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



                           Hallwood Energy Corporation

                                       and

                 Registrar and Transfer Company, as Rights Agent


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



                                RIGHTS AGREEMENT

                            Dated as of June 8, 1999


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


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<PAGE>



                                TABLE OF CONTENTS

                                                                        Page No.


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

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

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

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

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

Section 6. Transfer, Split Up, Combination and Exchange of Right Certificates;

Mutilated, Destroyed, Lost or Stolen Right Certificates........................8

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

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

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

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

Section 11. Adjustment of Purchase Price; Number and Kind of Shares and

Number of Rights..............................................................11

Section 12. Certificate of Adjusted Purchase Price or Number of Shares........18

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

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

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

Section 16. Agreement of Right Holders........................................23

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

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<PAGE>




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

Section 19. Merger or Consolidation or Change of Name of Rights Agent.........24

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

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

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

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

Section 24. Exchange..........................................................28

Section 25. Notice of Certain Events..........................................29

Section 26. Notices...........................................................30

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

Section 28. Successors........................................................31

Section 29. Benefits of this Agreement........................................31

Section 30. Determinations and Actions by the Board of Directors..............31

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

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

Section 33. Counterparts......................................................32

Section 34. Descriptive Headings..............................................32


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                                       ii

<PAGE>



                                RIGHTS AGREEMENT


         Rights  Agreement,  dated  as of June 8,  1999  ("Agreement"),  between
Hallwood  Energy  Corporation,  a  Delaware  corporation  (the  "Company"),  and
Registrar and Transfer Company, a __________  corporation,  as Rights Agent (the
"Rights Agent").

         The Board of  Directors  of the Company has  authorized  and declared a
dividend of one  preferred  share  purchase  right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the Close
of Business (as defined below) on June 8, 1999, (the "Record Date"),  each Right
representing the right to purchase one one-thousandth (subject to adjustment) of
a share of Preferred Stock (as hereinafter defined),  upon the terms and subject
to the conditions herein set forth, and has further  authorized and directed the
issuance of one Right (subject to adjustment as provided herein) with respect to
each share of Common Stock that shall become outstanding between the Record Date
and the earlier of the Distribution  Date and the Expiration Date (as such terms
are  hereinafter  defined);  provided,  however,  that Rights may be issued with
respect  to shares of Common  Stock  that  shall  become  outstanding  after the
Distribution  Date and prior to the Expiration  Date in accordance  with Section
22.

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

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

         (a)  "Acquiring  Person"  shall  mean  any  Person  (as  such  term  is
hereinafter defined) who or which shall be the Beneficial Owner (as such term is
hereinafter  defined)  of 15% or  more  of  the  shares  of  Common  Stock  then
outstanding,  but  shall  not  include  (i) an  Exempt  Person  (as such term is
hereinafter  defined) or (ii) any such Person who has reported or is required to
report such  ownership  (but less than 25%) on Schedule 13G under the Securities
Exchange Act of 1934, as amended (the  "Exchange  Act"),  (or any  comparable or
successor  report) or on Schedule 13D under the Exchange Act (or any  comparable
or successor  report),  which  Schedule 13D  (including an amendment to Schedule
13D)  does not  state any  intention  to or  reserve  the  right to  control  or
influence  the  management  or  policies  of the Company or engage in any of the
actions  specified in Item 4 of such Schedule 13D (other than the disposition of
the Common  Stock)  and,  within 10 Business  Days (as such term is  hereinafter
defined)  of being  requested  by the Company to advise it  regarding  the same,
certifies  to the Company  that such Person  acquired  shares of Common Stock in
excess of 14.99%  inadvertently or without  knowledge of the effect of the terms
of the Rights and who,  together with all Affiliates and Associates,  thereafter
does not acquire additional shares of Common Stock while the Beneficial Owner of
15% or more of the shares of Common Stock then outstanding;  provided,  however,
that (A) if the Person requested to so certify fails to do so within 10 Business
Days or (B) if such Person  thereafter  becomes obligated to file a Schedule 13D
(including  an amendment to a Schedule 13D) that would state any intention to or
reserve  the right to control or  influence  the  management  or policies of the
Company or engage in

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                                                         1

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any of the  actions  specified  in Item 4 of such  Schedule  13D (other than the
disposition  of the Common  Stock),  then such Person  shall become an Acquiring
Person immediately thereafter.  Notwithstanding the foregoing, (x) if, as of the
date hereof,  any Person is the Beneficial Owner of 15% or more of the shares of
Common  Stock  outstanding,  such  Person  shall not be or become an  "Acquiring
Person"  unless and until such time as such Person shall  become the  Beneficial
Owner of an  additional 1% of the shares of Common Stock (other than pursuant to
a dividend or distribution paid or made by the Company on the outstanding Common
Stock in shares of Common  Stock or  pursuant to a split or  subdivision  of the
outstanding  Common Stock),  unless,  upon becoming the Beneficial Owner of such
additional shares of Common Stock, either such Person is not then the Beneficial
Owner of 15% or more of the  shares of Common  Stock  then  outstanding  or such
Person is exempted from the definition of "Acquiring Person" pursuant to Section
1(a)(ii)  hereof and (y) no Person  shall  become an  "Acquiring  Person" as the
result of an  acquisition  of shares of Common  Stock by the Company  which,  by
reducing the number of shares outstanding, increases the proportionate number of
shares of Common Stock  beneficially  owned by such Person to 15% or more of the
shares of Common Stock then  outstanding;  provided,  however,  that if a Person
shall become the  Beneficial  Owner of 15% or more of the shares of Common Stock
then  outstanding by reason of such share  acquisitions by the Company and shall
thereafter  become the Beneficial Owner of any additional shares of Common Stock
(other than pursuant to a dividend or  distribution  paid or made by the Company
on the outstanding Common Stock in shares of Common Stock or pursuant to a split
or  subdivision  of the  outstanding  Common  Stock),  then such Person shall be
deemed to be an "Acquiring Person" unless, upon becoming the Beneficial Owner of
such  additional  shares of Common  Stock,  either  such  Person is not then the
Beneficial  Owner of 15% or more of the shares of Common Stock then  outstanding
or such Person is exempted from the definition of "Acquiring Person" pursuant to
Section 1(a)(ii) hereof. 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 as in effect on the
date hereof.

