Document:

RIGHTS AGREEMENT

                                   DATED AS OF

                                  JULY 20, 2001

                                     BETWEEN

                             HAUPPAUGE DIGITAL, INC.
                             A DELAWARE CORPORATION

                                       AND

                                MILDRED ROSTOLDER
                        d/b/a NORTH AMERICAN TRANSFER CO.
                                 AS RIGHTS AGENT

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                                                 TABLE OF CONTENTS

<S>                     <C>                                                                                                      <C>
Section 1.  Certain Definitions......................................................................1

Section 2. Appointment of Rights Agent...............................................................6

Section 3.  Issuance of Rights Certificates..........................................................7

Section 4.  Form of Rights Certificates..............................................................8

Section 5.  Countersignature and Registration........................................................9

Section 6.  Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated,
         Destroyed, Lost or Stolen Rights Certificates..............................................10

Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights............................11

Section 8. Cancellation and Destruction of Rights Certificates......................................12

Section 9. Reservation and Availability of Capital Stock............................................13

Section 10. Common Stock Record Date................................................................14

Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights.............14

Section 12. Certificate of Adjusted Purchase Price or Number of Shares..............................21

Section 13.  Consolidation, Merger or Sale or Transfer of Assets, Cash Flow or
         Earning Power..............................................................................22

Section 14.  Fractional Rights and Fractional Shares................................................24

Section 15. Rights of Action........................................................................25

Section 16. Agreement of Rights Holders.............................................................25

Section 17. Rights Certificate Holder Not Deemed a Stockholder......................................26

Section 18.  Concerning the Rights Agent............................................................26

Section 19.  Merger or Consolidation or Change of Name of Rights Agent..............................27

Section 20. Duties of Rights Agent..................................................................27

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Section 21. Change of Rights Agent..................................................................29

Section 22. Issuance of New Rights Certificates.....................................................30

Section 23.  Redemption and Termination.............................................................30

Section 24.  Notice of Certain Events...............................................................33

Section 25. Notices.................................................................................34

Section 26. Supplements and Amendments..............................................................34

Section 27. Successors..............................................................................35

Section 28. Determinations and Actions by the Board of Directors, etc...............................35

Section 29. Benefits of this Agreement..............................................................35

Section 30. Severability............................................................................35

Section 31. Governing Law...........................................................................36

Section 32. Counterparts............................................................................36

Section 33. Descriptive Headings....................................................................36

                                                     EXHIBITS

Exhibit A -    Form of Rights Certificate

Exhibit B -    Form of Summary Rights

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                                RIGHTS AGREEMENT

     RIGHTS  AGREEMENT,  dated as of July 20,  2001  (the  "Agreement"),  by and
between HAUPPAUGE  DIGITAL,  INC., a Delaware  corporation (the "Company"),  and
MILDRED ROSTOLDER d/b/a NORTH AMERICAN TRANSFER CO. (the "Rights Agent").

                               W I T N E S S E T H

     WHEREAS,  on July 19, 2001 (the "Rights Dividend  Declaration  Date"),  the
Board of  Directors  of the Company (the "Board of  Directors")  authorized  and
declared a dividend  distribution of one Right (as hereinafter defined) for each
share of common  stock,  par value $0.01 per share,  of the Company (the "Common
Stock")  outstanding  at the close of  business  on August 5, 2001 (the  "Record
Date"),  and has  authorized  the  issuance  of one  Right (as such  number  may
hereinafter  be adjusted  pursuant to the  provisions  of Section 11 hereof) for
each  share of Common  Stock of the  Company  issued  between  the  Record  Date
(whether  originally  issued or delivered  from the Company's  treasury) and the
Distribution Date (as hereinafter defined) each Right initially representing the
right to  purchase  one share of Common  Stock upon the terms and subject to the
conditions hereinafter set forth (the "Rights");

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

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

          (a)  "Acquiring  Person"  shall  mean  (x) any  Person  who or  which,
     together with all Affiliates  and  Associates of such Person,  shall be the
     Beneficial  Owner  of 10% or  more  of the  shares  of  Common  Stock  then
     outstanding,  but shall not include (i) the Company, (ii) any Subsidiary of
     the  Company,  (iii) any employee  benefit  plan of the Company,  or of any
     Subsidiary of the Company, or any Person or entity organized,  appointed or
     established  by the  Company for or pursuant to the terms of any such plan,
     (iv) any  Person who  becomes  the  Beneficial  Owner of 10% or more of the
     shares of Common Stock then  outstanding  as a result of a reduction in the
     number of  shares of Common  Stock  outstanding  due to the  repurchase  of
     shares of Common Stock by the Company other than during the Special  Period
     (as defined in Section  23(c)  hereof) or at a time when the rights are not
     redeemable,  unless and until such Person,  after  becoming aware that such
     Person  has  become  the  Beneficial  Owner  of 10%  or  more  of the  then
     outstanding  shares of  Common  Stock,  acquires  beneficial  ownership  of
     additional shares of Common Stock  representing 1% or more of the shares of
     Common Stock then  outstanding,  (v) any Exempted Person,  unless and until
     such Person is an Exempted  Person pursuant to clause (i) of the definition
     thereof and after the date such  Person  initially  is an Exempted  Person,
     such Person acquires  beneficial  ownership of additional  shares of Common
     Stock  representing  1%  or  more  of  the  shares  of  Common  Stock  then
     outstanding,  (vi) any Passive  Institutional  Investor,  or (vii) any such
     Person who has reported or is required to report such ownership on Schedule
     13G under the Securities Exchange Act of 1934, as amended and in effect

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     on the date of the Agreement  (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 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  (other than the  disposition  of the Common  Stock) and,
     within ten (10) Business  Days 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 9.9% inadvertently or without knowledge
     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 10% or more of the  shares of Common  Stock
     then outstanding; that if the Person requested to so certify fails to do so
     within ten (10) Business  Days,  then such Person shall become an Acquiring
     Person immediately after such 10-Business-Day  period or (y) any Person who
     or which has entered into any agreement or arrangement  with the Company or
     any Subsidiary of the Company providing for an Acquisition  Transaction (as
     defined in Section 1(b) hereof).

          (b) "Acquisition  Transaction" shall mean (x) a merger,  consolidation
     or similar transaction  involving the Company or any of its Subsidiaries as
     a result of which stockholders of the Company will no longer own a majority
     of the  outstanding  shares of Common  Stock of the  Company  or a publicly
     traded  entity which  controls the Company or, if  appropriate,  the entity
     into which the Company may be merged,  consolidated  or otherwise  combined
     (based  solely on the shares of Common  Stock  received or retained by such
     stockholders, in their capacity as stockholders of the Company, pursuant to
     such  transaction),  (y) a  purchase  or  other  acquisition  of  all  or a
     substantial  portion of the assets of the Company and its Subsidiaries,  or
     (z) a purchase or other acquisition of securities  representing 10% or more
     of the shares of Common Stock then outstanding.

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

          (d) "Affected Transaction" shall have the meaning set forth in Section
     23(c) hereof.

          (e)  "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.

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

                    (i) which such Person or any of such Person's  Affiliates or
                    Associates, directly or indirectly, has the right to acquire
                    (whether such right is exercisable immediately or only after
                    the passage of time) pursuant to any agreement,  arrangement
                    or  understanding  (whether  or not in  writing) or upon the
                    exercise of  conversion  rights,  exchange  rights,  rights,
                    warrants or options, or otherwise; provided, however, that a
                    Person shall not be deemed the "Beneficial  Owner" of, or to
                    "beneficially  own," (A) securities  tendered  pursuant to a
                    tender or exchange offer made by such Person or any of such

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                    Person's   Affiliates  or  Associates  until  such  tendered
                    securities  are  accepted  for  purchase  or  exchange,  (B)
                    securities  issuable  upon  exercise  of  Rights at any time
                    prior  to  the   occurrence   of  a  Triggering   Event  (as
                    hereinafter   defined),  or  (C)  securities  issuable  upon
                    exercise  of  Rights  from and  after  the  occurrence  of a
                    Triggering  Event which Rights were  acquired by such Person
                    or any of such Person's  Affiliates  or Associates  prior to
                    the Distribution  Date (as hereinafter  defined) or pursuant
                    to Section 3(a) or Section 22 hereof (the "Original Rights")
                    or pursuant to Section  11(i) hereof in  connection  with an
                    adjustment made with respect to any Original Rights;

                    (ii) which such Person or any of such Person's Affiliates or
                    Associates, directly or indirectly, has the right to vote or
                    dispose of or has  "beneficial  ownership" of (as determined
                    pursuant to Rule 13d-3 of the General Rules and  Regulations
                    under the  Exchange  Act),  including,  but not  limited to,
                    pursuant to any  agreement,  arrangement  or  understanding,
                    whether or not in writing; provided,  however, that a Person
                    shall  not  be  deemed  the  "Beneficial  Owner"  of,  or to
                    "beneficially  own," any  security  under this  subparagraph
                    (ii)  as  a  result   of  an   agreement,   arrangement   or
                    understanding  to vote  such  security  if  such  agreement,
                    arrangement  or  understanding:  (A)  arises  solely  from a
                    revocable  proxy  given in  response  to a  public  proxy or
                    consent  solicitation  made  pursuant to, and in  accordance
                    with,  the  applicable  provisions  of the General Rules and
                    Regulations   under  the  Exchange   Act,  and  (B)  is  not
                    reportable by such Person 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 (or any Affiliate or Associate  thereof)
                    with which such Person (or any of such  Person's  Affiliates
                    or   Associates)   has   any   agreement,   arrangement   or
                    understanding  (whether or not in writing),  for the purpose
                    of  acquiring,   holding,   voting  (except  pursuant  to  a
                    revocable  proxy as described in the proviso to subparagraph
                    (ii)  of this  paragraph  (d)) or  disposing  of any  voting
                    securities of the Company;  provided,  however, that nothing
                    in this  paragraph  (d)  shall  cause a  Person  engaged  in
                    business  as  an   underwriter   of  securities  to  be  the
                    "Beneficial  Owner"  of,  or  to  "beneficially   own,"  any
                    securities  acquired through such Person's  participation in
                    good  faith  in a firm  commitment  underwriting  until  the
                    expiration of forty days after the date of such acquisition,
                    and then  only if such  securities  continue  to be owned by
                    such Person at such  expiration  of forty days and  provided
                    further,  however, that any stockholder of the Company, with
                    affiliate(s),  associate(s)  or other  person(s)  who may be
                    deemed  representatives  of it serving as director(s) of the
                    Company,  shall not be deemed to beneficially own securities
                    held by other Persons as a result of (i) persons  affiliated
                    or otherwise  associated  with such  stockholder  serving as
                    directors or taking any action in connection

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                    therewith, (ii) discussing the status of its shares with the
                    Company  or  other  stockholders  of the  Company  similarly
                    situated  or (iii)  voting or acting in a manner  similar to
                    other  stockholders  similarly  situated,  absent a specific
                    finding by the Board of  Directors  of an express  agreement
                    among such  stockholders  to act in concert with one another
                    as  stockholders  so as to cause, in the good faith judgment
                    of the Board of Directors,  each such  stockholder to be the
                    Beneficial   Owner  of  the   shares   held  by  the   other
                    stockholder(s).

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

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

          (i) "Common  Stock"  shall mean the common  stock,  par value $.01 per
     share, of the Company,  except that "Common Stock" when used with reference
     to any Person other than the Company  shall mean the capital  stock of such
     Person with the greatest  voting power,  or the equity  securities or other
     equity interest  having power to control or direct the management,  of such
     Person.

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

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

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

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

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

          (o) "Exempted  Person" shall mean any Person who (i) is the Beneficial
     Owner, on the date hereof,  of securities  representing  10% or more of the
     shares of Common Stock  outstanding  on the date hereof,  and such Person's
     Affiliates and  Associates as of the date hereof  (provided that any Person
     who,  following  the date  hereof,  fails to continue to be the  Beneficial
     Owner of securities representing at least 10% of the shares of Common Stock
     outstanding at any time shall, as of such date, no longer be deemed to be a
     "Exempted  Person" pursuant to this clause(i)) or, (ii) becomes,  after the
     date hereof, the Beneficial Owner of securities representing 10% or more of
     the outstanding shares of Common Stock as a result of a Qualified Offer.

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

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

          (r) "Independent  Advisor" shall have the meaning set forth in Section
     23(c) hereof.

          (s)  "Interest"  shall have the  meaning  set forth in  Section  23(c)
     hereof.

          (t)  "Passive  Institutional  Investor"  shall  mean an  institutional
     investor  that,  together with its Affiliates  and  Associates,  is (A) the
     Beneficial  Owner of less  than 20% of the  shares  of  Common  Stock  then
     outstanding  and (B) such  investor  reports or is  required to report such
     ownership  on  Schedule  13G of the  Exchange  Act  (or any  comparable  or
     successor  report)  and is not  permitted  to,  and does not,  report  such
     ownership  on Schedule 13D under the  Exchange  Act (or any  comparable  or
     successor  report);  provided that any such Person that,  together with its
     Affiliates and Associates,  (A) becomes the Beneficial Owner of 20% or more
     of the shares of Common Stock then  outstanding or (B) becomes  required to
     report, or reports,  such ownership on Schedule 13D of the Exchange Act (or
     any comparable or successor report) shall, at such time,  immediately cease
     to be a Passive Institutional Investor.

          (u) "Person" shall mean any individual, firm, corporation, partnership
     or other entity.

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

          (w) "Purchase  Price" shall have the meaning set forth in Section 4(a)
     hereof.

          (x)  "Qualified  Offer"  shall have the  meaning  set forth in Section
     11(a)(ii) hereof.

          (y)  "Record  Date"  shall have the  meaning  set forth in the WHEREAS
     clause at the beginning of this Agreement.

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

          (aa)  "Rights  Agent"  shall have the meaning set forth in the parties
     clause at the beginning of this Agreement.

          (bb) "Rights  Certificate" shall have the meaning set forth in Section
     3(a) hereof.

          (aa1.) "Rights Dividend  Declaration  Date" shall have the meaning set
     forth in the WHEREAS clause at the beginning of this Agreement.

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          (bb1.)  "Section  11(a)(ii)  Event" shall mean any event  described in
     Section 11(a)(ii) hereof.

          (cc1.)  "Section 13 Event"  shall mean any event  described in clauses
     (x), (y) or (z) of Section 13(a) hereof.

          (dd1.)  "Special  Period"  shall have the meaning set forth in Section
     23(c) hereof.

          (ee1.) "Spread" shall have the meaning set forth in Section 11(a)(iii)
     hereof.

          (ff1.) "Stock  Acquisition  Date" shall mean the earlier (i) the first
     date of public announcement (which, for purposes of this definition,  shall
     include,  without limitation, a report filed or amended pursuant to Section
     13(d) under the Exchange Act) by the Company or an Acquiring Person that an
     Acquiring  Person has become such pursuant to clause (x) of the  definition
     of Acquiring Person other than pursuant to a Qualified Offer , and (ii) the
     date that an Acquiring Person has become such pursuant to clause (y) of the
     definition of Acquiring Person.

          (gg1.)  "Subsidiary"  shall mean,  with  reference to any Person,  any
     corporation of which an amount of voting securities  sufficient to elect at
     least a majority  of the  directors  of such  corporation  is  beneficially
     owned,  directly or indirectly,  by such Person, or otherwise controlled by
     such Person.

          (hh1.)  "Substitution  Period"  shall  have the  meaning  set forth in
     Section 11(a)(iii) hereof.

          (ii1.) "Summary of Rights" shall have the meaning set forth in Section
     3(b) hereof.

          (jj1.) "Transaction" shall have the meaning set forth in Section 23(c)
     hereof.

          (kk1.)  "Trading  Day"  shall  have the  meaning  set forth in Section
     11(d)(i) hereof.

          (ll1.)  "Triggering  Event" shall mean any Section  11(a)(ii) Event or
     any Section 13 Event.

          (mm1.) "Value Enhancement Procedures" shall have the meaning set forth
     in Section 23(c) 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,  upon 10 days' prior written notice to the Rights Agent.
The  Rights  Agent  shall  have no duty to  supervise,  and shall in no event be
liable for, the acts or omissions of any such co-rights agent.

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     Section 3. Issuance of Rights Certificates.

