herein as the "Section
     11(a)(ii)  Trigger Date"),  then the Company shall be obligated to deliver,
     upon the surrender for exercise of a Right and without requiring payment of
     the  Purchase  Price  (other  than an amount  equal to the par value of the
     shares of Common Stock to be issued), shares of Common Stock (to the extent
     available) and then, if necessary,  cash,  which shares and/or cash have an
     aggregate value equal to the Spread.  If the Board of Directors  determines
     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,
     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  action is to be taken  pursuant  to the first  and/or  second
     sentences  of this  Section  11(a)(iii),  the  Company  (1) shall  provide,
     subject to Section 7(e) hereof,  that such action shall apply  uniformly to
     all  outstanding  Rights,  and (2) may  suspend the  exercisability  of the
     Rights until the  expiration  of the  Substitution  Period in order to seek
     such  stockholder  approval for such  authorization  of  additional  shares
     and/or to decide the  appropriate  form of distribution to be made pursuant
     to such first sentence and to determine the value thereof.  In the event of
     any such suspension, the Company shall make a public announcement and shall
     give  simultaneous  written  notice to the Rights  Agent  stating  that the

                                       18

<PAGE>


     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  Current  Value  of each
     Adjustment  Share shall be the Current Market Price per share of the Common
     Stock on the Section  11(a)(ii) Trigger Date, and the per share or per unit
     value of any Common Stock  Equivalent  shall be deemed to equal the Current
     Market Price per share of the Common Stock on such date.

          (b) In case the Company  shall fix a record  date for the  issuance of
     rights,  options or  warrants  to all record  holders  of  Preferred  Stock
     entitling them to subscribe for or purchase (for a period  expiring  within
     forty-five  (45) calendar days after such record date)  Preferred Stock (or
     shares having the same rights,  privileges and preferences as the shares of
     Preferred Stock ("equivalent  preferred stock")) or securities  convertible
     into Preferred Stock or equivalent  preferred stock at a price per share of
     Preferred  Stock or per share of  equivalent  preferred  stock (or having a
     conversion price per share, if a security  convertible into Preferred Stock
     or equivalent preferred stock) less than the Current Market Price per share
     of Preferred  Stock 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 stock outstanding on such record date, plus the number
     of shares of  Preferred  Stock and  equivalent  preferred  stock  which the
     aggregate  offering price of the total number of shares of Preferred  Stock
     and/or  equivalent  preferred  stock so to be offered (and/or the aggregate
     initial  conversion  price of the convertible  securities so to be offered)
     would purchase at such Current Market Price,  and the  denominator of which
     shall be the number of shares of Preferred  Stock and equivalent  preferred
     stock outstanding on such record date, plus the number of additional shares
     of Preferred  Stock  and/or  equivalent  preferred  stock to be offered for
     subscription or purchase (or into which the convertible securities so to be
     offered are initially convertible).  In case such subscription price may be
     paid by  delivery  of  consideration  part or all of which may be in a form
     other than cash, the value of such consideration  shall be as determined in
     good  faith  by the  Board  of  Directors,  whose  determination  shall  be
     described  in a statement  filed with the Rights Agent and shall be binding
     on the Rights  Agent and the  holders of the  Rights.  Shares of  Preferred
     Stock and  equivalent  preferred  stock owned by or held for the account of
     the  Company  shall not be deemed  outstanding  for the purpose of any such
     computation.  Such adjustment  shall be made  successively  whenever such a
     record date is fixed, and in the event that such rights or warrants are not
     so issued,  the Purchase  Price shall be adjusted to be the Purchase  Price
     which would then be in effect if such record date had not been fixed.

          (c) In case the Company shall fix a record date for a distribution  to
     all record holders of 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,  cash
     (other  than a regular  quarterly  cash  dividend  out of the  earnings  or
     retained earnings of the Company), assets (other than a dividend payable in
     Preferred  Stock,  but including  any dividend  payable in stock other than
     Preferred  Stock) or  subscription  rights  or  warrants  (excluding  those
     referred to in Section 11(b)  hereof),  the Purchase  Price to be in effect

                                       19

<PAGE>


     after such record date shall be  determined  by  multiplying  the  Purchase
     Price in effect  immediately  prior to such record date by a fraction,  the
     numerator  of which  shall  be the  Current  Market  Price  (as  determined
     pursuant  to Section  11(d)  hereof) per share of  Preferred  Stock on such
     record date, less the fair market value (as determined in good faith by the
     Board of Directors,  whose  determination shall be described in a statement
     filed  with the Rights  Agent and shall be binding on the Rights  Agent and
     the holders of the Rights) of the portion of the cash,  assets or evidences
     of  indebtedness  so to be  distributed or of such  subscription  rights or
     warrants  applicable to a share of Preferred  Stock and the  denominator of
     which shall be such Current Market Price per share of Preferred Stock. 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 be adjusted to be the  Purchase  Price which would have been in
     effect if such record date had not been fixed.

               (d) (i) For the purpose of any computation hereunder,  other than
          computations made pursuant to Section  11(a)(iii) hereof, the "Current
          Market Price" per share of Common Stock on any date shall be deemed to
          be the  average of the daily  closing  prices per share of such Common
          Stock for the thirty (30) consecutive  Trading Days immediately  prior
          to such date,  and for  purposes  of  computations  made  pursuant  to
          Section  11(a)(iii)  hereof,  the  Current  Market  Price per share of
          Common  Stock on any date  shall be  deemed to be the  average  of the
          daily  closing  prices per share of such Common Stock for the ten (10)
          consecutive  Trading Days immediately  following such date;  provided,
          however,  that in the event that the Current Market Price per share of
          the  Common  Stock  is  determined   during  a  period  following  the
          announcement  by the issuer of such Common  Stock of (A) a dividend or
          distribution  on such  Common  Stock  payable in shares of such Common
          Stock or  securities  convertible  into  shares of such  Common  Stock
          (other  than  the  Rights),  or (B) any  subdivision,  combination  or
          reclassification   of  such  Common  Stock,  and  the  ex-dividend  or
          ex-distribution date for such dividend or distribution,  or the record
          date for such subdivision,  combination or reclassification  shall not
          have occurred prior to the  commencement of the requisite  thirty (30)
          Trading Day or ten (10) Trading Day period, as set forth above,  then,
          and in each such case,  the  Current  Market  Price  shall be properly
          adjusted to reflect the current  market price per share  equivalent of
          Common  Stock.  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 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 shares of Common
          Stock 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 shares of Common Stock are
          listed or admitted  to trading  or, if the shares of Common  Stock are
          not listed or admitted to trading on any national securities exchange,
          the last sale price,  regular  way, or, if such last sale price is not
          reported,  the  average  of the high bid and low  asked  prices in the
          over-the-counter  market,  as reported by the NASDAQ  Global Market or
          such other  system then in use,  or, if on any such date the shares of

                                       20

<PAGE>


          Common Stock 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 Common  Stock  selected  by the Board of
          Directors.  If on any such date no market  maker is making a market in
          the  Common  Stock,  the fair  value of such  shares  on such  date as
          determined in good faith by the Board of Directors  shall be used. The
          term "Trading  Day" shall mean a day on which the  principal  national
          securities  exchange on which the shares of Common Stock are listed or
          admitted to trading is open for the transaction of business or, if the
          shares of Common  Stock are not listed or  admitted  to trading on any
          national securities  exchange,  a Business Day. If the Common Stock is
          not publicly held or not so listed or traded, Current Market Price per
          share shall mean the fair value per share as  determined in good faith
          by the Board of Directors, whose determination shall be described in a
          statement  filed with the Rights Agent and shall be conclusive for all
          purposes.

               (ii) For the purpose of any  computation  hereunder,  the Current
          Market Price per share of Preferred  Stock shall be  determined in the
          same manner as set forth  above for the Common  Stock in clause (i) of
          this Section  11(d)  (other than the last  sentence  thereof).  If the
          Current Market Price per share of Preferred Stock cannot be determined
          in the manner provided above or if the Preferred Stock is not publicly
          held or listed or traded in a manner  described  in clause (i) of this
          Section 11(d),  the Current Market Price per share of Preferred  Stock
          shall be conclusively  deemed to be an amount equal to 10,000 (as such
          number may be appropriately  adjusted for such events as stock splits,
          stock dividends and recapitalizations with respect to the Common Stock
          occurring after the date of this Agreement)  multiplied by the Current
          Market  Price per share of the Common  Stock.  If  neither  the Common
          Stock nor the Preferred Stock is publicly held or so listed or traded,
          Current  Market Price per share of the Preferred  Stock shall mean the
          fair  value  per  share as  determined  in good  faith by the Board of
          Directors, whose determination shall be described in a statement filed
          with the Rights Agent and shall be conclusive  for all  purposes.  For
          all  purposes  of this  Agreement,  the  Current  Market  Price of one
          ten-thousandth  of a share of  Preferred  Stock  shall be equal to the
          Current  Market  Price of one  share of  Preferred  Stock  divided  by
          10,000.

          (e) Anything herein to the contrary notwithstanding,  no adjustment in
     the Purchase Price shall be required unless such  adjustment  would require
     an increase or decrease of at least one percent (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  hundred-thousandth
     of a share of Common  Stock or other share or  one-millionth  of a share of
     Preferred Stock, as the case may be.  Notwithstanding the first sentence of
     this Section  11(e),  any  adjustment  required by this Section 11 shall be
     made no later than the  earlier of (i) three (3) years from the date of the
     transaction which mandates such adjustment, or (ii) the Expiration Date.

                                       21

<PAGE>


          (f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
     or Section 13(a) hereof, the holder of any Right thereafter exercised shall
     become entitled to receive any shares of capital stock other than Preferred
     Stock,  thereafter  the  number of such  other  shares so  receivable  upon
     exercise of any Right and the Purchase  Price  thereof  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),  (b),  (c),  (e), (g), (h), (i), (j), (k) and
     (m), 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 ten-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 in Sections  11(b) and (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  ten-thousandths  of a share of Preferred  Stock  (calculated to the
     nearest one-  millionth)  obtained by (i) multiplying (x) the number of one
     ten-thousandths  of a share  covered by a Right  immediately  prior to this
     adjustment,  by (y) the Purchase Price in effect  immediately prior to such
     adjustment of the Purchase Price, and (ii) dividing the product so obtained
     by the Purchase Price in effect  immediately  after such  adjustment of the
     Purchase Price.