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

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

                  (i) which such Person or any of such  Person's  Affiliates  or
Associates is deemed to  beneficially  own,  directly or indirectly,  within the
meaning of Rule 13d-3 of the General  Rules and  Regulations  under the Exchange
Act as in effect on the date hereof;

                  (ii) which such Person or any of such  Person's  Affiliates or
Associates  has (A) the right to  acquire  (whether  such  right is  exercisable
immediately or only after the passage of time)

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                                                         2

<PAGE>



pursuant to any agreement,  arrangement or  understanding  (other than customary
agreements with and between  underwriters and selling group members with respect
to a bona  fide  public  offering  of  securities),  or  upon  the  exercise  of
conversion rights,  exchange rights, rights,  warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially  own, (x) securities  tendered  pursuant to a tender or exchange
offer made by or on behalf of such Person or any of such Person's  Affiliates or
Associates  until such  tendered  securities  are  accepted  for  purchase,  (y)
securities  which such Person has a right to acquire upon the exercise of Rights
at any time prior to the time that any Person becomes an Acquiring Person or (z)
securities issuable upon the exercise of Rights from and after the time that any
Person  becomes an Acquiring  Person if such Rights were acquired by such Person
or any of such Person's  Affiliates or Associates prior to the Distribution Date
or pursuant to Section 3(a) or Section 22 hereof ("Original Rights") or pursuant
to Section  11(i) or Section  11(n) with  respect to an  adjustment  to Original
Rights;  or (B) the right to vote  pursuant  to any  agreement,  arrangement  or
understanding;  provided,  however,  that  a  Person  shall  not be  deemed  the
Beneficial  Owner of, or to  beneficially  own,  any  security by reason of such
agreement,  arrangement  or  understanding  if  the  agreement,  arrangement  or
understanding  to vote such security (1) arises solely from a revocable proxy or
consent  given  to  such  Person  in  response  to a  public  proxy  or  consent
solicitation  made pursuant to, and in accordance with, the applicable rules and
regulations  promulgated  under  the  Exchange  Act  and  (2) is not  also  then
reportable  on  Schedule  13D  under  the  Exchange  Act (or any  comparable  or
successor report); or

                  (iii) which are beneficially owned, directly or indirectly, by
any other Person and with  respect to which such Person or any of such  Person's
Affiliates or Associates has any agreement,  arrangement or understanding (other
than  customary  agreements  with and between  underwriters  and  selling  group
members  with  respect to a bona fide  public  offering of  securities)  for the
purpose of acquiring,  holding, voting (except to the extent contemplated by the
proviso to Section  1(c)(ii)(B)) or disposing of such securities of the Company;
provided,  however, that no Person who is an officer, director or employee of an
Exempt  Person  shall be  deemed,  solely by reason of such  Person's  status or
authority  as  such,  to be the  "Beneficial  Owner"  of,  to  have  "Beneficial
Ownership" of or to  "beneficially  own" any securities  that are  "beneficially
owned" (as defined in this Section 1(c)),  including,  without limitation,  in a
fiduciary capacity,  by an Exempt Person or by any other such officer,  director
or employee of an Exempt Person.

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

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

         (f) "Common  Stock" when used with  reference to the Company shall mean
the Common Stock,  presently par value $.01 per share,  of the Company.  "Common
Stock" when used with

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                                                         3

<PAGE>



reference to any Person other than the Company  shall mean the common stock (or,
in the case of an  unincorporated  entity,  the equivalent equity interest) with
the  greatest  voting  power of such other  Person or, if such other Person is a
subsidiary of another  Person,  the Person or Persons which  ultimately  control
such first-mentioned Person.

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

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

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

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

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

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

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

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

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

         (p) "NASDAQ" shall mean The Nasdaq National Market.

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

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

         (s)  "Preferred  Stock"  shall mean the  Series B Junior  Participating
Preferred  Stock, par value $.01 per share, of the Company having the rights and
preferences set forth in the Form of Certificate of Designation attached to this
Agreement as Exhibit A.

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<PAGE>




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

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

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

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

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

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

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

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

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

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

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

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

         Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights  Agent to act as agent for the Company 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.


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         Section 3.  Issue of Right Certificates.

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

         (b) With respect to certificates for Common Stock outstanding as of the
Record Date, until the  Distribution  Date, the Rights will be evidenced by such
certificates registered in the names of the holders thereof together with a copy
of the  Summary of Rights in  substantially  the form of  Exhibit C hereto  (the
"Summary  of  Rights").  Until  the  Distribution  Date  (or,  if  earlier,  the
Expiration Date), the surrender for transfer of any certificate for Common Stock
outstanding on the Record Date, with or without a copy of the Summary of Rights,
shall also  constitute  the  transfer of the Rights  associated  with the Common
Stock represented thereby.

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


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                  This certificate also evidences and entitles the holder hereof
                  to  certain  rights  ("Rights")  as  set  forth  in  a  Rights
                  Agreement between Hallwood Energy  Corporation (the "Company")
                  and Registrar and Transfer Company,  as Rights Agent, dated as
                  of June 8, 1999,  as the same may be amended from time to time
                  (the  "Rights  Agreement"),  the  terms  of which  are  hereby
                  incorporated  herein  by  reference  and a copy of which is on
                  file at the principal executive offices of the Company.  Under
                  certain  circumstances,  as set forth in the Rights Agreement,
                  such Rights will be  evidenced  by separate  certificates  and
                  will no longer be evidenced by this  certificate.  The Company
                  will  mail to the  holder  of this  certificate  a copy of the
                  Rights  Agreement  without  charge after  receipt of a written
                  request therefor. Under certain circumstances, as set forth in
                  the Rights  Agreement,  Rights owned by or  transferred to any
                  Person who is or becomes an  Acquiring  Person (as  defined in
                  the Rights  Agreement)  and certain  transferees  thereof will
                  become null and void and will no longer be transferable.

With respect to such  certificates  containing the foregoing  legend,  until the
Distribution  Date the Rights  associated  with the Common Stock  represented by
such  certificates  shall  be  evidenced  by such  certificates  alone,  and the
surrender  for transfer of any such  certificate,  except as otherwise  provided
herein,  shall also  constitute the transfer of the Rights  associated  with the
Common Stock represented thereby. If the Company purchases or otherwise acquires
any Common Stock after the Record Date but prior to the  Distribution  Date, any
Rights associated with such Common Stock shall be deemed canceled and retired so
that the Company  shall not be entitled to exercise any Rights  associated  with
the Common Stock that are no longer outstanding.

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

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

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<PAGE>







         Section 5.  Countersignature and Registration.

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

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

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

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


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<PAGE>



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

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

         (a)  Except as  otherwise  provided  herein,  the Rights  shall  become
exercisable on the  Distribution  Date, and thereafter the registered  holder of
any Right  Certificate  may,  subject to Section  11(a)(ii) hereof and except as
otherwise provided herein,  exercise the Rights evidenced thereby in whole or in
part upon  surrender  of the Right  Certificate,  with the form of  election  to
purchase on the reverse side thereof duly  executed,  to the Rights Agent at the
office or agency of the Rights Agent designated for such purpose,  together with
payment of the aggregate  Purchase Price with respect to the total number of one
one-thousandths  of a share of  Preferred  Stock (or other  securities,  cash or
other assets,  as the case may be) as to which the Rights are exercised,  at any
time  that is both  after  the  Distribution  Date and  prior  to the time  (the
"Expiration  Date") that is the earliest of (i) the Close of Business on June 7,
2009  (the  "Final  Expiration  Date"),  (ii) the time at which the  Rights  are
redeemed as provided in Section 23 hereof (the "Redemption  Date"), or (iii) the
time at which such Rights are exchanged as provided in Section 24 hereof.

         (b)  The  Purchase  Price  shall  be  initially  $40.00  for  each  one
one-thousandth  of a share of Preferred Stock purchasable upon the exercise of a
Right.  The Purchase Price and the number of one  one-thousandths  of a share of
Preferred Stock or other  securities or property to be acquired upon exercise of
a Right shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable  in lawful  money of the United  States of
America in accordance with paragraph (c) of this Section 7.