          (a)  Until  the  earlier  of (i) the  close of  business  on the tenth
     Business Day after the Stock  Acquisition  Date (or, if the tenth  Business
     Day after the Stock  Acquisition  Date occurs  before the Record Date,  the
     close of business on the Record Date), or (ii) the close of business on the
     tenth  Business  Day (or such  later date as the Board of  Directors  shall
     determine provided, however, that no deferral of a Distribution Date by the
     Board of  Directors  pursuant  to this  clause (ii) may be made at any time
     during the Special  Period) after the date of the  commencement of a tender
     or exchange offer by any Person (other than the Company,  any Subsidiary of
     the Company,  any employee benefit plan of the Company or of any Subsidiary
     of the Company, or any Person or entity organized, appointed or established
     by the Company  for or  pursuant to the terms of any such plan)  within the
     meaning of Rule  14d-2(a) of the General  Rules and  Regulations  under the
     Exchange  Act, or any successor  provision  thereto,  if upon  consummation
     thereof,  such Person would become an Acquiring  Person, in either instance
     other than pursuant to a Qualified Offer (the earlier of (i) and (ii) being
     herein  referred  to as the  "Distribution  Date"),  (x) the Rights will be
     evidenced (subject to the provisions of paragraph (b) of this Section 3) by
     the  certificates  for the  Common  Stock  registered  in the  names of the
     holders of the Common Stock (which  certificates  for Common Stock shall be
     deemed   also  to  be   certificates   for  Rights)  and  not  by  separate
     certificates,  and (y) the Rights will be  transferable  only in connection
     with the transfer of the  underlying  shares of Common  Stock  (including a
     transfer to the Company).  As soon as  practicable  after the  Distribution
     Date, the Rights Agent will send by first-class,  insured,  postage-prepaid
     mail, to each record holder of the Common Stock as of the close of business
     on the  Distribution  Date,  at the  address  of such  holder  shown on the
     records of the Company,  one or more right  certificates,  in substantially
     the form of Exhibit A hereto (the "Rights  Certificates"),  evidencing  one
     Right for each  share of Common  Stock so held,  subject to  adjustment  as
     provided  herein.  In the event that an  adjustment in the number of Rights
     per share of Common Stock has been made, at the time of distribution of the
     Rights  Certificates,  the Company shall make the necessary and appropriate
     rounding  adjustments  (in  accordance  with Section  14(a) hereof) so that
     Rights   Certificates   representing  only  whole  numbers  of  Rights  are
     distributed  and cash is paid in lieu of any fractional  Rights.  As of and
     after the  Distribution  Date, the Rights will be evidenced  solely by such
     Rights Certificates.

          (b) The  Company  will make  available,  as  promptly  as  practicable
     following the Record Date, a copy of a Summary of Rights,  in substantially
     the form  attached  hereto as Exhibit B (the  "Summary  of  Rights") to any
     holder  of  Rights  who may so  request  from  time to  time  prior  to the
     Expiration  Date.  With  respect  to  certificates  for  the  Common  Stock
     outstanding as of the Record Date, until the Distribution  Date, the Rights
     will  be  evidenced  by such  certificates  for the  Common  Stock  and the
     registered holders of the Common Stock shall also be the registered holders
     of the associated Rights. Until the earlier of the Distribution Date or the
     Expiration  Date (as such term is  defined  in Section  7(a)  hereof),  the
     transfer of any certificates representing shares of Common Stock in respect
     of which Rights have been issued shall also  constitute the transfer of the
     Rights associated with such shares of Common Stock.

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          (c) Rights  shall be issued in  respect of all shares of Common  Stock
     which are issued (whether originally issued or from the Company's treasury)
     after the Record Date but prior to the earlier of the Distribution  Date or
     the Expiration Date. Certificates  representing such shares of Common Stock
     shall  also be deemed to be  certificates  for  Rights,  and shall bear the
     following legend:

               This certificate also evidences and entitles the holder hereof to
               certain  Rights  as set  forth in the  Rights  Agreement  between
               Hauppauge  Digital,  Inc.  (the  "Company")  and the Rights Agent
               thereunder  (the  "Rights  Agreement"),  the  terms of which  are
               hereby incorporated herein by reference and a copy of which is on
               file at the  principal  offices  of the  Company.  Under  certain
               circumstances,  as set forth in the Rights Agreement, such Rights
               will be evidenced by separate  certificates and will no longer be
               evidenced  by this  certificate.  The  Company  will  mail to the
               holder of this certificate a copy of the Rights Agreement,  as in
               effect on the date of mailing,  without  charge,  promptly  after
               receipt   of  a   written   request   therefor.   Under   certain
               circumstances  set forth in the Rights  Agreement,  Rights issued
               to, or held by, any  Person  who is, was or becomes an  Acquiring
               Person or any  Affiliate or Associate  thereof (as such terms are
               defined in the Rights Agreement), whether currently held by or on
               behalf of such  Person or by any  subsequent  holder,  may become
               null and void.

With respect to such  certificates  containing the foregoing  legend,  until the
earlier of (i) the  Distribution  Date or (ii) the  Expiration  Date, the Rights
associated  with the Common  Stock  represented  by such  certificates  shall be
evidenced  by such  certificates  alone and  registered  holders of Common Stock
shall also be the registered  holders of the associated Rights, and the transfer
of any of such  certificates  shall also  constitute  the transfer of the Rights
associated with the Common Stock represented by such certificates.

     Section 4. Form of Rights Certificates.

          (a) The Rights Certificates (and the forms of election to purchase and
     of  assignment  to be  printed  on  the  reverse  thereof)  shall  each  be
     substantially  in the form set forth in  Exhibit A 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
     on which the  Rights  may from time to time be  listed,  or to  conform  to
     usage.  Subject to the provisions of Section 11 and Section 22 hereof,  the
     Rights Certificates,  whenever distributed, shall be dated as of the Record
     Date and on their face shall  entitle the holders  thereof to purchase such
     number of shares of Common Stock as shall be set forth therein at the price
     set forth therein (such  exercise price per share,  the "Purchase  Price"),
     but the amount and type of securities

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     purchasable  upon the exercise of each Right and the Purchase Price thereof
     shall be subject to adjustment as provided herein.

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

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

     Section 5. Countersignature and Registration.

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

                                        9

<PAGE>

          (b) Following the  Distribution  Date,  the Rights Agent will keep, or
     cause to be kept,  at its  principal  office or offices  designated  as the
     appropriate  place for  surrender of Rights  Certificates  upon exercise or
     transfer,  books for registration  and transfer of the Rights  Certificates
     issued  hereunder.  Such books  shall show the names and  addresses  of the
     respective  holders  of the  Rights  Certificates,  the  number  of  Rights
     evidenced  on its face by each of the Rights  Certificates  and the date of
     each of the Rights Certificates.

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

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

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

                                       10

<PAGE>

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

          (a) Subject to Section 7(e) hereof, at any time after the Distribution
     Date the  registered  holder of any Rights  Certificate  may  exercise  the
     Rights evidenced  thereby (except as otherwise  provided herein  including,
     without limitation, the restrictions on exercisability set forth in Section
     9(c), Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon
     surrender of the Rights Certificate,  with the form of election to purchase
     and the  certificate  on the reverse  side thereof  duly  executed,  to the
     Rights  Agent at the  principal  office  or  offices  of the  Rights  Agent
     designated  for  such  purpose,  together  with  payment  of the  aggregate
     Purchase  Price  with  respect  to the total  number  of  shares  (or other
     securities,  cash or other  assets,  as the  case may be) as to which  such
     surrendered Rights are then exercisable,  at or prior to the earlier of (i)
     5:00 P.M.,  Hauppauge,  New York time, on July 19, 2011, or such later date
     as may be established by the Board of Directors  prior to the expiration of
     the Rights (such date, as it may be extended by the Board of Directors, the
     ("Final  Expiration  Date"),  or (ii)  the  time at which  the  Rights  are
     redeemed  as  provided  in Section 23 hereof  (the  earlier of (i) and (ii)
     being herein referred to as the "Expiration Date").

          (b) The Purchase  Price for each share of Common Stock pursuant to the
     exercise  of a Right  shall  initially  be $11.00,  and shall be subject to
     adjustment  from time to time as provided  in Section 11 and Section  13(a)
     hereof and shall be payable in accordance with paragraph (c) below.

          (c) Upon  receipt  of a Rights  Certificate  representing  exercisable
     Rights,  with the form of  election to purchase  and the  certificate  duly
     executed,  accompanied by payment, with respect to each Right so exercised,
     of the  Purchase  Price  per  share  of  Common  Stock  (or  other  shares,
     securities,  cash or other  assets,  as the case may be) to be purchased as
     set forth below and an amount  equal to any  applicable  transfer  tax, the
     Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i)
     (A)  requisition  from any transfer agent of the shares of Common Stock (or
     make available,  if the Rights Agent is the transfer agent for such shares)
     certificates for the total number of shares of Common Stock to be purchased
     and the Company hereby irrevocably  authorizes its transfer agent to comply
     with all such requests, or (B) if the Company shall have elected to deposit
     the total number of shares of Common Stock  issuable  upon  exercise of the
     Rights hereunder with a depositary  agent,  requisition from the depositary
     agent  depositary  receipts  representing  such  number of shares of Common
     Stock as are to be purchased (in which case  certificates for the shares of
     Common  Stock  represented  by such  receipts  shall  be  deposited  by the
     transfer agent with the  depositary  agent) and the Company will direct the
     depositary  agent to comply with such request,  (ii)  requisition  from the
     Company the amount of cash, if any, to be paid in lieu of fractional shares
     in  accordance  with  Section  14  hereof,  (iii)  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  Rights  Certificate,
     registered in such name or names as may be  designated by such holder,  and
     (iv) after receipt thereof, deliver such cash, if any, to or upon the order
     of the  registered  holder of such Rights  Certificate.  The payment of the
     Purchase  Price  (as  such  amount  may  be  reduced  pursuant  to  Section
     11(a)(iii) hereof) shall be made in cash or by certified bank check or bank
     draft payable to the order of the Company. In the event that the Company is
     obligated  to issue  other  securities  of the  Company,  pay  cash  and/or
     distribute  other  property  pursuant to Section 11(a) hereof,  the Company
     will make all arrangements

                                       11

<PAGE>

     necessary so that such other  securities,  cash and/or  other  property are
     available for distribution by the Rights Agent, if and when appropriate.

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

          (e) Notwithstanding  anything in this Agreement to the contrary,  from
     and after the first  occurrence of a Section  11(a)(ii)  Event,  any Rights
     beneficially  owned by (i) an Acquiring Person or an Associate or Affiliate
     of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
     such Associate or Affiliate)  who becomes a transferee  after the Acquiring
     Person  becomes such,  or (iii) a transferee of an Acquiring  Person (or of
     any such  Associate  or  Affiliate)  who becomes a  transferee  prior to or
     concurrently  with the  Acquiring  Person  becoming  such and receives such
     Rights pursuant to either (A) a transfer (whether or not for consideration)
     from the Acquiring  Person to holders of equity interests in such Acquiring
     Person or to any Person with whom the Acquiring  Person has any  continuing
     agreement, arrangement or understanding regarding the transferred Rights or
     (B) a transfer  which the Board of Directors of the Company has  determined
     is part of a plan,  arrangement  or  understanding  which  has as a primary
     purpose or effect the avoidance of this Section 7(e), shall become null and
     void without any further action and no holder of such Rights shall have any
     rights whatsoever with respect to such Rights,  whether under any provision
     of this  Agreement  or  otherwise.  The  Company  shall use all  reasonable
     efforts to insure that the provisions of this Section 7(e) and Section 4(b)
     hereof are  complied  with,  but shall have no  liability  to any holder of
     Rights  Certificates or any 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.

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

     Section 8. Cancellation and Destruction of Rights Certificates.

     All Rights Certificates surrendered for the purpose of exercise,  transfer,
split-up, combination or exchange shall, if surrendered to the Company or any of
its agents,  be delivered to the Rights Agent for  cancellation  or in cancelled
form, or, if  surrendered to the Rights Agent,  shall be cancelled by it, and no
Rights  Certificates  shall  be  issued  in lieu  thereof  except  as  expressly
permitted by any of the provisions of this Agreement.  The Company shall deliver
to the Rights Agent for cancellation and retirement,  and the Rights Agent shall
so cancel and retire, any other Rights Certificate

                                       12

<PAGE>

purchased or acquired by the Company  otherwise than upon the exercise  thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the Company,
or shall, at the written request of the Company,  destroy such cancelled  Rights
Certificates,  and in such case  shall  deliver  a  certificate  of  destruction
thereof to the Company.

     Section 9. Reservation and Availability of Capital Stock.

          (a) The Company covenants and agrees that it will cause to be reserved
     and kept  available,  out of its authorized  and unissued  shares of Common
     Stock and/or other  securities or out of its  authorized  and issued shares
     held in its  treasury,  the number of shares of Common  Stock  and/or other
     securities  that,  as  provided  in  this  Agreement,   including   Section
     11(a)(iii) hereof, will be sufficient to permit the exercise in full of all
     outstanding Rights.

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

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

          (d) The Company covenants and agrees that it will take all such action
     as may be

                                       13

<PAGE>

     necessary to ensure that all shares of Common Stock and/or other securities
     delivered  upon  exercise of Rights  shall,  at the time of delivery of the
     certificates for such shares (subject to payment of the Purchase Price), be
     duly and validly authorized and issued and fully paid and nonassessable.

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

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

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

               (a)(i) In the event the Company  shall at any time after the date
               of this  Agreement  (A)  declare a dividend  on the Common  Stock
               payable in shares of Common Stock,  (B) subdivide the outstanding
               Common  Stock,  (C) combine the  outstanding  Common Stock into a
               smaller number of shares,  or (D) issue any shares of its capital
               stock in a  reclassification  of the Common Stock  (including any
               such reclassification in

                                       14

<PAGE>

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

               (ii) In the event any Person shall,  at any time after the Rights
               Dividend Declaration Date, become an Acquiring Person, unless the
               event  causing  such  Person to become an  Acquiring  Person is a
               transaction  set  forth  in  Section  13(a)  hereof,   or  is  an
               acquisition  of shares of Common Stock pursuant to a tender offer
               or an exchange offer for all  outstanding  shares of Common Stock
               at a price and on terms  determined by at least a majority of the
               members of the Board of  Directors  who are not  officers  of the
               Company and who are not representatives,  nominees, Affiliates or
               Associates of an Acquiring  Person,  after receiving  advice from
               one or more investment  banking firms, to be (a) at a price which
               is fair to stockholders  and not inadequate  (taking into account
               all factors  which such  members of the Board of  Directors  deem
               relevant,  including,  without  limitation,  prices  which  could
               reasonably  be achieved if the Company or its assets were sold on
               an  orderly  basis  designed  to realize  maximum  value) and (b)
               otherwise   in  the  best   interests  of  the  Company  and  its
               stockholders (provided, however, that no such determination shall
               be made during the Special  Period) (a  "Qualified  Offer") then,
               promptly following the occurrence of such event, proper provision
               shall be made so that each holder of a Right  (except as provided
               below and in Section 7(e) hereof) shall thereafter have the right
               to receive,  upon exercise  thereof at the then current  Purchase
               Price in accordance with the terms of this Agreement,  in lieu of
               a  number  of  shares  of  Common  Stock  for  which a Right  was
               theretofore exercisable, such number of shares of Common Stock of
               the Company as shall equal the result obtained by (x) multiplying
               the then current  Purchase  Price by the then number of shares of
               Common Stock for which a Right was exercisable  immediately prior
               to the first  occurrence of a Section  11(a)(ii)  Event,  and (y)
               dividing that product  (which,  following such first  occurrence,
               shall  thereafter be referred to as the "Purchase Price" for each
               Right  and for all  purposes  of  this  Agreement)  by 50% of the
               Current Market Price (determined pursuant to Section

                                       15

<PAGE>

               11(d) hereof) per share of Common Stock on the date of such first
               occurrence (such number of shares, the "Adjustment Shares").

               (iii) In the event  that the  number  of  shares of Common  Stock
               which   are   authorized   by  the   Company's   Certificate   of
               Incorporation,  as  amended,  but  which are not  outstanding  or
               reserved for issuance  for purposes  other than upon  exercise of
               the Rights,  are not sufficient to permit the exercise in full of
               the Rights in accordance with the foregoing  subparagraph (ii) of
               this Section 11(a),  the Company shall (A) determine the value of
               the Adjustment  Shares issuable upon the exercise of a Right (the
               "Current Value"),  and (B) with respect to each Right (subject to
               Section 7(e) hereof),  make adequate  provision to substitute for
               the Adjustment  Shares,  upon the exercise of a Right and payment
               of the applicable  Purchase  Price,  (1) cash, (2) a reduction in
               the Purchase Price,  (3) Common Stock or other equity  securities
               of the Company (including,  without limitation,  shares, or units
               of shares,  of preferred  stock which the Board of Directors  has
               deemed to have  essentially  the same value or economic rights as
               shares of Common  Stock  (such  shares of  preferred  stock being
               referred to as "Common Stock Equivalents")),  (4) debt securities
               of the Company,  (5) other assets,  or (6) any combination of the
               foregoing,  having an aggregate value equal to the Current Value,
               where such  aggregate  value has been  determined by the Board of
               Directors  based  upon  the  advice  of a  nationally  recognized
               investment  banking  firm  selected  by the  Board of  Directors;
               provided,  however,  that if the  Company  shall  not  have  made
               adequate  provision to deliver value pursuant to clause (B) above
               within  thirty  (30)  days  following  the later of (x) the first
               occurrence of a Section 11(a)(ii) Event and (y) the date on which
               the  Company's  right of  redemption  pursuant  to Section  23(a)
               expires (the later of (x) and (y) being referred to herein as the
               "Section  11(a)(ii)  Trigger  Date"),  then the Company  shall be
               obligated to deliver,  upon the surrender for exercise of a Right
               and without  requiring  payment of the Purchase Price,  shares of
               Common Stock (to the extent  available)  and then,  if necessary,
               cash,  which shares and/or cash have an aggregate  value equal to
               the Spread.  For  purposes of the  preceding  sentence,  the term
               "Spread" shall mean the excess of (i) the Current Value over (ii)
               the Purchase Price. If the Board of Directors  determines in good
               faith  that it is likely  that  sufficient  additional  shares of
               Common Stock could be  authorized  for issuance  upon exercise in
               full of the  Rights,  the thirty  (30) day period set forth above
               may be extended to the extent necessary, but not more than ninety
               (90) days after the Section 11(a)(ii) Trigger Date, in order that
               the Company may seek stockholder  approval for the  authorization
               of such additional shares (such thirty (30) day period, as it may
               be extended, is herein called the "Substitution  Period"). To the
               extent  that action is to be taken  pursuant to the first  and/or
               third sentences of this Section 11(a)(iii), the Company (1) shall
               provide,  subject to Section 7(e) hereof,  that such action shall
               apply  uniformly to all outstanding  Rights,  and (2) may suspend
               the  exercisability  of the Rights  until the  expiration  of the
               Substitution  Period in order to seek such  stockholder  approval
               for such  authorization of additional shares and/or to decide the
               appropriate form of

                                       16

<PAGE>

               distribution  to be made  pursuant to such first  sentence and to
               determine the value thereof. In the event of any such suspension,
               the Company  shall 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
               Current  Value of the Common  Stock shall be the  Current  Market
               Price  per share of the  Common  Stock on the  Section  11(a)(ii)
               Trigger Date and the value of any Common Stock  Equivalent  shall
               be  deemed  to equal the  Current  Market  Price per share of the
               Common Stock on such date.