          (i) The  Company may elect on or after the date of any  adjustment  of
     the  Purchase  Price  to  adjust  the  number  of  Rights,  in  lieu of any
     adjustment  in the number of one  ten-thousandths  of a share of  Preferred
     Stock  purchasable  upon  the  exercise  of a  Right.  Each  of the  Rights
     outstanding  after  the  adjustment  in  the  number  of  Rights  shall  be
     exercisable for the number of one  ten-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-millionth)  obtained by dividing the Purchase  Price in effect
     immediately prior to adjustment of the Purchase Price by the Purchase Price
     in effect  immediately  after adjustment of the Purchase Price. The Company
     shall make a public announcement and shall give simultaneous written notice
     to the  Rights  Agent 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.  This record date may be the date
     on which the Purchase Price is adjusted or any day thereafter,  but, if the
     Rights Certificates have been issued, shall be at least ten (10) days later
     than the date of the public announcement.  If Rights Certificates have been
     issued,  upon each  adjustment  of the  number of Rights  pursuant  to this
     Section 11(i),  the Company shall, as promptly as practicable,  cause to be
     distributed  to holders of Rights  Certificates  on such record date Rights
     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

                                       22

<PAGE>


     to such holders in substitution and replacement for the Rights Certificates
     held by such holders prior to the date of  adjustment,  and upon  surrender
     thereof, if required by the Company, new Rights Certificates evidencing all
     the Rights to which such holders shall be entitled  after such  adjustment.
     Rights  Certificates  so to be  distributed  shall be issued,  executed and
     countersigned  in the  manner  provided  for herein  (and may bear,  at the
     option of the Company, the adjusted Purchase Price) and shall be registered
     in the names of the holders of record of Rights  Certificates on the record
     date specified in the public announcement.

          (j)  Irrespective of any adjustment or change in the Purchase Price or
     the number by one  ten-thousandths  of a share of Preferred  Stock issuable
     upon the exercise of the Rights,  the Rights  Certificates  theretofore and
     thereafter  issued may  continue  to  express  the  Purchase  Price per one
     ten-thousandths of a share and the number of one ten-thousandths of a share
     which were expressed in the initial Rights 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 number of one
     ten-thousandths of a share of Preferred Stock, or the par value, if any, of
     any shares of any other capital stock issuable upon exercise of the Rights,
     the Company  shall take any  corporate  action which may, in the opinion of
     its counsel, be necessary in order that the Company may validly and legally
     issue such number of fully paid and non-assessable one ten-thousandths of a
     share of Preferred  Stock (or such other shares) at such adjusted  Purchase
     Price.  If upon any  exercise  of the  Rights,  a holder  is to  receive  a
     combination of Common Stock and Common Stock Equivalents,  a portion of the
     consideration paid upon such exercise, equal to at least the then par value
     of a share of Common  Stock,  shall be  allocated  as the  payment for each
     share of Common Stock so received.

          (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,  the issuance to the record holder of any Right exercised after
     such record date the number of one  ten-thousandths of a share of Preferred
     Stock  and  other  capital  stock or  securities  of the  Company,  if any,
     issuable   upon  such   exercise   over  and   above  the   number  of  one
     ten-thousandths  of a share of 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   (fractional  or  otherwise)  or  securities  upon  the
     occurrence of the event requiring such adjustment.

          (m) Anything in this Section 11 to the contrary  notwithstanding,  the
     Company shall be entitled to make such reductions in the Purchase Price, in
     addition to those adjustments expressly required by this Section 11, as and
     to the  extent  that in their good faith  judgment  the Board of  Directors
     shall  determine  to be advisable  in order that any (i)  consolidation  or
     subdivision of the Preferred  Stock,  (ii) issuance  wholly for cash of any
     shares of Preferred  Stock at less than the Current  Market Price  thereof,

                                       23

<PAGE>


     (iii) issuance  wholly for cash of shares of Preferred  Stock or securities
     which by their terms are  convertible  into or  exchangeable  for shares of
     Preferred Stock, (iv) stock dividends,  or (v) issuance of rights,  options
     or warrants  referred to in this Section 11,  hereafter made by the Company
     to holders of its Preferred Stock shall not be taxable to such holders.

          (n) The  Company  covenants  and agrees that it shall not, at any time
     after  the  Distribution  Date  and so long as the  Rights  have  not  been
     redeemed pursuant to Section 23 hereof or exchanged  pursuant to Section 24
     hereof,  (i) consolidate  with any other Person (other than a Subsidiary of
     the Company in a transaction  which  complies  with Section 11(o)  hereof),
     (ii) merge with or into any other Person  (other than a  Subsidiary  of the
     Company in a transaction  which  complies with Section  11(o)  hereof),  or
     (iii) sell or transfer (or permit any  Subsidiary to sell or transfer),  in
     one  transaction,  or a series of related  transactions,  assets or earning
     power  aggregating  more  than 50% of the  assets or  earning  power of the
     Company  and its  Subsidiaries  (taken as a whole)  to any other  Person or
     Persons  (other than the Company and/or any of its  Subsidiaries  in one or
     more transactions each of which complies with Section 11(o) hereof), if (x)
     at the time of or  immediately  after  such  consolidation,  merger or sale
     there are any  certificate  of  incorporation  or bylaw  provisions  or any
     rights,   warrants  or  other  instruments  or  securities  outstanding  or
     agreements  in effect or other  actions  taken  which  would  substantially
     diminish or otherwise eliminate the benefits intended to be afforded by the
     Rights or (y) prior  to,  simultaneously  with or  immediately  after  such
     consolidation,   merger  or  sale,  the  stockholders  of  the  Person  who
     constitutes,  or would  constitute,  the  Principal  Party for  purposes of
     Section  13(a)  hereof  shall  have  received  a  distribution   of  Rights
     previously  owned by such Person or any of its Affiliates  and  Associates.
     The Company shall not consummate any such  consolidation,  merger,  sale or
     transfer  unless prior thereto the Company and such other person shall have
     executed  and  delivered  to the  Rights  Agent  a  supplemental  agreement
     evidencing compliance with this Section 11(n).

          (o) The Company  covenants  and agrees  that,  after the  Distribution
     Date, it will not, except as permitted by Section 23, Section 24 or Section
     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 otherwise eliminate the benefits intended to
     be afforded by the Rights.

          (p) Anything in this Agreement to the contrary notwithstanding, in the
     event  that the  Company  shall  at any  time  after  the  Rights  Dividend
     Declaration Date and prior to the Distribution  Date (i) declare or pay any
     dividend on the  outstanding  shares of Common  Stock  payable in shares of
     Common  Stock,  (ii)  subdivide or split the  outstanding  shares of Common
     Stock into a greater number of shares,  or (iii) combine or consolidate the
     outstanding  shares of  Common  Stock  into a  smaller  number of shares or
     effect a reverse split of the outstanding shares of Common Stock, then, and
     in each such  event,  the  number of Rights  associated  with each share of
     Common Stock then outstanding,  or issued or delivered thereafter but prior
     to the  Distribution  Date, 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

                                       24

<PAGE>


     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.

     Section 12.  Certificate  of Adjusted  Purchase  Price or Number of Shares.
Whenever an  adjustment is made as provided in Section 11 and Section 13 hereof,
the  Company  shall  (a)  promptly  prepare a  certificate  setting  forth  such
adjustment and a brief  statement of the facts  accounting for such  adjustment,
(b) promptly  file with the Rights Agent,  and with each transfer  agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief  summary  thereof to each record  holder of a Rights  Certificate  (or, if
prior  to  the  Distribution  Date,  to  each  record  holder  of a  certificate
representing  shares of Common Stock) in accordance with Section 26 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
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 that, following the Stock Acquisition Date (which for
     purposes  of this  Section  13(a) only shall also  include  the date of the
     first  public  announcement  or  public  disclosure   (including,   without
     limitation,  a report  filed  pursuant to Section  13(d) under the Exchange
     Act)  that any  Person  (other  than the  Company,  any  Subsidiary  of the
     Company,  any employee  benefit plan of the Company or of any Subsidiary of
     the Company, or any Person or entity organized, appointed or established by
     the Company for or pursuant to the terms of any such plan),  together  with
     any of such Person's  Affiliates and Associates,  has become the Beneficial
     Owner  of 15% or  more of the  shares  of  Common  Stock  then  outstanding
     pursuant to a Qualifying  Offer),  directly or indirectly,  (x) the Company
     shall  consolidate  with,  or merge with and into,  any other Person (other
     than a  Subsidiary  of the Company in a  transaction  which  complies  with
     Section  11(o)  hereof),  and the Company  shall not be the  continuing  or
     surviving  corporation  of such  consolidation  or  merger,  (y) any Person
     (other than a Subsidiary  of the Company in a  transaction  which  complies
     with Section 11(o) hereof) shall  consolidate  with, or merge with or into,
     the  Company,  and  the  Company  shall  be  the  continuing  or  surviving
     corporation of such  consolidation  or merger and, in connection  with such
     consolidation  or merger,  all or part of the outstanding  shares of Common
     Stock shall be changed into or exchanged  for stock or other  securities of
     any other Person or cash or any other  property,  or (z) the Company  shall
     sell or otherwise  transfer (or one or more of its Subsidiaries  shall sell
     or  otherwise  transfer),  in  one  transaction  or  a  series  of  related
     transactions,  assets or  earning  power  aggregating  more than 50% of the
     assets or earning  power of the  Company and its  Subsidiaries  (taken as a
     whole) to any Person or Persons  (other than the Company or any  Subsidiary
     of the  Company in one or more  transactions  each of which  complies  with
     Section  11(o)  hereof),  then,  upon the first  occurrence  of such  event
     (except as may be contemplated by Section 13(d) hereof),  proper  provision
     shall be made so that:  (i) each  holder of a Right,  except as provided in
     Section 7(e) hereof,  shall thereafter have the right to receive,  upon the
     exercise thereof at the then current Purchase Price, in accordance with the
     terms of this  Agreement,  such  number of validly  authorized  and issued,
     fully paid,  non-assessable  and freely tradeable shares of Common Stock of

