Document:

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                                                                     Exhibit 4.1

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                             KERR-MCGEE HOLDCO, INC.

                                       and

                                 UMB BANK, N.A.,

                                 as Rights Agent

                                Rights Agreement

                             Dated as of July 26, 2001

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                                Table of Contents

<TABLE>
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Section 1.   Certain Definitions............................................        1

Section 2.   Appointment of Rights Agent....................................        7

Section 3.   Issue of Right Certificates....................................        7

Section 4.   Form of Right Certificates.....................................       10

Section 5.   Countersignature and Registration..............................       10

Section 6.   Transfer, Split Up, Combination and Exchange of Right
              Certificates; Mutilated, Destroyed, Lost or Stolen Right
              Certificates..................................................       11

Section 7.   Exercise of Rights, Purchase Price; Expiration Date of Rights..       12

Section 8.   Cancellation and Destruction of Right Certificates.............       15

Section 9.   Availability of Shares of Preferred Stock......................       15

Section 10.   Preferred Stock Record Date...................................       17

Section 11.   Adjustment of Purchase Price, Number of Shares and Number of
               Rights.......................................................       18

Section 12.   Certificate of Adjusted Purchase Price or Number of Shares....       32

Section 13.   Consolidation, Merger or Sale or Transfer of Assets or Earnings
               Power........................................................       33

Section 14.   Fractional Rights and Fractional Shares.......................       39

Section 15.   Rights of Action..............................................       41

Section 16.   Agreement of Right Holders....................................       42

Section 17.   Right Certificate Holder Not Deemed a Stockholder.............       43

Section 18.   Concerning the Rights Agent...................................       43

Section 19.   Merger or Consolidation or Change of Name of Rights Agent.....       44

Section 20.   Duties of Rights Agent........................................       45

Section 21.   Change of Rights Agent........................................       49

Section 22.   Issuance of New Right Certificates............................       50

Section 23.   Redemption....................................................       51
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Section 24.   Exchange......................................................       52

Section 25.   Notice of Certain Events......................................       54

Section 26.   Notices.......................................................       55

Section 27.   Supplements and Amendments....................................       56

Section 28.   Successors....................................................       57

Section 29.   Benefits of this Agreement....................................       57

Section 30.   Determinations and Actions by the Board of Directors..........       57

Section 31.   Severability..................................................       58

Section 32.   Governing Law.................................................       58

Section 33.   Counterparts..................................................       58

Section 34.   Descriptive Headings..........................................       58
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                                RIGHTS AGREEMENT

            Agreement, dated as of July 26, 2001 between Kerr-McGee Holdco,
Inc.,  a Delaware corporation (the "Company"), and UMB Bank, N.A., as Rights
Agent (the "Rights Agent").

            The Board of Directors of the Company has authorized and directed
the issuance of one preferred share purchase right (a "Right") for each share of
Common Stock (as hereinafter defined) of the Company outstanding as of the
effective time of the merger of Kerr-McGee Merger Sub, Inc. with and into
Kerr-McGee Corporation (the "Merger Effective Time") each Right representing the
right to purchase one-hundredth (subject to adjustment) of a share of Preferred
Stock (as hereinafter defined), upon the terms and subject to the conditions
herein set forth, and the Board of Directors has further authorized and directed
the issuance of one Right (subject to adjustment as provided herein) with
respect to each share of Common Stock that shall become outstanding between the
Merger Effective Time and the earliest of the Distribution Date, the Redemption
Date and the Final Expiration Date (as such terms are hereinafter defined);
provided, however, that Rights may be issued with respect to shares of Common
Stock that shall become outstanding after the Distribution Date and prior to the
Redemption Date and the Final Expiration Date in accordance with Section 22.

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

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

            (a) "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which shall be the Beneficial Owner (as such term is
hereinafter defined) of
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15% or more of the shares of Common Stock then outstanding, but shall not
include an Exempt Person (as such term is hereinafter defined); provided,
however, that if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person" has become such
inadvertently (including, without limitation, because (i) such Person was
unaware that it beneficially owned a percentage of Common Stock that would
otherwise cause such Person to be a "Acquiring Person" or (ii) such Person was
aware of the extent of its Beneficial Ownership of Common Stock but had no
actual knowledge of the consequences of such Beneficial Ownership under this
Rights Agreement) and without any intention of changing or influencing control
of the Company, and such Person, as promptly as practicable after being advised
of such determination divested or divests himself or itself of Beneficial
Ownership of a sufficient number of shares of Common Stock so that such Person
would no longer be an Acquiring Person, then such Person shall not be deemed to
be or to have become an "Acquiring Person" for any purposes of this Agreement.
Notwithstanding the foregoing, (i) if a Person would be deemed an Acquiring
Person upon the adoption of this Agreement because of ownership of 15% or more
but less than 20% of the shares of stock on such date, such Person will not be
deemed an Acquiring Person for any purposes of this Agreement unless and until
such Person acquires Beneficial Ownership of any additional shares of Common
Stock (other than pursuant to a dividend or distribution paid or made by the
Company on the outstanding Common Stock in shares of Common Stock or pursuant to
a split or subdivision of the outstanding Common Stock), after the adoption of
this Agreement unless upon the consummation of the acquisition of such
additional shares of Common Stock such Person does not own 15% or more of the
shares of Common Stock then outstanding and (ii) no Person shall become an
"Acquiring Person" as the result of an acquisition of shares of Common Stock by
the

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Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the shares of Common Stock then outstanding, provided, however, that if a
Person shall become the Beneficial Owner of 15% or more of the shares of Common
Stock then outstanding by reason of such share acquisitions by the Company and
thereafter become the Beneficial Owner of any additional shares of Common Stock
(other than pursuant to a dividend or distribution paid or made by the Company
on the outstanding Common Stock in shares of Common Stock or pursuant to a split
or subdivision of the outstanding Common Stock), then such Person shall be
deemed to be an "Acquiring Person" unless upon the consummation of the
acquisition of such additional shares of Common Stock such Person does not own
15% or more of the shares of Common Stock then outstanding. For all purposes of
this Agreement, any calculation of the number of shares of Common Stock
outstanding at any particular time, including for purposes of determining the
particular percentage of such outstanding shares of Common Stock of which any
Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date hereof.

            (b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in
effect on the date of this Agreement.

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

            (i) which such Person or any of such Person's Affiliates or
      Associates is deemed to beneficially own, directly or indirectly within
      the meaning of Rule 13d-3 of

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      the General Rules and Regulations under the Exchange Act as in effect on
      the date of this Agreement;

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

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      accordance with, the applicable rules and regulations promulgated under
      the Exchange Act and (2) is not also then reportable on Schedule 13D under
      the Exchange Act (or any comparable or successor report); or

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

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

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

            (f) "Common Stock" when used with reference to the Company shall
mean the common stock, par value $1.00 per share, of the Company. "Common Stock"
when used with reference to any Person other than the Company shall mean the
capital stock (or, in the case of an unincorporated entity, the equivalent
equity interest) with the greatest voting power of such other Person or, if such
other Person is a subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.

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

            (h) "equivalent preferred shares" shall have the meaning set forth
in Section 11(b) hereof.

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

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

            (k) "Merger Effective Time" shall have the meaning set forth in the
recitals hereto.

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

            (m) "Person" shall mean any individual, firm, corporation or other
entity, and shall include any successor (by merger or otherwise) of such
entity.

            (n) "Preferred Stock" shall mean the Series B Junior Participating
Preferred Stock, without par value, of the Company having the rights and
preferences set forth in the Form of Certificate of Designation attached to this
Agreement as Exhibit A.

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

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

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

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

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

            Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
the tenth day after the Stock Acquisition Date or (ii) the tenth Business Day
(or such later date as may be determined by action of the Board of Directors
prior to such time as any Person becomes an Acquiring Person) after the date of
the commencement by any Person (other than an Exempt Person) of, or of the first
public announcement of the intention of such Person (other than an Exempt
Person) to commence, a tender or exchange offer the consummation of which would
result in any Person (other than an Exempt Person) becoming the Beneficial Owner
of shares of

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Common Stock aggregating 15% or more of the Common Stock then outstanding
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights), the earlier of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for Common Stock
registered in the names of the holders thereof and not by separate Right
Certificates, and (y) the Rights will be transferable only in connection with
the transfer of Common Stock. As soon as practicable after the Distribution
Date, the Company will prepare and execute, the Rights Agent will countersign,
and the Company will send or cause to be sent (and the Rights Agent will, if
requested, by and at the expense of the Company, send) by first-class, insured,
postage?prepaid mail, to each record holder of Common Stock as of the Close of
Business on the Distribution Date (other than any Acquiring Person or any
Associate or Affiliate of an Acquiring Person), at the address of such holder
shown on the records of the Company, a Right Certificate, in substantially the
form of Exhibit B hereto (a "Right Certificate"), evidencing one Right (subject
to adjustment as provided herein) for each share of Common Stock so held. As of
the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.

            (b) At the Merger Effective Time, or as soon as practicable
thereafter, the Company will send a copy of a Summary of Rights to Purchase
Shares of Preferred Stock, in substantially the form of Exhibit C hereto (the
"Summary of Rights"), by first class, postage prepaid mail, to each record
holder of Common Stock as of the close of business at the Merger Effective Time
(other than any Acquiring Person or any Associate or Affiliate of any Acquiring
Person), at the address of such holder shown on the records of the Company. With
respect to certificates for Common Stock outstanding as of the Merger Effective
Time, until the Distribution Date, the Rights will be evidenced by such
certificates registered in the names of the

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holders thereof together with the Summary of Rights. Until the Distribution Date
(or the earlier of the Redemption Date or the Final Expiration Date), the
surrender for transfer of any certificate for Common Stock outstanding at the
Merger Effective Time, with or without a copy of the Summary of Rights, shall
also constitute the transfer of the Rights associated with the Common Stock
represented thereby.

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

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

With respect to such certificates containing the foregoing legend until the
Distribution Date, the Rights associated with the Common Stock represented by
such certificates shall be evidenced by such certificates alone, and the
surrender for transfer of any such certificate, except as otherwise provided
herein, shall also constitute the transfer of the Rights associated with the
Common Stock represented thereby. In the event that the Company purchases or
otherwise acquires any

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Common Stock after the Merger Effective Time but prior to the Distribution Date,
any Rights associated with such Common Stock shall be deemed cancelled and
retired so that the Company shall not be entitled to exercise any Rights
associated with the Common Stock which are no longer outstanding.

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

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

            Section 5. Countersignature and Registration. (a) The Right
Certificates shall be executed on behalf of the Company by the Chairman of the
Board of Directors, the President, any of the Vice Presidents, the Treasurer or
the Controller of the Company, either manually or by

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

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

            Section 6. Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. (a)
Subject to the provisions of Sections 7(e), 11(a)(ii) and 14 hereof, at any time
after the Close of Business on the Distribution Date, and prior to the Close of
Business on the earlier of the Redemption Date or the Final Expiration Date, any
Right Certificate or Right Certificates may be transferred, split up, combined
or exchanged

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for another Right Certificate or Right Certificates, entitling the registered
holder to purchase a like number of one one-hundredths of a share of Preferred
Stock as the Right Certificate or Right Certificates surrendered then entitled
such holder to purchase. Any registered holder desiring to transfer, split up,
combine or exchange any Right Certificate or Right Certificates shall make such
request in writing in form reasonably acceptable and delivered to the Rights
Agent, and shall surrender the Right Certificate or Right Certificates to be
transferred, split up, combined or exchanged at the office or agency of the
Rights Agent designated for such purpose. Thereupon the Rights Agent shall
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Company or the
Rights Agent may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Right Certificates.