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

CORPDAL:121602.3  18747-00028
                                                         9

<PAGE>



agent with the  depositary  agent) and the Company hereby directs the depositary
agent to comply with such request,  (ii) when appropriate,  requisition from the
Company the amount of cash to be paid in lieu of issuance of  fractional  shares
in  accordance  with Section 14 hereof,  (iii)  promptly  after  receipt of such
certificates or depositary  receipts,  cause the same to be delivered to or upon
the order of the registered holder of such Right Certificate, registered in such
name or names as may be  designated  by such  holder and (iv) when  appropriate,
after receipt, promptly deliver such cash to or upon the order of the registered
holder of such Right Certificate.

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

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

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

         Section 9.  Availability of Shares of Preferred Stock.

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

         (b) So long as the shares of Preferred Stock issuable upon the exercise
of Rights  may be listed or  admitted  to  trading  on any  national  securities
exchange, or quoted on NASDAQ, the

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                                                        10

<PAGE>



Company  shall use its best  efforts  to cause,  from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed or
admitted to trading on such exchange,  or quoted on NASDAQ, upon official notice
of issuance upon such exercise.

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

         (d) The Company  covenants and agrees that it will take all such action
as may be necessary to ensure that all shares of Preferred  Stock delivered upon
exercise of Rights shall, at the time of delivery of the  certificates  therefor
(subject to payment of the Purchase Price),  be duly and validly  authorized and
issued and fully paid and nonassessable shares.

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

         Section 10.  Preferred Stock Record Date. Each Person in whose name any
certificate  for Preferred Stock is issued upon the exercise of Rights shall for
all  purposes  be deemed to have  become  the  holder of record of the shares of
Preferred Stock represented thereby on, and such certificate shall be dated, the
date  upon  which  the  Right  Certificate   evidencing  such  Rights  was  duly
surrendered  and  payment of the  Purchase  Price (and any  applicable  transfer
taxes)  was made;  provided,  however,  that if the date of such  surrender  and
payment is a date upon which the Preferred Stock transfer books

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                                                        11

<PAGE>



of the Company are closed, such Person shall be deemed to have become the record
holder  of such  shares  on,  and  such  certificate  shall be  dated,  the next
succeeding  Business  Day on which the  Preferred  Stock  transfer  books of the
Company are open.  Prior to the exercise of the Rights  evidenced  thereby,  the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred  Stock for which the Rights shall be exercisable,  including,  without
limitation,  the right to vote or to receive  dividends or other  distributions,
and shall not be  entitled  to  receive  any  notice of any  proceedings  of the
Company, except as provided herein.

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

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

                  (ii)  Subject to Section 24 of this  Agreement,  if any Person
becomes an Acquiring  Person (the first  occurrence of such event being referred
to  hereinafter  as the "Flip-In  Event"),  then (A) the Purchase Price shall be
adjusted to be the  Purchase  Price in effect  immediately  prior to the Flip-In
Event  multiplied by the number of one  one-thousandths  of a share of Preferred
Stock for which a Right was exercisable immediately prior to such Flip-In Events
whether or not such Right was then exercisable,  and (B) each holder of a Right,
except as otherwise  provided in this Section  11(a)(ii) and Section  11(a)(iii)
hereof,  shall thereafter have the right to receive,  upon exercise thereof at a
price equal to the Purchase Price (as so adjusted), in accordance with the terms
of this  Agreement  and in lieu of shares of  Preferred  Stock,  such  number of
shares of Common  Stock as shall  equal the  result  obtained  by  dividing  the
Purchase  Price (as so adjusted) by 50% of the current per share market price of
the Common Stock  (determined  pursuant to Section  11(d) hereof) on the date of
such Flip- In Event; provided, however, that the Purchase Price (as so adjusted)
and the number of shares of Common Stock so receivable  upon exercise of a Right
shall, following the Flip-In Event, be subject

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                                                        12

<PAGE>



to further  adjustment as appropriate  in accordance  with Section 11(f) hereof.
Notwithstanding  anything in this Agreement to the contrary,  however,  from and
after the  Flip-In  Event,  any Rights  that are  beneficially  owned by (x) any
Acquiring Person (or any Affiliate or Associate of any Acquiring Person),  (y) a
transferee of any  Acquiring  Person (or any such  Affiliate or  Associate)  who
becomes  a  transferee  after  the  Flip-In  Event  or (z) a  transferee  of any
Acquiring  Person (or any such  Affiliate or Associate)  who became a transferee
prior to or  concurrently  with the  Flip-In  Event  pursuant  to  either  (I) a
transfer from the Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing  agreement,  arrangement or understanding
regarding the transferred  Rights or (II) a transfer that the Board of Directors
has determined is part of the plan,  arrangement or understanding  which has the
purpose or effect of avoiding the  provisions of this  paragraph and  subsequent
transferees  of such Persons,  shall be void without any further  action and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any  provision of this  Agreement.  The Company  shall use all
reasonable  efforts to ensure that the provisions of this Section  11(a)(ii) are
complied with,  but shall have no liability to any holder of Right  Certificates
or other  Person  as a result of its  failure  to make any  determinations  with
respect to an Acquiring  Person or its  Affiliates,  Associates  or  transferees
hereunder.  From and after the Flip- In  Event,  no Right  Certificate  shall be
issued pursuant to Section 3 or Section 6 hereof that represents Rights that are
or have become void pursuant to the  provisions of this  paragraph and any Right
Certificate  delivered  to the Rights Agent that  represents  Rights that are or
have become void pursuant to the provisions of this paragraph shall be canceled.
From and after the occurrence of an event specified in Section 13(a) hereof, any
Rights  that  theretofore  have  not been  exercised  pursuant  to this  Section
11(a)(ii) shall thereafter be exercisable only in accordance with Section 13 and
not pursuant to this Section 11(a)(ii).

                  (iii) The Company may at its option  substitute for a share of
Common  Stock  issuable  upon the  exercise  of  Rights in  accordance  with the
foregoing  subparagraph  (ii) a number of shares of Preferred  Stock or fraction
thereof  such that the current per share  market price of one share of Preferred
Stock  multiplied  by such  number or fraction is equal to the current per share
market  price of one share of Common  Stock.  If there  shall not be  sufficient
shares of Common Stock issued but not  outstanding or authorized but unissued to
permit the  exercise  in full of the  Rights in  accordance  with the  foregoing
subparagraph  (ii),  the Board of Directors  shall,  to the extent  permitted by
applicable law and any material  agreements  then in effect to which the Company
is a party (A) determine the excess (such excess, the "Spread") of (1) the value
of the  shares  of  Common  Stock  issuable  upon  the  exercise  of a Right  in
accordance with the foregoing  subparagraph  (ii) (the "Current Value") over (2)
the Purchase  Price (as adjusted in accordance  with the foregoing  subparagraph
(ii)),  and (B) with  respect to each Right  (other than Rights that have become
void pursuant to the foregoing  subparagraph  (ii)), make adequate  provision to
substitute  for the  shares of Common  Stock  issuable  in  accordance  with the
foregoing  subparagraph  (ii) upon  exercise  of the Right  and  payment  of the
Purchase Price (as adjusted in accordance therewith),  (1) cash, (2) a reduction
in such Purchase Price, (3) shares of Preferred Stock or other equity securities
of the Company (including,  without limitation, shares or fractions of shares of
Preferred  Stock  that,  by virtue of having  dividend,  voting and  liquidation
rights  substantially  comparable  to those of the shares of Common  Stock,  are
deemed in good faith by the Board of  Directors to have  substantially  the same
value as the shares of Common