          (b) In case the Company  shall fix a record  date for the  issuance of
     rights,  options or warrants to all holders of Common Stock  entitling them
     to subscribe for or purchase (for a period expiring within  forty-five (45)
     calendar   days  after  such  record  date)  Common  Stock  or   securities
     convertible  into  Common  Stock at a price per  share of Common  Stock (or
     having a conversion price per share, if a security  convertible into Common
     Stock)  less than the  Current  Market  Price (as  determined  pursuant  to
     Section  11(d)  hereof) per share of Common Stock on such record date,  the
     Purchase  Price to be in effect after such record date shall be  determined
     by  multiplying  the  Purchase  Price in effect  immediately  prior to such
     record date by a fraction,  the  numerator  of which shall be the number of
     shares of Common Stock  outstanding on such record date, plus the number of
     shares of Common  Stock  which the  aggregate  offering  price of the total
     number of shares of Common  Stock so to be offered  (and/or  the  aggregate
     initial  conversion  price of the convertible  securities so to be offered)
     would purchase at such Current Market Price,  and the  denominator of which
     shall be the number of shares of Common  Stock  outstanding  on such record
     date,  plus the number of  additional  shares of Common Stock to be offered
     for  subscription or purchase (or into which the convertible  securities so
     to be offered are initially  convertible).  In case such subscription price
     may be paid by delivery of consideration,  part or all of which may be in a
     form  other  than  cash,  the  value  of  such  consideration  shall  be as
     determined  in good faith by the Board of Directors  of the Company,  whose
     determination shall be described in a statement filed with the Rights Agent
     and shall be  binding on the Rights  Agent and the  holders of the  Rights.
     Shares of Common  Stock  owned by or held for the  account  of the  Company
     shall not be deemed  outstanding  for the purpose of any such  computation.
     Such adjustment shall be made  successively  whenever such a record date is
     fixed, and in the event that such rights or warrants are not so issued, the
     Purchase  Price shall be adjusted to be the Purchase Price which would then
     be in effect if such record date had not been fixed.

          (c) In case the Company shall fix a record date for a distribution  to
     all  holders  of Common  Stock  (including  any such  distribution  made in
     connection  with a  consolidation  or merger in which  the  Company  is the
     continuing  corporation) of evidences of  indebtedness,  cash (other than a
     cash  dividend  out of the earnings or retained  earnings of the  Company),
     assets (other than a dividend  payable in Common  Stock,  but including any
     dividend  payable in stock other than  Common  Stock),  or of  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 Current
     Market Price (as determined pursuant to Section 11(d) hereof) per share

                                       17

<PAGE>

     of  Common  Stock on such  record  date,  less the fair  market  value  (as
     determined  in good faith by the Board of  Directors,  whose  determination
     shall be  described  in a  statement  filed with the  Rights  Agent) of the
     portion  of  the  cash,  assets  or  evidences  of  indebtedness  so  to be
     distributed  or of such  subscription  rights or warrants  applicable  to a
     share of Common Stock,  and the  denominator of which shall be such Current
     Market Price (as determined  pursuant to Section 11(d) hereof) per share of
     Common Stock. Such adjustments  shall be made successively  whenever such a
     record  date is fixed,  and in the event that such  distribution  is not so
     made,  the Purchase  Price shall be adjusted to be the Purchase Price which
     would have been in effect if such record date had not been fixed.

          (d)  For  the  purpose  of  any  computation  hereunder,   other  than
     computations  made  pursuant to Section  11(a)(iii)  hereof,  the  "Current
     Market  Price" per share of Common  Stock on any date shall be deemed to be
     the average of the daily closing  prices per share of such Common Stock for
     the thirty (30) consecutive  Trading Days  immediately  prior to such date,
     and for  purposes  of  computations  made  pursuant  to Section  11(a)(iii)
     hereof,  the  Current  Market  Price per share of Common  Stock on any date
     shall be deemed to be the average of the daily closing  prices per share of
     such Common Stock for the ten (10)  consecutive  Trading  Days  immediately
     following such date; provided,  however, that in the event that the Current
     Market  Price per share of the Common Stock is  determined  during a period
     following  the  announcement  by the issuer of such  Common  Stock of (A) a
     dividend or  distribution  on such Common  Stock  payable in shares of such
     Common  Stock or  securities  convertible  into shares of such Common Stock
     (other  than  the  Rights),   or  (B)  any   subdivision,   combination  or
     reclassification  of such Common Stock,  and the ex-dividend  date for such
     dividend  or  distribution,  or  the  record  date  for  such  subdivision,
     combination  or  reclassification  shall  not  have  occurred  prior to the
     commencement  of the requisite  thirty (30) Trading Day or ten (10) Trading
     Day period,  as set forth above,  then,  and in each such case, the Current
     Market Price shall be properly  adjusted to take into  account  ex-dividend
     trading.  The  closing  price for each day  shall be the last  sale  price,
     regular  way, or, in case no such sale takes place on such day, the average
     of the  closing  bid and asked  prices,  regular  way,  in  either  case as
     reported in the principal  consolidated  transaction  reporting system with
     respect to  securities  listed or admitted to trading on the New York Stock
     Exchange  or, if the shares of Common  Stock are not listed or  admitted to
     trading  on the New York  Stock  Exchange,  as  reported  in the  principal
     consolidated transaction reporting system with respect to securities listed
     on the principal national securities exchange on which the shares of Common
     Stock are listed or admitted  to trading or, if the shares of Common  Stock
     are not listed or admitted to trading on any national securities  exchange,
     the last 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 the
     National  Association  of Securities  Dealers  Automated  Quotation  System
     ("NASDAQ")  or such other  system then in use,  or, if on any such date the
     shares of Common Stock are not quoted by any such organization, the average
     of the closing bid and asked prices as furnished by a  professional  market
     maker  making  a  market  in the  Common  Stock  selected  by the  Board of
     Directors.  If on any such date no  market  maker is making a market in the
     Common  Stock,  the fair value of such shares on such date as determined in
     good faith by the Board of Directors  shall be used. The term "Trading Day"
     shall mean a day on which the  principal  national  securities  exchange on
     which the shares of Common  Stock are listed or admitted to trading is open
     for the  transaction  of business or, if the shares of Common Stock are not
     listed or admitted to trading on any national

                                       18

<PAGE>

     securities  exchange,  a Business  Day. If the Common Stock is not publicly
     held or not so listed or traded,  Current Market Price per share shall mean
     the fair  value  per  share as  determined  in good  faith by the  Board of
     Directors, whose determination shall be described in a statement filed with
     the  Rights  Agent and  shall be  final,  conclusive  and  binding  for all
     purposes.

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

          (f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
     or Section 13(a) hereof, the holder of any Right thereafter exercised shall
     become  entitled to receive  any shares of capital  stock other than Common
     Stock,  thereafter  the  number of such  other  shares so  receivable  upon
     exercise of any Right and the Purchase  Price  thereof  shall be subject to
     adjustment from time to time in a manner and on terms as nearly  equivalent
     as practicable to the provisions with respect to the Common Stock contained
     in Sections 11(a),  (b), (c), (e), (g), (h), (i), (j), (k) and (m), and the
     provisions  of  Sections  7, 9, 10, 13 and 14 hereof  with  respect  to the
     Common 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 shares of Common
     Stock  purchasable from time to time hereunder upon exercise of the Rights,
     all subject to further adjustment as provided herein.

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

          (i) The  Company may elect on or after the date of any  adjustment  of
     the  Purchase  Price  to  adjust  the  number  of  Rights,  in  lieu of any
     adjustment  in the number of shares of Common  Stock  purchasable  upon the
     exercise of a Right. Each of the Rights outstanding after the adjustment in
     the  number  of Rights  shall be  exercisable  for the  number of shares of
     Common Stock for which a Right was  exercisable  immediately  prior to such
     adjustment. Each Right held of record prior to

                                       19

<PAGE>

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

          (j)  Irrespective of any adjustment or change in the Purchase Price or
     the number of shares of Common  Stock  issuable  upon the  exercise  of the
     Rights,  the Rights  Certificates  theretofore  and  thereafter  issued may
     continue to express the  Purchase  Price per share and the number of shares
     which were expressed in the initial Rights Certificates issued hereunder.

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

          (l) In any  case in  which  this  Section  11  shall  require  that an
     adjustment in the Purchase  Price be made effective as of a record date for
     a specified  event,  the Company may elect to defer until the occurrence of
     such event the  issuance  to the holder of any Right  exercised  after such
     record  date  the  shares  of  Common  Stock  and  other  capital  stock or
     securities  of the Company,  if any,  issuable  upon such exercise over and
     above the  number of shares  of  Common  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 or securities upon the occurrence of the event requiring
     such adjustment.

                                       20

<PAGE>

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

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

          (o) The Company  covenants  and agrees  that,  after the  Distribution
     Date, it will not,  except as permitted by Section 23 or Section 26 hereof,
     take (or  permit  any  Subsidiary  to take) any  action if at the time such
     action is taken it is reasonably foreseeable that such action will diminish
     substantially or otherwise  eliminate the benefits  intended to be afforded
     by the Rights.

     Section 12.  Certificate  of Adjusted  Purchase  Price or Number of Shares.
Whenever an  adjustment is made as provided in Section 11 and Section 13 hereof,
the  Company  shall  (a)  promptly  prepare a  certificate  setting  forth  such
adjustment and a brief  statement of the facts  accounting for such  adjustment,
(b) promptly  file with the Rights Agent,  and with each transfer  agent for the
Common Stock,  a copy of such  certificate  and (c) if a  Distribution  Date has
occurred, mail a brief summary thereof to each holder of a Rights Certificate in
accordance with Section 25 hereof.  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained.

                                       21

<PAGE>

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

          (a) In the event that,  following the Stock Acquisition Date, directly
     or indirectly,  (x) the Company shall  consolidate  with, or merge with and
     into,  any other  Person  (other  than a  Subsidiary  of the  Company  in a
     transaction  which  complies  with Section 11(o)  hereof),  and the Company
     shall not be the continuing or surviving  corporation of such consolidation
     or merger,  (y) any Person  (other  than a  Subsidiary  of the Company in a
     transaction  which  complies with Section  11(o) hereof) shall  consolidate
     with,  or merge with or into,  the  Company,  and the Company  shall be the
     continuing or surviving corporation of such consolidation or merger and, in
     connection  with  such   consolidation  or  merger,  all  or  part  of  the
     outstanding  shares of Common Stock shall be changed into or exchanged  for
     stock  or  other  securities  of any  other  Person  or cash  or any  other
     property,  or (z) the Company  shall sell or otherwise  transfer (or one or
     more  of  its  Subsidiaries  shall  sell  or  otherwise  transfer),  in one
     transaction  or a series  of  related  transactions,  assets,  cash flow or
     earning power aggregating more than 50% of the assets, cash flow or earning
     power of the Company and its Subsidiaries  (taken as a whole) to any Person
     or Persons  (other than the Company or any Subsidiary of the Company in one
     or more  transactions  each of which  complies with Section 11(o)  hereof),
     then, and in each such case (except as may be contemplated by Section 13(d)
     hereof),  proper  provision  shall be made so that:  (i) each  holder  of a
     Right, except as provided in Section 7(e) hereof, shall thereafter have the
     right to receive,  upon the exercise  thereof at the then current  Purchase
     Price in  accordance  with the  terms of this  Agreement,  such  number  of
     validly  authorized  and  issued,  fully  paid,  non-assessable  and freely
     tradeable  shares of Common Stock of the  Principal  Party (as such term is
     hereinafter  defined),  not subject to any liens,  encumbrances,  rights of
     first  refusal  or other  adverse  claims,  as shall be equal to the result
     obtained by (1) multiplying  the then current  Purchase Price by the number
     of  shares of Common  Stock  for which a Right is  exercisable  immediately
     prior to the first  occurrence  of a  Section  13 Event  (or,  if a Section
     11(a)(ii) Event has occurred prior to the first  occurrence of a Section 13
     Event,  multiplying  the  number  of such  shares  for  which  a Right  was
     exercisable  immediately  prior  to  the  first  occurrence  of  a  Section
     11(a)(ii) Event by the Purchase Price in effect  immediately  prior to such
     first  occurrence),  and dividing that product (which,  following the first
     occurrence  of a Section 13 Event,  shall be referred  to as the  "Purchase
     Price" for each Right and for all purposes of this Agreement) by (2) 50% of
     the Current Market Price  (determined  pursuant to Section 11(d)(i) hereof)
     per  share  of the  Common  Stock  of such  Principal  Party on the date of
     consummation  of such  Section 13 Event;  (ii) such  Principal  Party shall
     thereafter  be liable for, and shall  assume,  by virtue of such Section 13
     Event,  all the  obligations  and duties of the  Company  pursuant  to this
     Agreement;  (iii) the term "Company" shall thereafter be deemed to refer to
     such Principal Party, it being specifically intended that the provisions of
     Section 11 hereof shall apply only to such  Principal  Party  following the
     first  occurrence of a Section 13 Event;  (iv) such  Principal  Party shall
     take such  steps  (including,  but not  limited  to, the  reservation  of a
     sufficient  number of shares of its Common  Stock) in  connection  with the
     consummation of any such transaction as may be necessary to assure that the
     provisions  hereof shall thereafter be applicable,  as nearly as reasonably
     may be, in relation to its shares of Common  Stock  thereafter  deliverable
     upon  the  exercise  of the  Rights;  and (v)  the  provisions  of  Section
     11(a)(ii)  hereof shall be of no effect  following the first  occurrence of
     any Section 13 Event.

                                       22

<PAGE>

          (b) "Principal Party" shall mean:

                    (i) in the case of any  transaction  described in clause (x)
                    or (y) of the first  sentence of Section  13(a),  the Person
                    that is the issuer of any  securities  into which  shares of
                    Common Stock of the Company are  converted in such merger or
                    consolidation,  and  if no  securities  are so  issued,  the
                    Person   that  is  the  other   party  to  such   merger  or
                    consolidation; and

                    (ii) in the case of any transaction  described in clause (z)
                    of the first sentence of Section  13(a),  the Person that is
                    the party receiving the greatest portion of the assets, cash
                    flow  or  earning   power   transferred   pursuant  to  such
                    transaction or transactions;

provided, however, that in any such case, (1) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding twelve (12)
month period registered under Section 12 of the Exchange Act, and such Person is
a direct or indirect  Subsidiary of another  Person the Common Stock of which is
and has been so registered,  "Principal Party" shall refer to such other Person;
and (2) in case such Person is a  Subsidiary,  directly or  indirectly,  of more
than one Person,  the Common Stocks of two or more of which are and have been so
registered,  "Principal  Party"  shall refer to whichever of such Persons is the
issuer of the Common Stock having the greatest aggregate market value.

          (c) The Company shall not consummate any such  consolidation,  merger,
     sale or transfer unless the Principal Party shall have a sufficient  number
     of  authorized  shares of its Common  Stock  which have not been  issued or
     reserved  for  issuance  to permit  the  exercise  in full of the Rights in
     accordance  with this Section 13 and unless  prior  thereto the Company and
     such Principal  Party shall have executed and delivered to the Rights Agent
     a  supplemental  agreement  providing for the terms set forth in paragraphs
     (a) and (b) of this  Section  13 and  further  providing  that,  as soon as
     practicable after the date of any  consolidation,  merger or sale of assets
     mentioned in paragraph (a) of this Section 13, the Principal Party will

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

                    (ii) take such all such other  action as may be necessary to
                    enable  the   Principal   Party  to  issue  the   securities
                    purchasable  upon exercise of the Rights,  including but not
                    limited  to  the   registration  or  qualification  of  such
                    securities   under   all   requisite   securities   laws  of
                    jurisdictions  of the various states and the listing of such
                    securities on such  exchanges and trading  markets as may be
                    necessary or appropriate; and

                                       23

<PAGE>

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

The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13 Event
shall occur at any time after the occurrence of a Section  11(a)(ii)  Event, the
Rights  which  have not  theretofore  been  exercised  shall  thereafter  become
exercisable in the manner described in Section 13(a).