                                       25

<PAGE>


     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  be  equal to the  result  obtained  by (1)  multiplying  the then
     current Purchase Price by the number of one  ten-thousandths  of a share of
     Preferred Stock for which a Right is exercisable  immediately  prior to the
     first  occurrence of a Section 13 Event (or, if a Section  11(a)(ii)  Event
     has  occurred  prior  to  the  first  occurrence  of a  Section  13  Event,
     multiplying the number of such one  ten-thousandths  of a share for which a
     Right  was  exercisable  immediately  prior to the  first  occurrence  of a
     Section  11(a)(ii) Event by the Purchase Price in effect  immediately prior
     to such first occurrence),  and dividing that product (which, following the
     first  occurrence  of a  Section  13  Event,  shall be  referred  to as the
     "Purchase  Price" for each Right and for all purposes of this Agreement) by
     (2)  50% of the  Current  Market  Price  (determined  pursuant  to  Section
     11(d)(i)  hereof) per share of the Common Stock of such Principal  Party on
     the date of  consummation,  provided that the Purchase Price and the number
     of shares of Common Stock of such Principal Party issuable upon exercise of
     each Right shall be further  adjusted as provided in Section  11(f) of this
     Agreement  to reflect  any events  occurring  in respect of such  Principal
     Party after the date of such Section 13 Event;  (ii) such  Principal  Party
     shall thereafter be liable for, and shall assume, by virtue of such Section
     13 Event,  all the obligations  and duties of the Company  pursuant to this
     Agreement;  (iii) the term "Company" shall thereafter be deemed to refer to
     such Principal Party, it being specifically intended that the provisions of
     Section 11 hereof shall apply only to such  Principal  Party  following the
     first  occurrence of a Section 13 Event;  (iv) such  Principal  Party shall
     take such  steps  (including,  but not  limited  to, the  reservation  of a
     sufficient  number of shares of its Common  Stock) in  connection  with the
     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 its shares of Common  Stock  thereafter  deliverable
     upon  the  exercise  of the  Rights;  and (v)  the  provisions  of  Section
     11(a)(ii)  hereof shall be of no effect  following the first  occurrence of
     any Section 13 Event.

          (b) "Principal Party" shall mean

               (i) in the case of any transaction described in clause (x) or (y)
          of the first  sentence  of Section  13(a):  (A) the Person that is the
          issuer of any  securities  into  which  shares of Common  Stock of the
          Company are converted in such merger or consolidation,  or if there is
          more than one such  issuer,  the issuer of the shares of Common  Stock
          which has the greatest  aggregate market value of shares  outstanding,
          or (B) if no  securities  are so issued,  (1) 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  has the  greatest  aggregate  market  value of  shares
          outstanding or (2) 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 (3) the Person  resulting
          from the consolidation; and

               (ii) in the case of any  transaction  described  in clause (z) of
          the first  sentence  of Section  13(a),  the Person  that is the party
          receiving  the  greatest  portion  of  the  assets  or  earning  power

                                       26

<PAGE>


          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 as is the issuer
          of the shares of Common  Stock having the  greatest  aggregate  market
          value of shares outstanding;

provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect  Subsidiary of another  Person the Common Stock of which is
and has been so registered,  "Principal Party" shall refer to such other Person;
(2) in case such Person is a Subsidiary,  directly or  indirectly,  of more than
one  Person,  the  Common  Stocks  of two or more of which  are and have been so
registered,  "Principal  Party"  shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest  aggregate market value of shares
outstanding;  and (3) in case 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 (1) and (2) above shall
apply to each of the  chains of  ownership  having  an  interest  in such  joint
venture  as if such  party  were a  "Subsidiary"  of  both or all of such  joint
venturers  and  the  Principal  Parties  in  each  such  chain  shall  bear  the
obligations  set forth in this  Section 13 in the same ratio as their  direct or
indirect interests in such Person bear to the total of such interests.

          (c) The Company shall not consummate any such  consolidation,  merger,
     sale or transfer  unless the Principal  Party  covenants and agrees that it
     will cause to be reserved  and kept  available  out of its  authorized  and
     unissued  shares of Common Stock or out of its authorized and issued shares
     held in its treasury, the number of shares of its Common Stock that will be
     sufficient to permit the exercise in full of all  outstanding  Rights under
     this  Section 13 and unless  prior  thereto the Company and such  Principal
     Party shall have executed and delivered to the Rights Agent a  supplemental
     agreement  confirming that the requirements set forth in paragraphs (a) and
     (b) of this Section 13 shall be promptly performed in accordance with their
     terms and further  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 Act, with
          respect to the Rights and the securities  purchasable upon exercise of
          the Rights on an  appropriate  form,  and will use its best efforts to
          cause such  registration  statement to (A) become effective as soon as
          practicable  after  such  filing  and  (B)  remain  effective  (with a
          prospectus at all times meeting the requirements of the Act) until the
          Expiration Date and similarly  comply with applicable state securities
          laws;

               (ii) use its best  efforts,  if the shares of Common Stock of the
          Principal  Party shall be listed or admitted to trading on an Exchange
          to list or admit to trading  (or  continue  the listing of) the Rights
          and the securities  purchasable upon exercise of the Rights on such an
          Exchange  and, if the shares of Common  Stock of the  Principal  Party
          shall not be listed or  admitted to trading on an  Exchange,  to cause
          the Rights and the securities  purchasable upon exercise of the Rights
          to be reported by such other system then in use;

                                       27

<PAGE>


               (iii)  deliver  to  record  holders  of  the  Rights   historical
          financial   statements  for  the  Principal  Party  and  each  of  its
          Affiliates  which comply in all  respects  with the  requirements  for
          registration on Form 10 under the Exchange Act; and

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

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section  11(a)(ii)  Event, the
Rights  which  have not  theretofore  been  exercised  shall  thereafter  become
exercisable in the manner  described in Section 13(a).  If, for any reason,  the
Rights  cannot be exercised  for Common  Stock of the Company or such  Principal
Party,  then a holder of Rights will have the right to exchange  such Rights for
cash from the Company or such  Principal  Party in an amount equal to the number
of shares of such  Common  Stock such  holder  would  otherwise  be  entitled to
purchase times 50% of the then Current Market Price,  as determined  pursuant to
Section 11(d)(i)  hereof,  of such stock of such Principal Party or the Company.
If, for any reason,  including,  without limitation,  such Principal Party is an
individual,  private partnership or private company,  the foregoing  formulation
cannot be  applied  to  determine  the cash  amount  into  which the  Rights are
exchangeable,  then the Board of  Directors,  based upon advice from one or more
investment banking firms, shall determine such amount reasonably and with utmost
good faith to the holders of Rights. Any such determination shall be binding and
final.

          (d)  Notwithstanding  anything  in  this  Agreement  to the  contrary,
     Section  13  shall  not  be  applicable  to  a  transaction   described  in
     subparagraphs  (x) and (y) of  Section  13(a)  if (i) such  transaction  is
     consummated  with a Person or Persons who  acquired  shares of Common Stock
     pursuant to a Qualifying  Offer (or a wholly owned  Subsidiary  of any such
     Person or  Persons),  (ii) the price per share of Common  Stock  offered in
     such  transaction is not less than the price per share of Common Stock paid
     to all record holders of shares of Common Stock whose shares were purchased
     pursuant  to such  Qualifying  Offer,  and (iii) the form of  consideration
     being  offered to the  remaining  record  holders of shares of Common Stock
     pursuant to such transaction is the same as the form of consideration  paid
     pursuant  to  such  Qualifying   Offer.   Upon  consummation  of  any  such
     transaction  contemplated by this Section 13(d), all Rights hereunder shall
     expire.

     Section 14. Fractional Rights and Fractional Shares.

          (a) The Company  shall not be required to issue  fractions  of Rights,
     except prior to the Distribution  Date as provided in Section 11(p) hereof,
     or to distribute Rights  Certificates which evidence  fractional Rights. In
     lieu of such fractional  Rights,  there shall be paid to the record holders
     of the Rights  Certificates  with  regard to which such  fractional  Rights
     would  otherwise be issuable,  an amount in cash equal to the same fraction

                                       28

<PAGE>


     of the current market value of a whole Right.  For 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 of the Rights 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 sale price or, if such last sale price is not
     reported,  the  average  of the  high  bid  and  low  asked  prices  in the
     over-the-counter  market,  as reported by the NASDAQ  Global Market 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
     selected  by the Board of  Directors.  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  shall be
     used.

          (b) The Company shall not be required to issue  fractions of shares of
     Preferred Stock (other than, except as provided in Section 7(c),  fractions
     which are integral  multiples of one ten-thousandth of a share of Preferred
     Stock) upon  exercise  of the Rights or to  distribute  certificates  which
     evidence  fractional  shares of Preferred Stock (other than fractions which
     are  integral  multiples  of one  ten-thousandth  of a share  of  Preferred
     Stock). Fractions of shares of Preferred Stock in integral multiples of one
     ten-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,
     however,  that  such  agreement  shall  provide  that the  holders  of such
     depositary  receipts shall have the rights,  privileges and  preferences to
     which they are  entitled as  beneficial  owners of the shares of  Preferred
     Stock represented by such depositary receipts. In lieu of fractional shares
     of Preferred Stock that are not integral multiples of one ten-thousandth of
     a share of Preferred  Stock,  the Company may pay to the record  holders of
     Rights  Certificates  at the time  such  Rights  are  exercised  as  herein
     provided an amount in cash equal to the same fraction of the current market
     value of one  ten-thousandth of a share of Preferred Stock. For purposes of
     this Section  14(b),  the current market value of one  ten-thousandth  of a
     share of Preferred Stock shall be one  ten-thousandth  of the closing price
     of a share of Preferred Stock (as determined  pursuant to Section 11(d)(ii)
     hereof) for the Trading Day immediately prior to the date of such exercise.