CORPDAL:121602.3  18747-00028
                                                        13

<PAGE>



Stock  (such  shares of  Preferred  Stock and shares or  fractions  of shares of
Preferred Stock are hereinafter referred to as "Common Stock Equivalents")), (4)
debt securities of the Company,  (5) other assets, or (6) any combination of the
foregoing,  having a value that, when added to the value of the shares of Common
Stock issued upon exercise of such Right, shall have an aggregate value equal to
the Current  Value (less the amount of any  reduction in such  Purchase  Price),
where such  aggregate  value has been  determined by the Board of Directors upon
the advice of a nationally  recognized  investment banking firm selected in good
faith by the Board of Directors;  provided,  however,  that if the Company shall
not make adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days  following the Flip-In Event (the  "Section  11(a)(ii)  Trigger
Date"),  then the Company shall be obligated to deliver, to the extent permitted
by applicable law and any material agreement then in effect to which the Company
is a party,  upon the  surrender  for exercise of a Right and without  requiring
payment  of  such  Purchase  Price,  shares  of  Common  Stock  (to  the  extent
available),  and then,  if  necessary,  such  number or  fractions  of shares of
Preferred Stock (to the extent  available) and then, if necessary,  cash,  which
shares  and/or cash have an  aggregate  value equal to the Spread.  If, upon the
occurrence of the Flip-In Event,  the Board of Directors shall determine in good
faith that it is likely that sufficient  additional shares of Common Stock could
be authorized  for issuance  upon  exercise in full of the Rights,  then, if the
Board of Directors so elects,  the thirty (30) day period set forth above may be
extended to the extent  necessary,  but not more than ninety (90) days after the
Section  11(a)(ii)  Trigger Date, in order that the Company may seek stockholder
approval for the  authorization of such additional  shares (such thirty (30) day
period, as it may be extended,  is herein called the "Substitution  Period"). To
the extent that the Company  determines  that some action need be taken pursuant
to the second and/or third sentence of this Section 11(a)(iii),  the Company (x)
shall provide, subject to Section 11(a)(ii) hereof and the last sentence of this
Section  11(a)(iii)  hereof,  that such  action  shall  apply  uniformly  to all
outstanding  Rights and (y) may suspend the  exercisability  of the Rights until
the expiration of the Substitution  Period in order to seek any authorization of
additional  shares and/or to decide the  appropriate  form of distribution to be
made pursuant to such second  sentence and to determine the value thereof.  Upon
any such suspension,  the Company shall issue a public announcement stating that
the  exercisability of the Rights has been temporarily  suspended,  as well as a
public  announcement at such time as the suspension is no longer in effect.  For
purposes of this  Section  11(a)(iii),  the value of the shares of Common  Stock
shall be the current per share market price (as  determined  pursuant to Section
11(d)(i)) on the Section  11(a)(ii) Trigger Date and the per share or fractional
value of any Common  Stock  Equivalent  shall be deemed to equal the current per
share  market price of the Common  Stock.  The Board of Directors of the Company
may, but shall not be required to, establish procedures to allocate the right to
receive  shares of Common Stock upon the exercise of the Rights among holders of
Rights pursuant to this Section 11(a)(iii).

         (b) In case the  Company  shall fix a record  date for the  issuance of
rights,  options or warrants to all holders of Preferred  Stock  entitling  them
(for a period  expiring  within  forty-five (45) calendar days after such record
date) to subscribe  for or purchase  Preferred  Stock (or shares having the same
rights, privileges and preferences as the Preferred Stock ("Equivalent Preferred
Shares")) or securities convertible into Preferred Stock or Equivalent Preferred
Shares at a price per share of Preferred  Stock or Equivalent  Preferred  Shares
(or having a conversion price per share if a security

CORPDAL:121602.3  18747-00028
                                                        14

<PAGE>



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

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

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                                                        15

<PAGE>




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

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

         (e) No adjustment in the Purchase  Price shall be required  unless such
adjustment  would require an increase or decrease of at least 1% in the Purchase
Price;  provided,  however, that any adjustments which by reason of this Section
11(e) are not required to be made shall be carried

CORPDAL:121602.3  18747-00028
                                                        16

<PAGE>



forward and taken into account in any subsequent  adjustment.  All  calculations
under this  Section 11 shall be made to the  nearest  cent or to the nearest one
hundred-thousandth  of a share of Preferred Stock or one-hundredth of a share of
Common Stock or other share or security as the case may be.  Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the  earlier of (i) three years from the date of the
transaction that requires such adjustment or (ii) the Expiration Date.

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

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

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

         (i) The Company may elect on or after the date of any adjustment of the
Purchase  Price  pursuant to Sections 11(b) or 11(c) hereof to adjust the number
of  Rights,   in   substitution   for  any  adjustment  in  the  number  of  one
one-thousandths of a share of Preferred Stock purchasable upon the exercise of a
Right.  Each of the Rights  outstanding  after such  adjustment of the number of
Rights shall be exercisable for the number of one  one-thousandths of a share of
Preferred  Stock  for which a Right was  exercisable  immediately  prior to such
adjustment.  Each Right held of record prior to such adjustment of the number of
Rights  shall  become  that  number  of  Rights   (calculated   to  the  nearest
one-hundredth)  obtained by dividing  the Purchase  Price in effect  immediately
prior to  adjustment  of the  Purchase  Price by the  Purchase  Price in  effect
immediately  after  adjustment of the Purchase  Price.  The Company shall make a
public  announcement of its election to adjust the number of Rights,  indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment  to be made.  Such record date may be the date on which the  Purchase
Price is adjusted

CORPDAL:121602.3  18747-00028
                                                        17

<PAGE>



or any day thereafter, but, if the Right Certificates have been issued, shall be
at least ten (10) days later than the date of the public announcement.  If Right
Certificates  have been  issued,  upon each  adjustment  of the number of Rights
pursuant to this Section  11(i),  the Company  may, as promptly as  practicable,
cause to be  distributed  to  holders  of record of Right  Certificates  on such
record date Right  Certificates  evidencing,  subject to Section 14 hereof,  the
additional  Rights to which such  holders  shall be entitled as a result of such
adjustment,  or, at the option of the Company,  shall cause to be distributed to
such  holders  of  record  in   substitution   and  replacement  for  the  Right
Certificates  held by such  holders  prior to the date of  adjustment,  and upon
surrender thereof, if required by the Company, new Right Certificates evidencing
all the Rights to which such holders  shall be entitled  after such  adjustment.
Right  Certificates  so  to  be  distributed  shall  be  issued,   executed  and
countersigned  in the manner  provided for herein and shall be registered in the
names  of the  holders  of  record  of Right  Certificates  on the  record  date
specified in the public announcement.