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

            Section 7. Exercise of Rights, Purchase Price; Expiration Date of
Rights. (a) Except as otherwise provided herein, the Rights shall become
exercisable on the Distribution

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Date, and thereafter the registered holder of any Right Certificate may, subject
to Section 11(a)(ii) hereof and except as otherwise provided herein, exercise
the Rights evidenced thereby in whole or in part upon surrender of the Right
Certificate, with the form of election to purchase on the reverse side thereof
duly executed with signature guarantee and such individual information as may be
reasonably requested by the Rights Agent, to the Rights Agent at the office or
agency of the Rights Agent designated for such purpose, together with payment of
the Purchase Price for each one one-hundredth of a share of Preferred Stock as
to which the Rights are exercised, at any time which is both after the
Distribution Date and prior to the earliest of (i) the Close of Business on July
22, 2006 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date") or (iii) the
time at which such Rights are exchanged as provided in Section 24 hereof.

            (b) The Purchase Price shall be initially $215.00 for each one
one-hundredth of a share of Preferred Stock purchasable upon the exercise of a
Right. The Purchase Price and the number of one one-hundredths of a share of
Preferred Stock or other securities or property to be acquired upon exercise of
a Right shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof and shall be payable in lawful money of the United States of
America in accordance with paragraph (c) of this Section 7.

            (c) Except as otherwise provided herein, upon receipt of a Right
Certificate representing exercisable Rights, with the form of election to
purchase duly executed, accompanied by payment of the aggregate Purchase Price
for the shares of Preferred Stock to be purchased and an amount equal to any
applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 9 hereof, in cash or by certified check,
cashier's check or money order payable to the order of the Company, the Rights
Agent shall

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thereupon promptly (i) (A) requisition from any transfer agent of the Preferred
Stock certificates for the number of shares of Preferred Stock to be purchased
and the Company hereby irrevocably authorizes its transfer agent to comply with
all such requests, or (B) requisition from the depositary agent depositary
receipts representing interests in such number of one one-hundredths of a share
of Preferred Stock as are to be purchased (in which case the Preferred Stock
represented by such receipts shall be deposited by the transfer agent with the
depositary agent) and the Company hereby directs the depositary agent to comply
with such request, (ii) when appropriate, requisition from the Company the
amount of cash to be paid in lieu of issuance of fractional shares in accordance
with Section 14 hereof, (iii) promptly after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder and (iv) when appropriate, after receipt,
promptly deliver such cash to or upon the order of the registered holder of such
Right Certificate.

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

            (e) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder of Rights upon the occurrence of any
purported transfer or exercise of Rights pursuant to Section 6 hereof or this
Section 7 unless such registered holder shall have (i) completed and signed the
certificate contained in the form of assignment or election to purchase

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<PAGE>   18
set forth on the reverse side of the Rights Certificate surrendered for such
transfer or exercise and (ii) provided such additional evidence of the identity
of the Beneficial Owner (or former Beneficial Owner) thereof as the Company or
the Rights Agent shall reasonably request.

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

            Section 9. Availability of Shares of Preferred Stock. (a) The
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock or any
shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights.

            (b) So long as the shares of Preferred Stock (and, following the
time that a Person becomes an Acquiring Person, shares of Common Stock and other
securities) issuable upon the exercise of Rights may be listed or admitted to
trading on the New York Stock Exchange or listed on any other national
securities exchange or quotation system, the Company

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shall use its best efforts to cause, from and after such time as the Rights
become exercisable, all shares reserved for such issuance to be listed or
admitted to trading on the New York Stock Exchange or listed on any other
exchange or quotation system upon official notice of issuance upon such
exercise.

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

                                       16
<PAGE>   20
until a registration statement under the Securities Act (if required) shall have
been declared effective.

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

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

            Section 10. Preferred Stock Record Date. Each Person in whose name
any certificate for Preferred Stock is issued upon the exercise of Rights shall
for all purposes be

                                       17
<PAGE>   21
deemed to have become the holder of record of the shares of Preferred Stock
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided,
however, that if the date of such surrender and payment is a date upon which the
Preferred Stock transfer books of the Company are closed, such Person shall be
deemed to have become the record holder of such shares on, and such certificate
shall be dated, the next succeeding Business Day on which the Preferred Stock
transfer books of the Company are open. Prior to the exercise of the Rights
evidenced thereby, the holder of a Right Certificate shall not be entitled to
any rights of a holder of Preferred Stock for which the Rights shall be
exercisable, including, without limitation, the right to vote or to receive
dividends or other distributions, and shall not be entitled to receive any
notice of any proceedings of the Company, except as provided herein.

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

            (a) (i) In the event the Company shall at any time after the date of
      this Agreement (A) declare a dividend on the Preferred Stock payable in
      shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
      (C) combine the outstanding Preferred Stock into a smaller number of
      Preferred Stock or (D) issue any shares of its capital stock in a
      reclassification of the Preferred Stock (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing or surviving corporation), except as otherwise
      provided in this Section 11(a),

                                       18
<PAGE>   22
      the Purchase Price in effect at the time of the record date for such
      dividend or of the effective date of such subdivision, combination or
      reclassification, and the number and kind of shares of capital stock
      issuable on such date, shall be proportionately adjusted so that the
      holder of any Right exercised after such time shall be entitled to receive
      the aggregate number and kind of shares of capital stock which, if such
      Right had been exercised immediately prior to such date and at a time when
      the Preferred Stock transfer books of the Company were open, the holder
      would have owned upon such exercise and been entitled to receive by virtue
      of such dividend, subdivision, combination or reclassification; provided,
      however, that in no event shall the consideration to be paid upon the
      exercise of one Right be less than the aggregate par value of the shares
      of capital stock of the Company issuable upon exercise of one Right.

            (ii) Subject to Section 24 of this Agreement, in the event that any
      Person becomes an Acquiring Person, then (A) the Purchase Price shall be
      adjusted to be the Purchase Price in effect immediately prior to such
      Person becoming an Acquiring Person multiplied by the number of one
      one-hundredths of a share of Preferred Stock for which a Right was
      exercisable immediately prior to such Person becoming an Acquiring Person,
      whether or not such Right was then exercisable, and (B) each holder of a
      Right, except as otherwise provided in this Section 11(a)(ii) and
      Subsection 11(a)(iii) hereof, shall thereafter have the right to receive,
      upon exercise at a price equal to the Purchase Price (as so adjusted), in
      accordance with the terms of this Agreement and in lieu of shares of
      Preferred Stock, such number of shares of Common Stock (or at the option
      of the Company, such number of one one-hundredths of shares of Preferred
      Stock) as shall equal the result obtained by (x) multiplying the then
      current Purchase Price by the

                                       19
<PAGE>   23
      number of one one-hundredths of a share of Preferred Stock for which a
      Right is then exercisable and dividing that product by (y) 50% of the then
      current per share market price of the Company's Common Stock (determined
      pursuant to Section 11(d) hereof) on the date such Person became an
      Acquiring Person; provided, however, that the Purchase Price and the
      number of shares of Common Stock so receivable upon exercise of a Right
      shall thereafter be subject to further adjustment as appropriate in
      accordance with Section 11(f) hereof. Notwithstanding anything in this
      Agreement to the contrary, however, from and after the time (the
      "invalidation time") when any Person first becomes an Acquiring Person,
      any Rights that are beneficially owned by (x) any Acquiring Person (or any
      Affiliate or Associate of any Acquiring Person), (y) a transferee of any
      Acquiring Person (or any such Affiliate or Associate) who becomes a
      transferee after the invalidation time or (z) a transferee of any
      Acquiring Person (or any such Affiliate or Associate) who became a
      transferee prior to or concurrently with the invalidation time pursuant to
      either (I) a transfer from the Acquiring Person to holders of its equity
      securities or to any Person with whom it has any continuing agreement,
      arrangement or understanding regarding the transferred Rights or (II) a
      transfer which the Board of Directors has determined is part of a plan,
      arrangement or understanding which has the purpose or effect of avoiding
      the provisions of this paragraph, and subsequent transferees of such
      Persons, shall be void without any further action and any holder of such
      Rights shall thereafter have no rights whatsoever with respect to such
      Rights under any provision of this Agreement. The Company shall use all
      reasonable efforts to ensure that the provisions of this Section 11(a)(ii)
      are complied with, but shall have no liability to any holder of Right
      Certificates or other Person as a result of its failure to make any
      determinations with respect to an

                                       20
<PAGE>   24
      Acquiring Person or its Affiliates, Associates or transferees hereunder.
      From and after the invalidation time, no Right Certificate shall be issued
      pursuant to Section 3 or Section 6 hereof that represents Rights that are
      or have become void pursuant to the provisions of this paragraph, and any
      Right Certificate delivered to the Rights Agent that represents Rights
      that are or have become void pursuant to the provisions of this paragraph
      shall be cancelled. From and after the occurrence of an event specified in
      Section 13(a) hereof, any Rights that theretofore have not been exercised
      pursuant to this Section 11(a)(ii) shall thereafter be exercisable only in
      accordance with Section 13 and not pursuant to this Section 11(a)(ii).

            (iii) The Company may at its option substitute for a share of Common
      Stock issuable upon the exercise of Rights in accordance with the
      foregoing subparagraph (ii) such number or fractions of shares of
      Preferred Stock having an aggregate current market value equal to the
      current per share market price of a share of Common Stock. In the event
      that there shall not be sufficient shares of Common Stock issued but not
      outstanding or authorized but unissued to permit the exercise in full of
      the Rights in accordance with the foregoing subparagraph (ii), the Board
      of Directors shall, to the extent permitted by applicable law and any
      material agreements then in effect to which the Company is a party (A)
      determine the excess of (1) the value of the shares of Common Stock
      issuable upon the exercise of a Right in accordance with the foregoing
      subparagraph (ii) (the "Current Value") over (2) the then current Purchase
      Price multiplied by the number of one one-hundredths of shares of
      Preferred Stock for which a Right was exercisable immediately prior to the
      time that the Acquiring Person became such (such excess, the "Spread"),
      and (B) with respect to each Right (other than Rights

                                       21
<PAGE>   25
      which have become void pursuant to Section 11(a)(ii)), make adequate
      provision to substitute for the shares of Common Stock issuable in
      accordance with subparagraph (ii) upon exercise of the Right and payment
      of the applicable Purchase Price, (1) cash, (2) a reduction in the
      Purchase Price, (3) shares of Preferred Stock or other equity securities
      of the Company (including, without limitation, shares or fractions of
      shares of preferred stock which, by virtue of having dividend, voting and
      liquidation rights substantially comparable to those of the shares of
      Common Stock, are deemed in good faith by the Board of Directors to have
      substantially the same value as the shares of Common Stock (such shares of
      preferred stock and shares or fractions of shares of preferred stock are
      hereinafter referred to as "Common Stock equivalents"), (4) debt
      securities of the Company, (5) other assets, or (6) any combination of the
      foregoing, having a value which, when added to the value of the shares of
      Common Stock actually issued upon exercise of such Right, shall have an
      aggregate value equal to the Current Value (less the amount of any
      reduction in the Purchase Price), where such aggregate value has been
      determined by the Board of Directors upon the advice of a nationally
      recognized investment banking firm selected in good faith by the Board of
      Directors; provided, however, if the Company shall not make adequate
      provision to deliver value pursuant to clause (B) above within thirty (30)
      days following the date that the Acquiring Person became such (the
      "Section 11(a)(ii) Trigger Date"), then the Company shall be obligated to
      deliver, to the extent permitted by applicable law and any material
      agreements then in effect to which the Company is a party, upon the
      surrender for exercise of a Right and without requiring payment of the
      Purchase Price, shares of Common Stock (to the extent available), and
      then, if necessary, such number or fractions of shares of Preferred Stock

                                       22
<PAGE>   26
      (to the extent available) and then, if necessary, cash, which shares
      and/or cash have an aggregate value equal to the Spread. If, upon the date
      any Person becomes an Acquiring Person, the Board of Directors shall
      determine in good faith that it is likely that sufficient additional
      shares of Common Stock could be authorized for issuance upon exercise in
      full of the Rights, then, if the Board of Directors so elects, the thirty
      (30) day period set forth above may be extended to the extent necessary,
      but not more than ninety (90) days after the Section 11(a)(ii) Trigger
      Date, in order that the Company may seek stockholder approval for the
      authorization of such additional shares (such thirty (30) day period, as
      it may be extended, is herein called the "Substitution Period"). To the
      extent that the Company determines that some action need be taken pursuant
      to the second and/or third sentence of this Section 11(a)(iii), the
      Company (x) shall provide, subject to Section 11(a)(ii) hereof and the
      last sentence of this Section 11(a)(iii) hereof, that such action shall
      apply uniformly to all outstanding Rights and (y) may suspend the
      exercisability of the Rights until the expiration of the Substitution
      Period in order to seek any authorization of additional shares and/or to
      decide the appropriate form of distribution to be made pursuant to such
      second sentence and to determine the value thereof. In the event of any
      such suspension, the Company shall issue a public announcement and shall
      promptly as practicable thereafter give written notice to the Rights
      Agent, stating that the exercisability of the Rights has been temporarily
      suspended, as well as a public announcement at such time as the suspension
      is no longer in effect. For purposes of this Section 11(a)(iii), the value
      of the shares of Common Stock shall be the current per share market price
      (as determined pursuant to Section 11(d)(i)) on the Section 11(a)(ii)
      Trigger Date and the per share or fractional value of any "Common Stock
      equivalent" shall be

                                       23
<PAGE>   27
      deemed to equal the current per share market price of the Common Stock.
      The Board of Directors of the Company may, but shall not be required to,
      establish procedures to allocate the right to receive shares of Common
      Stock upon the exercise of the Rights among holders of Rights pursuant to
      this Section 11(a)(iii).