          (c) Following the occurrence of a Triggering  Event, the Company shall
     not be required to issue fractions of shares of Common Stock,  exercise the
     Rights or  distribute  certificates  which  evidence  fractional  shares of
     Common Stock. In lieu of fractional  shares of Common Stock the Company may
     pay to the record  holders of Rights  Certificates  at the time such Rights
     are  exercised  as herein  provided  an  amount  in cash  equal to the same

                                       29

<PAGE>


     fraction  of the current  market  value of one share of Common  Stock.  For
     purposes of this Section  14(c),  the current  market value of one share of
     Common Stock shall be determined in a manner set forth in Section  11(d)(i)
     hereof for the Trading Day immediately prior to the date of such exercise.

          (d) The  record  holder  of a Right by the  acceptance  of the  Rights
     expressly  waives  his  right  to  receive  any  fractional  Rights  or any
     fractional  shares upon  exercise of a Right,  except as  permitted by this
     Section 14.

     Section  15.  Rights of  Action.  All  rights of action in  respect of this
Agreement,  except the rights of action given to the Rights Agent, are vested in
the respective  record  holders of the Rights  Certificates  (and,  prior to the
Distribution  Date,  the record  holders of the  Common  Stock);  and any record
holder of any Rights  Certificate  (or, prior to the  Distribution  Date, of the
Common  Stock),  without the consent of the Rights Agent or of the record holder
of any other Rights  Certificate  (or,  prior to the  Distribution  Date, of the
Common Stock), may, in his own behalf and for his own benefit,  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  Rights  Certificate  in the manner  provided  in such Rights
Certificate  and in  this  Agreement.  Without  limiting  the  foregoing  or any
remedies  available  to  the  record  holders  of  Rights,  it  is  specifically
acknowledged  that such holders of Rights  would not have an adequate  remedy at
law for  any  breach  of this  Agreement  and  shall  be  entitled  to  specific
performance of the obligations hereunder and injunctive relief against actual or
threatened violations of the obligations hereunder of any Person subject to this
Agreement.  After a Triggering Event, holders of Rights (other than an Acquiring
Person or such Person's  Affiliates and Associates) shall be entitled to recover
the reasonable costs and expenses,  including  attorneys' fees, incurred by them
to enforce the provisions of this Agreement.

     Section  16.  Agreement  of Rights  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 shall be evidenced by
     the  Book-Entries  representing,  or the  certificates  for,  Common  Stock
     registered in the name of the holders of Common Stock,  which  Book-Entries
     representing,  or the certificates  for, Common Stock shall also constitute
     certificates for Rights, and not by separate Rights Certificates,  and each
     Right shall be  transferable  only  simultaneously  and  together  with the
     transfer of shares of Common Stock;

          (b)  after  the  Distribution   Date,  the  Rights   Certificates  are
     transferable  only on the transfer books of the Rights Agent if surrendered
     at the office or offices of the Rights Agent  designated for such purposes,
     duly endorsed or  accompanied  by a proper  instrument of transfer and with
     the appropriate forms and certificates fully executed;

          (c) subject to Section 6(a) and Section  7(f) hereof,  the Company and
     the  Rights  Agent  may deem and treat  the  person in whose  name a Rights
     Certificate (or, prior to the Distribution Date, the associated  Book-Entry
     representing,  or  certificate  for,  Common  Stock) is  registered  on the
     transfer books of the Rights Agent as the absolute owner thereof and of the

                                       30

<PAGE>


     Rights  evidenced  thereby  (notwithstanding  any notations of ownership or
     writing  on  the  Rights   Certificates  or  the  associated  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,
     subject to the  penultimate  sentence  of  Section  7(e)  hereof,  shall be
     required to be affected by any notice to the contrary; and

          (d)  notwithstanding  anything  in  this  Agreement  to the  contrary,
     neither the Company nor the Rights  Agent shall have any  liability  to any
     holder of a Right or other  Person as a result of its  inability to perform
     any of its obligations under this Agreement by reason of any preliminary or
     permanent  injunction or other order,  judgment,  decree or ruling (whether
     interlocutory or final) issued by a court or by a governmental,  regulatory
     or administrative agency or commission, or any statute, rule, regulation or
     executive  order  promulgated  or  enacted by any  governmental  authority,
     prohibiting  or  otherwise  restraining  performance  of such  obligations;
     provided,  however, the Company must use its reasonable efforts to have any
     such order,  decree or ruling  lifted or  otherwise  overturned  as soon as
     possible.

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

     Section 18. Concerning the Rights Agent.

          (a) The Company agrees to pay to the Rights Agent such compensation as
     shall be agreed to in writing  between the Company and the Rights Agent 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
     disbursements 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 including
     its members, directors, officers, employees,  shareholders and agents, for,
     and to hold it harmless against, any loss, liability, or expense,  incurred
     without gross  negligence,  bad faith or willful  misconduct on the part of
     the Rights  Agent,  for  anything  done or  omitted by the Rights  Agent in
     connection  with  the  acceptance  and  administration  of this  Agreement,
     including,  without limitation, the costs and expenses of defending against
     any claim of liability in the premises  (including  reasonable counsel fees
     and  expenses).  The  indemnity  provided  for  herein  shall  survive  the
     expiration of the Rights and the termination of this Agreement.

                                       31

<PAGE>


          (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
     Rights  Certificate or certificate for 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,   guaranteed  or
     acknowledged, by the proper Person or Persons.

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

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

     Section  20.  Duties of Rights  Agent.  The  Rights  Agent  undertakes  the
specific duties and  obligations  expressly  imposed by this  Agreement,  and no
implied  duties or  obligations  shall be read into this  Agreement  against the
Rights  Agent,  upon the  following  terms and  conditions,  by all of which the
Company and the holders of Rights  Certificates,  by their  acceptance  thereof,
shall be bound:

          (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.

                                       32

<PAGE>


          (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
     (including,  without  limitation,  the identity of any Acquiring Person and
     the  determination  of "Current  Market Price") be proved or established by
     the Company prior to taking or omitting 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 Chairman of the Board,  the President,  any Vice
     President,  the Treasurer,  any Assistant  Treasurer,  the Secretary or any
     Assistant  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 omitted in good faith by it under the  provisions  of this
     Agreement in reliance upon such certificate.

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

          (d) The  Rights  Agent  shall not be liable for or by reason of any of
     the  statements of fact or recitals  contained in this  Agreement or in the
     Rights  Certificates  or be required  to verify the same  (except as to its
     countersignature on such Rights Certificates),  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   Rights   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 Rights  Certificate;  nor shall it be  responsible  for any  adjustment
     required  under  the  provisions  of  Section  11 or  Section  13 hereof or
     responsible for the manner,  method or amount of any such adjustment or the
     ascertaining  of the  existence  of  facts  that  would  require  any  such
     adjustment  (except  with  respect to the  exercise of Rights  evidenced by
     Rights Certificates after actual notice of any such 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  Common  Stock,
     Preferred Stock or other securities to be issued pursuant to this Agreement
     or any  Rights  Certificate  or as to whether  any shares of Common  Stock,
     Preferred  Stock or other  securities,  will  when so  issued,  be  validly
     authorized and issued, fully paid and nonassessable.

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

          (g) The  Rights  Agent is hereby  authorized  and  directed  to accept
     instructions  with respect to the performance of its duties  hereunder from
     the  Chairman  of  the  Board,  the  President,  any  Vice  President,  the
     Secretary,   any  Assistant  Secretary,  the  Treasurer  or  any  Assistant
     Treasurer  of the  Company,  and to apply to such  officers  for  advice or

                                       33

<PAGE>


     instructions in connection with its duties,  and it shall not be liable for
     any action  taken or omitted to be taken by it in good faith in  accordance
     with  instructions  of any such  officer  or for any delay in acting  while
     waiting for those instructions.

          (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,  that reasonable
     care was exercised in the selection and continued employment thereof.

          (j) No provision of this  Agreement  shall require the Rights Agent to
     expend or risk its own funds or otherwise incur any financial  liability in
     the  performance  of any of its duties  hereunder or in the exercise of its
     rights if there shall be reasonable grounds for believing that repayment of
     such funds or adequate  indemnification  against  such risk or liability is
     not reasonably assured to it.

          (k) If,  with  respect to any Rights  Certificate  surrendered  to the
     Rights Agent for exercise or transfer, the certificate attached to the form
     of  assignment  or form of  election to  purchase,  as the case may be, has
     either not been completed or indicates an affirmative  response to clause 1
     and/or 2 thereof,  the Rights Agent shall not take any further  action with
     respect to such  requested  exercise or transfer  without first  consulting
     with the Company.

          (l) The Rights Agent shall have no responsibility to the Company,  any
     holders of Rights or any holders of shares of Common  Stock for interest or
     earnings on any moneys held by the Rights Agent pursuant to this Agreement.