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

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

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

         (m) Anything in this Section 11 to the  contrary  notwithstanding,  the
Company shall be entitled to make such  adjustments  in the Purchase  Price,  in
addition to those adjustments  expressly  required by this Section 11, as and to
the extent that it in its sole  discretion  shall  determine  to be advisable in
order that any  consolidation  or subdivision of the Preferred  Stock,  issuance
wholly for cash of any shares of Preferred Stock at less than the current market
price,  issuance wholly for cash of Preferred Stock or securities which by their
terms are convertible  into or exchangeable  for Preferred  Stock,  dividends on
Preferred Stock payable in shares of Preferred Stock or issuance of

CORPDAL:121602.3  18747-00028
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<PAGE>



rights,  options or warrants referred to hereinabove in Section 11(b), hereafter
made by the  Company to holders of its  Preferred  Stock shall not be taxable to
such stockholders.

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

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

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

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

         (a) If, directly or indirectly, at any time after the Flip-In Event (i)
the Company shall  consolidate  with or shall merge into any other Person,  (ii)
any Person  shall merge with and into the  Company and the Company  shall be the
continuing or surviving  corporation of such merger and, in connection with such
merger,  all or part of the Common Stock shall be changed into or exchanged  for
stock or other securities of any other Person (or of the Company) or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or one or
more of its  Subsidiaries  shall  sell or  otherwise  transfer),  in one or more
transactions,  assets or earning power  aggregating 50% or more of the assets or
earning  power of the  Company  and its  Subsidiaries  (taken as a whole) to any
other Person (other than the Company or one or more wholly owned Subsidiaries of
the Company), then

CORPDAL:121602.3  18747-00028
                                                        19

<PAGE>



upon the first occurrence of such event, proper provision shall be made so that:
(A) each holder of a Right (other than Rights that have become void  pursuant to
Section 11(a)(ii)  hereof) shall thereafter have the right to receive,  upon the
exercise  thereof at the Purchase Price (as  theretofore  adjusted in accordance
with Section 11(a)(ii)  hereof),  in accordance with the terms of this Agreement
and in lieu of shares of Preferred  Stock or Common  Stock of the Company,  such
number of validly authorized and issued,  fully paid,  non-assessable and freely
tradeable  shares  of  Common  Stock of the  Principal  Party  (as such  term is
hereinafter defined),  not subject to any liens,  encumbrances,  rights of first
refusal or other adverse claims,  as shall equal the result obtained by dividing
the Purchase Price (as theretofore adjusted in accordance with Section 11(a)(ii)
hereof) by 50% of the current per share market price of the Common Stock of such
Principal  Party  (determined  pursuant to Section  11(d) hereof) on the date of
consummation of such consolidation, merger, sale or transfer; provided, however,
that the Purchase  Price (as  theretofore  adjusted in  accordance  with Section
11(a)(ii)  hereof)  and the number of shares of Common  Stock of such  Principal
Party so  receivable  upon  exercise  of a Right  shall be  subject  to  further
adjustment as appropriate in accordance with Section 11(f) hereof to reflect any
events  occurring in respect of the Common Stock of such  Principal  Party after
the  occurrence  of such  consolidation,  merger,  sale or  transfer;  (B)  such
Principal Party shall  thereafter be liable for, and shall assume,  by virtue of
such consolidation,  merger, sale or transfer, all the obligations and duties of
the Company  pursuant to this Rights  Agreement;  (C) the term  "Company"  shall
thereafter be deemed to refer to such  Principal  Party;  and (D) such Principal
Party shall take such steps (including, but not limited to, the reservation of a
sufficient  number of its shares of Common  Stock in  accordance  with Section 9
hereof) in connection with such  consummation of any such  transaction as may be
necessary to assure that the provisions  hereof shall  thereafter be applicable,
as nearly as  reasonably  may be, in relation to the shares of its Common  Stock
thereafter deliverable upon the exercise of the Rights; provided, however, that,
upon the subsequent occurrence of any consolidation, merger, sale or transfer of
assets or other  extraordinary  transaction in respect of such Principal  Party,
each holder of a Right shall thereupon be entitled to receive,  upon exercise of
a Right and payment of the  Purchase  Price as provided in this  Section  13(a),
such cash,  shares,  rights,  warrants and other property that such holder would
have been entitled to receive had such holder,  at the time of such transaction,
owned the Common Stock of the Principal Party  receivable upon the exercise of a
Right pursuant to this Section 13(a),  and such Principal  Party shall take such
steps (including,  but not limited to, reservation of shares of stock) as may be
necessary to permit the subsequent exercise of the Rights in accordance with the
terms hereof for such cash, shares, rights, warrants and other property.

         (b)      "Principal Party" shall mean:

                  (i) in the case of any transaction described in (i) or (ii) of
the first sentence of Section 13(a) hereof: (A) the Person that is the issuer of
the  securities  into which the  shares of Common  Stock are  converted  in such
merger or consolidation,  or, if there is more than one such issuer,  the issuer
the shares of Common Stock of which have the greatest  aggregate market value of
shares  outstanding,  or (B) if no securities are so issued, (x) the Person that
is the other party to the merger,  if such Person  survives said merger,  or, if
there is more than one such  Person,  the Person  the shares of Common  Stock of
which have the greatest aggregate market value of shares outstanding

CORPDAL:121602.3  18747-00028
                                                        20

<PAGE>



or (y) if the Person  that is the other party to the merger does not survive the
merger,  the Person that does  survive the merger  (including  the Company if it
survives) or (z) the Person resulting from the consolidation; and

                  (ii) in the case of any transaction  described in (iii) of the
first sentence in Section 13(a) hereof,  the Person that is the party  receiving
the greatest portion of the assets or earning power transferred pursuant to such
transaction  or  transactions,  or,  if each  Person  that  is a  party  to such
transaction or  transactions  receives the same portion of the assets or earning
power so  transferred  or if the Person  receiving  the greatest  portion of the
assets or earning power cannot be  determined,  whichever of such Persons is the
issuer of Common  Stock  having the  greatest  aggregate  market value of shares
outstanding; provided, however, that in any such case described in the foregoing
clause (b)(i) or (b)(ii), if the Common Stock of such Person is not at such time
or has not been continuously over the preceding 12-month period registered under
Section 12 of the Exchange  Act, then (1) if such Person is a direct or indirect
Subsidiary  of  another  Person  the  Common  Stock  of which is and has been so
registered, the term "Principal Party" shall refer to such other, or (2) if such
Person is a Subsidiary,  directly or  indirectly,  of more than one Person,  the
Common Stock of all of which is and has been so registered,  the term "Principal
Party"  shall refer to  whichever  of such Persons is the issuer of Common Stock
having the greatest aggregate market value of shares outstanding, or (3) if such
Person is owned,  directly or  indirectly,  by a joint venture  formed by two or
more Persons that are not owned, directly or indirectly, by the same Person, the
rules set forth in clauses  (1) and (2) above  shall apply to each of the owners
having an interest in the  venture as if the Person  owned by the joint  venture
was a Subsidiary of both or all of such joint venturers, and the Principal Party
in each such case shall bear the obligations set forth in this Section 13 in the
same ratio as its interest in such Person bears to the total of such interests.

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

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

                  (ii)  use  its  best  efforts,  if  the  Common  Stock  of the
Principal  Party  shall be listed or admitted to trading on NASDAQ or on another
national securities exchange, to list or admit to

CORPDAL:121602.3  18747-00028
                                                        21

<PAGE>



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

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

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

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

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


CORPDAL:121602.3  18747-00028
                                                        22

<PAGE>



         Section 14.  Fractional Rights and Fractional Shares.