            (b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Stock (or shares having the same rights,
privileges and preferences as the Preferred Stock ("equivalent preferred
shares")) or securities convertible into Preferred Stock or equivalent preferred
shares at a price per share of Preferred Stock or equivalent preferred shares
(or having a conversion price per share, if a security convertible into shares
of Preferred Stock or equivalent preferred shares) less than the then current
per share market price of the Preferred Stock (determined pursuant to Section
11(d) hereof) on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Preferred Stock and equivalent preferred shares
outstanding on such record date plus the number of shares of Preferred Stock and
equivalent preferred shares which the aggregate offering price of the total
number of shares of Preferred Stock and/or equivalent preferred shares so to be
offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Preferred Stock and
equivalent preferred shares outstanding on such record date plus the number of
additional shares of Preferred Stock and/or equivalent preferred shares to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are

                                       24
<PAGE>   28
initially convertible); provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent. Shares of Preferred Stock and equivalent preferred
shares owned by or held for the account of the Company shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall be
made successively whenever such a record date is fixed; and in the event that
such rights, options or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such record
date had not been fixed.

            (c) In case the Company shall fix a record date for the making of a
distribution to all holders of the Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation) of evidences of indebtedness
or assets (other than a regular quarterly cash dividend or a dividend payable in
Preferred Stock) or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after such record
date shall be determined by multiplying the Purchase Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
then current per share market price of the Preferred Stock (determined pursuant
to Section 11(d) hereof) on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the assets or evidences of indebtedness so to be distributed or
of such subscription rights or warrants

                                       25
<PAGE>   29
applicable to one share of Preferred Stock, and the denominator of which shall
be such current per share market price (determined pursuant to Section 11(d)
hereof) of the Preferred Stock; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company to be issued
upon exercise of one Right. Such adjustments shall be made successively whenever
such a record date is fixed; and in the event that such distribution is not so
made, the Purchase Price shall again be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.

            (d) (i) Except as otherwise provided herein, for the purpose of any
      computation hereunder, the "current per share market price" of any
      security (a "Security" for the purpose of this Section 11(d)(i)) on any
      date shall be deemed to be the average of the daily closing prices per
      share of such Security for the 30 consecutive Trading Days (as such term
      is hereinafter defined) immediately prior to such date; provided, however,
      that in the event that the current per share market price of the Security
      is determined during a period following the announcement by the issuer of
      such Security of (A) a dividend or distribution on such Security payable
      in shares of such Security or securities convertible into such shares, or
      (B) any subdivision, combination or reclassification of such Security, and
      prior to the expiration of 30 Trading Days after the ex-dividend date for
      such dividend or distribution, or the record date for such subdivision,
      combination or reclassification, then, and in each such case, the current
      per share market price shall be appropriately adjusted to reflect the
      current market price per share equivalent of such Security. The closing
      price for each day shall be the last sale price, regular way, or, in case
      no such sale takes place on such day, the average of the closing bid and
      asked prices,

                                       26
<PAGE>   30
      regular way, in either case as reported by the principal consolidated
      transaction reporting system with respect to securities listed or admitted
      to trading on the New York Stock Exchange or, if the Security is not
      listed or admitted to trading on the New York Stock Exchange, as reported
      in the principal consolidated transaction reporting system with respect to
      securities listed on the principal national securities exchange on which
      the Security is listed or admitted to trading or, if the Security is not
      listed or admitted to trading on any national securities exchange, the
      last quoted price or, if not so quoted, the average of the high bid and
      low asked prices in the over-the-counter market, as reported by NASDAQ or
      such other system then in use, or, if on any such date the Security is not
      quoted by any such organization, the average of the closing bid and asked
      prices as furnished by a professional market maker making a market in the
      Security selected by the Board of Directors of the Company. The term
      "Trading Day" shall mean a day on which the principal national securities
      exchange on which the Security is listed or admitted to trading is open
      for the transaction of business or, if the Security is not listed or
      admitted to trading on any national securities exchange, a Business Day.

            (ii) For the purpose of any computation hereunder, if the Preferred
      Stock is publicly traded, the "current per share market price" of the
      Preferred Stock shall be determined in accordance with the method set
      forth in Section 11(d)(i). If the Preferred Stock is not publicly traded
      but the Common Stock is publicly traded, the "current per share market
      price" of the Preferred Stock shall be conclusively deemed to be the
      current per share market price of the Common Stock as determined pursuant
      to Section 11(d)(i) multiplied by one hundred (appropriately adjusted to
      reflect any stock split, stock dividend or similar transaction occurring
      after the date hereof). If neither the Common

                                       27
<PAGE>   31
      Stock nor the Preferred Stock is publicly traded, "current per share
      market price" shall mean the fair value per share as determined in good
      faith by the Board of Directors of the Company, whose determination shall
      be described in a statement filed with the Rights Agent.

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

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

            (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted

                                       28
<PAGE>   32
Purchase Price, the number of one one-hundredths of a share of Preferred Stock
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.

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

            (i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in substitution for any
adjustment in the number of one one-hundredths of a share of Preferred Stock
purchasable upon the exercise of a Right. Each of the Rights outstanding after
such adjustment of the number of Rights shall be exercisable for the number of
one one-hundredths of a share of Preferred Stock for which a Right was
exercisable immediately prior to such adjustment. Each Right held of record
prior to such adjustment of the number of Rights shall become that number of
Rights (calculated to the nearest one 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 and shall as promptly as

                                       29
<PAGE>   33
practicable thereafter give written notice to the Rights Agent of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
10 days later than the date of the public announcement. If Right Certificates
have been issued, upon each adjustment of the number of Rights pursuant to this
Section 11(i), the Company may, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Company, shall cause to be distributed to such holders of record
in substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
and shall be registered in the names of the holders of record of Right
Certificates on the record date specified in the public announcement.

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

            (k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value, if any, of the Preferred Stock or
other shares of capital

                                       30
<PAGE>   34
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
Preferred Stock or other such shares at such adjusted Purchase Price.

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

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

                                       31
<PAGE>   35
            (n) Anything in this Agreement to the contrary notwithstanding, in
the event that at any time after the date of this Agreement and prior to the
Distribution Date, the Company shall (i) declare or pay any dividend on the
Common Stock payable in Common Stock or (ii) effect a subdivision, combination
or consolidation of the Common Stock (by reclassification or otherwise than by
payment of a dividend payable in Common Stock) into a greater or lesser number
of Common Stock, then in any such case, the number of Rights associated with
each share of Common Stock then outstanding, or issued or delivered thereafter,
shall be proportionately adjusted so that the number of Rights thereafter
associated with each share of Common Stock following any such event shall equal
the result obtained by multiplying the number of Rights associated with each
share of Common Stock immediately prior to such event by a fraction the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to the occurrence of the event and the denominator
of which shall be the total number of shares of Common Stock outstanding
immediately following the occurrence of such event.

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

            Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Section 11 or 13 hereof,
the Company shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for

                                       32
<PAGE>   36
the Common Stock or the Preferred Stock a copy of such certificate and (c) mail
a brief summary thereof to each holder of a Right Certificate in accordance with
Section 25 hereof (if so required under Section 25 hereof). The Rights Agent
shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.

            Section 13. Consolidation, Merger or Sale or Transfer of Assets or
Earnings Power. (a) In the event, directly or indirectly, at any time after any
Person has become an Acquiring Person, (i) the Company shall merge with and into
any other Person, (ii) any Person shall consolidate with the Company, or any
Person shall merge with and into the Company and the Company shall be the
continuing or surviving corporation of such merger and, in connection with such
merger, all or part of the Common Stock shall be changed into or exchanged for
stock or other securities of any other Person (or of the Company) or cash or any
other property, or (iii) the Company shall sell or otherwise transfer (or one or
more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person (other than the Company or one or more of its wholly-owned
Subsidiaries), then upon the first occurrence of such event, proper provision
shall be made so that: (A) each holder of record of a Right (other than Rights
which have become void pursuant to Section 11(a)(ii)) shall thereafter have the
right to receive, upon the exercise thereof at a price equal to the then current
Purchase Price multiplied by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable (whether or not such Right was
then exercisable) immediately prior to the time that any Person first became an
Acquiring Person (each as subsequently adjusted thereafter pursuant to Sections
11(a)(i), 11(b), 11(c), 11(h), 11(i)

                                       33
<PAGE>   37
and 11(m)), in accordance with the terms of this Agreement and in lieu of
Preferred Stock, such number of validly issued, fully paid and non-assessable
and freely tradable shares of Common Stock of the Principal Party (as defined
herein) not subject to any liens, encumbrances, rights of first refusal or other
adverse claims, as shall be equal to the result obtained by (1) multiplying the
then current Purchase Price by the number of one one-hundredths of a share of
Preferred Stock for which a Right was exercisable immediately prior to the time
that any Person first became an Acquiring Person (as subsequently adjusted
thereafter pursuant to Sections 11(a)(i), 11(b), 11(c), 11(h), 11(i) and 11(m))
and (2) dividing that product by 50% of the then current per share market price
of the Common Stock of such Principal Party (determined pursuant to Section
11(d)(i) hereof) on the date of consummation of such consolidation, merger, sale
or transfer; provided that the Purchase Price and the number of shares of Common
Stock of such Principal Party issuable upon exercise of each Right shall be
further adjusted as provided in Section 11(f) of this Agreement to reflect any
events occurring in respect of such Principal Party after the date of the such
consolidation, merger, sale or transfer; (B) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Agreement; (C) the term "Company" shall thereafter be deemed to refer to
such Principal Party; and (D) such Principal Party shall take such steps
(including, but not limited to, the reservation of a sufficient number of its
shares of Common Stock in accordance with Section 9 hereof) in connection with
such consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to the shares of its Common Stock thereafter deliverable upon
the exercise of the Rights; provided that, upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary

                                       34
<PAGE>   38
transaction in respect of such Principal Party, each holder of a Right shall
thereupon be entitled to receive, upon exercise of a Right and payment of the
Purchase Price as provided in this Section 13(a), such cash, shares, rights,
warrants and other property which such holder would have been entitled to
receive had such holder, at the time of such transaction, owned the Common Stock
of the Principal Party receivable upon the exercise of a Right pursuant to this
Section 13(a), and such Principal Party shall take such steps (including, but
not limited to, reservation of shares of stock) as may be necessary to permit
the subsequent exercise of the Rights in accordance with the terms hereof for
such cash, shares, rights, warrants and other property.