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

                                       34

<PAGE>


     Section  21.  Change of Rights  Agent.  The Rights  Agent or any  successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon  thirty  (30) days'  notice in  writing,  mailed to the  Company  and shall
provide  notice  thereof to each transfer agent of the Common Stock or Preferred
Stock  by  registered  or  certified  mail,  and to the  holders  of the  Rights
Certificates  in  accordance  with  Section  26  hereof,  or  if  prior  to  the
Distribution  Date,  to the  holders of Rights  through  any filing  made by the
Company  pursuant  to  the  Exchange  Act.  In the  event  the  transfer  agency
relationship in effect between the Company and the Rights Agent terminates,  the
Rights Agent will be deemed to have  resigned  automatically  and be  discharged
from  its  duties  under  this  Agreement  as of  the  effective  date  of  such
termination,  and the Company  shall be  responsible  for  sending any  required
notice.  The Company may remove the Rights Agent or any  successor  Rights Agent
upon  thirty  (30)  days'  notice  in  writing,  mailed to the  Rights  Agent or
successor  Rights Agent, as the case may be, and shall provide notice thereof to
each transfer  agent of the Common Stock and Preferred  Stock,  by registered or
certified mail, and to the holders of the Rights Certificates in accordance with
Section 26 hereof,  or, if prior to the  Distribution  Date,  to the  holders of
Rights  through any filing made by the Company  pursuant tot he Exchange Act. If
the Rights Agent shall resign or be removed or shall otherwise  become incapable
of acting,  the Company shall  appoint a successor to the Rights  Agent.  If the
Company shall fail to make such appointment  within a period of thirty (30) days
after giving  notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the record  holder of a Rights  Certificate  (who  shall,  with such  notice,
submit his Rights  Certificate  for inspection by the Company),  then any record
holder of any Rights  Certificate  or the Rights Agent 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 or banking  association  organized and doing business under the laws
of the United States or of the State of Missouri or the State of New York (or of
any other state of the United States so long as such  corporation  is authorized
to do business as a banking institution in the State of Missouri or the State of
New York),  in good  standing,  which is authorized  under such laws to exercise
corporate  trust 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,  along  with  its  Affiliates,  of at  least
$50,000,000.  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 and the rights and
obligations of the  predecessor  shall cease and terminate,  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 and the  Preferred  Stock,  and mail a notice  thereof  in  writing to the
holders of the Rights  Certificates in accordance with Section 26 hereof, or, if
prior to the Distribution Date, give notice to the holders of Rights through any
filing made by the Company  pursuant to the  Exchange  Act.  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 Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Rights Certificates  evidencing Rights in such form as

                                       35

<PAGE>


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 Rights  Certificates made in accordance with
the provisions of this Agreement.  In addition,  in connection with the issuance
or sale of shares of Common Stock following the  Distribution  Date and prior to
the redemption or expiration of the Rights,  the Company (a) shall, with respect
to shares of Common  Stock so issued or sold  pursuant to the  exercise of stock
options or under any employee plan or arrangement,  granted or awarded as of the
Distribution  Date, or upon the  exercise,  conversion or exchange of securities
hereinafter  issued by the  Company,  and (b) may, in any other case,  if deemed
necessary or  appropriate by the Board of Directors,  issue Rights  Certificates
representing  the appropriate  number of Rights in connection with such issuance
or sale; provided, however, that (i) no such Rights Certificates shall be issued
and this  sentence  shall be null and void ab initio if, and to the extent that,
the  Company  shall be advised  by counsel  that such  issuance  would  create a
significant  risk of  material  adverse tax  consequences  to the Company or the
Person to whom such Rights  Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that,  appropriate  adjustment
shall otherwise have been made in lieu of the issuance thereof

     Section 23. Redemption and Termination.

          (a) The Board of  Directors,  at its option,  at any time prior to the
     earlier of (i) the Close of Business on the tenth  Business  Day  following
     the Stock  Acquisition  Date,  or (ii) the time at which the Rights  expire
     pursuant to this  Agreement,  may redeem all but not less than all the then
     outstanding Rights at a redemption price of $.001 per Right, as such amount
     may be adjusted  pursuant hereto (such redemption  price being  hereinafter
     referred to as the "Redemption Price").  Notwithstanding anything contained
     in this  Agreement to the  contrary,  the Rights  shall not be  exercisable
     after the first occurrence of a Section  11(a)(ii) Event until such time as
     the Company's right of redemption  hereunder has expired.  The Company may,
     at its option,  pay the  Redemption  Price in cash,  shares of Common Stock
     (based  on the  Current  Market  Price of the  Common  Stock at the time of
     redemption) or any other form of  consideration  deemed  appropriate by the
     Board of Directors.  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.

          (b) Immediately upon the action of the Board of Directors ordering the
     redemption  of the Rights  pursuant to Section 23(a) (or at such later time
     as the Board of  Directors  may  establish  for the  effectiveness  of such
     redemption),  notice of which shall have been provided to the Rights Agent,
     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 for each Right
     so held.  Promptly after the action by the Board of Directors  ordering the
     redemption  of the Rights  becoming  effective,  the Company  shall provide
     notice of such  redemption  to the Rights Agent and the holders of the then
     outstanding Rights in accordance with Section 26 (provided that the failure
     to provide,  or any defect in, such notice shall not affect the validity of
     such  redemption).  Any  notice  which is  provided  in the  manner  herein
     provided shall be deemed given,  whether or not the record holder  receives
     the notice.  Each such notice of redemption  will state the method by which
     the payment of the Redemption Price will be made.

                                       36

<PAGE>


     Section 24. Exchange.

          (a) The Board of Directors  may, at its option,  at any time after any
     Person  becomes  an  Acquiring  Person,  exchange  all or part of the  then
     outstanding  and  exercisable  Rights (which shall not include  Rights that
     have  become  null and void  pursuant  to the  provisions  of Section  7(e)
     hereof)  for shares of Common  Stock at an  exchange  ratio of one share of
     Common Stock per Right,  appropriately adjusted to reflect any stock split,
     stock dividend or similar transaction occurring after the date hereof (such
     exchange  ratio being  hereinafter  referred to as the  "Exchange  Ratio"),
     provided that the shares of Common Stock so exchanged  shall be of the same
     class or series which the holders of such Rights  would have been  entitled
     to receive upon the exercise thereof.  Notwithstanding  the foregoing,  the
     Board of Directors  shall not be  empowered to effect such  exchange at any
     time after any Person  (other than an Exempted  Person),  together with all
     Affiliates and Associates of such Person,  becomes the Beneficial  Owner of
     Voting Securities of the Company then outstanding  representing 50% or more
     of the Voting Power of the Company.

          (b) Immediately upon the action of the Board of Directors ordering the
     exchange of any Rights  pursuant  to Section  24(a) and without any further
     action and  without any notice,  the right to  exercise  such Rights  shall
     terminate and the only right thereafter of a holder of such Rights shall be
     to receive  that  number of shares of Common  Stock  equal to the number of
     such Rights held by such holder multiplied by the Exchange Ratio,  provided
     that the shares of Common Stock so exchanged  shall be of the same class or
     series which the holder of such Rights would have been  entitled to receive
     upon  the  exercise  thereof.  The  Company  shall  promptly  make a public
     announcement of any such exchange;  provided,  however, that the failure to
     make,  or any  defect in,  such  public  announcement  shall not affect the
     validity  of such  exchange.  Promptly  after  the  action  of the Board of
     Directors  ordering  the  exchange of the Rights  becoming  effective,  the
     Company shall  provide  notice of such exchange to the Rights Agent and all
     of the holders of the then outstanding Rights in accordance with Section 25
     hereof  (provided  that the failure to give,  or any defect in, such notice
     shall not affect the validity of such exchange). Any notice which is mailed
     in the manner provided in Section 26 hereof 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 based on the number of Rights (other than Rights which have become
     null and void  pursuant to the  provisions  of Section 7(e) hereof) held by
     each holder of Rights.

          (c) In the event  that  there  shall not be  authorized  and  unissued
     shares of the applicable class or series of Common Stock and/or  authorized
     and issued shares of the applicable class or series of Common Stock held in
     its treasury sufficient to permit any exchange of Rights as contemplated in
     accordance  with this Section 24, the Company shall take all such action as
     may be necessary to authorize  additional shares of the applicable class or

                                       37

<PAGE>


     series of Common Stock for  issuance  upon  exchange of the Rights.  In the
     event the Company  shall,  after good faith  effort,  be unable to take all
     such action as may be necessary to authorize such additional  shares of the
     applicable class or series of Common Stock,  the Company shall  substitute,
     for each share of such class or series of Common Stock that would otherwise
     be issuable upon exchange of a Right,  a number of shares of the applicable
     series of Preferred  Stock or fraction  thereof  (subject to Section  14(b)
     hereof)  such that the  Current  Market  Price per share of the  applicable
     series of Preferred Stock multiplied by such number or fraction is equal to
     the Current  Market Price per share of such class or series of Common Stock
     as of the date of issuance of such shares of such series of Preferred Stock
     or fraction thereof.

          (d) 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.  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
     Price per share of the applicable class or series of Common Stock as of the
     Trading Day  immediately  prior to the record date of exchange  pursuant to
     this Section 24.

     Section 25. Notice of Certain Events.

          (a) In  case  the  Company  shall  propose,  at  any  time  after  the
     Distribution Date, (i) to pay any dividend payable in stock of any class to
     the holders of  Preferred  Stock or to make any other  distribution  to the
     holders of Preferred  Stock (other than a regular  quarterly  cash dividend
     out of earnings or retained  earnings of the Company),  or (ii) to offer to
     the holders of 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,  or (iii) to effect any
     reclassification  of its  Preferred  Stock  (other than a  reclassification
     involving only the subdivision of outstanding  shares of Preferred  Stock),
     or (iv) to effect any consolidation or merger into or with any other Person
     (other than a Subsidiary  of the Company in a  transaction  which  complies
     with Section 11(o) hereof),  or to effect any sale or other transfer (or to
     permit  one or  more of its  Subsidiaries  to  effect  any  sale  or  other
     transfer), in one transaction or a series of related transactions,  of more
     than 50% of the assets or earning power of the Company and its Subsidiaries
     (taken as a whole) to any other  Person or Persons  (other than the Company
     and/or any of its  Subsidiaries in one or more  transactions  each of which
     complies  with Section  11(o)  hereof),  or (v) to effect the  liquidation,
     dissolution  or winding up of the  Company,  then,  in each such case,  the
     Company shall give to each holder of a Rights Certificate and to the Rights
     Agent, to the extent  feasible and 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, distribution of rights or warrants, or the
     date on which such reclassification, consolidation, merger, sale, transfer,
     liquidation,  dissolution,  or  winding up is to take place and the date of
     participation  therein by the holders of the shares of 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 twenty (20) days
     prior to the record date for determining holders of the shares of Preferred

                                       38

<PAGE>


     Stock  for  purposes  of such  action,  and in the case of any  such  other
     action,  at least  twenty (20) days prior to the date of the taking of such
     proposed action or the date of participation  therein by the holders of the
     shares of Preferred Stock whichever shall be the earlier.