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

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

         (c) The Company  shall not be required to issue  fractions of shares of
Common Stock or to distribute  certificates  that evidence  fractional shares of
Common Stock upon the exercise or exchange of Rights. In lieu of such fractional
shares of Common Stock, the Company shall pay to

CORPDAL:121602.3  18747-00028
                                                        23

<PAGE>



the  registered  holder  of the Right  Certificates  with  regard to which  such
fractional  shares of Common Stock would otherwise be issuable an amount in cash
equal to the same  fraction  of the  current  market  value of a whole  share of
Common Stock (as  determined  in  accordance  with Section 14(a) hereof) for the
Trading Day immediately prior to the date of such exercise or exchange.

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

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

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

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

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

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


CORPDAL:121602.3  18747-00028
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<PAGE>



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

         Section 18.  Concerning the Rights Agent.

         (a)  The  Company  agrees  to  pay  to  the  Rights  Agent   reasonable
compensation  for all services  rendered by it hereunder and, from time to time,
on demand of the Rights  Agent,  its  reasonable  expenses  and counsel fees and
other  disbursements  incurred  in the  administration  and  execution  of  this
Agreement and the exercise and performance of its duties hereunder.  The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless  against,
any loss, liability or expense, incurred without 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  the costs and expenses of defending  against any claim of
liability arising therefrom,  directly or indirectly. In no case will the Rights
Agent be liable for  special,  indirect,  incidental  or  consequential  loss or
damage of any kind whatsoever (including but not limited to lost profits),  even
if the Rights Agent has been advised of the possibility of such damages.

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

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

         (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with  which it may be  consolidated,  or any  corporation
resulting  from any merger or  consolidation  to which the  Rights  Agent or any
successor  Rights Agent shall be a party, or any  corporation  succeeding to the
stock  transfer or corporate  trust powers of the Rights Agent or any  successor
Rights Agent,  shall be the  successor to the Rights Agent under this  Agreement
without the  execution  or filing of any paper or any further act on the part of
any of the parties hereto; provided,

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<PAGE>



however,  that such corporation would be eligible for appointment as a successor
Rights Agent under the provisions of Section 21 hereof. In case at the time such
successor  Rights Agent shall succeed to the agency  created by this  Agreement,
any of the Right  Certificates  shall have been countersigned but not delivered,
any  such  successor  Rights  Agent  may  adopt  the   countersignature  of  the
predecessor  Rights Agent and deliver such Right  Certificates so countersigned;
and in case at that  time any of the  Right  Certificates  shall  not have  been
countersigned,   any  successor   Rights  Agent  may   countersign   such  Right
Certificates  either in the name of the predecessor  Rights Agent or in the name
of the  successor  Rights Agent;  and in all such cases such Right  Certificates
shall  have  the full  force  provided  in the  Right  Certificates  and in this
Agreement.

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

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

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

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

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

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


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<PAGE>



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

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

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

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


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<PAGE>



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

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

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

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<PAGE>



therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the  appointment  of the successor  Rights Agent,  as the
case may be.

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

         Section 23.  Redemption.

         (a) The Board of Directors of the Company may, at any time prior to the
Flip-In Event,  redeem all but not less than all of the then outstanding  Rights
at a redemption price of $.01 per Right,  appropriately  adjusted to reflect any
stock split,  stock  dividend or similar  transaction  occurring  after the date
hereof (the redemption  price being  hereinafter  referred to as the "Redemption
Price").  The  redemption  of the Rights may be made  effective at such time, on
such  basis  and with such  conditions  as the  Board of  Directors  in its sole
discretion may establish.  The Redemption Price shall be payable,  at the option
of the  Company,  in  cash,  shares  of  Common  Stock,  or such  other  form of
consideration as the Board of Directors shall determine.

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


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<PAGE>



         Section 24.  Exchange.

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

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

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

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<PAGE>




         Section 25.  Notice of Certain Events.

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

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

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

                           Hallwood Energy Corporation
                          4610 Ulster Street, Suite 200
                                Denver, CO 80237

Subject to the provisions of Section 21 hereof,  any notice or demand authorized
by this  Agreement  to be given or made by the  Company  or by the holder of any
Right Certificate to or on the Rights

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<PAGE>



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

                         Registrar and Transfer Company
                                            10 Commerce Drive
                         Cranford, New Jersey 07016-3572


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

         Section  27.  Supplements  and  Amendments.  Except as  provided in the
penultimate  sentence  of this  Section  27,  for so long as the Rights are then
redeemable,  the Company may in its sole and absolute discretion, and the Rights
Agent shall,  if the Company so directs,  supplement  or amend any  provision of
this Agreement in any respect without the approval of any holders of the Rights.
At any time when the Rights are no longer redeemable,  except as provided in the
penultimate  sentence of this  Section 27, the Company may, and the Rights Agent
shall, if the Company so directs, supplement or amend this Agreement without the
approval  of any  holders  of  Rights in order to (i) cure any  ambiguity,  (ii)
correct or supplement  any provision  contained  herein that may be defective or
inconsistent with any other provision 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,  however,
that no such supplement or amendment shall adversely affect the interests of the
holders of Rights as such (other than an  Acquiring  Person or an  Affiliate  or
Associate of an Acquiring  Person),  and no such  amendment may cause the Rights
again to become  redeemable  or cause the  Agreement  again to become  amendable
other  than in  accordance  with this  sentence;  further,  provided,  that this
Agreement  may not be  supplemented  or amended to lengthen,  pursuant to clause
(iii) of this  sentence,  (A) a time  period  relating to when the Rights may be
redeemed  at such time as the  Rights are not then  redeemable  or (B) any other
time period unless such lengthening is for the purpose of protecting,  enhancing
or  clarifying  the rights of,  and/or the  benefits  to, the holders of Rights.
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 that
states that the proposed supplement or amendment is in compliance with the terms
of this Section 27, the Rights Agent shall execute such supplement or amendment.

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

         Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company,  the Rights Agent and
the registered holders of the Right

CORPDAL:121602.3  18747-00028
                                                        32

<PAGE>



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

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

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

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

         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.


CORPDAL:121602.3  18747-00028
                                                        33

<PAGE>



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


                                                     HALLWOOD ENERGY CORPORATION


                                                     By:  /s/ Cathleen M. Osborn
                                                     Name: Cathleen M.  Osborn
                                                     Title:   Vice President


                                                 Registrar and Transfer Company,
                                as Rights Agent,


                                                     By:
                                                     Name:
                                                     Title:





CORPDAL:121602.3  18747-00028
                                                        34

<PAGE>



                                                                       Exhibit A
                                     FORM OF
                           CERTIFICATE OF DESIGNATION
                                       of
                  SERIES B JUNIOR PARTICIPATING PREFERRED STOCK
                                       of
                           HALLWOOD ENERGY CORPORATION
                         Pursuant to Section 151 of the
                        Delaware General Corporation Law


         Hallwood Energy Corporation, a corporation organized and existing under
the laws of the State of Delaware,  in accordance with the provisions of Section
103 thereof, DOES HEREBY CERTIFY:

         That  pursuant to the  authority  vested in the Board of  Directors  in
accordance with the provisions of the Certificate of  Incorporation  of the said
Corporation,  as amended,  the said Board of Directors on June 8, 1999,  adopted
the  following  resolution  creating  a series  of  shares  of  Preferred  Stock
designated as "Series B Junior Participating Preferred Stock":