            (b) "Principal Party" shall mean

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

            (ii) in the case of any transaction described in (iii) of the first
      sentence in Section 13(a) hereof, the Person that is the party receiving
      the greatest portion of the

                                       35
<PAGE>   39
      assets or earning power transferred pursuant to such transaction or
      transactions, or, if each Person that is a party to such transaction or
      transactions receives the same portion of the assets or earning power so
      transferred or if the Person receiving the greatest portion of the assets
      or earning power cannot be determined, whichever of such Persons as is the
      issuer of Common Stock having the greatest aggregate market value of
      shares outstanding;

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

            (c) The Company shall not consummate any consolidation, merger, sale
or transfer referred to in Section 13(a) hereof unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement

                                       36
<PAGE>   40
confirming that the requirements of Sections 13(a) and (b) hereof shall promptly
be performed in accordance with their terms and that such consolidation, merger,
sale or transfer of assets shall not result in a default by the Principal Party
under this Agreement as the same shall have been assumed by the Principal Party
pursuant to Sections 13(a) and (b) hereof and providing that, as soon as
practicable after executing such agreement pursuant to this Section 13, the
Principal Party will:

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

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

                                       37
<PAGE>   41
            (iii) deliver to holders of the Rights historical financial
      statements for the Principal Party which comply in all respects with the
      requirements for registration on Form 10 (or any successor form) under the
      Exchange Act; and

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

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

                                       38
<PAGE>   42

         (e) The Company covenants and agrees that it shall not, at any time
after a Person first becomes an Acquiring Person enter into any transaction of
the type contemplated by (i) - (iii) of Section 13(a) hereof if (x) at the time
of or immediately after such consolidation, merger, sale, transfer or other
transaction there are any rights, warrants or other instruments or securities
outstanding or agreements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, (y)
prior to, simultaneously with or immediately after such consolidation, merger,
sale, transfer of other transaction, 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 or Associates or (z) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights.

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

                                       39
<PAGE>   43
or, if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.

         (b) The Company shall not be required to issue fractions of Preferred
Stock (other than fractions which are integral multiples of one one-hundredth of
a share of Preferred Stock) upon exercise of the Rights or to distribute
certificates which evidence fractional shares of Preferred Stock (other than
fractions which are integral multiples of one one-hundredth of a share of
Preferred Stock). Interests in fractions of Preferred Stock in integral
multiples of one one-hundredth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
provided, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Stock represented by such
depositary receipts. In lieu of fractional shares of Preferred Stock that are
not integral multiples of one one-hundredth of a share of Preferred Stock, the
Company shall pay to the registered holders of Right Certificates at

                                       40
<PAGE>   44
the time such Rights are exercised as herein provided an amount in cash equal to
the same fraction of the current market value of one share of Preferred Stock.
For the purposes of this Section 14(b), the current market value of a share of
Preferred Stock shall be the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(i) hereof) for the Trading Day immediately
prior to the date of such exercise.

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

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

         Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), on his own behalf and for his own
benefit, may enforce, and may institute and maintain

                                       41
<PAGE>   45
any suit, action or proceeding against the Company to enforce, or otherwise act
in respect of, his right to exercise the Rights evidenced by such Right
Certificate (or, prior to the Distribution Date, such Common Stock) in the
manner provided in such Right 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 will be entitled to specific
performance of the obligations under, and injunctive relief against actual or
threatened violations of, the obligations of any Person subject to this
Agreement.

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

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

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

                  (c) the Company and the Rights Agent may deem and treat the
         Person in whose name the Right Certificate (or, prior to the
         Distribution Date, the Common Stock certificate) is registered on the
         books for registration and transfer of the Rights or the common stock
         as the case may be, as the absolute owner thereof and of the Rights
         evidenced thereby (notwithstanding any notations of ownership or
         writing on the Right Certificates or the Common Stock certificate made
         by anyone other than the Company or

                                       42
<PAGE>   46
         the Rights Agent) for all purposes whatsoever, and neither the Company
         nor the Rights Agent shall be affected by any notice to the contrary.

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

         Section 18. Concerning the Rights Agent. (a) The Company agrees to pay
to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent, including its
members, directors, officers, employees, shareholders and agents for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the

                                       43
<PAGE>   47
costs and expenses of defending against any claim of liability arising
therefrom, directly or indirectly.

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

         Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or with which it may be consolidated, or any corporation resulting
from any merger or consolidation to which the Rights Agent or any successor
Rights Agent shall be a party, or any corporation succeeding to the stock
transfer or corporate trust powers of the Rights Agent or any successor Rights
Agent, shall be the successor to the Rights Agent under this Agreement without
the execution or filing of any paper or any further act on the part of any of
the parties hereto; provided, that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 21
hereof. In case at the time such successor Rights Agent shall succeed to the
agency created by this Agreement, any of the Right Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Right
Certificates so countersigned; and in case at that time any of the Right
Certificates shall not have been

                                       44
<PAGE>   48
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.

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

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

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

         (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be

                                       45
<PAGE>   49
conclusively proved and established by a certificate signed by any one of the
Chairman of the Board of Directors, the President, any Vice President, the
Treasurer, the Controller or the Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate.

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

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

                                       46
<PAGE>   50
reservation of any shares of Preferred Stock or other securities to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of Preferred Stock or other securities will, when issued, be validly authorized
and issued, fully paid and nonassessable.

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

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

                                       47
<PAGE>   51
omission), the Rights Agent shall have received written instructions in response
to such application specifying the action to be taken or omitted.

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

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

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

         (k) The Rights Agent shall have no responsibility to the Company, any
holders of Rights or any stockholder for interest or earnings on any monies held
by the Rights

                                       48
<PAGE>   52
Agent pursuant to this Agreement; provided, that the Rights Agent shall use its
reasonable efforts to pay promptly in accordance with Section 7 any monies held.

         (l) The Rights Agent shall not be required to take notice or be deemed
to have notice of any event or condition hereunder, including, but not limited
to, a Distribution Date, a Redemption Date, any adjustment of the Purchase Price
or the Common Stock, the existence of an Acquiring Person, an Adverse Person or
a Beneficial Owner or any other event or condition that may require action by
the Rights Agent, unless the Rights Agent shall be specifically notified in
writing of such event or condition by the Company.

         Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Common Stock or Preferred Stock by registered or certified mail, and,
following the Distribution Date, to the holders of the Right Certificates by
first class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock or Preferred Stock by registered or certified mail, and, following
the Distribution Date, to the holders of the Right Certificates by first class
mail. If the Rights Agent shall resign or be removed or shall otherwise become
incapable of acting, the Company shall appoint a successor to the Rights Agent.
If the Company shall fail to make such appointment within a period of 30 days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Right Certificate (who shall, with such notice, submit his
Right Certificate for inspection by the Company), then the registered holder of
any Right Certificate or the Rights Agent may apply to any court of

                                       49
<PAGE>   53
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be a
corporation organized and doing business under the laws of the United States or
any State thereof, which is authorized under such laws to exercise corporate
trust or stock transfer powers and is subject to supervision or examination by
federal or state authority and which has at the time of its appointment as
Rights Agent a combined capital and surplus of at least $50 million. After
appointment, the successor Rights Agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed and the rights and obligations of the
predecessor thereafter shall cease and terminate; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Common Stock or
Preferred Stock, and, following the Distribution Date, mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

         Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Right Certificates evidencing Rights in such forms
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Right Certificates made in

                                       50
<PAGE>   54
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of Common Stock following the Distribution Date and
prior to the earlier of the Redemption Date and the Final Expiration Date, the
Company may with respect to shares of Common Stock so issued or sold pursuant to
(i) the exercise of stock options, (ii) under any employee plan or arrangement,
(iii) upon the exercise, conversion or exchange of securities, notes or
debentures issued by the Company or (iv) a contractual obligation of the Company
in each case existing prior to the Distribution Date, issue Rights Certificates
representing the appropriate number of Rights in connection with such issuance
or sale.

         Section 23. Redemption. (a) The Board of Directors of the Company may,
at any time prior to such time as any Person first becomes an Acquiring Person,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.01 per Right, appropriately adjusted to reflect any stock split,
stock dividend or similar transaction occurring after the date hereof (the
redemption price being hereinafter referred to as the "Redemption Price"). The
redemption of the Rights may be made effective at such time, on such basis and
with such conditions as the Board of Directors in its sole discretion may
establish. The Company may, at its option, pay the Redemption Price in cash,
shares of Common Stock (based on the current market price of the Common Stock at
the time of redemption) or any other form of consideration deemed appropriate by
the Board of Directors.

         (b) Immediately upon the action of the Board of Directors ordering the
redemption of the Rights pursuant to paragraph (a) of this Section 23 (or at
such later time as the Board of Directors may establish for the effectiveness of
such redemption), and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price. The Company

                                       51
<PAGE>   55
shall promptly give public notice of any such redemption; provided, however,
that the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption. Within 10 days after such action of the Board of
Directors ordering the redemption of the Rights (or such later time as the Board
of Directors may establish for the effectiveness of such redemption), the
Company shall mail a notice of redemption to all the holders of the then
outstanding Rights at their last addresses as they appear upon the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent for the Common Stock. Any notice which is mailed in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of redemption shall state the method by
which the payment of the Redemption Price will be made.

         Section 24. Exchange. (a) The Board of Directors of the Company may, at
its option, at any time after any Person first becomes an Acquiring Person,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have not become effective or that have become void
pursuant to the provisions of Section 11(a)(ii) hereof) for shares of Common
Stock at an exchange ratio of one share of Common Stock per Right, appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof (such amount per Right being hereinafter
referred to as the "Exchange Ratio"). Notwithstanding the foregoing, the Board
of Directors shall not be empowered to effect such exchange at any time (1)
after any Person (other than an Exempt Person), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of shares of Common
Stock aggregating 50% or more of the shares of Common Stock then outstanding.
From and after the occurrence of an event specified in Section 13(a) hereof, any
Rights that theretofore have not been exchanged pursuant to this Section 24(a)
shall thereafter be exercisable only in

                                       52
<PAGE>   56
accordance with Section 13 and may not be exchanged pursuant to this Section
24(a). The exchange of the Rights by the Board of Directors may be made
effective at such time, on such basis and with such conditions as the Board of
Directors in its sole discretion may establish.

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

         (c) The Company may at its option and in the event that there shall not
be sufficient shares of Common Stock issued but not outstanding or authorized
but unissued to permit an exchange of Rights as contemplated in accordance with
this Section 24, the Company shall substitute to the extent of such
insufficiency, for each share of Common Stock that would

                                       53
<PAGE>   57
otherwise be issuable upon exchange of a Right, a number of shares of Preferred
Stock or fraction thereof (or equivalent preferred shares as such term is
defined in Section 11(b)) such that the current per share market price
(determined pursuant to Section 11(d) hereof) of one share of Preferred Stock
(or equivalent preferred share) multiplied by such number or fraction is equal
to the current per share market price of one share of Common Stock (determined
pursuant to Section 11(d) hereof) as of the date of such exchange.

         Section 25. Notice of Certain Events. (a) In case the Company shall at
any time after the earlier of the Distribution Date or the Stock Acquisition
Date propose (i) to pay any dividend payable in stock of any class to the
holders of its Preferred Stock or to make any other distribution to the holders
of its Preferred Stock (other than a regular quarterly cash dividend), (ii) to
offer to the holders of its Preferred Stock rights or warrants to subscribe for
or to purchase any additional shares of Preferred Stock or shares of stock of
any class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision or combination of outstanding Preferred Stock), (iv) to
effect the liquidation, dissolution or winding up of the Company, or (v) to
declare or pay any dividend on the Common Stock payable in Common Stock or to
effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock),
then, in each such case, the Company shall give to each holder of a Right
Certificate, in accordance with Section 26 hereof, a notice of such proposed
action, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of the Common Stock and/or Preferred Stock,
if any such date is to be fixed, and such notice shall be so given in the

                                       54
<PAGE>   58
case of any action covered by clause (i) or (ii) above at least 10 days prior to
the record date for determining holders of the Preferred Stock for purposes of
such action, and in the case of any such other action, at least 10 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of the Common Stock and/or Preferred Stock, whichever
shall be the earlier.