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

     Section 14. Fractional Rights and Fractional Shares.

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

                                       24

<PAGE>

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

          (b) The Company shall not be required to issue  fractions of shares of
     Common  Stock upon  exercise  of the Rights or to  distribute  certificates
     which  evidence  fractional  shares of Common Stock.  In lieu of fractional
     shares of Common Stock,  the Company may pay to the  registered  holders of
     Rights  Certificates  at the time  such  Rights  are  exercised  as  herein
     provided an amount in cash equal to the same fraction of the current market
     value of a share of Common Stock.  For purposes of this Section 14(b),  the
     current  market value of a share of Common Stock shall be the closing price
     of one (1)  share of  Common  Stock  (as  determined  pursuant  to  Section
     11(d)(i) hereof) for the Trading Day immediately  prior to the date of such
     exercise.

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

     Section  15.  Rights of  Action.  All  rights of action in  respect of this
Agreement  are  vested  in the  respective  registered  holders  of  the  Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution  Date, of the Common Stock),  without the consent of the Rights
Agent  or of the  holder  of any  other  Rights  Certificate  (or,  prior to the
Distribution Date, of the Common Stock),  may, in his own behalf and for his own
benefit,  enforce, and may institute and maintain any suit, action or proceeding
against  the Company to enforce,  or  otherwise  act in respect of, his right to
exercise the Rights evidenced by such Rights  Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or  any  remedies  available  to  the  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 shall be entitled to specific  performance
of the obligations  hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

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

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

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

                                       25

<PAGE>

          (c) subject to Section 6(a) and Section  7(f) hereof,  the Company and
     the  Rights  Agent  may deem and treat  the  Person in whose  name a Rights
     Certificate  (or, prior to the  Distribution  Date,  the associated  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  Rights   Certificates  or  the  associated  Common  Stock
     certificate  made by anyone other than the Company or the Rights Agent) for
     all  purposes  whatsoever,  and neither  the Company nor the Rights  Agent,
     subject to the last  sentence of Section 7(e) hereof,  shall be required to
     be affected by any notice to the contrary; and

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

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

     Section 18. Concerning the Rights Agent.

          (a)  The  Company  agrees  to  pay  to  the  Rights  Agent  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   disbursements   and  other   disbursements   incurred   in  the
     administration  and  execution  of  this  Agreement  and the  exercise  and
     performance of its duties  hereunder.  The Company also agrees to indemnify
     the Rights Agent 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 in the premises.

                                       26

<PAGE>

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

     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 corporate  trust,  stock  transfer or other  shareholder
     services business of the Rights Agent or any successor Rights Agent,  shall
     be the  successor  to the Rights  Agent  under this  Agreement  without the
     execution  or filing of any paper or any  further act on the part of any of
     the parties  hereto;  but only if 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 Rights Certificates shall
     have been countersigned but not delivered,  any such successor Rights Agent
     may adopt the  countersignature  of a predecessor  Rights Agent and deliver
     such Rights Certificates so countersigned;  and in case at that time any of
     the Rights  Certificates shall not have been  countersigned,  any successor
     Rights Agent may countersign such Rights Certificates either in the name of
     the  predecessor or in the name of the successor  Rights Agent;  and in all
     such cases such Rights  Certificates  shall have the full force provided in
     the Rights Certificates and in this Agreement.

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

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

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

                                       27

<PAGE>

          (b) Whenever in the performance of its duties under this Agreement the
     Rights Agent shall deem it  necessary or desirable  that any fact or matter
     (including,  without  limitation,  the identity of any Acquiring Person and
     the  determination of Current Market Price) be proved or established by the
     Company  prior to taking or 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 Chairman of the Board,  the President,  any Vice
     President,  the Treasurer,  any Assistant  Treasurer,  the Secretary or any
     Assistant  Secretary of the Company and delivered to the Rights Agent;  and
     such  certificate  shall be full  authorization to the Rights Agent for any
     action taken or 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 only for its own gross
     negligence, bad faith or willful misconduct.

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

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

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

          (g) The  Rights  Agent is hereby  authorized  and  directed  to accept
     instructions  with respect to the performance of its duties  hereunder from
     the  Chairman  of  the  Board,  the  President,  any  Vice  President,  the
     Secretary,   any  Assistant  Secretary,  the  Treasurer  or  any  Assistant
     Treasurer  of the  Company,  and to apply to such  officers  for  advice or
     instructions in connection with its duties,  and it shall not be liable for
     any action taken or suffered to be taken by it in good faith in accordance

                                       28

<PAGE>

     with instructions of any such officer.

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

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

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

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

     Section  21.  Change of Rights  Agent.  The Rights  Agent or any  successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon  thirty (30) days'  notice in writing  mailed to the  Company,  and to each
transfer  agent of the Common Stock,  by registered or certified  mail,  and, if
such resignation  occurs after the Distribution  Date, to the registered holders
of the Rights  Certificates  by  first-class  mail.  The  Company may remove the
Rights  Agent or any  successor  Rights  Agent upon thirty (30) days'  notice in
writing,  mailed to the Rights Agent or successor  Rights Agent, as the case may
be, and to each transfer  agent of the Common Stock,  by registered or certified
mail, and, if such removal occurs after the Distribution Date, to the holders of
the Rights 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
Rights  Certificate (who shall, with such notice,  submit his Rights Certificate
for  inspection  by the  Company),  then any  registered  holder  of any  Rights
Certificate may apply to any court of competent jurisdiction for the appointment
of a new

                                       29

<PAGE>

Rights Agent. 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, and, if such appointment  occurs after the Distribution  Date,
mail a notice  thereof  in  writing  to the  registered  holders  of the  Rights
Certificates.  Failure  to give any  notice  provided  for in this  Section  21,
however, or any defect therein, shall not affect the legality or validity of the
resignation  or removal of the Rights Agent or the  appointment of the successor
Rights Agent, as the case may be.

     Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary,  the Company may,
at its option,  issue new Rights Certificates  evidencing Rights in such form as
may be approved by the Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property  purchasable  under the Rights  Certificates made in accordance with
the provisions of this Agreement.  In addition,  in connection with the issuance
or sale of shares of Common Stock following the  Distribution  Date and prior to
the redemption or expiration of the Rights,  the Company (a) shall, with respect
to shares of Common  Stock so issued or sold  pursuant to the  exercise of stock
options or under any employee plan or arrangement,  granted or awarded as of the
Distribution  Date, or upon the  exercise,  conversion or exchange of securities
hereinafter  issued by the  Company,  and (b) may, in any other case,  if deemed
necessary or  appropriate by the Board of Directors,  issue Rights  Certificates
representing  the appropriate  number of Rights in connection with such issuance
or sale; provided,  however, that (i) no such Rights Certificate shall be issued
if, and to the extent  that,  the Company  shall be advised by counsel that such
issuance would create a significant risk of material adverse tax consequences to
the Company or the Person to whom such Rights  Certificate would be issued,  and
(ii) no such  Rights  Certificate  shall be issued if,  and to the extent  that,
appropriate  adjustment  shall  otherwise have been made in lieu of the issuance
thereof.

     Section 23. Redemption and Termination.

          (a) The Board of  Directors  may, at its option,  at any time prior to
     the  earlier  of (i) the  close  of  business  on the  tenth  Business  Day
     following the Stock  Acquisition  Date (or, if the Stock  Acquisition  Date
     shall have occurred  prior to the Record Date, the close of business on the
     tenth Business Day following the Record Date), or (ii) the Final Expiration
     Date, redeem all but not less than all of the then outstanding  Rights at a
     redemption  price of $.001 per Right,  as such amount may be  appropriately
     adjusted to reflect any stock split, stock dividend or similar  transaction
     occurring after the date hereof (such  redemption  price being  hereinafter
     referred to as the "Redemption Price").  Notwithstanding anything contained
     in this  Agreement to the  contrary,  the Rights  shall not be  exercisable
     after the first occurrence of a Section  11(a)(ii) Event until such time as
     the Company's right of redemption  hereunder has expired.  The Company may,
     at its option,  pay the  Redemption  Price in cash,  shares of Common Stock
     (based on the Current Market Price, as

                                       30

<PAGE>

     defined  in Section  11(d)(i)  hereof,  of the Common  Stock at the time of
     redemption) or any other form of  consideration  deemed  appropriate by the
     Board of Directors.

          (b) Immediately upon the action of the Board of Directors ordering the
     redemption of the Rights,  evidence of which shall have been filed with the
     Rights  Agent and without any  further  action and without any notice,  the
     right to exercise the Rights will  terminate and the only right  thereafter
     of the holders of Rights shall be to receive the Redemption  Price for each
     Right so held. Promptly after the action of the Board of Directors ordering
     the  redemption  of the  Rights,  the  Company  shall  give  notice of such
     redemption  to the Rights  Agent and the  holders  of the then  outstanding
     Rights by mailing  such notice to all such  holders at each  holder's  last
     address as it appears 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 will state the method by which the payment of the
     Redemption Price will be made.

          (c) Notwithstanding the provisions of Section 23(a) hereof, if, within
     180 days of a public announcement by a third party of an intent or proposal
     to engage  (without the current and continuing  concurrence of the Board of
     Directors)  in a  transaction  involving  an  acquisition  of  or  business
     combination  with the Company or otherwise  to become an Acquiring  Person,
     there is an  election  of  Directors  (whether  at one or more  stockholder
     meetings and/or  pursuant to written  stockholder  consent)  resulting in a
     majority of the Board of Directors  being comprised of persons who were not
     nominated  by the Board of Directors  in office  immediately  prior to such
     election, then following the effectiveness of such election for a period of
     180 days (the "Special  Period") the Rights,  if otherwise then  redeemable
     absent the  provisions of this  paragraph  (c),  shall be  redeemable  upon
     either of the following conditions being satisfied, but not otherwise:

          (A) by a vote of a majority of the Directors then in office,  provided
     that

               (I)  before  such  vote,  the  Board  of  Directors   shall  have
          implemented the Value Enhancement Procedures (as defined below) and

               (II) promptly  after such vote,  the Company  publicly  announces
          such vote and

                    (a) the  manner in which the  Value  Enhancement  Procedures
               were implemented,

                    (b) any  material  financial,  business,  personal  or other
               benefit or relationship  (an "Interest")  which each Director and
               each  Affiliate of such Director  (identifying  each Director and
               Affiliate  separately  in relation to each such  Interest) has in
               connection  with any suggested,  proposed or pending  transaction
               with or  involving  the  Company (a  "Transaction"),  or with any
               other party or  Affiliate  of any other  party to a  Transaction,
               where such  Transaction  would or might,  or is  intended  to, be
               permitted  or   facilitated  by  redemption  of  the  Rights  (an
               "Affected Transaction"), other than treatment as a shareholder on
               a  pro  rata  basis  with  other   shareholders  or  pursuant  to
               compensation  arrangements  as a  director  or  employee  of  the
               Company or a subsidiary which have been previously

                                       31

<PAGE>

               disclosed by the Company,

                    (c) the  individual  vote of each  Director on the motion to
               redeem the Rights, and

                    (d) the  statement  of any Director who voted for or against
               the motion to redeem the Rights and  desires to have a  statement
               included in such announcement, or

          (B) if clause (A) is not  applicable,  by a vote of a majority  of the
     Directors then in office,  provided that (I) if there is a challenge to the
     Directors'   action  approving   redemption  and/or  any  related  Affected
     Transaction  as a breach  of the  fiduciary  duty of care or  loyalty,  the
     Directors,  solely for purposes of determining  the  effectiveness  of such
     redemption  pursuant to this clause (B), are able to  establish  the entire
     fairness of such  redemption  and, if  applicable,  such  related  Affected
     Transaction, and (II) the Company shall have publicly announced the vote of
     the Board of Directors  approving such redemption and, if applicable,  such
     related  Affected  Transaction,  which  announcement  shall  set  forth the
     information prescribed by clauses (A)(II)(b), (c) and (d) above.

"Value Enhancement Procedures" shall mean:

               (1) the  selection by the Board of  Directors  of an  independent
          financial  advisor (the  "Independent  Advisor") from among  financial
          advisors which have national standing,  have established  expertise in
          advising on  mergers,  acquisitions  and  related  matters and have no
          Interest relating to an Affected Transaction,  and have not during the
          preceding  year  provided  services  to,  been  engaged  by or  been a
          financing source for any other party to an Affected Transaction or any
          Affiliate of any such party or of any Director (other than the Company
          and its subsidiaries);

               (2) whether or not there is a then-pending  Affected Transaction,
          the receipt by the Board of Directors from its Independent  Advisor of
          (a) such  advisor's  view  (expressed in such form and subject to such
          qualifications  and  limitations  as  the  Independent  Advisor  deems
          appropriate) regarding whether redemption of the Rights will serve the
          best  interests  of the  Company  and  its  shareholders  or (b)  such
          advisor's  statement that it is unable to express such a view, setting
          forth the reasons therefor;

               (3) if there is a then-pending Affected Transaction,

               (A)  the  establishment  and   implementation  by  the  Board  of
          Directors  of a process and  procedures  approved  by its  Independent
          Advisor which the Board of Directors and such advisor  conclude  would
          be most  likely to result in the best value  reasonably  available  to
          shareholders (regardless of whether such Affected Transaction involves
          a "sale of control" or  "break-up"  of the  Company for  Delaware  law
          purposes),

               (B) the Board of  Directors  (I)  receiving  the  opinion  of its
          Independent Advisor, in customary form and content for transactions of
          the  type  involved,  that  the  Affected  Transaction  is fair to the
          Company's  shareholders  from a  financial  point  of  view  and  (II)
          determining, and the

                                       32

<PAGE>

          Independent Advisor confirming,  that it has no reason to believe that
          a superior  transaction is reasonably available for the benefit of the
          Company's shareholders, and

               (C) the execution of a definitive transaction agreement and other
          definitive documentation necessary to effect the Affected Transaction.

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

     Section 24. Notice of Certain Events.

          (a) In  case  the  Company  shall  propose,  at  any  time  after  the
     Distribution Date, (i) to pay any dividend payable in stock of any class to
     the  holders  of  Common  Stock or to make any  other  distribution  to the
     holders of Common Stock (other than a regular  quarterly  cash dividend out
     of earnings or retained  earnings of the Company),  or (ii) to offer to the
     holders of Common Stock rights or warrants to subscribe  for or to purchase
     any  additional  shares of Common  Stock or shares of stock of any class or
     any  other  securities,   rights  or  options,   or  (iii)  to  effect  any
     reclassification  of  its  Common  Stock  (other  than  a  reclassification
     involving only the subdivision of outstanding  shares of Common Stock),  or
     (iv) to effect any  consolidation  or merger into or with any other  Person
     (other than a Subsidiary  of the Company in a  transaction  which  complies
     with Section 11(o) hereof),  or to effect any sale or other transfer (or to
     permit  one or  more of its  Subsidiaries  to  effect  any  sale  or  other
     transfer), in one transaction or a series of related transactions,  of more
     than 50% of the assets,  cash flow or earning  power of the Company and its
     Subsidiaries  (taken as a whole) to any other Person or Persons (other than
     the Company and/or any of its Subsidiaries in one or more transactions each
     of  which  complies  with  Section  11(o)  hereof),  or (v) to  effect  the
     liquidation,  dissolution or winding up of the Company,  then, in each such
     case, the Company shall give to each holder of a Rights Certificate, to the
     extent feasible and in accordance with Section 26 hereof,  a notice of such
     proposed  action,  which shall  specify the record date for the purposes of
     such stock  dividend,  distribution  of rights or warrants,  or the date on
     which  such  reclassification,   consolidation,   merger,  sale,  transfer,
     liquidation,  dissolution,  or  winding up is to take place and the date of
     participation  therein by the holders of the shares of Common Stock, if any
     such date is to be fixed,  and such notice shall be so given in the case of
     any action  covered by clause (i) or (ii) above at least  twenty  (20) days
     prior to the record  date for  determining  holders of the shares of Common
     Stock  for  purposes  of such  action,  and in the case of any  such  other
     action,  at least  twenty (20) days prior to the date of the taking of such
     proposed action or the date of participation  therein by the holders of the
     shares of Common Stock whichever shall be the earlier.

          (b) In case a Section  11(a)(ii) Event shall occur,  then, in any such
     case,  the Company  shall as soon as  practicable  thereafter  give to each
     holder of a Rights  Certificate,  to the extent  feasible and in accordance
     with Section 26 hereof,  a notice of the  occurrence  of such event,  which
     shall  specify  the event and the  consequences  of the event to holders of
     Rights under Section

                                       33

<PAGE>

     11(a)(ii) hereof.