          (b) In the event that a Section  11(a)(ii) Event shall occur,  then in
     any such case (i) the Company shall as soon as practicable  thereafter give
     to the  Rights  Agent and to each  holder of a Rights  Certificate,  to the
     extent feasible and in accordance  with Section 26 hereof,  a notice of the
     occurrence   of  such  event,   which  shall  specify  the  event  and  the
     consequences  of the event to holders  of Rights  under  Section  11(a)(ii)
     hereof,  and (ii) all  references in the  preceding  paragraph to Preferred
     Stock  shall be deemed  thereafter  to refer to  Common  Stock  and/or,  if
     appropriate, other securities of the Company.

     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 Rights  Certificate to
or on the  Company  shall be  sufficiently  given  or made if sent by  overnight
delivery or first-class mail, postage prepaid,  addressed (until another address
is filed in writing with the Rights Agent) as follows:

                 Gateway Energy Corporation
                 1415 Louisana Street, Suite 4100
                 Houston, Texas 77001
                 Attention:  President

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

                 American Stock Transfer & Trust Company, LLC
                 6201 15th Avenue
                 Brooklyn, NY  11219
                 Attention:  Herb Lemmer/Carlos Pinto

                 with a copy to:
                 American Stock Transfer & Trust Company, LLC
                 6201 15th Avenue
                 Brooklyn, NY  11219
                 Attention:  Legal Department


Notices  or  demands  authorized  by this  Agreement  to be given or made by the
Company or the Rights  Agent to the holder of any  Rights  Certificate  (or,  if
prior to the  Distribution  Date,  to the  holder of  certificates  representing
shares  of  Common  Stock)  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 Rights Agent (or, if prior to
the  Distribution  Date,  on the registry  books of the  Transfer  Agent for the
Common Stock 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  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

                                       39

<PAGE>


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  Certificates  in order to (i) cure any  ambiguity,  (ii)
correct or supplement any provision  contained  herein which may be defective or
inconsistent  with any other  provisions  herein,  (iii) shorten or lengthen any
time period hereunder,  or (iv) change or supplement the provisions hereunder in
any manner which the Company may deem  necessary or desirable;  provided that no
such supplement or amendment  adversely  affects 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;  provided,  however, that the Rights
Agent may, but shall not be  obligated  to,  enter into any such  supplement  or
amendment  which  adversely  affects the Rights  Agent's  own rights,  duties or
immunities under this Agreement.

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

     Section 29. Determinations and Actions by the Board of Directors,  Etc. 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 Exchange Act. The Board of Directors, except as otherwise specifically
provided for herein,  shall have the exclusive power and authority to administer
this Agreement and to exercise all rights and powers specifically granted to the
Board of Directors 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 a  determination  to redeem or not redeem the Rights or to
amend  the  Agreement).  All such  actions,  calculations,  interpretations  and
determinations  (including, for purposes of clause (y) below, all omissions with
respect to the  foregoing)  which are done or made by the Board of  Directors in
good  faith,  shall (x) be final,  conclusive  and binding on the  Company,  the
Rights  Agent,  the  holders  of the  Rights  Certificates  (and,  prior  to the
Distribution  Date,  record  holders of the Common Stock) and all other parties,
and (y) not subject the Board of  Directors  to any  liability to the holders of
the Rights.

     Section 30. 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
record holders of the Rights  Certificates (and, prior to the Distribution Date,
record  holders of the Common  Stock) any legal or  equitable  right,  remedy or
claim  under  this  Agreement;  but  this  Agreement  shall  be for the sole and
exclusive benefit of the Company, the Rights Agent and the record holders of the
Rights  Certificates (and, prior to the Distribution Date, record holders of the
Common Stock).

                                       40

<PAGE>


     Section 31. Severability.  If any term, provision,  covenant or restriction
of this  Agreement  is  held  by a court  of  competent  jurisdiction  or  other
authority  to be invalid,  void or  unenforceable,  the  remainder of the terms,
provisions,  covenants and  restrictions  of this Agreement shall remain in full
force and  effect  and shall in no way be  affected,  impaired  or  invalidated;
provided,  however,  that  notwithstanding  anything  in this  Agreement  to the
contrary, if any such term,  provision,  covenant or restriction is held by such
court  or  authority  to be  invalid,  void or  unenforceable  and the  Board of
Directors of the Company determines in its good faith judgment that severing the
invalid  language  from this  Agreement  would  adversely  affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be  reinstated  and shall not expire  until the Close of  Business  on the
tenth  Business  Day (or such  longer  period of time as  permitted  pursuant to
Section 27 of this Agreement)  following the date of such  determination  by the
Board of Directors.  Without limiting the foregoing,  if any provision requiring
that a determination be made by less than the entire Board of Directors (or at a
time or with the concurrence of a group of directors consisting of less than the
entire Board of Directors) is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, such determination shall then be
made by the  Board  of  Directors  in  accordance  with  applicable  law and the
Company's Certificate of Incorporation and Bylaws.

     Section  32.  Governing  Law.  This  Agreement,  each Right and each Rights
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 made
and to be performed entirely within such State.

     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.

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

                                       41

<PAGE>


     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
duly executed and their  respective  corporate seals to be hereunto  affixed and
attested, all as of the day and year first above written.

                                            GATEWAY ENERGY CORPORATION


                                            By:  /s/  Robert Panico
                                               --------------------------------
                                                      Robert Panico
                                                      President and
                                                      Chief Executive Officer





                                            AMERICAN STOCK TRANSFER AND TRUST
                                            COMPANY, LLC, as Rights Agent

                                            By:  /s/  Carlos Pinto
                                               --------------------------------
                                                      Carlos Pinto
                                                      Vice President

                                       42

<PAGE>


                                                                       EXHIBIT A
                                                                       ---------


                                SUMMARY OF RIGHTS
                                -----------------


Declaration of Rights

     On February 26, 2010, the Board of Directors of Gateway Energy  Corporation
(the  "Company")  declared a dividend  distribution of one right (a "Right") for
each outstanding  share of the Company's common stock, par value $0.25 per share
(the "Common Stock"), payable to stockholders of record at the close of business
on March 10,  2010 (the  "Record  Date") and with  respect  to the Common  Stock
issued  thereafter until the  Distribution  Date (defined below) and, in certain
circumstances,  with respect to the Common  Stock issued after the  Distribution
Date.  Except as set forth  below,  each  Right,  when it  becomes  exercisable,
entitles the  registered  holder to purchase from the Company a unit  consisting
initially  of one  ten-thousandth  of a share (a "Unit")  of Series A  Preferred
Stock, par value $1.00 per share (the "Preferred  Stock"),  of the Company, at a
purchase price of $1.87 per Unit,  subject to adjustment (the "Purchase Price").
The description and terms of the Rights are set forth in a Rights Agreement (the
"Rights  Agreement"),  dated as of February  26,  2010,  between the Company and
American Stock Transfer and Trust Company, LLC, as Rights Agent.

     Rights will also be issued with respect to shares of Common Stock issued by
the Company or transferred  from the Company's  treasury after February 26, 2010
and prior to the  Distribution  Date, and, under certain  circumstances,  Rights
will be issued with respect to shares of Common Stock issued or  transferred  by
the Company after the Distribution Date.

Rights Initially Attached to and Trade with Common Stock

     Until the  earlier  of the  Distribution  Date or the date the  Rights  are
redeemed or expire:

     (1) the  Rights  will be  evidenced  by Common  Stock  certificates  and no
separate Rights Certificates will be distributed,

     (2) the Rights will be transferable only in connection with the transfer of
the underlying shares of Common Stock,

     (3) the  surrender  for transfer of any Common Stock  certificate  (with or
without a copy of a Summary of Rights attached thereto) will also constitute the
transfer of the Rights associated with the shares of Common Stock represented by
such certificate, and

     (4) new Common Stock certificates  issued after March 10, 2010 will contain
a notation  incorporating  the Rights Agreement by reference.  Stockholders will
not be required to take any action in connection  with the payment of the Rights
dividend on March 10, 2010.

                                       43

<PAGE>


When Rights Separate from Common Stock and Become Exercisable

     The Rights will  separate from the Common Stock and become  exercisable  on
the  Distribution  Date. As soon as  practicable  after the  Distribution  Date,
Rights  Certificates  will be mailed to holders of record of the Common Stock as
of the close of business on the  Distribution  Date, and thereafter the separate
Rights Certificates will represent the Rights.

     The  "Distribution  Date" will occur upon the  earlier of (1) ten  business
days after the Stock  Acquisition  Date (as defined  below) or (2) ten  business
days  (or  such  later  date  as  the  Board  shall  determine)   following  the
commencement  of, or  announcement of an intention to make, a tender or exchange
offer,  the consummation of which would result in a Person becoming an Acquiring
Person (as defined below).

     The "Stock Acquisition Date" means the earlier of (i) the date of the first
public  announcement  by the Company or an  Acquiring  Person that an  Acquiring
Person has become such or (ii) the public  disclosure of facts by the company or
an Acquiring Person that such Person has become an Acquiring Person.

     Under the Rights Agreement, an "Acquiring Person" is collectively a person,
together with all Affiliates  (defined below) and Associates  (defined below) of
such person who or which has acquired beneficial ownership of 15% or more of the
outstanding  shares  of Common  Stock  except  pursuant  to a  Qualifying  Offer
(defined below). The term "Acquiring Person" excludes (i) the Company,  (ii) any
subsidiary of the Company, (iii) any employee benefit plan of the Company or any
subsidiary  of the Company,  (iv) any person or entity  organized,  appointed or
established  by the Company  for or pursuant to the terms of any such plan,  and
(v) any person,  together with such person's  Affiliates and Associates,  who or
which  becomes a beneficial  owner of 15% or more of the  outstanding  shares of
Common Stock as a result of acquiring such shares directly from the Company.

     An "Affiliate" of a person is a person that directly, or indirectly through
one or more  intermediaries,  controls,  or is controlled by, or is under common
control  with,  the  person  specified.  An  "Associate"  of a person is (i) any
corporation  or  organization  (other  than the  Company  or any  majority-owned
subsidiary  of the Company) of which such person is an officer or partner or is,
directly  or  indirectly,  the  beneficial  owner of 10% or more of any class of
equity  securities,  (ii) any trust or other  estate in which such  person has a
substantial  beneficial interest or as to which such person serves as trustee or
in a  similar  fiduciary  capacity,  and (iii)  any  relative  or spouse of such
person, or any relative of such spouse,  who has the same home as such person or
who  is a  director  or  officer  of  such  person  or any  of  its  parents  or
subsidiaries.