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

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

                  Kerr-McGee Holdco, Inc.
                  P.O. Box 25861
                  Oklahoma City, Oklahoma  73125
                  Attention:  General Counsel

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

                  UMB Bank, N.A., as Rights Agent
                  Attention:  Corporate Trust

                                       55
<PAGE>   59
                  2401 Grand Blvd., Suite 200
                  Kansas City, Missouri  64108

                  Fax No. 816-860-3029

                           and

                  UMB Bank, N.A.
                  Attention: Legal Department
                  1010 Grand Blvd.
                  Kansas City, Missouri  64116

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

         Section 27. Supplements and Amendments. Except as otherwise provided in
this Section 27, for so long as the Rights are then redeemable, the Company may
in its sole and absolute discretion, and the Rights Agent shall if the Company
so directs, supplement or amend any provision of this Agreement in any respect
without the approval of any holders of the Rights. At any time when the Rights
are no longer redeemable, except as otherwise provided in this Section 27, the
Company may, and the Rights Agent shall, if the Company so directs, supplement
or amend this Agreement without the approval of any holders of Rights
Certificates in order to (i) cure any ambiguity, (ii) correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, (iii) shorten or lengthen any time period hereunder, or (iv)
change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable; provided that no such supplement or amendment
shall adversely affect the interests of the holders of Rights as such (other
than an Acquiring Person or an Affiliate or Associate of an Acquiring Person),
and no such amendment may cause the rights again to become redeemable or cause
the Agreement again to become

                                       56
<PAGE>   60
amendable other than in accordance with this sentence. Notwithstanding anything
contained in this Agreement to the contrary, no supplement or amendment shall be
made which decreases the Redemption Price. Upon the delivery of a certificate
from an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment.

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

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

         Section 30. Determinations and Actions by the Board of Directors. The
Board of Directors of the Company shall have the exclusive power and authority
to administer this Agreement and to exercise the rights and powers specifically
granted to the Board of Directors of the Company or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights or to amend this Agreement). All such
actions, calculations, interpretations and determinations (including, for
purposes of clause (y) below, all omissions with respect to the
<PAGE>   61
foregoing) that are done or made by the Board of Directors of the Company in
good faith, shall be final, conclusive and binding on the Company, the Rights
Agent, the holders of the Rights, as such, and all other parties.

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

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

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

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

                                       58
<PAGE>   62
                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and attested, all as of the day and year first
above written.

Attest:                                    KERR-MCGEE HOLDCO, INC.

        /s/ GREGORY F. PILCHER                     /s/ LUKE R. CORBETT
By___________________________              By______________________________
     Name:  Gregory F. Pilcher                  Name:  Luke R. Corbett
     Title: Secretary                           Title: Chairman of the Board
                                                        and Chief Executive
                                                             Officer

                                            UMB Bank, N.A.

Attest:

       /S/  KENNETH J. DOTSON                       /s/ WILLIAM BLOEMKER
By____________________________             By_______________________________
     Name:  Kenneth J. Dotson                    Name:  William Bloemker
     Title: Assistant Secretary                  Title: Vice President

                                       59
<PAGE>   63
                                                                       Exhibit A

                                      FORM

                                       OF

                           CERTIFICATE OF DESIGNATION

                                       OF

                  SERIES B JUNIOR PARTICIPATING PREFERRED STOCK

                                       OF

                             KERR-MCGEE HOLDCO, INC.

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

                  Kerr-McGee Holdco, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (hereinafter called
the "Company"), hereby certifies that the following resolution was duly adopted
by the Board of Directors of the Company as required by Section 151 of the
General Corporation Law of the State of Delaware acting by unanimous written
consent pursuant to Section 141(f) of the General Corporation Law of the State
of Delaware:

                  RESOLVED, that pursuant to the authority granted to and vested
in the Board of Directors of the Company (hereinafter called the "Board of
Directors" or the "Board") in accordance with the provisions of the Company's
Certificate of Incorporation, as amended to date (hereinafter called the
"Certificate of Incorporation"), the Board of Directors hereby creates a series
of Preferred Stock, without par value, of the Company and hereby states the
designation and number of shares, and fixes the relative rights, powers and
preferences thereof, and the limitations thereof, as follows:

               1. Designation and Amount. The shares of such series shall be
designated as "Series B Junior Participating Preferred Stock" (the "Series B
Preferred Stock") and the number of shares constituting the Series B Preferred
Stock shall be 1,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided, that no decrease shall reduce
the number of shares of Series B Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants or upon
the conversion of any outstanding securities issued by the Company convertible
into Series B Preferred Stock.

                                      A-1
<PAGE>   64
               2. Dividends and Distributions.

               (A) Subject to the rights of the holders of any shares of any
series of Preferred Stock of the Company (the "Preferred Stock") (or any similar
stock) ranking prior and superior to the Series B Preferred Stock with respect
to dividends, the holders of shares of Series B Preferred Stock, in preference
to the holders of Common Stock, par value $1.00 per share, of the Company (the
"Common Stock") and of any other stock of the Company ranking junior to the
Series B Preferred Stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the last day of January, April, July, and
October in each year (each such date being referred to herein as a "Dividend
Payment Date"), commencing on the first Dividend Payment Date after the first
issuance of a share or fraction of a share of Series B Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of (a) $1 or
(b) subject to the provision for adjustment hereinafter set forth, 100 times the
aggregate per share amount of all cash dividends, and 100 times the aggregate
per share amount (payable in kind) of all non-cash dividends or other
distributions other than a dividend payable in shares of Common Stock, declared
on the Common Stock since the immediately preceding Dividend Payment Date or,
with respect to the first Dividend Payment Date, since the first issuance of any
share or fraction of a share of Series B Preferred Stock. In the event the
Company shall at any time after the effective time of the merger of Kerr-McGee
Merger Sub., Inc. with and into Kerr-McGee Corporation (the "Merger Effective
Time" declare or pay any dividend on the Common Stock payable in shares of
Common Stock, or effect a subdivision or combination or consolidation of the
outstanding shares of Common Stock (by reclassification or otherwise than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common Stock, then in each such case the amount to which holders of
shares of Series B Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction, the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

               (B) The Company shall declare a dividend or distribution on the
Series B Preferred Stock as provided in paragraph (A) of this Section
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Dividend Payment Date and the next subsequent
Dividend Payment Date, a dividend of $1 per share on the Series B Preferred
Stock shall nevertheless be payable, when, as and if declared, on such
subsequent Dividend Payment Date.

               (C) Dividends shall begin to accrue and be cumulative, whether or
not earned or declared, on outstanding shares of Series B Preferred Stock from
the Dividend Payment Date next preceding the date of issue of such shares,
unless the date of issue of such shares is prior to the record date for the
first Dividend Payment Date, in which case dividends on such shares shall begin
to accrue from the date of issue of such shares, or unless the date of issue is
a Dividend Payment Date or is a date after the record date for the determination
of holders of shares of Series B Preferred Stock entitled to receive a quarterly
dividend and before such Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative

                                      A-2
<PAGE>   65
from such Dividend Payment Date. Accrued but unpaid dividends shall not bear
interest. Dividends paid on the shares of Series B Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and payable on
such shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix a record date for
the determination of holders of shares of Series B Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be not more than 60 days prior to the date fixed for the payment
thereof.

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

                  (A) Subject to the provision for adjustment hereinafter set
         forth and except as otherwise provided in the Certificate of
         Incorporation or required by law, each share of Series B Preferred
         Stock shall entitle the holder thereof to 100 votes on all matters upon
         which the holders of the Common Stock of the Company are entitled to
         vote. In the event the Company shall at any time after the Merger
         Effective Time declare or pay any dividend on the Common Stock payable
         in shares of Common Stock, or effect a subdivision or combination or
         consolidation of the outstanding shares of Common Stock (by
         reclassification or otherwise than by payment of a dividend in shares
         of Common Stock) into a greater or lesser number of shares of Common
         Stock, then in each such case the number of votes per share to which
         holders of shares of Series B Preferred Stock were entitled immediately
         prior to such event shall be adjusted by multiplying such number by a
         fraction, the numerator of which is the number of shares of Common
         Stock outstanding immediately after such event and the denominator of
         which is the number of shares of Common Stock that were outstanding
         immediately prior to such event.

                  (B) Except as otherwise provided herein, in the Certificate of
         Incorporation or in any other Certificate of Designations creating a
         series of Preferred Stock or any similar stock, and except as otherwise
         required by law, the holders of shares of Series B Preferred Stock and
         the holders of shares of Common Stock and any other capital stock of
         the Company having general voting rights shall vote together as one
         class on all matters submitted to a vote of stockholders of the
         Company.

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

               4. Certain Restrictions.

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

                  (i) declare or pay dividends, or make any other distributions,
         on any shares of stock ranking junior (as to dividends) to the Series B
         Preferred Stock;

                                      A-3
<PAGE>   66
                  (ii) declare or pay dividends, or make any other
         distributions, on any shares of stock ranking on a parity (as to
         dividends) with the Series B Preferred Stock, except dividends paid
         ratably on the Series B Preferred Stock and all such parity stock on
         which dividends are payable or in arrears in proportion to the total
         amounts to which the holders of all such shares are then entitled;

                  (iii) redeem or purchase or otherwise acquire for
         consideration shares of any stock ranking junior (either as to
         dividends or upon liquidation, dissolution or winding up) to the Series
         B Preferred Stock, provided that the Company may at any time redeem,
         purchase or otherwise acquire shares of any such junior stock in
         exchange for shares of any stock of the Company ranking junior (as to
         dividends and upon dissolution, liquidation or winding up) to the
         Series B Preferred Stock or rights, warrants or options to acquire such
         junior stock;

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

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

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

               6. Liquidation, Dissolution or Winding Up. Upon any liquidation,
dissolution or winding up of the Company, no distribution shall be made (A) to
the holders of the Common Stock or of shares of any other stock of the Company
ranking junior, upon liquidation, dissolution or winding up, to the Series B
Preferred Stock unless, prior thereto, the holders of shares of Series B
Preferred Stock shall have received $100 per share, plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not earned or
declared, to the date of such payment, provided that the holders of shares of
Series B Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 times the aggregate amount to be distributed per share to holders of shares
of Common Stock, or (B) to the holders of shares of stock ranking on a parity
upon liquidation, dissolution or winding up with the Series B Preferred Stock,
except

                                      A-4
<PAGE>   67
distributions made ratably on the Series B Preferred Stock and all such parity
stock in proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding up. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Series B liquidation preference and the liquidation preferences of
all other classes and series of stock of the Company, if any, that rank on a
parity with the Series B Preferred Stock in respect thereof, then the assets
available for such distribution shall be distributed ratably to the holders of
the Series B Preferred Stock and the holders of such parity shares in the
proportion to their respective liquidation preferences. In the event the Company
shall at any time after the Merger Effective Time declare or pay any dividend on
the Common Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common Stock, then in each
such case the aggregate amount to which holders of shares of Series B Preferred
Stock were entitled immediately prior to such event under the proviso in clause
(A) of the preceding sentence shall be adjusted by multiplying such amount by a
fraction the numerator of which is the number of shares of Common Stock
outstanding immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately prior to such
event.

               7. Consolidation, Merger, etc. In case the Company shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are converted into, exchanged for or changed into other
stock or securities, cash and/or any other property, then in any such case each
share of Series B Preferred Stock shall at the same time be similarly converted
into, exchanged for or changed into an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 100 times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
converted, exchanged or converted. In the event the Company shall at any time
after the Merger Effective Time declare or pay any dividend on the Common Stock
payable in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise than by payment of a dividend in shares of Common Stock) into a
greater or lesser number of shares of Common Stock, then in each such case the
amount set forth in the preceding sentence with respect to the conversion,
exchange or change of shares of Series B Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

               8. No Redemption. The shares of Series B Preferred Stock shall
not be redeemable from any holder.

               9. Rank. The Series B Preferred Stock shall rank, with respect to
the payment of dividends and the distribution of assets upon liquidation,
dissolution or winding up of the Company, junior to all other series of
Preferred Stock and senior to the Common Stock.