                  RESOLVED,  that pursuant to the authority  vested in the Board
         of Directors of this  Corporation in accordance  with the provisions of
         the  Certificate of  Incorporation,  a series of Preferred  Stock,  par
         value $.01 per share, of the Corporation be and hereby is created,  and
         that the  designation  and number of shares  thereof and the voting and
         other  powers,  preferences  and relative,  participating,  optional or
         other  rights of the  shares  of such  series  and the  qualifications,
         limitations and restrictions thereof are as follows:

                  Series B Junior Participating Preferred Stock

         1.  Designation and Amount.  There shall be a series of Preferred Stock
that shall be designated as "Series B Junior Participating Preferred Stock," and
the number of shares  constituting such series shall be 150,000.  Such number of
shares may be increased or decreased by  resolution  of the Board of  Directors;
provided,  however, that no decrease shall reduce the number of shares of Series
B Junior  Participating  Preferred  Stock to less than the number of shares then
issued and  outstanding  plus the number of shares  issuable  upon  exercise  of
outstanding  rights,  options or  warrants  or upon  conversion  of  outstanding
securities issued by the Corporation.


CORPDAL:121602.3  18747-00028
                                      A - 1

<PAGE>



         2.       Dividends and Distributions.

                  (A) Subject to the prior and superior  right of the holders of
any shares of any class or series of stock of the Corporation  ranking prior and
superior  to the shares of Series B Junior  Participating  Preferred  Stock with
respect to  dividends,  the  holders of shares of Series B Junior  Participating
Preferred Stock,  shall be entitled to receive,  when, as and if declared by the
Board of Directors  out of funds legally  available  for the purpose,  quarterly
dividends  payable in cash on the 15th day of January,  April, July and October,
in each year (each such date being  referred to herein as a "Quarterly  Dividend
Payment Date"),  commencing on the first Quarterly  Dividend  Payment Date after
the  first  issuance,  of a share  or  fraction  of a share  of  Series B Junior
Participating  Preferred  Stock,  in an amount per share (rounded to the nearest
cent) equal to the Adjustment  Number (as defined below) times the aggregate per
share  amount  of all  cash  dividends,  and the  Adjustment  Number  times  the
aggregate per share amount (payable in kind) of all non-cash  dividends or other
distributions  other  than a  dividend  payable  in shares of Common  Stock or a
subdivision of the outstanding  shares of Common Stock (by  reclassification  or
otherwise),  declared  on the Common  Stock,  par value  $.01 per share,  of the
Corporation  (the "Common  Stock")  since the  immediately  preceding  Quarterly
Dividend Payment Date, or, with respect to the first Quarterly  Dividend Payment
Date,  since the first  issuance of any share or fraction of a share of Series B
Junior Participating Preferred Stock. The "Adjustment Number" shall initially be
1,000.  If the  Corporation  shall at any time after  June 7, 1999 (the  "Rights
Declaration  Date"), (i) declare and pay any dividend on Common Stock payable in
shares of Common Stock,  (ii)  subdivide the  outstanding  Common Stock or (iii)
combine the  outstanding  Common Stock into a smaller number of shares,  then in
each such case the Adjustment  Number in effect  immediately prior to such event
shall be adjusted  by  multiplying  such  Adjustment  Number by a fraction,  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

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

                  (C) The  Board  of  Directors  may fix a  record  date for the
determination  of holders of shares of Series B Junior  Participating  Preferred
Stock  entitled  to  receive  payment  of a dividend  or  distribution  declared
thereon, which record date shall be no more than 60 days prior to the date fixed
for the payment thereof.

         3.   Voting   Rights.   The  holders  of  shares  of  Series  B  Junior
Participating Preferred Stock shall have the following voting rights:

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

CORPDAL:121602.3  18747-00028
                                      A - 2

<PAGE>



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

         4.       Certain Restrictions.

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

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

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

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

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

         5.  Reacquired  Shares.  Any  shares of  Series B Junior  Participating
Preferred Stock purchased or otherwise acquired by the Corporation in any manner
whatsoever  shall be retired  promptly after the acquisition  thereof.  All such
shares shall upon their retirement become authorized

CORPDAL:121602.3  18747-00028
                                      A - 3

<PAGE>



but  unissued  shares of  Preferred  Stock and may be  reissued as part of a new
series of Preferred  Stock to be created by  resolution  or  resolutions  of the
Board of Directors,  subject to any conditions and  restrictions on issuance set
forth herein.

         6.  Liquidation,  Dissolution  or  Winding  Up.  Paragraph(A)  Upon any
liquidation,  dissolution  or  winding  up  of  the  Corporation,  voluntary  or
otherwise,  no  distribution  shall be made to the  holders  of  shares of stock
ranking  junior  (either as to dividends  or upon  liquidation,  dissolution  or
winding up) to the Series B Junior  Participating  Preferred Stock unless, prior
thereto, the holders of shares of Series B Junior Participating  Preferred Stock
shall have received an amount per share (the "Series B Liquidation  Preference")
equal to the  greater  of (i) $1.00 plus an amount  equal to accrued  and unpaid
dividends and distributions thereon whether or not declared, to the date of such
payment,  or (ii) the  Adjustment  Number times the per share amount of all cash
and other  property to be  distributed  in respect of the Common Stock upon such
liquidation, dissolution or winding up of the Corporation.

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

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

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

         8. No  Redemption.  Shares of Series B Junior  Participating  Preferred
Stock shall not be subject to redemption by the Company.

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


CORPDAL:121602.3  18747-00028
                                      A - 4

<PAGE>



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

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

         IN WITNESS WHEREOF,  the undersigned has executed this Certificate this
_____ day of __________ __, 1999.

                                                     Hallwood Energy Corporation


                                                     By:
                                                     Name:  Cathleen M. Osborn
                                                     Title:   Vice President





CORPDAL:121602.3  18747-00028
                                      A - 5

<PAGE>



                                                                      Exhibit B
                            Form of Right Certificate

Certificate No. R-__________                                   __________ Rights


                  NOT  EXERCISABLE  AFTER JUNE 7, 2009, OR EARLIER IF REDEMPTION
                  OR EXCHANGE  OCCURS.  THE RIGHTS ARE SUBJECT TO  REDEMPTION AT
                  $.01 PER RIGHT AND TO  EXCHANGE  ON THE TERMS SET FORTH IN THE
                  RIGHTS AGREEMENT.  UNDER CERTAIN CIRCUMSTANCES AS SET FORTH IN
                  THE RIGHTS  AGREEMENT,  RIGHTS OWNED BY OR  TRANSFERRED TO ANY
                  PERSON WHO IS OR BECOMES AN  ACQUIRING  PERSON (AS  DEFINED IN
                  THE RIGHTS  AGREEMENT)  AND CERTAIN  TRANSFEREES  THEREOF WILL
                  BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