     Section 25. Notices.  Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights  Certificate to
or on the Company  shall be  sufficiently  given or made if sent by  first-class
mail,  postage prepaid,  addressed (until another address is filed in writing by
the Rights Agent with the Company) as follows:

         Hauppauge Digital, Inc.
         91 Cabot Court
         Hauppauge, New York 11788
         Telephone: (408) 434-1600
         Attention: Chairman of the Board

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

         North American Transfer Co.
         147 West Merrick Road
         Freeport, New York 11520
         Attn: Mildred Rostolder

     Notices or demands  authorized by this Agreement to be given or made by the
Company or the Rights  Agent to the holder of any  Rights  Certificate  (or,  if
prior to the  Distribution  Date,  to the  holder of  certificates  representing
shares  of  Common  Stock)  shall  be  sufficiently  given  or  made  if sent by
first-class  mail,  postage prepaid,  addressed to such holder at the address of
such holder as shown on the registry books of the Company.

     Section 26. Supplements and Amendments. Prior to the Distribution Date, the
Company and the Rights Agent  shall,  if the Company so directs,  supplement  or
amend any  provision  of this  Agreement  without the approval of any holders of
certificates   representing   shares  of  Common  Stock.   From  and  after  the
Distribution  Date,  the Company and the Rights Agent  shall,  if the Company so
directs,  supplement or amend this Agreement without the approval of any holders
of Rights  Certificates  in order (i) to cure any ambiguity,  (ii) to correct or
supplement any provision contained herein which may be defective or inconsistent
with any other provisions  herein,  (iii) to shorten or lengthen any time period
hereunder,  or (iv) to change or  supplement  the  provisions  hereunder  in any
manner which the Company may deem  necessary  or  desirable  and which shall not
adversely affect the interests of the holders of Rights Certificates (other than
an Acquiring  Person or an  Affiliate  or  Associate  of an  Acquiring  Person);
provided, this Agreement may not be supplemented or amended to lengthen any time
period hereunder,  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

                                       34

<PAGE>

clarifying  the rights of,  and/or the benefits to, the holders of Rights.  Upon
the delivery of a certificate  from an appropriate  officer of the Company which
states that the proposed supplement or amendment is in compliance with the terms
of this Section 26, the Rights Agent shall execute such supplement or amendment.
Prior to the Distribution  Date, the interests of the holders of Rights shall be
deemed   coincident   with  the  interests  of  the  holders  of  Common  Stock.
Notwithstanding  anything  herein to the  contrary,  no  supplement or amendment
shall be made to this Agreement  during the Special Period or at a time when the
Rights are not redeemable.

     Section 27. 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 28. Determinations and Actions by the Board of Directors,  etc. For
all  purposes  of this  Agreement,  any  calculation  of the number of shares of
Common Stock  outstanding  at any  particular  time,  including  for purposes of
determining the particular percentage of such outstanding shares of Common Stock
of which any Person is the Beneficial  Owner,  shall be made in accordance  with
the last sentence of Rule  13d-3(d)(1)(i)  of the General Rules and  Regulations
under the Exchange Act. The Board of Directors  shall have the  exclusive  power
and authority to administer this Agreement and to exercise all rights and powers
specifically  granted to the Board of Directors or to the Company,  or as may be
necessary or  advisable  in the  administration  of this  Agreement,  including,
without limitation,  the right and power to (i) interpret the provisions of this
Agreement,  and (ii) make all  determinations  deemed necessary or advisable for
the  administration  of  this  Agreement  (including,  but  not  limited  to,  a
determination to redeem or not redeem the Rights or to amend the Agreement). All
such actions,  calculations,  interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing) which
are done or made by the Board in good faith, shall (x) be final,  conclusive and
binding on the  Company,  the Rights  Agent,  the  holders of the Rights and all
other  Persons,  and (y) not subject the Board of Directors to any  liability to
the holders of the Rights.

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

     Section 30. Severability.  If any term, provision,  covenant or restriction
of this  Agreement  is  held  by a court  of  competent  jurisdiction  or  other
authority  to be invalid,  void or  unenforceable,  the  remainder of the terms,
provisions,  covenants and  restrictions  of this Agreement shall remain in full
force and  effect  and shall in no way be  affected,  impaired  or  invalidated;
provided,  however,  that  notwithstanding  anything  in this  Agreement  to the
contrary, if any such term,  provision,  covenant or restriction is held by such
court  or  authority  to be  invalid,  void or  unenforceable  and the  Board of
Directors  determines  in its good faith  judgment  that  severing  the  invalid
language from this

                                       35

<PAGE>

Agreement  would adversely  affect the purpose or effect of this Agreement,  the
right of redemption set forth in Section 23 hereof shall be reinstated and shall
not expire until the close of business on the tenth  Business Day  following the
date of such determination by the Board of Directors.

     Section  31.  Governing  Law.  This  Agreement,  each Right and each Rights
Certificate  issued  hereunder  shall be deemed to be a contract  made under the
laws of the State of  Delaware  and for all  purposes  shall be  governed by and
construed in accordance with the laws of such State applicable to contracts made
and to be  performed  entirely  within  such  State,  except that the rights and
obligations  of the Rights  Agent  shall be governed by the laws of the State of
New York.

     Section 32.  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  33.  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.

                                       36

<PAGE>

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

Attest:                                         HAUPPAUGE DIGITAL, INC.

By: /s/ Benjamin A. Tan                          By:  /s/ Kenneth Plotkin
   -------------------------------                 -----------------------------
   Name: Benjamin A. Tan                           Name:  Kenneth Plotkin
        --------------------------                      -----------------------
             (Please Print)                                   (Please Print)

   Title: Corporate Counsel                        Title:
          Hauppauge Digital, Inc.
         -------------------------                       -----------------------

                                                /s/ Mildred Rostolder
                                                -------------------------------
                                                Mildred Rostolder
                                                d/b/a North American Transfer
                                                Company

                                       37

<PAGE>

                                                                     Exhibit A

                          [Form of Rights Certificate]

Certificate No. R-                                              ________ Rights

NOT  EXERCISABLE  AFTER  _________ __, 2011 UNLESS EXTENDED PRIOR THERETO BY THE
BOARD OF DIRECTORS OR EARLIER IF REDEEMED BY THE COMPANY. THE RIGHTS ARE SUBJECT
TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $.001 PER RIGHT ON THE TERMS SET
FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES,  RIGHTS BENEFICIALLY
OWNED BY AN ACQUIRING  PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS  AGREEMENT)
AND ANY SUBSEQUENT  HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.  [THE RIGHTS
REPRESENTED  BY THIS  RIGHTS  CERTIFICATE  ARE OR WERE  BENEFICIALLY  OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING  PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING  PERSON  (AS  SUCH  TERMS  ARE  DEFINED  IN  THE  RIGHTS   AGREEMENT).
ACCORDINGLY,  THIS  RIGHTS  CERTIFICATE  AND THE RIGHTS  REPRESENTED  HEREBY MAY
BECOME  NULL AND VOID IN THE  CIRCUMSTANCES  SPECIFIED  IN SECTION  7(e) OF SUCH
AGREEMENT.]1 Rights Certificate

                             HAUPPAUGE DIGITAL, INC.

     This  certifies  that  _________________,  or  registered  assigns,  is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement,  dated as of ________  __,  2001 (the  "Rights  Agreement"),  between
HAUPPAUGE   DIGITAL,   INC.,  a  Delaware   corporation  (the  "Company"),   and
___________________________________,  a _______________ banking corporation (the
"Rights  Agent"),  to  purchase  from the Company at any time prior to 5:00 P.M.
Hauppauge,  New York time) on July 19, 2011 (unless such date is extended  prior
thereto by the Board of  Directors) at the office or offices of the Rights Agent
designated for such purpose,  or its successors as Rights Agent, one fully paid,
non-assessable  share of Common Stock (the "Common Stock") of the Company,  at a
purchase price of $11.00 per share (the "Purchase Price"), upon presentation and
surrender of this Rights  Certificate  with the Form of Election to Purchase and
related Certificate duly executed. The number of Rights evidenced by this Rights
Certificate  (and the  number of shares  which may be  purchased  upon  exercise
thereof) set forth above,  and the Purchase Price per share set forth above, are
the number and Purchase Price as of July 19, 2001,  based on the Common Stock as
constituted at such date.

--------
         1The portion of the legend in brackets shall be inserted only if
        applicable and shall replace the preceding sentence.

                                        1

<PAGE>

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

     As provided in the Rights Agreement,  the Purchase Price and the number and
kind of shares of Common Stock or other securities,  which may be purchased upon
the exercise of the Rights  evidenced by this Rights  Certificate are subject to
modification  and  adjustment  upon the happening of certain  events,  including
Triggering Events.

     This  Rights  Certificate  is subject to all of the terms,  provisions  and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights  Agent,  the Company and the  holders of the Rights  Certificates,  which
limitations of rights include the temporary  suspension of the exercisability of
such Rights under the specific  circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned  office of the
Rights Agent and are also available upon written request to the Rights Agent.

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

     Subject to the provisions of the Rights Agreement,  the Rights evidenced by
this  Certificate  may be redeemed by the Company at its option at a  redemption
price  of $.001  per  Right at any time  prior to the  earlier  of the  close of
business on (i) the tenth Business Day following the Stock  Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final  Expiration  Date. For 180 days following a change in control of the Board
of Directors,  that has not been  approved by the Board of Directors,  occurring
within  six  months  of an  unsolicited  third  party  acquisition  or  business
combination  proposal,  the new  directors  are  entitled  to redeem  the Rights
(assuming  the Rights  would  have  otherwise  been  redeemable),  including  to
facilitate an  acquisition  or business  combination  transaction  involving the
Company,  but only (1) if they have followed  certain  procedures or (2) if such
procedures are not followed,  and if their decision regarding  redemption and/or
any acquisition or business combination is challenged as a breach of fiduciary

                                        2

<PAGE>

duty of care or loyalty,  the directors  (solely for purposes of determining the
effectiveness  of such  redemption) are able to establish the entire fairness of
such redemption, and, if applicable, such transaction.

     No  fractional  shares of Common  Stock will be issued upon the exercise of
any Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Rights Agreement.

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

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

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

Dated as of July __, 2001

ATTEST:                                         HAUPPAUGE DIGITAL, INC.

By:_______________________                      By:_________________________
            Secretary                              Name:______________________
                                                            (Please Print)
                                                   Title:_____________________
Countersigned:

-------------------------------
Mildred Rostolder
d/b/a North American Transfer Company

                                        3

<PAGE>

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

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

     FOR VALUE  RECEIVED_________________________________________  hereby sells,
assigns and  transfers  unto____________________________________________________
________________________________________________________________________________
                 (Please print name and address of transferee)

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

Dated: ___________, ____

                                                 ------------------------
                                                        Signature
Signature Guaranteed:

                                   Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

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

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

Dated: _____________, ____
                                                     -------------------------
                                                             Signature
Signature Guaranteed:

                                        4

<PAGE>

                                     NOTICE

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

                                        5

<PAGE>

                          FORM OF ELECTION TO PURCHASE

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

To: HAUPPAUGE DIGITAL, INC.

     The undersigned  hereby  irrevocably  elects to exercise  __________ Rights
represented  by this Rights  Certificate  to purchase the shares of Common Stock
issuable  upon the  exercise  of the  Rights (or such  other  securities  of the
Company or of any other  person  which may be issuable  upon the exercise of the
Rights) and requests that  certificates for such shares be issued in the name of
and delivered to:

Please insert social security
or other identifying number

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

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

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

Please insert social security
or other identifying number

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

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

Dated: ___________, ____

                                                  -------------------------
                                                          Signature

Signature Guaranteed:

                                        6

<PAGE>

                                   Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

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

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

Dated: ____________, ____
                                                     ------------------------
                                                              Signature

Signature Guaranteed:

                                     NOTICE

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

                                        7

<PAGE>

                                                                     Exhibit B

                          SUMMARY OF RIGHTS TO PURCHASE
                                  COMMON STOCK

     On July 19, 2001,  the Board of Directors of Hauppauge  Digital,  Inc. (the
"Company")  declared a dividend  distribution of one Right for each  outstanding
share of Company Common Stock to stockholders of record at the close of business
on August 5, 2001 (the "Record Date"). Each Right entitles the registered holder
to purchase  from the Company one share of Common  Stock at a Purchase  Price of
$11.00 per share (the "Purchase Price"), subject to adjustment.  The description
and  terms  of the  Rights  are set  forth in a Rights  Agreement  (the  "Rights
Agreement")  between  the  Company and North  American  Transfer  Co., as Rights
Agent.

     Initially,  the Rights will be attached  to all Common  Stock  certificates
representing  shares then outstanding,  and no separate Rights Certificates will
be distributed. Subject to certain exceptions specified in the Rights Agreement,
the Rights will  separate  from the Common  Stock and a  Distribution  Date will
occur upon the earlier of (i) 10 business days  following a public  announcement
that a person  or group of  affiliated  or  associated  persons  (an  "Acquiring
Person") has  acquired  beneficial  ownership of 10% or more of the  outstanding
shares of Common Stock,  other than as a result of  repurchases  of stock by the
Company  or  certain  inadvertent  actions by  institutional  or  certain  other
stockholders  or the date a Person has entered into an agreement or  arrangement
with the Company or any  subsidiary of the Company  providing for an Acquisition
Transaction  (the "Stock  Acquisition  Date") or (ii) 10 business  days (or such
later date as the Board shall determine,  provided, however, that no deferral of
a  Distribution  Date by the  Board of  Directors  pursuant  to the terms of the
Rights  Agreement  described  in this clause (ii) may be made at any time during
the Special Period (as defined  below))  following the  commencement of a tender
offer or  exchange  offer that  would  result in a person or group  becoming  an
Acquiring Person. An Acquisition  Transaction is defined in the Rights Agreement
as (x) a merger,  consolidation or similar transaction  involving the Company or
any of its Subsidiaries as a result of which stockholders of the Company will no
longer own a majority of the  outstanding  shares of Common Stock of the Company
or a publicly traded entity which controls the Company or, if  appropriate,  the
entity into which the Company may be merged,  consolidated or otherwise combined
(based  solely on the  shares of  Common  Stock  received  or  retained  by such
stockholders, in their capacity as stockholders of the Company, pursuant to such
transaction),  (y) a  purchase  or  other  acquisition  of all or a  substantial
portion of the assets of the Company and its Subsidiaries,  or (z) a purchase or
other acquisition of securities representing 10% or more of the shares of Common
Stock then  outstanding.  Until the  Distribution  Date,  (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock  certificates,  (ii) new Common Stock certificates issued
after the Record Date will contain a notation incorporating the Rights Agreement
by reference and (iii) the surrender for transfer of any certificates for Common
Stock  outstanding  will also  constitute the transfer of the Rights  associated
with the Common Stock represented by such certificate.

     The Rights are not exercisable  until the Distribution Date and will expire
at 5:00 P.M.

                                        1

<PAGE>

(Hauppauge, New York time) on July 19, 2011, unless such date is extended or the
Rights are earlier redeemed or exchanged by the Company as described below.

     As soon as practicable  after the Distribution  Date,  Rights  Certificates
will be mailed to  holders  of  record  of the  Common  Stock as of the close of
business  on  the  Distribution  Date  and,  thereafter,   the  separate  Rights
Certificates alone will represent the Rights.  Except as otherwise determined by
the  Board of  Directors,  only  shares  of  Common  Stock  issued  prior to the
Distribution Date will be issued with Rights.

     In the event that a Person becomes an Acquiring Person,  except pursuant to
an offer  for all  outstanding  shares  of Common  Stock  which the  independent
directors  determine to be fair and not inadequate to and to otherwise be in the
best interests of the Company and its stockholders,  after receiving advice from
one or more  investment  banking firms (a "Qualified  Offer"),  each holder of a
Right will  thereafter  have the right to receive,  upon exercise,  Common Stock
(or,  in  certain  circumstances,  cash,  property  or other  securities  of the
Company)  having a value  equal to two times the  exercise  price of the  Right.
Notwithstanding any of the foregoing,  following the occurrence of the event set
forth in this  paragraph,  all Rights that are, or (under certain  circumstances
specified in the Rights  Agreement)  were,  beneficially  owned by any Acquiring
Person will be null and void. However,  Rights are not exercisable following the
occurrence  of the event set forth  above  until  such time as the Rights are no
longer redeemable by the Company as set forth below.

     For example, at an exercise price of $11.00 per Right, each Right not owned
by an Acquiring  Person (or by certain related  parties)  following an event set
forth in the preceding  paragraph  would  entitle its holder to purchase  $22.00
worth of Common  Stock (or other  consideration,  as noted  above)  for  $11.00.
Assuming that the Common Stock had a per share value of $22.00 at such time, the
holder of each valid Right would be entitled to purchase 1 share of Common Stock
(or other consideration) for $11.00.

     In the event that, at any time  following the Stock  Acquisition  Date, (i)
the Company  engages in a merger or other  business  combination  transaction in
which the Company is not the  surviving  corporation  (other than with an entity
which  acquired  the shares  pursuant  to a Qualified  Offer),  (ii) the Company
engages  in a merger  or other  business  combination  transaction  in which the
Company is the  surviving  corporation  and the Common  Stock of the  Company is
changed or exchanged, or (iii) 50% or more of the Company's assets, cash flow or
earning  power is sold or  transferred,  each holder of a Right  (except  Rights
which have previously been voided as set forth above) shall  thereafter have the
right to receive, upon exercise,  common stock of the acquiring company having a
value equal to two times the exercise  price of the Right.  The events set forth
in this paragraph and in the second  preceding  paragraph are referred to as the
"Triggering Events."