               10. Amendment. If any proposed amendment to the Certificate of
Incorporation (including this Certificate of Designations) would alter, change
or repeal any of the

                                      A-5
<PAGE>   68
preferences, powers or special rights given to the Series B Preferred Stock so
as to affect the Series B Preferred Stock adversely, then the holders of the
Series B Preferred Stock shall be entitled to vote separately as a class upon
such amendment, and the affirmative vote of two-thirds of the outstanding shares
of the Series B Preferred Stock, voting separately as a class, shall be
necessary for the adoption thereof, in addition to such other vote as may be
required by the General Corporation Law of the State of Delaware.

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

                  IN WITNESS WHEREOF, this Certificate of Designations is
executed on behalf of the Company by its Chairman of the Board of Directors and
attested by its Secretary this ________ day of July, 2001.

                                           _____________________________________
                                            Luke R. Corbett
                                            Chairman of the Board and
                                            Chief Executive Officer

Attest:

______________________________
Gregory F. Pilcher, Secretary

                                      A-6
<PAGE>   69
                                                                       Exhibit B

                            Form of Right Certificate

Certificate No. R- ____                                               ___ Rights

         NOT EXERCISABLE AFTER July 22, 2006 OR EARLIER IF REDEMPTION OR
         EXCHANGE OCCURS. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT
         AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER
         CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
         OWNED BY OR TRANSFERRED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON
         (AS DEFINED IN THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF
         WILL BECOME NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

                                Right Certificate

                             KERR-MCGEE HOLDCO, 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 July __, 2001 as the same may be amended from time to
time (the "Rights Agreement"), between Kerr-McGee Holdco, Inc., a Delaware
corporation (the "Company"), and UMB Bank, N.A., (the "Rights Agent"), to
purchase from the Company at any time after the Distribution Date (as such term
is defined in the Rights Agreement) and prior to 5:00 P.M., New York City time,
on July 22, 2006 at the office or agency of the Rights Agent designated for such
purpose, or of its successor as Rights Agent, one one-hundredth of a fully paid
non-assessable share of Series B Junior Participating Preferred Stock, without
par value (the "Preferred Stock"), of the Company, at a purchase price of
$215.00 per one one-hundredth of a share of Preferred Stock (the "Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of one one-hundredths of a share of Preferred
Stock which may be purchased upon exercise hereof) set forth above, and the
Purchase Price set forth above, are the number and Purchase Price as of July
____, 2001 based on the Preferred Stock as constituted at such date. As provided
in the Rights Agreement, the Purchase Price, the number of one one-hundredths of
a share of Preferred Stock (or other securities or property) which may be
purchased upon the exercise of the Rights and the number of Rights evidenced by
this Right Certificate are subject to modification and adjustment upon the
happening of certain events.

                                      B-1
<PAGE>   70
                  This Right Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Right Certificates.
Copies of the Rights Agreement are on file at the principal executive offices of
the Company and the above-mentioned office or agency of the Rights Agent. The
Company will mail to the holder of this Right Certificate a copy of the Rights
Agreement without charge after receipt of a written request therefor.

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

                  Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate (i) may be redeemed by the Company at a redemption
price of $.01 per Right or (ii) may be exchanged in whole or in part for shares
of Preferred Stock or shares of the Company's Common Stock, no par value ($1 per
share stated value).

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

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

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

                                      B-2
<PAGE>   71
               WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal. Dated as of _____________.

Attest:                                                KERR-MCGEE HOLDCO, INC.

By __________________                                  By __________________

Countersigned:

____________________________
as Rights Agent

By _________________________
     Authorized Signature

                                      B-3
<PAGE>   72
                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

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

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

Dated: _________________

                                                     ___________________________
                                                              Signature

Signature Guaranteed:

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

________________________________________________________________________________
                           (To be completed)

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

                                                     ___________________________
                                                              Signature

                                      B-4
<PAGE>   73
              Form of Reverse Side of Right Certificate - continued

                          FORM OF ELECTION TO PURCHASE

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

To Kerr-McGee Holdco, Inc.:

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

________________________________________________________________________________

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

Please insert social security
or other identifying number

________________________________________________________________________________
                         (Please print name and address)

________________________________________________________________________________

Dated:  ____________________

                                                     ___________________________
                                                             Signature

(Signature must conform to holder specified on Right Certificate)

Signature Guaranteed:

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

                                      B-5
<PAGE>   74
             Form of Reverse Side of Right Certificate -- continued
________________________________________________________________________________
                                (To be completed)

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

                                                       _________________________
                                                              Signature

                                     NOTICE

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

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

                                      B-6
<PAGE>   75
UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS OWNED
BY OR TRANSFERRED TO ANY PERSON WHO BECOMES AN ACQUIRING PERSON (AS DEFINED IN
THE RIGHTS AGREEMENT) AND CERTAIN TRANSFEREES THEREOF WILL BECOME NULL AND VOID
AND WILL NO LONGER BE TRANSFERABLE.

                          SUMMARY OF RIGHTS TO PURCHASE

                            Shares of Preferred Stock

         On July ____, 2001 the Board of Directors of Kerr-McGee Holdco, Inc.
(the "Company") directed the issuance of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $1.00 per share,
of the Company (the "Common Stock"). Each Right entitles the registered holder
to purchase from the Company one one-hundredth of a share of Series B Junior
Participating Preferred Stock, without par value (the "Preferred Stock") of the
Company at a price of $215.00 per one one-hundredth of a share of Preferred
Stock (the "Purchase Price"), subject to adjustment. The description and terms
of the Rights are set forth in a Rights Agreement dated as of
_____________________, 2001, as the same may be amended from time to time (the
"Rights Agreement"), between the Company and UMB Bank, N.A., as Rights Agent
(the "Rights Agent").

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

         The Rights Agreement provides that, until the Distribution Date (or
earlier redemption or expiration of the Rights), the Rights will be transferred
with and only with the Common Stock. Until the Distribution Date (or earlier
redemption or expiration of the Rights), new Common Stock certificates issued
after the Merger Effective Time upon transfer or new issuances of Common Stock
will contain a notation incorporating the Right Agreement by reference. Until
the Distribution Date (or earlier redemption or expiration of the Rights), the
surrender for transfer of any certificates for shares of Common Stock
represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights ("Right
Certificates") will be mailed to holders of record of the Common Stock as of the
close of business on the Distribution Date and such separate Right Certificates
alone will evidence the Rights.

         The Rights are not exercisable until the Distribution Date. The Rights
will expire on July 22, 2006 (the "Final Expiration Date"), unless the Final
Expiration Date is advanced or extended
<PAGE>   76
or unless the Rights are earlier redeemed or exchanged by the Company, in each
case as described below.

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

         The Rights are also subject to adjustment in the event of a stock split
of the Common Stock or a stock dividend on the Common Stock payable in shares of
Common Stock or subdivision, consolidations or combinations of the Common Stock
occurring, in any such case, prior to the Distribution Date.

         Shares of Preferred Stock purchasable upon exercise of the Rights will
not be redeemable. Each share of Preferred Stock will be entitled, when, as and
if declared, to a minimum preferential quarterly dividend payment of $1 per
share but will be entitled to an aggregate dividend of 100 times the dividend
declared per share of Common Stock. In the event of liquidation, dissolution or
winding up of the Company, the holders of the Preferred Stock will be entitled
to a minimum preferential liquidation payment of $100 per share (plus any
accrued but unpaid dividends) but will be entitled to an aggregate payment of
100 times the payment made per share of Common Stock. Each share of Preferred
Stock will have 100 votes, voting together with the Common Stock. Finally, in
the event of any merger, consolidation or other transaction in which shares of
Common Stock are converted or exchanged, each share of Preferred Stock will be
entitled to receive 100 times the amount received per share of Common Stock.
These rights are protected by customary antidilution provisions.

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

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

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

                                       2
<PAGE>   77
whom the Company has engaged in the foregoing transaction (or its parent), which
number of shares at the time of such transaction will have a market value of two
times the exercise price of the Right.

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

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

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

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

         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.

         A copy of the Right Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form 8-A dated
_____________, 2001. A copy of the Rights Agreement is available free of charge
from the Company. This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the Rights Agreement,
as the same may be amended from time to time, which is hereby incorporated
herein by reference.

                                       3<PAGE>   1
                                                                  EXHIBIT 10(yy)

                              EMPLOYMENT AGREEMENT

                  AGREEMENT, made and entered into as of September 1, 2000 (the
"Effective Date") by and between Novametrix Medical Systems Inc., a Delaware
corporation (together with its successors and assigns permitted under this
Agreement, the "Company"), and Joseph A. Vincent (the "Executive").

                              W I T N E S S E T H :

                  WHEREAS, the Company desires to employ the Executive and to
enter into an agreement embodying the terms of such employment (this
"Agreement") and the Executive desires to enter into this Agreement and to
accept such employment, subject to the terms and provisions of this Agreement;

                  NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein and for other good and valuable consideration, the
receipt of which is mutually acknowledged, the Company and the Executive
(individually a "Party" and together the "Parties") agree as follows:

      1.       Definitions.

                 (a) "Affiliate" of a person or other entity shall mean a person
or other entity that directly or indirectly controls, is controlled by, or is
under common control with the person or other entity specified.

                 (b) "Base Salary" shall mean the salary provided for in Section
4 below or any increased salary granted to the Executive pursuant to Section 4.

                 (c) "Board" shall mean the Board of Directors of the Company.

                 (d) "Cause" shall mean:

                    (i) the Executive is indicted for a felony or other serious
crime involving moral turpitude;

                    (ii) the Executive participates in an act of fraud or
dishonesty against the Company or any of its customers or suppliers; or

                    (iii) in carrying out his duties, the Executive engages in
conduct that constitutes a willful gross or intentional breach of his duties
under this Agreement.

                 (e) "Change in Control" shall mean the occurrence of any one of
the following events:

                                      E-8
<PAGE>   2

                  (i) any "person," as such term is used in Sections 3(a)(9) and
13(d) of the Securities Exchange Act of 1934, becomes a "beneficial owner," as
such term is used in Rule 13D-3 promulgated under that act, of 50% or more of
the Voting Stock of the Company;

                  (ii) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of the Board on the date
of this Agreement, provided that any person becoming a director subsequent to
such date whose election or nomination for election was supported by two-thirds
of the directors who then comprised the Incumbent Directors shall be considered
to be an Incumbent Director;

                  (iii) the Company adopts any plan of liquidation providing for
the distribution of all or substantially all of its assets;

                  (iv) all or substantially all of the assets or business of the
Company is disposed of pursuant to a merger, consolidation or other transaction
(unless the shareholders of the Company immediately prior to such merger,
consolidation or other transaction beneficially own, directly or in-directly, in
substantially the same proportion as they owned the Voting Stock of the Company,
all of the Voting Stock or other ownership interests of the entity or entities,
if any, that succeed to the business of the Company); or

                  (v) the Company combines with another company and is the
surviving corporation but, immediately after the combination, the shareholders
of the Company immediately prior to the combination hold, directly or
indirectly, 50% or less of the Voting Stock of the combined company (there being
excluded from the number of shares held by such shareholders, but not from the
Voting Stock of the combined company, any shares received by Affiliates of such
other company in exchange for stock of such other company).

               For purposes of the Change in Control definition, the "Company"
shall include any entity that succeeds to all or substantially all of the
business of the Company.

               (f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.

               (g) "Constructive Termination Without Cause" shall mean
termination by the Executive of his employment at his initiative following the
occurrence of any of the following events without his consent:

                   (i) the failure to elect or reelect the Executive to any of
the positions described in Section 3 or the removal of him from any such
position;

                                      E-9
<PAGE>   3

                  (ii) a material diminution in the Executive's duties or the
assignment to the Executive of duties which are materially inconsistent with his
duties or which materially impair the Executive's ability to function as the
Executive Vice President and Chief Financial Officer of the Company;

                  (iii) a change in the reporting structure of the Company so
that the Executive no longer reports directly to the President of the Company;
or

                  (iv) a material breach by the Company of the provisions of
this Agreement; or

                  (v) the failure of the Company to obtain the assumption in
writing of its obligation to perform this Agreement by any successor to all or
substantially all of the assets of the Company within 15 calendar days after a
merger, consolidation, sale or similar transaction; or

                  (vi) the occurrence of a Change in Control of the Company.