                                RIGHT CERTIFICATE

                           Hallwood 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 June 8, 1999,  as the same may be amended  from time to time (the  "Rights
Agreement"),  between Hallwood Energy Corporation,  a Delaware  corporation (the
"Company"),  and  Registrar and Transfer  Company,  as Rights Agent (the "Rights
Agent"),  to purchase from the Company at any time after the  Distribution  Date
(as such term is  defined  in the  Rights  Agreement)  and  prior to 5:00  p.m.,
Denver,  Colorado  time,  on June 7, 2009 at the  office or agency of the Rights
Agent  designated  for such purpose,  or of its  successor as Rights Agent,  one
one-thousandth  of  a  fully  paid  non-assessable  share  of  Series  B  Junior
Participating Preferred Stock, par value $.01 per share (the "Preferred Stock"),
of the Company at a purchase price of $40.00 per one  one-thousandth  of a share
of Preferred Stock (the "Purchase  Price"),  upon  presentation and surrender of
this Right Certificate with the Form of Election to Purchase duly executed.  The
number of Rights evidenced by this Right Certificate (and the number of one one-
thousandths  of a share of Preferred  Stock that may be purchased  upon exercise
hereof) set forth above,  and the Purchase Price set forth above, are the number
and  Purchase  Price  as of  June 8,  1999,  based  on the  Preferred  Stock  as
constituted  at such date.  As provided in the Rights  Agreement,  the  Purchase
Price, the number of one one-thousandths of a share of Preferred Stock (or other
securities  or property)  that may be purchased  upon the exercise of the Rights
and the number of Rights  evidenced  by this Right  Certificate  are  subject to
modification and adjustment upon the happening of certain events.


CORPDAL:121602.3  18747-00028
                                      B - 1

<PAGE>



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

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

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

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

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

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


CORPDAL:121602.3  18747-00028
                                      B - 2

<PAGE>




         WITNESS the facsimile  signature of the proper  officers of the Company
and its corporate seal. Dated as of __________.

                                                     Hallwood Energy Corporation


                                                     By:
                                                     Name:
                                                     Title:
ATTEST:



[Title]




Countersigned:

Registrar and Transfer Company, as Rights Agent


By:
Name:
Title:



CORPDAL:121602.3  18747-00028
                                      B - 3

<PAGE>



                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

                (To be executed by the registered holder if such
                holder desires to transfer the Right Certificate)
FOR VALUE RECEIVED, ________________________ hereby sells, assigns and transfers
unto

                  (Please print name and address of transferee)

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

Dated:



                                                              Signature

Signature Guaranteed:


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


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

                                (To be completed)

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



                                                              Signature



CORPDAL:121602.3  18747-00028
                                      B - 4

<PAGE>



              Form of Reverse Side of Right Certificate - continued

                          FORM OF ELECTION TO PURCHASE

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

To ______________________:

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


                         (Please print name and address)



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

Please insert social security
or other identification number


                         (Please print name and address)



Dated:


                                                              Signature


        (Signature must conform to holder specified on Right Certificate)

Signature Guaranteed:

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

CORPDAL:121602.3  18747-00028
                                      B - 5

<PAGE>



              Form of Reverse Side of Right Certificate - continued


                                (To be completed)

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



                                    Signature


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



                                     NOTICE

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

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



CORPDAL:121602.3  18747-00028
                                      B - 6

<PAGE>



                                                                      Exhibit C

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

                          SUMMARY OF RIGHTS TO PURCHASE
                          SHARES OF PREFERRED STOCK OF
                           HALLWOOD ENERGY CORPORATION

         On June 8, 1999, the Board of Directors of Hallwood Energy  Corporation
(the  "Company")  declared a dividend of one preferred  share  purchase right (a
"Right") for each  outstanding  share of common stock, par value $.01 per share,
of the Company  (the  "Common  Stock").  The dividend is payable on June 8, 1999
(the "Record  Date"),  to the  stockholders  of record on that date.  Each Right
entitles the registered  holder to purchase from the Company one  one-thousandth
of a share of Series B Junior Participating  Preferred Stock, par value $.01 per
share,  of the  Company  (the  "Preferred  Stock")  at a price of $40.00 per one
one-thousandth of a share of Preferred Stock (the "Purchase Price"),  subject to
adjustment.  The  description  and terms of the Rights are set forth in a Rights
Agreement dated as of June 8, 1999, as the same may be amended from time to time
(the  "Rights  Agreement"),  between  the  Company and  Registrar  and  Transfer
Company, as Rights Agent (the "Rights Agent").

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

         The Rights Agreement  provides that,  until the  Distribution  Date (or
earlier expiration of the Rights),  the Rights will be transferred with and only
with the Common Stock. Until the Distribution Date (or earlier expiration of the
Rights),  new  Common  Stock  certificates  issued  after the  Record  Date upon
transfer or new issuances of Common Stock will contain a notation  incorporating
the Rights  Agreement  by  reference.  Until the  Distribution  Date (or earlier
expiration of the Rights), the

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surrender  for  transfer  of  any   certificates  for  shares  of  Common  Stock
outstanding as of the Record Date,  even without such notation or a copy of this
Summary of Rights,  will also  constitute the transfer of the Rights  associated
with the shares of Common Stock  represented  by such  certificates.  As soon as
practicable  following the Distribution Date, separate  certificates  evidencing
the  Rights  ("Right  Certificates")  will be mailed to holders of record of the
Common  Stock as of the  close of  business  on the  Distribution  Date and such
separate Right Certificates alone will evidence the Rights.

         The Rights are not exercisable until the Distribution  Date. The Rights
will  expire on June 7, 2009 (the  "Final  Expiration  Date"),  unless the Final
Expiration  Date is  advanced  or  extended  or unless the  Rights  are  earlier
redeemed or exchanged by the Company, in each case as described below.

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

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

         Shares of Preferred Stock  purchasable upon exercise of the Rights will
not be redeemable.  Each share of Preferred Stock will be entitled, when, as and
if declared,  to a dividend payment per share equal to an aggregate  dividend of
1,000 times the dividend  declared per share of Common Stock.  Upon liquidation,
dissolution  or winding up of the Company,  the holders of the  Preferred  Stock
will be entitled to a minimum  preferential payment of $1.00 per share (plus any
accrued but unpaid  dividends)  but will be entitled to an aggregate  payment of
1,000 times the payment made per share of Common Stock.  Each share of Preferred
Stock will have 1,000 votes,  voting  together with the Common  Stock.  Finally,
upon any merger,  consolidation or other transaction in which outstanding shares
of Common Stock are converted or exchanged,  each share of Preferred  Stock will
be  entitled  to receive  1,000  times the amount  received  per share of Common
Stock. These rights are protected by customary antidilution provisions.

         Because of the nature of the Preferred  Stock's  dividend,  liquidation
and voting rights,  the value of the one  one-thousandth  interest in a share of
Preferred Stock purchasable upon exercise of each Right should  approximately be
the value of one share of Common Stock.


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

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

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

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

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

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

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

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<PAGE>


         A copy of the Rights  Agreement has been filed with the  Securities and
Exchange Commission as an Exhibit to a Registration  Statement on Form 8-A dated
June 4, 1999. A copy of the Rights  Agreement  is available  free of charge from
the  Company.  This  summary  description  of the Rights  does not purport to be
complete and is qualified in its entirety by reference to the Rights  Agreement,
as the same may be  amended  from  time to time,  which is  hereby  incorporated
herein by reference.

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                                                  Thomas J. Jung, Vice President
                                                    (Chief Financial Officer)