     At any time until ten business days following the Stock  Acquisition  Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.001
per  Right  (payable  in  cash,  Common  Stock  or  other  consideration  deemed
appropriate  by the Board of  Directors).  For 180 days (the  "Special  Period")
following  a change  in  control  of the Board of  Directors,  that has not been
approved

                                        2

<PAGE>

by the Board of Directors,  occurring within six months of an unsolicited  third
party  acquisition  or business  combination  proposal,  the new  directors  are
entitled to redeem the Rights  (assuming  the Rights would have  otherwise  been
redeemable),  including to facilitate  an  acquisition  or business  combination
transaction  involving the Company,  but only (1) if they have followed  certain
procedures or (2) if such  procedures  are not followed,  and if their  decision
regarding   redemption  and/or  any  acquisition  or  business   combination  is
challenged  as a breach of  fiduciary  duty of care or  loyalty,  the  directors
(solely for purposes of determining the  effectiveness  of such  redemption) are
able to establish the entire  fairness of such  redemption,  and, if applicable,
such transaction. Immediately upon the action of the Board of Directors ordering
redemption  of the Rights,  the Rights will  terminate and the only right of the
holders of Rights will be to receive the $.001 redemption price.

     Until a Right is  exercised,  the  holder  thereof,  as such,  will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive  dividends.  While the distribution of the Rights will not
be taxable to stockholders or to the Company,  stockholders may,  depending upon
the circumstances,  recognize taxable income in the event that the Rights become
exercisable  for Common  Stock (or other  consideration)  of the  Company or for
common stock of the acquiring  company or in the event of the  redemption of the
Rights as set forth above.

     Any of the  provisions of the Rights  Agreement may be amended by the Board
of  Directors  of  the  Company  prior  to  the  Distribution  Date.  After  the
Distribution  Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any  ambiguity,  to make changes  which do not  adversely
affect the  interests  of holders of Rights,  or to shorten or lengthen any time
period under the Rights Agreement. The foregoing  notwithstanding,  no amendment
may be made to the Rights  Agreement during the Special Period or at a time when
the Rights are not redeemable.

     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]/[Current  Report on Form 8-K] dated  _________,  2001. A copy of the Rights
Agreement  is  available  free of charge  from the Rights  Agent.  This  summary
description  of the Rights does not purport to be complete  and is  qualified in
its entirety by reference to the Rights Agreement,  which is incorporated herein
by reference.

                                        3

<PAGE>EXHIBIT 10.10

                 INCENTIVE COMPENSATION AND EMPLOYMENT AGREEMENT

THIS AGREEMENT, is made and entered into as of the 23rd day of November, 1999,
by and between XDOGS.COM, INC., a Nevada corporation (the "Company"), and Kent
Rodriguez ("Executive").

                                    RECITALS

WHEREAS, Executive has been the Chairman and Chief Executive Officer of the
Company since January 1997;

WHEREAS, the Company desires to grant incentive compensation to Executive to
cause him to remain in the employ of the Company on the terms and subject to the
conditions set forth herein;

WHEREAS, each of the parties acknowledges that he or it is receiving good and
valuable consideration for entering into this Agreement, and Executive
acknowledges that this Agreement was negotiated between the parties hereto; and

WHEREAS, Executive has received a copy of this Agreement prior to executing it.

NOW, THEREFORE, in consideration of the mutual covenants contained herein, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

                                   ARTICLE I.

                         EMPLOYMENT; POSITION AND DUTIES

1.1. EFFECTIVE DATE. This Agreement shall govern the terms and conditions of
Executive's employment commencing as of the date hereof (the "Effective Date").

1.2. RETENTION PERIOD. The Company agrees to continue the Executive in its
employ as President and Chief Executive Officer, and the Executive agrees to
remain in the employ of the Company, for the period (the "Retention Period")
commencing on the Effective Date and ending on the earlier of the fifth
anniversary date of this Agreement or the date of any termination of the
Executive's employment in accordance with Article III of this Agreement.

1.3. POSITION.

     (a) No Reduction in Position. During the Retention Period, the Executive's
     position (including titles), authority and responsibilities as an executive
     officer of the Company shall be at least commensurate with the highest of
     those held or exercised by him at any time during the ninety (90)-day
     period immediately preceding the Effective Date.

     (b) Business Time. During the Retention Period, the Executive shall devote
     his full business time during normal business hours to the business and
     affairs of the Company and use his best efforts to perform faithfully and
     efficiently the responsibilities assigned to him hereunder, to the extent
     necessary to discharge such responsibilities, except for the following:

<PAGE>

          (i) reasonable time spent in serving on corporate, civic or charitable
          boards or committees of the nature similar to those on which the
          Executive served during the ninety (90)-day period immediately
          preceding the Effective Date, or otherwise approved by the Board, in
          each case only if and to the extent not substantially interfering with
          the performance of such responsibilities; and

          (ii) periods of vacation and sick leave to which he is entitled.

     It is expressly understood and agreed that the Executive's continuing to
     serve on any boards and committees on which he is serving or with which he
     is otherwise associated immediately preceding the Effective Date shall not
     be deemed to interfere with the performance of the Executive's services to
     the Company.

     (c) Office and Support Staff. During the Retention Period, the Executive
     shall be entitled to an office or offices of a size and with furnishings
     and other appointments, and to secretarial and other assistance, at least
     equal to the most favorable of the foregoing provided to the Executive at
     any time during the ninety (90)-day period immediately preceding the
     Effective Date.

1.4. DUTIES. Executive shall be responsible for planning, directing,
coordinating and controlling the daily operations of the Company directly or
through either executive officers to be appointed by the Board of Directors or
employees to be retained by the Executive. Executive shall be responsible for
all aspects of the daily operations of the Company, including the hiring and
firing of employees, the determination of employees' salaries within salary
guidelines approved by the Board of Directors of the Company, organizational
structure, staffing within approved budgets, approving expense reports, and such
other duties and functions as are reasonably assigned to him by the Board.

                                   ARTICLE II.

                         COMPENSATION AND STOCK OPTIONS

2.1. CASH COMPENSATION. The Company agrees that it will pay Executive initially
at the rate of Sixty Thousand Dollars ($60,000.00) per year, payable monthly,
less any applicable withholdings or deductions. Executive's cash compensation is
subject to review and adjustment in the sole discretion of the Company.

2.2. OTHER BENEFITS. The Company agrees that Executive is entitled to various
fringe benefits in connection with his employment. The Company agrees that
Executive is entitled to twenty (20) days of vacation per calendar year, and
that such vacation shall be carried over from year to year if not used. In
addition, the Company agrees that Executive is entitled to fifteen (15) days of
sick leave per calendar year, and that such sick leave shall not be carried over
from year to year if not used. Executive's vacation and sick leave days shall be
made available to Executive beginning on January 1 of each calendar year. For
any partial calendar year during which this Agreement is effective, the number
of vacation days and sick days to which the Executive is entitled for such
partial calendar year shall be pro-rated. The Company agrees that Executive is
entitled to eight (8) paid holidays per year in addition to his vacation days
and sick leave. The Company and the Executive agree that such holidays shall be
mutually determined by the Company and the Executive. The Company agrees to
provide health insurance coverage for Executive and all of his dependents and to
pay all premiums in connection with that health insurance coverage. The Company
agrees to reimburse qualifying dental expenses incurred by Executive on his own
behalf or on behalf of any of his dependents in an amount of up to One Thousand
and 00/100 Dollars ($1,000.00) per person per year. The Company agrees to

                                       2
<PAGE>

provide short-term disability insurance coverage for Executive which shall pay
Executive's full cash compensation for a period of ninety (90) days upon
Executive becoming disabled; all premiums for such short-term disability
insurance shall be paid by the Company. The Company agrees to provide long-term
disability insurance coverage for Executive which shall pay Executive's full
cash compensation upon Executive becoming disabled for the remainder of the term
of Executive's employment with the Company and at the rate of 60% of Executive's
annual cash compensation for the period after the five-year term has ended and
until Executive reaches age 65; all premiums for such long-term disability
insurance shall be paid by the Company. The Company agrees to provide term life
insurance coverage for Executive with a death value benefit of One Million and
00/100 Dollars ($1,000,000.00); all premiums for such term life insurance shall
be paid by the Company.

2.3. STOCK OPTIONS UNDER 1999 COMBINED INCENTIVE AND NON-STATUTORY STOCK OPTION
PLAN.

     (a) General Terms of Stock Options. On the Effective Date, the Company
     shall grant to Executive non-statutory stock options ("Options") under the
     XDOGS.COM, INC. 1999 Combined Incentive and Non-Statutory Stock Option Plan
     ("Plan") to purchase a total of Four Hundred Fifty Thousand (450,000)
     shares of the $0.01 per share par value common stock ("Common Stock") of
     the Company. The number of shares of Common Stock to be subject to the
     Options shall be subject to adjustment as provided in Section 2.3(c) of
     this Agreement. The Options shall be evidenced by three separate Agreements
     each substantially in the form of the Non-Statutory Stock Option Agreement
     attached hereto as Exhibit A (collectively, "Option Agreements"). Each of
     the Option Agreements shall provide for the right to purchase 150,000
     shares of Common Stock, with one Option Agreement providing for an initial
     exercise price of $1.00 per share, the other providing for an initial
     exercise price of $2.00 per share, and the remaining Option Agreement
     providing for an initial exercise price of $3.00 per share (collectively,
     the "Exercise Prices"). Such Exercise Prices shall be subject to adjustment
     as provided in Section 2.3(c) of this Agreement. The Options shall expire
     and be of no further force and effect if not exercised within five (5)
     years of the date of their grant.

     (b) Timing of Vesting of Stock Options. After the grant of the Options, the
     Options shall vest and become exercisable on the first to occur of either
     (i) the first anniversary date of the date the Options are granted or (ii)
     the last day in any period of twenty (20) consecutive trading days during
     which the "Fair Market Value" of the Common Stock (as such term is
     hereinafter defined) equals or exceeds on each of those trading days a per
     share amount equal to the respective Exercise Prices of the Options
     multiplied by two. By way of example, and not by way of limitation, if the
     Fair Market Value for each of the twenty (20) consecutive trading days
     ending on June 19, 2000 is $2.25 per share, the Options with a
     then-effective Exercise Price of $1.00 shall become fully vested, but the
     Options with Exercise Prices of $2.00 and $3.00 shall not vest. By way of
     further example and not by way of limitation, if the Fair Market Value for
     each of the twenty (20) consecutive trading days ending on June 19, 2000 is
     $5.50 per share, the Options with then-effective Exercise Prices of $1.00
     and $2.00 shall become fully vested, but the Options with an Exercise Price
     of $3.00 shall not vest.

                                       3
<PAGE>

     (c) Adjustments. If the Options are granted subsequent to any change in the
     number of outstanding shares of Common Stock of the Company occurring by
     reason of any stock dividend, stock split, reverse stock split,
     reclassification, combination, exchange of shares or other similar
     recapitalization of the Company, there shall be an appropriate and
     proportionate adjustment to the number of shares of Common Stock underlying
     the Options and the Exercise Price so that Executive shall be entitled to
     Options for the same aggregate Exercise Price as he would have received if
     the Options were granted before such recapitalization event occurred. By
     way of example, and not by way of limitation, if the Company effects a
     two-for-one split of its Common Stock, the total number of shares of Common
     Stock subject to the Options shall be equal to 900,000 shares, and the
     Exercise Prices shall be $0.50 per share (instead of $1.00), $1.00 (instead
     of $2.00), and $1.50 (instead of $3.00). No adjustment shall be made under
     this Section 2.3(c) upon the issuance by the Company of any warrants,
     rights, or options to acquire additional Common Stock or of securities
     convertible into Common Stock unless such warrants, rights, options or
     convertible securities are issued to all of the Company's shareholders on a
     proportionate basis.

     (d) Fair Market Value. As used herein, the term "Fair Market Value" means
     (i) if the Common Stock is listed or admitted to unlisted trading
     privileges on any national securities exchange, the average of the closing
     sales prices of the Common Stock on the end of any day on all national
     securities exchanges on which the Common Stock may at the time be listed
     or, if there have been no sales on any such exchange on any day, the
     average of the highest bid and lowest asked prices on all such exchanges at
     the end of such day or, (ii) if the Common Stock is not so listed or
     admitted but transactions in the Common Stock are reported on The Nasdaq
     Stock Market, the closing price quoted on The Nasdaq Stock Market on such
     day, or (iii) if the Common Stock is not so listed or admitted to unlisted
     trading privileges or quoted on The Nasdaq Stock Market, and bid and asked
     prices therefor in the domestic over-the-counter market are reported by the
     National Quotation Bureau, Incorporated (or any comparable reporting
     service), the average of the closing bid and asked prices on such day as
     reported by the National Quotation Bureau, Incorporated (or any comparable
     reporting service), or (iv) if the Common Stock is not listed on any
     national securities exchange or quoted on The Nasdaq Stock Market or in the
     domestic over-the-counter market, the fair value of the Common Stock
     determined by the Board of Directors or the Committee in good faith in the
     exercise of its reasonable discretion.

2.4. STOCK OPTIONS UNDER 1999 DIRECTOR AND SPECIAL ADVISOR STOCK OPTION PLAN. On
the Effective Date, the Company shall grant to Executive non-statutory stock
options ("Director Options") under the XDOGS.COM, Inc. 1999 Director and Special
Advisor Stock Option Plan ("Director Plan") to purchase One Hundred Thousand
(100,000) shares of the Common Stock of the Company. The number of shares of
Common Stock to be subject to the Director Options shall be subject to
adjustment as provided in the Director Plan. The Director Options shall be
evidenced by an Agreement in the form of the Agreement attached hereto as
Exhibit B ("Director Options Agreement"). The Director Options Agreement shall
provided for an initial exercise price of 100% of the Fair Market Value of one
share of Common Stock on the date of grant. Subject to the terms of the Director
Options Agreement, the Director Options granted to Executive shall vest and
become fully exercisable one (1) year after the date of grant. The Director
Options shall expire and be of no further force and effect if not exercised
within five (5) years of their date of grant. Upon termination of the
Executive's status as a Director of the Company for any reason other than his
death, any unvested Director Options shall terminate and be immediately
forfeited. Upon termination of the Executive's status as a Director of the
Company for any reason other than his death, any vested Director Options may be
exercised within one hundred eighty days (180) days of termination. If Executive
dies while serving as a Director of the Company, the Director Options shall
immediately vest and may be exercised within a period of one (1) year after the
date of death, but in no case later than the expiration date of the Director
Options.

                                       4
<PAGE>

2.5. INVESTMENT BANKING OPTIONS. If Executive is responsible, in the discretion
of the Company's Board of Directors, for successfully obtaining debt and/or
equity financing for the Company, the Company shall grant to Executive options
("Investment Banking Options") to acquire a number of shares of Common Stock
equal to (i) five percent (5%) of the amount of gross funds invested in the
Company divided by (ii) the average of the per share Fair Market Value of the
Company's Common Stock for the twenty (20) consecutive trading days immediately
preceding the date such financing is closed. The per share exercise price of the
Investment Banking Options shall be the average of the per share Fair Market
Value of the Company's Common Stock for the twenty (20) consecutive trading days
immediately preceding the date such financing is closed. The Investment Banking
Options shall automatically vest and become exercisable on the first anniversary
date of the date of their grant and shall otherwise contain such terms and
conditions to which Executive and the Company shall mutually agree.

                                  ARTICLE III.

                                   TERMINATION

3.1. EVENTS OF TERMINATION.

     (a) Death or Disability. The Executive's employment with the Company shall
     terminate automatically upon his death. The Company may terminate
     Executive's employment during the Retention Period, after having
     established the Executive's "Disability" (as such term is hereinafter
     defined), by giving the Executive written notice of its intention to
     terminate his employment, and his employment with the Company shall
     terminate effective on the ninetieth (90th) day after his receipt of such
     notice if, within ninety (90) days after such receipt, the Executive shall
     fail to return to full-time performance of his duties as described in this
     Agreement. For purposes of this Agreement, "Disability" means disability
     which, after the expiration of more than twenty-six (26) weeks after its
     commencement, is determined to be total and permanent by a physician
     selected by the Company or its insurers and acceptable to the Executive or
     his legal representatives (such agreement to acceptability not to be
     withheld unreasonably).

     (b) Voluntary Termination. Notwithstanding anything in this Agreement to
     the contrary, the Executive may, upon not less than ten (10) business days'
     advance written notice to the Company, voluntarily terminate employment
     during the Retention Period for any reason, provided that any termination
     by the Executive pursuant to Section 3.1(d) of this Agreement on account of
     "Good Reason" (as defined therein) shall not be treated as a voluntary
     termination under this Section 3.1(b).

     (c) Cause. The Company may terminate the Executive's employment during the
     Retention Period for "Cause," as such term is hereinafter defined. For
     purposes of this Agreement, "Cause" means (i) gross misconduct on the
     Executive's part which is demonstrably willful and deliberate and which
     results in material damage to the Company's business or reputation or (ii)
     repeated material violations by the Executive of his obligations under
     Section 1.4 of this Agreement which violations are demonstrably willful and
     deliberate; provided that, in each case, the Company has given the
     Executive written notice of the gross misconduct and/or material violations
     and the Executive has failed to cure such misconduct and/or violations
     within ninety (90) days of such written notice.