               Following written notice from the Executive of any of the events
described above, which notice must be delivered within 30 calendar days
following his learning of the occurrence of any of such events, the Company
shall have 30 calendar days in which to cure. If the Company fails to cure, the
Executive's termination shall become effective on the 31st calendar day
following the written notice.

               (h) "Disability" shall mean the Executive's inability, due to
physical or mental incapacity, substantially to perform his duties and
responsibilities under this Agreement for a period of 270 days as determined by
a medical doctor selected by the Company who is reasonably satisfactory to the
Executive.

               (i) "Pro Rata" shall mean a fraction, the numerator of which is
the number of days that the Executive was employed in the applicable performance
period (a calendar year in the case of an annual bonus and a performance cycle
in the case of an award under the Long-Term Incentive Plan) and the denominator
of which shall be the number of days in the applicable performance period.

               (j) "Stock" shall mean the Common Stock of the Company.

               (k) "Term of Employment" shall mean the period specified in
Section 2 below (including any extension as provided therein).

               (l) "Voting Stock" shall mean capital stock of any class or
classes having general voting power under ordinary circumstances, in the absence
of contingencies, to elect the directors of a corporation.

        2.   Term of Employment.

               The Term of Employment shall begin on the Effective Date, and
shall extend until December 31, 2001, with automatic one-year extensions
thereafter unless

                                      E-10
<PAGE>   4
either Party notifies the other at least 120 days before the scheduled
expiration date that the term is not to extend. Notwithstanding the foregoing,
the Term of Employment may be earlier terminated by either Party in accordance
with the provisions of Section 9.

        3. Position, Duties and Responsibilities.

               (a) Commencing on the Effective Date and continuing for the
remainder of the Term of Employment, the Executive shall be employed as the
Executive Vice President and Chief Financial Officer of the Company. The
Executive shall have all the authorities and responsibilities that are
customarily associated with such positions in a company of the size and
structure of the Company. The Executive, in carrying out his duties under this
Agreement, shall report to the President of the Company. During the term of this
Agreement, the Executive shall devote substantially all of his business time and
attention to the business and affairs of the Company and shall use his best
efforts, skills and abilities to promote its interests.

               (b) Nothing herein shall preclude the Executive from (i) serving
on the boards of directors of a reasonable number of other corporations with the
concurrence of the Board (which approval shall not be unreasonably withheld),
(ii) serving on the boards of a reasonable number of trade associations and/or
charitable organizations, (iii) engaging in charitable activities and community
affairs, and (iv) managing his personal investments and affairs, provided that
such activities set forth in this Section 3(b) do not conflict or materially
interfere with the effective discharge of his duties and responsibilities under
Section 3(a).

         4. Salary.

               The Executive shall be paid an annualized Salary, payable in
accordance with the regular payroll practices of the Company, currently in equal
biweekly installments, subject to applicable withholdings, of $150,000. The
Salary shall be reviewed annually for increase in the discretion of the Board.

         5. Annual Incentive Compensation.

               During the Term of Employment, the Executive shall be eligible to
receive an annual incentive payment (the "Incentive Payment") in accordance with
the Company's annual incentive program for its senior executives or any
successor thereto. The Executive's target Incentive Payment for each fiscal year
of the Company shall be 25% of his Base Salary. Each Incentive Payment earned by
the Executive shall be paid within 90 days after the end of the fiscal year for
which it is earned.

         6. Long Term Incentives.

               The Executive shall be eligible to participate in any long term
incentive programs (including equity programs) implemented by the Company for
its senior executives.

                                      E-11
<PAGE>   5

         7. Employee Benefit Programs and Perquisites.

               During the Term of Employment, the Executive shall be entitled to
participate in the Company's employee medical, dental and hospitalization plans,
as well as any welfare or pension benefits made available to the Company's
senior executives or to its employees generally, such as profit sharing, savings
and other retirement plans or programs, 401(k), disability and life insurance
plans, accidental death and dismemberment protection, and travel accident
insurance.

               The Executive shall be entitled to annual vacations in accordance
with the Company's policies applicable to senior executives generally and to an
automobile allowance of $600 per month.

               The Executive shall be provided with other employee benefits and
perquisites on the same basis as they are provided by the Company from time to
time to the Company's other senior executives.

         8. Reimbursement of Business Expenses.

                  The Executive is authorized to incur reasonable expenses in
carrying out his duties and responsibilities under this Agreement and the
Company shall promptly reimburse him for all reasonable business expenses
incurred in connection with carrying out the business of the Company, fulfilling
continuing professional education requirements and participating in professional
accounting meetings and seminars, subject to his submission of reasonable
supporting documentation in accordance with the Company's policies.

         9. Termination of Employment.

               (a) Termination Due to Death. In the event that the Executive's
employment is terminated due to his death, his estate or his beneficiaries, as
the case may be, shall be entitled to the following:

                   (i) Base Salary through the date of the Executive's death;

                   (ii) a Pro Rata Incentive Payment for the fiscal year in
which the Executive's death occurs, based on the original target Incentive
Payment for such year, payable in a single installment promptly after his death;
and

                   (iii) all outstanding stock options which are not then vested
shall be forfeited and all then vested options shall remain exercisable for the
balance of their stated term;

               (b) Termination Due to Disability. In the event that the
Executive's employment is terminated due to his Disability, he shall be entitled
to the following:

                                      E-12
<PAGE>   6

                   (i) disability benefits in accordance with the long-term
disability program then in effect for senior executives of the Company and the
disability insurance policy provided pursuant to Section 7;

                   (ii) Base Salary through the end of the month in which
disability benefits commence;

                   (iii) a Pro Rata Incentive Payment for the fiscal year in
which the Executive's termination occurs, based on the original target Incentive
Payment for such year, payable in a single installment promptly after his
termination; and

                   (iv) all outstanding stock options which are not then vested
shall be forfeited and all vested options shall remain exercisable for the
balance of their stated term.

               In no event shall a termination of the Executive's employment for
Disability occur until the Party terminating his employment gives written notice
to the other Party in accordance with Section 22 below.

               (c) Termination by the Company for Cause.

                   (i) A termination for Cause shall not take effect unless the
provisions of this paragraph (i) are complied with. The Executive shall be given
written notice by the Board of the intention to terminate him for Cause, stating
the grounds on which the proposed termination for Cause is based. The Executive
shall be given an opportunity to cure such conduct, to the extent such cure is
possible in the good faith opinion of a majority of the members of the Board. If
he fails to cure such conduct, the Executive shall then be entitled to a hearing
before the Board, and, thereafter, upon a determination by the affirmative vote
of no fewer than a majority of the members of Board that Cause exists, he shall
be terminated for Cause.

                   (ii) In the event the Company terminates the Executive's
employment for Cause:

                       (A) he shall be entitled to Base Salary through the date
of the termination; and

                       (B) all outstanding stock options which are not then
vested shall be forfeited and all vested options shall remain exercisable in
accordance with their terms.

               (d) Termination without Cause or Constructive Termination without
Cause. In the event the Executive's employment is terminated by the Company
without Cause, other than due to Disability or death, or in the event there is a
Constructive Termination without Cause, or in the event the Term of Employment
provided for in Section 2 is not extended and expires, the Executive shall be
entitled to the following:

                   (i) Base Salary through the date of termination;

                                      E-13
<PAGE>   7

                   (ii) Base Salary, at the annualized rate in effect on the
date of termination, for 12 months (the "Salary Continuation Period") after the
date of termination;

                   (iii) all outstanding stock options which are not then vested
shall be forfeited and all vested options shall remain exercisable in accordance
with their terms; and

                   (iv) continued participation in all medical, dental,
hospitalization and life insurance programs and in all other employee welfare
benefit plans and programs in which he was participating on the date of
termination (to the extent that such plans permit the Executive's continued
participation) until the earlier of (x) the end of the Salary Continuation
Period and (y) the date, or dates, that he becomes eligible for coverages and
benefits under the plans and programs of a subsequent employer.

               (e) Voluntary Termination. A termination of employment by the
Executive on his own initiative, other than a termination due to death or
Disability or a Constructive Termination without Cause, shall have the same
consequences as provided in Section 9(c)(ii) for a Termination for Cause. A
voluntary termination under this Section 9(e) shall be effective 30 calendar
days after prior written notice is received by the Company from the Executive,
unless the Company elects to make it effective earlier.

               (f) Consequences of a Change in Control.

                   (i) Upon Executive's termination of employment pursuant to
Section 9(d) following a Change in Control, the Executive shall be entitled to
the benefits provided in Section 9(d) above as well as to the benefits provided
in Section 9(f)(ii).

                   (ii) Immediately following a Change in Control, the
Executive's then unvested stock options shall fully vest and shall remain
exercisable for the balance of their stated term.

               (g) Other Termination Benefits. In the case of any of the
foregoing terminations, the Executive or his estate shall also be entitled to:

                   (i) the balance of any incentive awards due for performance
periods which have been completed, but which have not yet been paid;

                   (ii) any other amounts earned, accrued and owing to the
Executive but not yet paid; and

                   (iii) other benefits, if any, in accordance with applicable
plans, programs and arrangements of the Company and its Affiliates.

               (h) No Mitigation; No Offset. In the event of any termination of
employment under this Section 9, the Executive shall be under no obligation to
seek other employment and there shall be no offset against amounts due the
Executive under this

                                      E-14
<PAGE>   8
Agreement on account of any remuneration attributable to any subsequent
employment that he may obtain.

               (i) Nature of Payments. Any amounts due under this Section 9 are
in the nature of severance payments considered to be reasonable by the Company
and are not in the nature of a penalty.

         10. Confidentiality.

                   (a) The Executive agrees that he will not, at any time during
the Term of Employment or thereafter, disclose or use any trade secret,
proprietary or confidential information of the Company or any subsidiary or
Affiliate of the Company (collectively, "Confidential Information"), except as
required in the course of such employment or with the written permission of the
Company or, as applicable, any subsidiary or Affiliate of the Company or as may
be required by law, provided that, if the Executive receives legal process with
regard to disclosure of such information, he shall promptly notify the Company
and cooperate with the Company in seeking a protective order.

                   (b) The Executive agrees that at the time of the termination
of his employment with the Company, whether at the instance of the Executive or
the Company, and regardless of the reasons therefor, he will deliver to the
Company, and not keep or deliver to anyone else, any and all notes, files,
memoranda, papers and, in general, any and all physical matter containing
Confidential Information, including any and all documents significant to the
conduct of the business of the Company or any subsidiary or Affiliate of the
Company and all other Confidential Information in his possession, except for any
documents or property as to which the Company or any subsidiary or Affiliate of
the Company has given written consent to removal at the time of the termination
of the Executive's employment and his personal rolodex, personal files, phone
book and similar items as long as they do not contain Confidential Information,
in which case, the Executive may retain a copy.