     No person shall become an "Acquiring Person" either:

     (1) as the result of an  acquisition  of Common Stock by the Company which,
by  reducing  the  number  of  such  shares  then  outstanding,   increases  the
proportionate number of shares beneficially owned by such person,  together with
all  Affiliates and  Associates of such person,  unless such person,  after such

                                       44

<PAGE>


share  purchases  by the Company,  becomes the  beneficial  owner of  additional
shares of Common Stock  constituting 0.5% or more of the then outstanding shares
of Common Stock (other than pursuant to a Qualifying Offer);

     (2) the Board of Directors of the Company  determines  in good faith that a
person  who  would   otherwise  be  an   "Acquiring   Person"  has  become  such
inadvertently,  and such person  divests as promptly as practicable a sufficient
number  of shares of  Common  Stock so that  such  person  would no longer be an
Acquiring Person; or

     (3) as a result of the  beneficial  ownership  of 15% or more of the Common
Stock as of the date of this Agreement  provided such person does not thereafter
become the beneficial  owner of additional  shares of Common Stock  constituting
0.5% or more of the then outstanding shares of Common Stock (other than pursuant
to a Qualifying Offer).

Exercising Rights

     In the event that, at any time  following the  Distribution  Date, a person
becomes an Acquiring  Person,  except  pursuant to an offer for all  outstanding
shares of Common  Stock  which a  majority  of the  directors  determine,  after
receiving  advice from one or more  investment  banking firms, to be fair to the
stockholders  and  otherwise  in the  best  interests  of the  Company  and  its
stockholders (other than the Acquiring Person on whose behalf the offer is being
made) (a "Qualifying  Offer"),  each holder of a Right will  thereafter have the
right to  receive,  upon  exercise  of the Right,  Common  Stock (or, in certain
circumstances, cash, property or other securities of the Company) having a value
equal to two times the Purchase Price of the Right.  Notwithstanding  any of the
foregoing,  following the  occurrence of the event set forth in this  paragraph,
all Rights that are, or (under  certain  circumstances  specified  in the Rights
Agreement) were, beneficially owned by any Acquiring Person (or any Affiliate or
Associate of an Acquiring Person) will be null and void and  nontransferable and
any holder of any such Right  (including any purported  transferee or subsequent
holder) will be unable to exercise or transfer any such right.  However,  at the
option  of the  Board  of  Directors  of the  Company,  during  such  time as an
Acquiring  Person  Beneficially  Owns an  amount  of stock  less than 50% of the
outstanding  Common Stock,  the Company may exchange,  in whole or in part, each
Right of each holder (other than the Acquiring Person or the Acquiring  Person's
Affiliate or  Associates  or their  subsequent  holders) for one share of Common
Stock.  Notwithstanding  any of the  foregoing,  following the occurrence of the
event set forth in this  paragraph,  all  Rights  that  are,  or (under  certain
circumstances specified in the Rights Agreement) were, beneficially owned by any
Acquiring Person (or any Affiliate or Associate of an Acquiring  Person) will be
null and void and  nontransferable  and any holder of any such Right  (including
any purported  transferee  or  subsequent  holder) will be unable to exercise or
transfer any such right.

Adjustment of Rights upon Occurrence of a Triggering Event

     In the event that a Person  becomes an Acquiring  Person,  each holder of a
Right (except the Acquiring Person and certain other persons as described below)
will no longer have the right to purchase Units of Preferred  Stock, but instead

                                       45

<PAGE>


will thereafter have the right to receive, upon exercise of the Right, shares of
Common Stock (or, in certain  circumstances,  cash, property or other securities
of the  Company)  having a  Current  Market  Price  (as  defined  in the  Rights
Agreement)  equal to two times the then current exercise price of the Right. For
example,  at a  Purchase  Price of $1.87 per  Right,  each Right not owned by an
Acquiring Person  following an event set forth in the preceding  paragraph would
entitle  its  holder  to  purchase   $3.74  worth  of  Common  Stock  (or  other
consideration,  as noted above) for $1.87.  Assuming that the Common Stock had a
per share  value of $0.41 at such time,  the holder of each valid Right would be
entitled to purchase 9.1 shares of Common Stock for $1.87. Once a Person becomes
an Acquiring Person, all Rights that are, or under certain  circumstances  were,
beneficially owned by such Acquiring Person (or certain related parties) will be
null and void.

     In the event that,  at any time  following the date on which there has been
public  announcement or disclosure that a person has become an Acquiring  Person
or of facts  indicating  that such  person has become an  Acquiring  Person (the
"Stock  Acquisition  Date"), (i) the Company merges or consolidates with another
corporation  or  association in a transaction in which the holders of all of the
outstanding  shares of Common Stock immediately prior to the consummation of the
transaction  are not the holders of all of the  surviving  corporation's  voting
power, or (ii) more than 50% of the Company's assets or earning power is sold or
transferred,  in either case with or to an Acquiring  Person or any Affiliate or
Associate  or any other  person in which such  Acquiring  Person,  Affiliate  or
Associate  has an interest or any person  acting on behalf of or in concert with
such Acquiring  Person,  Affiliate or Associate,  or, if in such transaction all
holders of Common  Stock are not  treated  alike,  any other  person,  then each
holder of a Right (except Rights which  previously have been voided as set forth
above),  shall  thereafter have the right to receive upon exercise of the Right,
common  stock of the  acquiring  company  having a value  equal to two times the
Purchase  Price of the Right.  The events set forth in this paragraph and in the
preceding paragraph are referred to as the "Triggering Events."

Exchange of Rights

     At any time after any  Person  becomes an  Acquiring  Person,  the Board of
Directors of the Company may, at its option,  exchange the Rights (except Rights
which  previously have been voided as set forth above),  in whole or in part, at
an  exchange  ratio of one share of  Common  Stock for each  Right,  subject  to
adjustment for any stock split, stock dividend or similar transaction  occurring
after  February 26, 2010.  The Board of Directors  may not cause the exchange of
Rights at any time after any Person,  together with such person's Affiliates and
Associates,  becomes the beneficial owner of 50% or more of the shares of Common
Stock then outstanding, with certain exceptions.

Redemption of Rights

     At any time prior to the close of business on the tenth  business day after
the Stock Acquisition Date, the Company may order that all Rights be redeemed at
a price of $.001 per Right (payable in cash, Common Stock or other consideration
deemed  appropriate  by the Board of  Directors),  subject to adjustment for any

                                       46

<PAGE>


stock split,  stock dividend or similar  transaction  occurring  after March 10,
2010 (the "Redemption Price").  Immediately upon the effectiveness of the action
of the  Board of  Directors  ordering  redemption  of the  Rights,  the right to
exercise  the Rights will  terminate  and the holders of the Rights will only be
entitled to receive the Redemption Price for each Right so held.

Amendment of Rights

     Any of the provisions of the Rights  Agreement may be amended by resolution
of the Company's  Board of Directors so long as the Rights are redeemable  prior
to the  Distribution  Date.  After  the  Rights  are no longer  redeemable,  the
provisions of the Rights Agreement,  other than those provisions relating to the
principal  economic  terms of the  Rights,  may be amended  from time to time by
resolution of the Company's  Board of Directors in order to cure any  ambiguity,
to make changes which do not adversely affect the interests of holders of Rights
(excluding  the  interests  of  any  Acquiring   Person  or  its  affiliates  or
associates),  or to  shorten  or  lengthen  any time  period  under  the  Rights
Agreement.

Terms of Preferred Stock

     Each Unit of Preferred Stock  (consisting of one  ten-thousandth of a share
of  Preferred  Stock) that is  issuable  upon  exercise of the Rights  after the
Distribution  Date and prior to the occurrence of a Triggering Event is intended
to have  approximately  the same economic  rights and voting power as a share of
Common Stock, and the value of a Unit of Preferred Stock should  approximate the
value of one  share of Common  Stock.  Each  share of  Preferred  Stock  will be
entitled to dividend  payments  equal to 10,000  times the other cash  dividends
plus 1000 times the aggregate per share amount of all non-cash  dividends (other
than a dividend  payable in Common Stock) declared per share of Common Stock. In
the event of  liquidation,  the  holders  of shares of  Preferred  Stock will be
entitled to the greater of a minimum preferential  liquidation payment of $1,000
per share. Each share of Preferred Stock will have 10,000 votes, voting together
with, and on the same matters as, the Common Stock.  In the event of any merger,
consolidation or other transaction in which shares of Common Stock are exchanged
for or changed into other stock,  securities,  cash and/or other property,  each
share of  Preferred  Stock will be entitled to receive  10,000  times the amount
received  per share of Common  Stock.  These  rights are  protected by customary
anti-dilution provisions. Shares of Preferred Stock are not redeemable. Pursuant
to the Rights Agreement, the Company reserves the right to require, prior to the
occurrence of a Triggering  Event,  that upon any exercise of Rights a number of
Rights be exercised so that only whole shares of Preferred Stock will be issued.

Adjustment of Rights and Securities Upon Certain Events

     The Purchase Price payable,  and the number of Units of Preferred  Stock or
other securities or property  issuable,  upon exercise of the Rights are subject
to adjustment from time to time to prevent  dilution (1) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Preferred
Stock, or (2) upon the distribution to holders of the Preferred Stock of certain

                                       47

<PAGE>


rights,  options,  warrants,  evidences  of  indebtedness  or assets  (excluding
regular  quarterly cash dividends).  No adjustment in the Purchase Price will be
required  until  cumulative  adjustments  amount to at least 1% of the  Purchase
Price.

     The number of outstanding Rights attached to each share of Common Stock and
the number of Units of Preferred Stock  purchasable upon exercise of a Right are
also subject to  adjustment in the event of a stock split of the Common Stock or
a stock  dividend  on the Common  Stock  payable in shares of Common  Stock or a
subdivision or combination of the shares of Common Stock, occurring prior to the
Distribution Date.