                                       5
<PAGE>

     (d) Good Reason. The Executive may terminate his employment during the
     Retention Period for "Good Reason." For purposes of this Agreement, "Good
     Reason" means the following:

          (i) a good faith determination by the Executive that, without his
          prior written consent, the Company or any of its officers has taken or
          failed to take any action (including, without limitation, (A)
          exclusion of the Executive from consideration of material matters
          within his area of responsibility, other than an insubstantial or
          inadvertent exclusion remedied by the Company promptly after receipt
          of notice thereof from the Executive, (B) statements or actions which
          undermine the Executive's authority with respect to other employees of
          the Company or reduce his standing with his peers, other than an
          insubstantial or inadvertent statement or action which is remedied by
          the Company promptly after receipt of the notice thereof from the
          Executive, (C) a pattern of discrimination against or harassment of
          the Executive or persons under his supervision, and (D) the subjection
          of the Executive to procedures not generally applicable to other
          similarly situated executives) which changes the Executive's position
          (including titles), authority or responsibilities under Article I of
          this Agreement or reduces the Executive's ability to carry out his
          duties and responsibilities under Section 1.3 of this Agreement;

          (ii) any failure by the Company to comply with any of the provisions
          of Section 1.3 of this Agreement, other than an insubstantial or
          inadvertent failure remedied by the Company promptly after receipt of
          notice thereof from the Executive;

          (iii) the Company's requiring the Executive to be principally employed
          at any location more than thirty-five (35) miles further from his
          principal residence than the location at which the Executive was
          employed immediately preceding the Effective Date;

          (iv) the Company's decreasing the cash compensation or other benefits
          available to the Executive by an amount (or monetary equivalent) of at
          least ten percent (10%); or

          (v) any failure by the Company to obtain the assumption of and
          agreement to perform this Agreement by a successor as contemplated by
          Section 5.6 of this Agreement.

     (e) Without Cause. The Company shall give Executive at least fifteen (15)
     business days' advance written notice of any termination of Executive's
     employment which is not for Cause and not on account of Executive's
     Disability.

                                       6
<PAGE>

     (f) Notice of Termination. Any termination of Executive's employment by the
     Company for Cause or by the Executive for Good Reason during the Retention
     Period shall be communicated by "Notice of Termination" (as such term is
     hereinafter defined) to the other party hereto given in accordance with
     Section 5.1 of this Agreement. For purposes of this Agreement, a "Notice of
     Termination" means a written notice given, (i) in the case of a termination
     by the Company for Cause, within ten (10) business days after the Executive
     has failed to cure the misconduct or violations of which he was provided
     written notice by the Company under Section 3.1(c) of this Agreement, and
     (ii) in the case of a termination by Executive for Good Reason, within one
     hundred eighty (180) calendar days of the Executive's having actual
     knowledge of the events giving rise to such termination. In either case (i)
     or (ii), the Notice of Termination shall (x) indicate the specific
     termination provision in this Agreement relied upon, (y) set forth in
     reasonable detail the facts and circumstances claimed to provide a basis
     for termination of the Executive's employment under the provision so
     indicated, and (z) if the termination date is other than the date of
     receipt of such notice, specify such termination date (which date shall be
     not more than fifteen (15) calendar days after the giving of such notice).
     The failure by the Executive to set forth in the Notice of Termination any
     fact or circumstance which contributes to a showing of Good Reason shall
     not waive any right of the Executive hereunder or preclude the Executive
     from asserting such fact or circumstance in enforcing his rights hereunder.

     (g) Date of Termination. For purposes of this Agreement, the term "Date of
     Termination" means (i) in the case of a termination for which a Notice of
     Termination is required, the date of receipt of such Notice of Termination
     or, if later, the date specified therein, and (ii) in all other cases, the
     actual date on which the Executive's employment terminates during the
     Retention Period.

3.2. Obligations of the Company upon Termination.

     (a) Death or Disability. If the Executive's employment is terminated during
     the Retention Period by reason of the Executive's death or Disability, this
     Agreement shall terminate without further obligations by the Company to the
     Executive's legal representatives or the Executive under this Agreement
     other than the following:

          (i) the Company shall pay to the Executive or his legal
          representative(s) an amount equal to the aggregate cash compensation
          Executive would have received for the remainder of the five-year term
          of employment had the amount of the annual cash compensation that
          Executive would have received for the remainder of such five-year term
          been equal to the annual cash compensation Executive was receiving as
          of the Date of Termination, such amount to be paid by the Company
          within thirty (30) days after the Date of Termination;

          (ii) upon the Date of Termination, the Options and the Director
          Options shall become fully vested, and the Executive or his legal
          representative(s) may exercise all or any portion of the Options
          and/or the Director Options for a period of one (1) year after the
          Date of Termination in the event of the Executive's death or one
          hundred eighty (180) days after the Date of Termination in the event
          of the Executive's Disability (but in neither case later than the
          expiration date of the Options and/or the Director Options), at which
          time any unexercised Options and Director Options shall terminate and
          be of no further force or effect;

                                       7
<PAGE>

          (iii) the Executive shall be entitled to all other compensation and
          benefits accrued hereunder through the Date of Termination, including,
          for this purpose (A) any compensation previously deferred by the
          Executive (together with any accrued earnings thereon) and not yet
          paid by the Company, (B) any other amounts or benefits owing to the
          Executive under any of the Company's incentive compensation plans,
          stock option plans, restricted stock plans or other similar plans, and
          (C) any amounts or benefits owing to the Executive under any of the
          Company's employee benefit plans or policies; and

          (iv) the Company shall continue to provide health insurance coverage
          for all of the Executive's dependents until each dependent reaches age
          18 and shall continue to pay the cost of any premiums for such health
          insurance.

     (b) Cause or Voluntarily. If the Executive's employment is terminated
     during the Retention Period by reason of Cause pursuant to Section 3.1(c)
     or voluntarily by the Executive pursuant to Section 3.1(b), this Agreement
     shall terminate without further obligations by the Company to the Executive
     under this Agreement other than those obligations accrued hereunder through
     the Date of Termination, consisting of the following:

          (i) the Company shall pay to the Executive an amount equal to the
          Executive's annual cash compensation in effect on the Date of
          Termination under Section 2.1 of this Agreement, such amount to be
          paid by the Company within thirty (30) days after the Date of
          Termination;

          (ii) any compensation previously deferred by the Executive (together
          with any accrued earnings thereon) and not yet paid by the Company;

          (iii) any other amounts or benefits owing to the Executive under any
          of the Company's incentive compensation plans, stock option plans,
          restricted stock plans or other similar plans; and

          (iv) any amounts or benefits owning to the Executive under any of the
          Company's employee benefit plans or policies.

     Notwithstanding the foregoing, if the Executive's employment is terminated
     during the Retention Period for Cause, all Options not yet vested as of the
     Date of Termination shall terminate and be of no further force or effect,
     and the Executive shall have ninety (90) days after the Date of Termination
     (but in no case later than the expiration date of the Options) to exercise
     any vested portion of the Options, at which time the vested Options which
     are not then exercised shall terminate and be of no further force or
     effect.

     (c) Good Reason or Without Cause. If the Executive's employment is
     terminated during the Retention Period by the Company without Cause and not
     on account of Executive's Disability, or if the Executive's employment is
     terminated during the Retention Period by the Executive for Good Reason
     pursuant to Section 3.1(d), this Agreement shall terminate without further
     obligations by the Company to the Executive under this Agreement other than
     the following:

                                       8
<PAGE>

          (i) the Company shall pay to the Executive an amount equal to the
          aggregate cash compensation Executive would have received for the
          remainder of the five-year term of employment had the amount of the
          annual cash compensation that Executive would have received for the
          remainder of such five-year term been equal to the annual cash
          compensation Executive was receiving as of the Date of Termination,
          such amount to be paid by the Company within thirty (30) days after
          the Date of Termination;

          (ii) upon the Date of Termination, the Options and Director Options
          shall become fully vested, and the Executive may exercise all or any
          portion of the Options and/or Director Options for a period of one
          year after the Date of Termination (but in no case later than the
          expiration date of the Options and/or Director Options), at which time
          any unexercised Options and Director Options shall terminate and be of
          no further force or effect;

          (iii) the Executive shall be entitled to all other compensation and
          benefits accrued hereunder through the Date of Termination, including,
          for this purpose (A) any compensation previously deferred by the
          Executive (together with any accrued earnings thereon) and not yet
          paid by the Company, (B) any other amounts or benefits owing to the
          Executive under any of the Company's incentive compensation plans,
          stock option plans, restricted stock plans or other similar plans, and
          (C) any amounts or benefits owing to the Executive under any of the
          Company's employee benefit plans or policies; and

          (iv) the Company shall continue to provide health insurance coverage
          for all of Executive's dependents until each dependent reaches age 18
          and shall continue to pay the cost of any premiums for such health
          insurance.

3.3. SURVIVING RIGHTS. Notwithstanding the termination of Executive's
employment, the parties shall be required to carry out any provisions hereof
which contemplate performance subsequent to such termination; and such
termination shall not affect any liability or other obligation which shall have
accrued prior to such termination, including, but not limited to, any liability
for loss or damage on account of a prior default.

                                   ARTICLE IV.

                                   ARBITRATION

4.1. ARBITRATION. The Company and Executive agree that any claim or controversy
that arises out of or relates to this Agreement, or the breach of it by either
party, will be settled by arbitration in Minneapolis, Minnesota in accordance
with the rules of the American Arbitration Association that are in effect as of
the date the arbitration proceeding is commenced.

                                       9
<PAGE>

                                   ARTICLE V.

                               GENERAL PROVISIONS

5.1. NOTICES. All notices, requests, and other communications shall be in
writing and except as otherwise provided herein, shall be considered to have
been delivered when personally delivered or three (3) days after deposited in
the United States Mail, first class, certified or registered, postage prepaid,
return receipt requested, addressed to the proper party at its address as set
forth below, or to such other address as such party may hereafter designate by
written notice to the other party given pursuant to this paragraph:

     (a)  If to the Company, to:              XDOGS.COM, INC.
          3660 IDS Center
          80 South Eighth Street
          Minneapolis, MN  55402
          Attn:  _________________

     (b)  If to Executive, to:                Kent A. Rodriguez
          7020 Lanham Lane
          Edina, MN  55439

5.2. WAIVER, MODIFICATION OR AMENDMENT. No waiver, modification or amendment of
any term, condition or provision of this Agreement shall be valid or of any
effect unless made in writing, signed by the party to be bound or its duly
authorized representative and specifying with particularity the nature and
extent of such waiver, modification or amendment. Any waiver by any party of any
default of the other shall not effect, or impair any right arising from any
subsequent default. Nothing herein shall limit the rights and remedies of the
parties hereto under and pursuant to this Agreement, except as hereinbefore set
forth.

5.3. ENTIRE AGREEMENT. This Agreement, including any exhibits attached hereto or
documents expressly referred to herein, contains the entire agreement between
the Company and Executive and supersedes and cancels any and all other
agreements, whether oral or in writing, with respect to the matters referred to
herein.

5.4. INTERPRETATION AND SEVERANCE. The provisions of this Agreement shall be
applied and interpreted in a manner consistent with each other so as to carry
out the purposes and intent of the parties hereto, but if for any reason any
provision hereof is determined to be unenforceable or invalid, such provision or
such part thereof as may be unenforceable or invalid shall be deemed severed
from this Agreement and the remaining provisions shall be carried out with the
same force and effect as if the severed provision or part thereof had not been a
part of this Agreement.

5.5. GOVERNING LAW. This Agreement shall be construed and enforced in accordance
with the laws of the State of Minnesota.

5.6. ASSIGNMENT. Executive acknowledges that Executive's services are unique and
personal. Accordingly, Executive may not assign Executive's rights or delegate
Executive's duties or obligations under this Agreement. The Company's rights and
obligations under this Agreement shall inure to the benefit of and shall be
binding on the Company's successors and assigns.

                                       10
<PAGE>

5.7. COUNTERPARTS. This Agreement may be executed in counterparts with an
executed counterpart to be delivered to the other party. Each such executed
counterpart shall be deemed an original but shall constitute one and the same
instrument.

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

XDOGS.COM, INC.                         Executive:

By:
------------------------------------    -------------------------------------
      Signature                         Kent A. Rodriguez

Name Typed or Printed

Its:
------------------------------------
      Title Typed or Printed

MPL1: 302879-4

                                       11
<PAGE>

                                    EXHIBIT A

                                 XDOGS.COM, INC.
           1999 COMBINED INCENTIVE AND NON-STATUTORY STOCK OPTION PLAN

                      NON-STATUTORY STOCK OPTION AGREEMENT

================================================================================

OPTIONEE:                                Kent A. Rodriguez
GRANT DATE:                              __________, 1999
NUMBER OF OPTION SHARES:                 150,000 Shares
EXERCISE PRICE PER SHARE:                $________ per Share
EXPIRATION DATE:                         [FIVE YEARS AFTER GRANT DATE.]

================================================================================

     THIS AGREEMENT is made as of the Grant Date set forth above by and between
XDOGS.COM, INC., a Nevada corporation (the "Company"), and the Optionee named
above, who provides services to the Company or an Affiliate of the Company as an
employee, consultant, independent contractor, or other service provider (the
"Optionee").

     The Company desires, by affording the Optionee an opportunity to purchase
shares of its Common Stock, par value $.01 per share (the "Common Stock"), as
hereinafter provided, to carry out the purpose of the XDOGS.COM, INC. 1999
Combined Incentive and Non-Statutory Stock Option Plan (the "Option Plan").

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the parties hereby agree
as follows:

     1. Grant of Option. The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of the aggregate number of
shares of Common Stock set forth above (the "Option Shares") (such number being
subject to adjustment as provided in Section 8 hereof) on the terms and subject
to the conditions set forth in this Agreement. This Option is not intended to be
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.

     2. Purchase Price. The per share purchase price of the Option Shares shall
be the Exercise Price Per Share set forth above (such Exercise Price Per Share
being subject to adjustment as provided in Section 8 hereof).

     3. Term and Exercise of Option.

          (a) The term of this Option shall commence on the Grant Date set forth
          above and shall continue until the Expiration Date set forth above,
          unless earlier terminated as provided herein.

<PAGE>

          (b) This Option will become exercisable on the first to occur of
          either (i) the first anniversary date of the Grant Date or (ii) the
          last day in any period of twenty (20) consecutive trading days during
          which the per share Fair Market Value of the Common Stock equals or
          exceeds on each of those trading days a per share amount equal to the
          Exercise Price Per Share of the Option multiplied by two.

          (c) To exercise this Option, the Optionee shall give written notice to
          the Company, to the attention of its President or other designated
          agent, in substantially the form attached hereto as Exhibit A, and the
          Optionee shall deliver payment in full for the Option Shares with
          respect to which this Option is then being exercised, as provided in
          Section 4(a) below.

          (d) Neither the Optionee nor the Optionee's legal representatives,
          legatees or distributees, as the case may be, will be, or will be
          deemed to be, a holder of any Option Shares for any purpose unless and
          until certificates for such Option Shares are issued to the Optionee
          or the Optionee's legal representatives, legatees or distributees
          under the terms of the Option Plan.

     4. Limitations on Exercise of Option.

          (a) The exercise of this Option will be contingent upon receipt from
          the Optionee (or the purchaser acting under Section 6(c) below) of the
          full Exercise Price of such Option Shares. Payment of the Exercise
          Price shall be made in cash or by a certified or cashier's check.
          However, in its sole discretion, the Company may accept shares of
          Common Stock of the Company, including shares issuable upon the
          exercise of this Option, having an aggregate Fair Market Value on the
          date of exercise which is not less than the total Exercise Price, or a
          combination of cash and such shares of Common Stock, in payment of the
          Exercise Price. No Option Shares will be issued until full payment
          therefor has been made and the Optionee has executed any and all
          agreements that the Company may require the Optionee to execute.

          (b) The issuance of Option Shares upon the exercise of this Option
          shall be subject to all applicable laws, rules, and regulations. If,
          in the opinion of the Board of Directors of the Company or a Committee
          of the Board of Directors, (i) the listing, registration, or
          qualification of the Option Shares upon any securities exchange or
          under any state or federal law, (ii) the consent or approval of any
          regulatory body, or (iii) an agreement of the Optionee with respect to
          the disposition of the Option Shares, is necessary or desirable as a
          condition to the issuance or sale of the Option Shares, this Option
          shall not be exercised and/or Option Shares shall not be sold unless
          and until such listing, registration, qualification, consent, approval
          or agreement is effected or obtained in form satisfactory to the Board
          of Directors or the Committee.

     5. Nontransferability of Option. This Option shall not be transferable by
the Optionee other than by will or the laws of descent and distribution, and
during the lifetime of the Optionee, this Option shall be exercisable only by
the Optionee.