                   (c) The Executive shall promptly disclose to the Company any
invention, improvement, discovery, process, formula, or method or other
intellectual property, whether or not patentable or copyrightable (collectively,
"Inventions"), conceived or first reduced to practice by the Executive, either
alone or jointly with others, while performing services hereunder (or, if based
on any Confidential Information, at any time during or after the Term), (i)
which pertain to any line of business activity of the Company, whether then
conducted or then being actively planned by the Company, with which the
Executive was or is involved, (ii) which is developed using time, material or
facilities of the Company, whether or not during working hours or on the Company
premises, or (iii) which directly relates to any of the Executive's work during
the Term, whether or not during normal working hours. The Executive hereby
assigns to the Company all of the Executive's right, title and interest in and
to any such Inventions. During and after the Term, the Executive shall execute
any documents necessary to perfect the assignment of such Inventions to the
Company and to enable the Company to apply for, obtain and enforce patents,
trademarks and copyrights in any and all countries on such Inventions,
including, without limitation, the execution of any instruments and the giving
of evidence and testimony, without further compensation beyond the

                                      E-15
<PAGE>   9
Executive's agreed compensation during the course of the Executive's employment.
Without limiting the foregoing, the Executive further acknowledges that all
original works of authorship by the Executive, whether created alone or jointly
with others, related to the Executive's employment with the Company and which
are protectable by copyright, are "works made for hire" within the meaning of
the United States Copyright Act, 17 U.S.C. Section 101, as amended, and the
copyright of which shall be owned solely, completely and exclusively by the
Company. If any Invention is considered to be work not included in the
categories of work covered by the United States Copyright Act, 17 U.S.C. Section
101, as amended, such work is hereby assigned or transferred completely and
exclusively to the Company. The Executive hereby irrevocably designates counsel
to the Company as the Executive's agent and attorney-in-fact to do all lawful
acts necessary to apply for and obtain patents and copyrights and to enforce the
Company's rights under this Section. This Section 10(c) shall survive the
termination of this Agreement. Any assignment of copyright hereunder includes
all rights of paternity, integrity, disclosure and withdrawal and any other
rights that may be known as or referred to as "moral rights" (collectively
"Moral Rights"). To the extent such Moral Rights cannot be assigned under
applicable law and to the extent the following is allowed by the laws in the
various countries where Moral Rights exist, the Executive hereby waives such
Moral Rights and consents to any action of the Company that would violate such
Moral Rights in the absence of such consent. The Executive agrees to confirm any
such waivers and consents from time to time as requested by the Company.

               11. Non-Competition and Non-Solicitation.

                        The Executive acknowledges that the Company has invested
substantial time, money and resources in the development and retention of its
Inventions, Confidential Information (including trade secrets), customers,
accounts and business partners, and further acknowledges that during the course
of the Executive's employment with the Company the Executive has had and will
have access to the Company's Inventions and Confidential Information (including
trade secrets), and will be introduced to existing and prospective customers,
accounts and business partners of the Company. The Executive acknowledges and
agrees that any and all "goodwill" associated with any existing or prospective
customer, account or business partner belongs exclusively to the Company,
including, but not limited to, any goodwill created as a result of direct or
indirect contacts or relationships between the Executive and any existing or
prospective customers, accounts or business partners. Additionally, the parties
acknowledge and agree that Executive possesses skills that are special, unique
or extraordinary and that the value of the Company depends upon his use of such
skills on its behalf.

                        In recognition of this, the Executive covenants and
agrees that:

                        (a) During the Term, and for a period of one year
following any termination of the Executive's employment with the Company other
than a termination (x) by the Company without Cause (including a Constructive
Termination) or (y) by non-extension of the Term of Employment, the Executive
shall not, without the prior written consent of the Board (whether as an
employee, agent, servant, owner, partner, consultant, independent contractor,
representative, stockholder or in any other capacity whatsoever)

                                      E-16
<PAGE>   10
knowingly perform material services for, or knowingly have any material
involvement with, any person or entity (including a separate division of an
entity) that competes directly and materially with any business (a "Material
Business") which accounted for more than 10% of the revenues of the Company
during the fiscal year prior to his termination; provided, however, that the
Executive may in any event (i) perform services that do not directly relate to
business activities that compete directly and materially with a material
business of the Company, and (ii) own up to 3% of the outstanding securities of
any publicly-traded entity; and further provided that an entity (including a
separate division of an entity) shall be deemed to be in direct and material
competition with a Material Business of the Company only if the entity (or such
division) derived more than 10% of its revenues during its most recent fiscal
year from substantially similar businesses.

                        (b) During the Term, and for a period of two years
thereafter, the Executive shall not entice, solicit or encourage any Company
employee to leave the employ of the Company or any independent contractor to
sever its engagement with the Company, absent prior written consent to do so
from the Board.

                        (c) During the Term, and for a period of two years
thereafter, the Executive shall not, directly or indirectly, entice, solicit or
encourage any customer or prospective customer of the Company to cease doing
business with the Company, reduce its relationship with the Company or refrain
from establishing or expanding a relationship with the Company.

               12. Provisions Necessary and Reasonable.

                        (a) The Executive agrees that (i) the provisions of
Sections 10 and 11 of this Agreement are necessary and reasonable to protect the
Company's Confidential Information, Inventions, and goodwill; (ii) the specific
temporal, geographic and substantive provisions set forth in Section 12 of this
Agreement are reasonable and necessary to protect the Company's business
interests; and (iii) in the event of any breach of any of the covenants set
forth herein, the Company would suffer substantial irreparable harm and would
not have an adequate remedy at law for such breach. In recognition of the
foregoing, the Executive agrees that in the event of a breach or threatened
breach of any of these covenants, in addition to such other remedies as the
Company may have at law, without posting any bond or security, the Company shall
be entitled to seek and obtain equitable relief, in the form of specific
performance, and/or temporary, preliminary or permanent injunctive relief, or
any other equitable remedy which then may be available. The seeking of such
injunction or order shall not affect the Company's right to seek and obtain
damages or other equitable relief on account of any such actual or threatened
breach.

                        (b) If any of the covenants contained in Sections 10 and
11 hereof, or any part thereof, are hereafter construed to be invalid or
unenforceable, the same shall not affect the remainder of the covenant or
covenants, which shall be given full effect without regard to the invalid
portions.

                                      E-17
<PAGE>   11

                        (c) If any of the covenants contained in Sections 10 and
11 hereof, or any part thereof, are held to be unenforceable by a court of
competent jurisdiction because of the temporal or geographic scope of such
provision or the area covered thereby, the parties agree that the court making
such determination shall have the power to reduce the duration and/or geographic
area of such provision and, in its reduced form, such provision shall be
enforceable.

               13. Resolution of Disputes.

                        Subject to the provisions of Section 12, any disputes
arising under or in connection with this Agreement shall be resolved by binding
arbitration, to be held in New York, New York, in accordance with the Commercial
Arbitration Rules of the American Arbitration Association. Judgment upon the
award rendered by the arbitrator(s) may be entered in any court having
jurisdiction thereof. Each Party shall bear his or its own costs (including
attorneys' fees) of any mediation, arbitration or litigation; however, the
Executive shall be reimbursed for the costs and expenses associated with his
legal fees to the extent he prevails on any material issue which is the subject
of the dispute.

               14. Indemnification.

                        (a) The Company agrees that if the Executive is made a
party, or is threatened to be made a party, to any action, suit or proceeding,
whether civil, criminal, administrative or investigative (a "Proceeding"), by
reason of the fact that he is or was a director, officer or employee of the
Company or is or was serving at the request of the Company as a director,
officer, member, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, including service with respect to employee
benefit plans, whether or not the basis of such Proceeding is the Executive's
alleged action in an official capacity while serving as a director, officer,
member, employee or agent, the Executive shall be indemnified and held harmless
by the Company to the fullest extent legally permitted or authorized by the
Company's certificate of incorporation or bylaws or resolutions of the Company's
Board of Directors or, if greater, by the laws of the State of Delaware, against
all cost, expense, liability and loss (including, without limitation, attorneys'
fees, judgments, fines, ERISA excise taxes or other liabilities or penalties and
amounts paid or to be paid in settlement) reasonably incurred or suffered by the
Executive in connection therewith, and such indemnification shall continue as to
the Executive even if he has ceased to be a director, member, employee or agent
of the Company or other entity and shall inure to the benefit of the Executive's
heirs, executors and administrators. The Company shall advance to the Executive
all reasonable costs and expenses incurred by him in connection with a
Proceeding within 20 calendar days after receipt by the Company of a written
request for such advance. Such request shall include an undertaking by the
Executive to repay the amount of such advance if it shall ultimately be
determined that he is not entitled to be indemnified against such costs and
expenses.

                        (b) Neither the failure of the Company (including its
board of directors, independent legal counsel or stockholders) to have made a
determination prior

                                      E-18
<PAGE>   12
to the commencement of any proceeding concerning payment of amounts claimed by
the Executive under Section 14(a) that indemnification of the Executive is
proper because he has met the applicable standard of conduct, nor a
determination by the Company (including its board of directors, independent
legal counsel or stockholders) that the Executive has not met such applicable
standard of conduct, shall create a presumption that the Executive has not met
the applicable standard of conduct.

                        (c) The Company agrees to continue and maintain a
directors' and officers' liability insurance policy covering the Executive
during the Term of Employment and for six years thereafter, to the extent the
Company provides such coverage for its other executive officers.

               15. Assignability; Binding Nature.

                        This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective successors, heirs (in the case of
the Executive) and assigns. Rights or obligations of the Company under this
Agreement may be assigned or transferred by the Company pursuant to a merger or
consolidation in which the Company is or is not the continuing entity, or the
sale or liquidation of all or substantially all of the assets of the Company,
provided that the assignee or transferee is the successor to all or
substantially all of the assets of the Company and such assignee or transferee
assumes the liabilities, obligations and duties of the Company, as contained in
this Agreement, either contractually or as a matter of law. The Company further
agrees that, in the event of a sale of assets or liquidation as described in the
preceding sentence, it shall take whatever action it reasonably can in order to
cause such assignee or transferee expressly to assume the liabilities,
obligations and duties of the Company hereunder. No rights or obligations of the
Executive under this Agreement may be assigned or transferred by the Executive
other than his rights to compensation and benefits, which may be transferred
only by will or operation of law.

               16. Entire Agreement.

                        This Agreement contains the entire understanding and
agreement between the Parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between the Parties with respect thereto.

               17. Amendment or Waiver.

                        No provision in this Agreement may be amended unless
such amendment is agreed to in writing and signed by the Executive and an
authorized officer of the Company. No waiver by either Party of any breach by
the other Party of any condition or provision contained in this Agreement to be
performed by such other Party shall be deemed a waiver of a similar or
dissimilar condition or provision at the same or any prior or subsequent time.
Any waiver must be in writing and signed by the Executive or an authorized
officer of the Company, as the case may be.

                                      E-19
<PAGE>   13

               18. Severability.

                      In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law so as to achieve the purposes of this Agreement.

               19. Survivorship.

                      Except as otherwise expressly set forth in this Agreement,
the respective rights and obligations of the Parties hereunder shall survive any
termination of the Executive's employment. This Agreement itself (as
distinguished from the Executive's employment) may not be terminated by either
Party without the written consent of the other Party. Upon the expiration of the
Term of the Agreement, the respective rights and obligations of the Parties
shall survive such expiration to the extent necessary to carry out the
intentions of the Parties as embodied in the rights and obligations of the
Parties under this Agreement.

               20. References.

                      In the event of the Executive's death or a judicial
determination of his incompetence, references in this Agreement to the Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative.

               21. Governing Law.

                      This Agreement shall be governed in accordance with the
laws of the State of Delaware without reference to principles of conflict of
laws.

               22. Notices.

                      All notices and other communications required or permitted
hereunder shall be in writing and shall be deemed given when (a) delivered
personally, (b) delivered by certified or registered mail, postage prepaid,
return receipt requested or (c) delivered by overnight courier (provided that a
written acknowledgment of receipt is obtained by the overnight courier) to the
Party concerned at the address indicated below or to such changed address as
such Party may subsequently give such notice of:

If to the Company:             Novametrix Medical Systems Inc.
                               Five Technology Drive
                               P.O. Box 690
                               Wallingford, CT  06492

                               Attention: Chairman of the Board
                               and Chief Executive Officer

                                      E-20
<PAGE>   14

With a copy to:                Thomas M. Haythe, Esq.
                               Law Offices of Thomas M. Haythe
                               90 Park Avenue
                               15th Floor
                               New York, NY  10016

If to the Executive:           Joseph A. Vincent
                               25 Sheffield Circle
                               Stratford, CT  06614

         23. Headings.

                The headings of the sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.

         24. Counterparts.

                This Agreement may be executed in two or more counterparts.

                                      E-21
<PAGE>   15

               IN WITNESS WHEREOF, the undersigned have executed this Agreement
as of the date first written above.

                             NOVAMETRIX MEDICAL SYSTEMS INC.

                             By:  /s/ William J. Lacourciere
                                ------------------------------------------------
                                William J. Lacourciere
                                Chairman and Chief Executive Officer

                                 /s/ Joseph A. Vincent
                                ------------------------------------------------
                                 Joseph A. Vincent

                                      E-22

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