     The Company is not required to issue fractional Units; in lieu thereof, the
Company may pay cash for such fractional  Units based on the market price of the
Preferred Stock on the last trading date prior to the date of issuance.

Rights Holder Not a Stockholder

     Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.  The holders of Rights will be able to vote and
receive dividends on the Common Stock that they hold.

Tax Consequences

     While  the  current  distribution  of the  Rights  will not be  taxable  to
stockholders  or  to  the  Company,   stockholders  might,  depending  upon  the
circumstances,  realize  taxable  income in the  event  that the  Rights  become
severable  from the Common Stock and will likely  realize  taxable income in the
event such Rights become  exercisable for Common Stock of the acquiring  company
as set forth above or are exchanged as provided above.

Expiration of Rights

     The Rights  will expire at the close of  business  on  February  26,  2020,
unless the Company  redeems or exchanges  the Rights prior to such date, in each
case as described above.

Number of Rights to be Outstanding

     As of February 26, 2010, approximately  19,402,853 shares of Common Stock
were issued and outstanding. Each share of Common Stock outstanding at the close
of business on March 10, 2010 will receive one Right. Rights will also be issued
with  respect to shares of Common  Stock  issued or  transferred  by the Company
after March 10, 2010 and prior to the  Distribution  Date,  and,  under  certain
circumstances,  Rights  will be issued  with  respect to shares of Common  Stock
issued or transferred by the Company after the Distribution Date.

                                       48

<PAGE>


Rights Agreement

     This summary  description of the Rights does not purport to be complete and
is  qualified  in its  entirety by  reference  to the Rights  Agreement  and the
exhibits thereto.

                                       49

<PAGE>


                                                                       EXHIBIT B
                                                                       ---------

                           FORM OF RIGHTS CERTIFICATE

Certificate No. R-                                                _______ Rights

     NOT  EXERCISABLE  AFTER  FEBRUARY  26,  2020 OR EARLIER IF  REDEEMED BY THE
COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION,  AT THE OPTION OF THE COMPANY, AT
$.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS  AGREEMENT.  UNDER  CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS  AGREEMENT) AND ANY  SUBSEQUENT  HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS  REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY  OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING  PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS  AGREEMENT).   ACCORDINGLY,   THIS  RIGHTS  CERTIFICATE  AND  THE  RIGHTS
REPRESENTED  HEREBY MAY BECOME NULL AND VOID IN THE  CIRCUMSTANCES  SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.]*

                               RIGHTS CERTIFICATE
                           GATEWAY ENERGY 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 February 26, 2010 (the "Rights
Agreement"),  between Gateway Energy  Corporation,  a Delaware  corporation (the
"Company"),  and American  Stock  Transfer and Trust  Company,  LLC (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 at any time prior to 5:00
p.m.  (New York City time) on February  26, 2020 at the office or offices of the
Rights Agent designated for such purpose, or its successors as Rights Agent, one
ten-thousandth of a fully paid,  nonassessable share of Series A Preferred Stock
(the  "Preferred  Stock") of the Company,  at a purchase  price of $1.87 per one
ten-thousandth  of  a  share  (the  "Purchase  Price"),  upon  presentation  and
surrender of this Rights  Certificate  with the Form of Election to Purchase and
related  Certification  duly  executed.  The number of Rights  evidenced by this
Rights  Certificate  (and  the  number  of one  ten-thousandths  of a  share  of
Preferred  Stock which may be purchased upon exercise  thereof) set forth above,
and the Purchase  Price per share set forth  above,  are the number and Purchase
Price as of ________, 20___, based on the Preferred Stock as constituted at such
date. As provided in the Rights Agreement, the Purchase Price and the number and

*  The portion of the legend in brackets shall be inserted only if applicable
   and shall replace the preceding sentence.

                                       50

<PAGE>


kind of shares of  Preferred  Stock or other  securities  of the  Company or any
other  Person (as such term is defined  in the Rights  Agreement),  which may be
purchased upon the exercise of the Rights  evidenced by this Rights  Certificate
are subject to modification  and adjustment upon the happening of certain events
including a Triggering Event (as such term is defined in the Rights Agreement).


     Upon the occurrence of a Section  11(a)(ii)  Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially  owned by (i) an  Acquiring  Person or an Affiliate or Associate of
any such Acquiring  Person (as such terms are defined in the Rights  Agreement),
(ii) a transferee of any such Acquiring Person, Affiliate or Associate, or (iii)
under certain circumstances specified in the Rights Agreement, a transferee of a
person who, after such transfer,  became an Acquiring Person, or an Affiliate or
Associate of an Acquiring Person,  such Rights shall become null and void and no
holder  hereof  shall have any right with  respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.

     This  Rights  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 Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under the specific  circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned  office of the
Rights Agent and are also available upon written request to the Rights Agent.

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

     Subject to the provisions of the Rights Agreement,  the Rights evidenced by
this  Certificate  may be redeemed by the Company at its option at a  redemption
price  of $.001  per  Right at any time  prior to the  earlier  of the  close of
business on (i) the tenth Business Day following the Stock  Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final  Expiration  Date.  In addition,  subject to the  provisions of the Rights
Agreement,  each Right  evidenced  by this  Certificate  may be exchanged by the
Company at its option for one share of Common  Stock of the Company  (subject to
adjustment for any stock split, stock dividend or similar transaction) following
the Stock Acquisition Date and prior to the time an Acquiring person owns 50% or
more of the shares of Common Stock then outstanding.

                                       51

<PAGE>


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

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

     This Rights  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                   ,             GATEWAY ENERGY CORPORATION
           ------------------- ----

                                            By:  /s/
                                               --------------------------------
[SEAL]                                      Name:
                                            Title:
ATTEST:

----------------------------------
Name:
Title:

Countersigned:

AMERICAN STOCK TRANSFER AND TRUST COMPANY, LLC, as Rights Agent


By:  /s/
   -------------------------------
Name:
Title:

                                       52

<PAGE>


                  [Form of Reverse Side of Rights Certificate]


                               FORM OF ASSIGNMENT

     (To be executed by the record holder if such
     holder desires to transfer the Rights Certificate.)


FOR VALUE RECEIVED
                  -----------------------------------------------------------
hereby sells, assigns and transfers unto
                                        -------------------------------------

                  (Please print name and address of transferee)

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

Dated:                            ,
      ---------------------------- ----
                                            /s/
                                            -----------------------------------
                                            Signature


Signature Guaranteed:


     Signatures must be medallion signature  guaranteed by an Eligible Guarantor
Institution  as  defined by SEC Rule  17Ad-15  (12  C.F.R.  240.17Ad-15)  or any
similar rule which the Rights Agent deems applicable.

                                       53

<PAGE>


            [Form of Reverse Side of Rights Certificate (continued)]


                                  Certification
                                  -------------

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1) this Rights Certificate is not being sold,  assigned and transferred by
or on behalf of a Person who is or was an  Acquiring  Person or an  Affiliate or
Associate of any such Acquiring  Person (as such terms are defined in the Rights
Agreement);

     (2) after due inquiry and to the best  knowledge  of the  undersigned,  the
undersigned did not acquire the Rights evidenced by this Rights Certificate from
any  Person  who is,  was or  subsequently  became  an  Acquiring  Person  or an
Affiliate or Associate of an Acquiring Person.



Dated:               ,
      --------------- ----                  -----------------------------------
                                            Signature


Signature Guaranteed:

     Signatures must be medallion signature  guaranteed by an Eligible Guarantor
Institution  as  defined by SEC Rule  17Ad-15  (12  C.F.R.  240.17Ad-15)  or any
similar rule which the Rights Agent deems applicable.

                                     NOTICE
                                     ------

     The signature to the foregoing Assignment and Certification must correspond
to the  name as  written  upon  the  face of this  Rights  Certificate  in every
particular, without alteration or enlargement or any change whatsoever.

     In the  event  the  certification  set  forth  above  is not or  cannot  be
completed,  the Company and the Rights Agent will deem the  beneficial  owner of
the Rights evidenced by this Rights  Certificate to be an Acquiring Person or an
Affiliate or Associate  thereof (as defined in the Rights  Certificate) and such
Assignment will not be honored.

                                       54

<PAGE>


            [Form of Reverse Side of Rights Certificate (continued)]

                          FORM OF ELECTION TO PURCHASE
              (To be executed if holder desires to exercise Rights
                     represented by the Rights Certificate.)

To:      Gateway Energy Corporation:

     The undersigned hereby irrevocably elects to exercise____________________
Rights represented by this Rights Certificate to purchase the shares of
Preferred Stock issuable upon the exercise of the Rights (or such other
securities of the Company or of any other Person (as such term is defined in the
Rights Agreement) which may be issuable upon the exercise of the Rights) and
requests that certificates for such shares be issued in the name of:

Please insert social security
or other identifying number

                         (Please print name and address)

     If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance 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:               ,                      /s/
      --------------- ----                  -----------------------------------
                                            Signature
Signature Guaranteed:

     Signatures must be medallion signature guaranteed by an Eligible Guarantor
Institution as defined by SEC Rule 17Ad-15 (12 C.F.R. 240.17Ad-15) or any
similar rule which the Rights Agent deems applicable.

                                       55

<PAGE>


            [Form of Reverse Side of Rights Certificate (continued)]


                                  Certification
                                  -------------

     The undersigned hereby certifies by checking the appropriate boxes that:

          (1) the Rights evidenced by this Rights Certificate are not being
exercised by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person (as such terms are defined
in the Rights Agreement);

          (2) after due inquiry and to the best knowledge of the undersigned,
the undersigned did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.



Dated:               ,                      /s/
      --------------- ----                  -----------------------------------
                                            Signature

Signature Guaranteed:

     Signatures must be medallion signature guaranteed by an Eligible Guarantor
Institution as defined by SEC Rule 17Ad-15 (12 C.F.R. 240.17Ad-15) or any
similar rule which the Rights Agent deems applicable.

                                     NOTICE
                                     ------

     The signature to the foregoing Election to Purchase and Certification must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.

     In the event the certification set forth above is not or cannot be
completed, the Company and the Rights Agent will deem the beneficial owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Certificate) and such
Election to Purchase will not be honored.

                                       56