                                       2
<PAGE>

     6. Termination of Employment.

          (a) Upon termination by the Company of the Optionee's employment with
          the Company or with an Affiliate for "Cause" (as such term is defined
          in the Incentive Compensation and Employment Agreement of even date
          herewith by and between the Company and the Optionee (the "Employment
          Agreement")), or upon the voluntary termination by the Optionee of his
          employment with the Company as described in Section 3.1(b) of the
          Employment Agreement, (i) the unvested portion of this Option shall
          terminate and be immediately forfeited, and neither the Optionee nor
          the Optionee's heirs, personal representatives, successors or assigns
          shall have any future rights with respect to such unvested portion of
          this Option, and (ii) the vested portion of this Option may be
          exercised to the same extent that the Optionee would have been
          entitled to exercise it at the effective date of such termination of
          the Optionee's employment or other relationship with the Company or
          with an Affiliate and may be exercised for ninety (90) days after such
          effective date of termination, but in no case later than the
          Expiration Date set forth above.

          (b) Upon termination by the Company of the Optionee's employment with
          the Company without Cause, upon termination of the Optionee's
          employment with the Company by reason of the Optionee's "Disability"
          (as such term is defined in the Employment Agreement), or upon
          termination by the Optionee of the Optionee's employment with the
          Company for "Good Reason" (as such term is defined in the Employment
          Agreement), (i) any unvested portion of the Option shall immediately
          vest upon the "Date of Termination" (as such term is defined in the
          Employment Agreement), and (ii) the Option may be exercised by the
          Optionee or by his legal representative(s) for one year after the Date
          of Termination (but in no case later than the Expiration Date set
          forth above), at which time the unexercised portion of the Option
          shall terminate and be immediately forfeited.

          (c) Upon termination of the Optionee's employment with the Company
          because of the Optionee's death, (i) any unvested portion of the
          Option shall immediately vest upon the "Date of Termination" (as such
          term is defined in the Employment Agreement); (ii) the Option may be
          exercised by the Optionee or by his legal representative(s) for one
          year after the Date of Termination (but in no case later than the
          Expiration Date set forth above), at which time the unexercised
          portion of the Option shall terminate and be immediately forfeited;
          and (iii) this Option shall be exercisable only by the executors or
          administrators of the Optionee or by the person or persons to whom the
          Optionee's rights under the Option shall pass by the Optionee's will
          or the laws of descent and distribution.

     7. No Right to Continue to Provide Services. This Option will not confer
upon the Optionee any right to continue providing services to the Company or an
Affiliate of the Company as an employee, consultant, independent contractor, or
other service provider, nor will it interfere in any way with the Company's
right or the Affiliate's right to terminate the Optionee's employment or other
services at any time.

     8. Adjustments. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend, stock split, reverse stock split,
reclassification, combination, exchange of shares, or other similar
recapitalization of the Company, there shall be an appropriate and proportionate
adjustment to the number of Option Shares and the Exercise Price Per Share
hereunder so that the Optionee then shall receive for the aggregate Exercise
Price paid by the Optionee upon exercise of this Option the number of shares the
Optionee would have received if this Option had been exercised before such
recapitalization event occurred. No adjustment shall be made under this Section
8 upon the issuance by the Company of any warrants, rights, or options to
acquire additional Common Stock or of securities convertible into Common Stock
unless such warrants, rights, options or convertible securities are issued to
all shareholders of the Company on a proportionate basis.

                                       3
<PAGE>

     9. Immediate Acceleration of Option. Notwithstanding any provision in this
Option to the contrary, this Option will become exercisable in full immediately
if, subsequent to the Grant Date and before the Expiration Date set forth above,
any of the following events shall occur while the Optionee is an employee of the
Company or to an Affiliate:

          (a) The sale, lease, exchange or other transfer, directly or
          indirectly, of substantially all of the assets of the Company (in one
          transaction or in a series of related transactions) to a person or
          entity that is not controlled by the Company,

          (b) The sale or other transfer of greater than fifty percent (50%) of
          the then outstanding shares of the Company's Common Stock,

          (c) The merger, consolidation, or other combination of the Company
          with another entity in which the Company is not the surviving entity,
          or

          (d) The closing of a tender offer for the Company's Common Stock that
          results in the ownership by a person, entity or group making the
          tender offer of greater than fifty percent (50%) of the then
          outstanding shares of Common Stock of the Company.

Notwithstanding any provision in the Option Plan or this Option Agreement to the
contrary, the Board of Directors or the Committee shall not have the power or
right, either before or after the occurrence of an event described in
subparagraphs (a) through (d) above, to rescind, modify or amend the provisions
of this Section 9 without the consent of the Optionee.

     10. Interpretation. The interpretation and construction of any provision of
the Option Plan and this Option shall be made by the Board of Directors or the
Committee and shall be final, conclusive and binding on the Optionee and all
other persons.

     11. Definitions; Option Plan Governs. Any capitalized term used herein that
is not expressly defined herein shall have the meaning ascribed to it in the
Option Plan. This Option is in all respects subject to and governed by all of
the provisions of the Option Plan.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
its corporate name by its duly authorized officer, and the Optionee has executed
this Agreement as of the Grant Date set forth above.

     COMPANY:                       XDOGS.COM, INC.

                                    By
                                    --------------------------------------------
                                    Signature

                                    Name Typed or Printed

                                    Its:
                                    --------------------------------------------
                                    Title Typed or Printed

     OPTIONEE:
                                    --------------------------------------------
                                    Kent A. Rodriguez

                                    Address:

                                    7020 Lanham Lane
                                    Edina, MN  55439

                                    SSN: _______-_____-_______

                                       4
<PAGE>

                                    EXHIBIT A
                              NOTICE OF EXERCISE OF
                                  STOCK OPTION

TO:

FROM:

DATE:

RE:  Exercise of Stock Option

     I hereby exercise my option to purchase shares of Common Stock at $______
per share (total exercise price of $ ). This notice is given in accordance with
the terms of my Non-Statutory Stock Option Agreement ("Agreement") dated
_________. The option price and vested amount is in accordance with Sections 2
and 3 of the Agreement.

Check one:

____      Enclosed is cash, or a cashier's or certified check payable to
          XDOGS.COM, INC. for the total exercise price of the shares being
          purchased.

____      Attached is a certificate(s) for _________________ shares of common
          stock duly endorsed in blank and surrendered for the exercise price of
          the shares being purchased.*

____      I want to exercise my option by surrendering a sufficient number of
          shares of Common Stock issuable upon exercise of such option to pay
          the exercise price.*

          *The use of each of these alternatives is subject to the approval of
          XDOGS.COM, INC.

          Please prepare the stock certificate in the following name(s):

Sincerely,

------------------------------------
(Signature)

------------------------------------
(Print or Type Name)

Letter and consideration
received on _______________
(effective date of exercise)

<PAGE>

                                    EXHIBIT B

                                 XDOGS.COM, INC.
               1999 DIRECTOR AND SPECIAL ADVISOR STOCK OPTION PLAN

                   DIRECTOR AND SPECIAL ADVISOR NON-STATUTORY
                             STOCK OPTION AGREEMENT

================================================================================

OPTIONEE:                            Kent A. Rodriguez

GRANT DATE:                                                     , 1999
                                     ---------------------------

NUMBER OF OPTION SHARES:             100,000 Shares

EXERCISE PRICE PER SHARE:            $         per Share
                                      --------

EXPIRATION DATE:                     [FIVE YEARS AFTER GRANT DATE]

================================================================================

     THIS AGREEMENT is made as of the Grant Date set forth above, by and between
XDOGS.COM, Inc., a Nevada corporation (the "Company"), and the Optionee named
above, who is a director of or special advisor to the Company (the "Optionee").

     The Company desires, by affording the Optionee an opportunity to purchase
shares of its Common Stock, $0.01 par value per share (the "Common Stock"), as
hereinafter provided, to carry out the purpose of the XDOGS.COM, Inc. 1999
Director and Special Advisor Stock Option Plan (the "Option Plan").

     NOW, THEREFORE, in consideration of the mutual covenants hereinafter set
forth, and for other good and valuable consideration, the parties hereby agree
as follows:

     1. Grant of Option. The Company hereby grants to the Optionee the right and
option (the "Option") to purchase all or any part of the aggregate number of
shares of Common Stock set forth above (the "Option Shares") (such number being
subject to adjustment as provided in Section 8 hereof) on the terms and subject
to the conditions set forth in this Agreement. This Option is not intended to be
an "incentive stock option" within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended.

     2. Purchase Price. The per share purchase price of the Option Shares shall
be the Exercise Price Per Share set forth above (such Exercise Price Per Share
being subject to adjustment as provided in Section 8 hereof).

     3. Term and Exercise of Option.

          (a) The term of this Option shall commence on the Grant Date set forth
     above and shall continue until the Expiration Date set forth above, unless
     earlier terminated as provided herein. Except as otherwise provided herein,
     this Option may not be exercised prior to the first anniversary date of the
     Grant Date, at which time this Option will become exercisable in full.

          (b) To exercise this Option, the Optionee shall give written notice to
     the Company, to the attention of its President or other designated agent,
     in substantially the form attached hereto as Exhibit A, and the Optionee
     shall deliver payment in full for the Option Shares with respect to which
     this Option is then being exercised, as provided in Section 4(b) below.

          (c) Neither the Optionee nor the Optionee's legal representatives,
     legatees or distributees, as the case may be, will be, or will be deemed to
     be, a holder of any Option Shares for any purpose unless and until
     certificates for such Option Shares are issued to the Optionee or the
     Optionee's legal representatives, legatees or distributees under the terms
     of the Option Plan.

<PAGE>

     4. Limitations on Exercise of Option.

          (a) Except as provided in Section 7 below, this Option may not be
     exercised unless the Optionee, at all times during the period beginning on
     the Grant Date and ending on the day ninety (90) days before the date of
     such exercise, shall have continuously served as a Director of the Company.

          (b) The exercise of this Option will be contingent upon receipt from
     the Optionee (or the purchaser acting under Section 7 below) of the full
     Exercise Price of such Option Shares. Payment of the Exercise Price shall
     be made in cash or by a certified or cashier's check. However, in its sole
     discretion, the Company may accept shares of Common Stock of the Company,
     including shares issuable upon the exercise of this Option, having an
     aggregate Fair Market Value on the date of exercise which is not less than
     the total Exercise Price, or a combination of cash and such shares of
     Common Stock, in payment of the Exercise Price. No Option Shares will be
     issued until full payment therefor has been made and the Optionee has
     executed any and all agreements that the Company may require the Optionee
     to execute.

          (c) The issuance of Option Shares upon the exercise of this Option
     shall be subject to all applicable laws, rules, and regulations. If, in the
     opinion of the Board of Directors of the Company or a Committee of the
     Board of Directors, (i) the listing, registration, or qualification of the
     Option Shares upon any securities exchange or under any state or federal
     law, (ii) the consent or approval of any regulatory body, or (iii) an
     agreement of the Optionee with respect to the disposition of the Option
     Shares, is necessary or desirable as a condition to the issuance or sale of
     the Option Shares, this Option shall not be exercised and/or Option Shares
     shall not be sold unless and until such listing, registration,
     qualification, consent, approval or agreement is effected or obtained in
     form satisfactory to the Board of Directors or the Committee.

     5. Nontransferability of Option. This Option shall not be transferable by
the Optionee other than by will or the laws of descent and distribution, and
during the lifetime of the Optionee, this Option shall be exercisable only by
the Optionee.

     6. Termination of Service. If the Optionee ceases to serve as a director of
or special advisor to the Company or of an Affiliate for a reason other than the
death of the Optionee, (i) any unvested portion of the Option shall terminate
and be immediately forfeited, and neither the Optionee nor the Optionee's heirs,
personal representatives, successors or assigns shall have any future rights
with respect to such unvested portion of the Option, and (ii) the vested portion
of this Option may be exercised, to the same extent that the Optionee would have
been entitled to exercise it at the effective date of such termination, and it
may be exercised within a period of one hundred eighty (180) days after the date
of such termination of service as a Director or a special advisor, but in no
case may the Option be exercised later than the Expiration Date set forth above.

                                       2
<PAGE>

     7. Death of Optionee. If the Optionee dies while the Optionee is a Director
of or special advisor to the Company or of an Affiliate, and the Optionee had
continuously served as a Director or special advisor since the Grant Date, (i)
any unvested portion of the Option shall terminate and be immediately forfeited,
and the Optionee's heirs, personal representatives, successors and assigns shall
have no future rights with respect to such unvested portion of the Option, and
(ii) the vested portion of this Option may be exercised, to the same extent that
the Optionee would have been entitled to exercise it at the date of death, and
it may be exercised within a period of one (1) year after the date of death, but
in no case may the Option be exercised later than the Expiration Date set forth
above. Upon the Optionee's death, this Option shall be exercisable only by the
executors or administrators of the Optionee or by the person or persons to whom
the Optionee's rights under the Option shall pass by the Optionee's will or the
laws of descent and distribution.

     8. Adjustments. In the event of any change in the outstanding shares of
Common Stock by reason of any stock dividend, stock split, reverse stock split,
reclassification, combination, exchange of shares, or similar recapitalization
of the Company, there shall be an appropriate and proportionate adjustment to
the number of Option Shares and Exercise Price Per Share hereunder so that the
Optionee shall receive for the aggregate Exercise Price paid by the Optionee
upon exercise of the Option the number of shares the Optionee would have
received if this Option had been exercised before such recapitalization event
occurred. No adjustment shall be made under this Section 8 upon the issuance by
the Company of any warrants, rights, or options to acquire additional Common
Stock or of securities convertible into Common Stock unless such warrants,
rights, options or convertible securities are issued to all shareholders of the
Company on a proportionate basis.

     9. Immediate Acceleration of Option. Notwithstanding any provision in this
Option to the contrary, this Option will become exercisable in full immediately
if, subsequent to the Grant Date and before the Expiration Date set forth above,
any of the following events shall occur while the Optionee is serving as a
Director of the Company or of any Affiliate:

          (a) The sale, lease, exchange or other transfer, directly or
indirectly, of substantially all of the assets of the Company (in one
transaction or in a series of related transactions) to a person or entity that
is not controlled by the Company,

          (b) The sale or other transfer of greater than fifty percent (50%) of
the then outstanding shares of the Company's Common Stock,

          (c) The merger, consolidation, or other combination of the Company
with another entity in which the Company is not the surviving entity, or

          (d) The closing of a tender offer for the Company's Common Stock that
results in the ownership by a person, entity, or group making the tender offer
of greater than fifty percent (50%) of the then outstanding shares of Common
Stock of the Company.

Notwithstanding any provision in the Option Plan or this Option Agreement to the
contrary, the Board of Directors or the Committee shall not have the power or
right, either before or after the occurrence of an event described in
subparagraphs (a) through (d) above, to rescind, modify or amend the provisions
of this Section 9 without the consent of the Optionee.

                                       3
<PAGE>

     10. No Right to Continue to Serve. This Option will not confer upon the
Optionee any right to continue to serve as a Director of the Company, nor will
it interfere in any way with the Company's right to terminate the Optionee's
service as a Director at any time.

     11. Interpretation. The interpretation and construction of any provision of
the Option Plan and this Option shall be made by the Board of Directors or the
Committee and shall be final, conclusive and binding on the Optionee and all
other persons.

     12. Definitions; Option Plan Governs. Any capitalized term used herein that
is not expressly defined herein shall have the meaning ascribed to it in the
Option Plan. This Option is in all respects subject to and governed by all of
the provisions of the Option Plan.

     IN WITNESS WHEREOF, the Company has caused this Agreement to be executed in
its corporate name by its duly authorized officer, and the Optionee has executed
this Agreement as of the Grant Date set forth above.

          COMPANY:                  XDOGS.COM, INC.

                                    By
                                    --------------------------------------------
                                    Signature

                                    --------------------------------------------
                                    Name Typed or Printed

                                    Its
                                    --------------------------------------------
                                    Title Typed or Printed

          OPTIONEE:

                                    --------------------------------------------
                                    Kent A. Rodriguez

                                    Address:

                                    7020 Lanham Lane
                                    Edina, MN 55439

                                    SSN:  ______ - _____ - ______

                                       4
<PAGE>

                                    EXHIBIT A
                              NOTICE OF EXERCISE OF
                                  STOCK OPTION

TO:

FROM:

DATE:

RE:  Exercise of Stock Option

     I hereby exercise my option to purchase shares of Common Stock at
$___________ per share (total exercise price of $ ). This notice is given in
accordance with the terms of my Director and Special Advisor Non-Statutory Stock
Option Agreement ("Agreement") dated , 19__. The option price and vested amount
is in accordance with Sections 2 and 3 of the Agreement.

Check one:

[ ]  Attached is cash or a cashier's or certified check payable to XDOGS.COM,
     Inc. for the total exercise price of the shares being purchased.

[ ]  Attached is a certificate(s) for shares of common stock duly endorsed in
     blank and surrendered for the exercise price of the shares being
     purchased.*

[ ]  I wish to exercise my option by surrendering a sufficient number of
     shares of Common Stock issuable upon exercise of such option to pay the
     exercise price.*

     * The use of each of these alternatives is subject to the approval of
     XDOGS.COM, Inc.

     Please prepare the stock certificate in the following name(s):

Sincerely,

------------------------------------
(Signature)

------------------------------------
(Print or Type Name)

Letter and consideration
received on ____________, 19__
(effective date of exercise)

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00027-of-00352.parquet"}]]