Document:

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                                                                    EXHIBIT 10.8

                                    WARRANT

THE SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE OFFERED FOR SALE,
SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN
FORM, REASONABLY ACCEPTABLE TO THE ISSUER THAT REGISTRATION IS NOT REQUIRED
UNDER THE 1933 ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.  ANY SUCH
OFFER, SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH THE APPLICABLE STATE
SECURITIES LAWS.

                                DATA RACE INC.

                       Warrant To Purchase Common Stock

Warrant No.: 2000-D-06                                  Number of Shares: 11,795
Date of Issuance: June 12, 2000

Data Race Inc., a Texas corporation (the "Company"), hereby certifies that, for
Ten United States Dollars ($10.00) and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, G-BAR LIMITED
PARTNERSHIP, the registered holder hereof or its permitted assigns, is entitled,
subject to the terms set forth below, to purchase from the Company upon
surrender of this Warrant, at any time or times on or after the date hereof, but
not after 11:59 P.M. Central Time on the Expiration Date (as defined herein)
11,795 fully paid nonassessable shares of Common Stock (as defined herein) of
the Company (the "Warrant Shares") at the purchase price per share provided in
Section 1(b) below.

     Section 1.

          (a) Securities Purchase Agreement.  This Warrant is one of the
              -----------------------------
Warrants (the "Warrants") issued pursuant to the terms of that certain
Securities Purchase Agreement dated as of June 12, 2000, among the Company and
the Buyers referred to therein (the "Securities Purchase Agreement").

          (b) Definitions.  The following words and terms as used in this
              -----------
Warrant shall have the following meanings:
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               (i)    "Common Stock" means (i) the Company's common stock, no
par value per share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a reclassification
of such Common Stock.

               (ii)   "Common Stock Deemed Outstanding" means, at any given
time, the number of shares of Common Stock actually outstanding at such time,
plus the number of shares of Common Stock deemed to be outstanding pursuant to
Sections 8(b)(i) and 8(b)(ii) hereof regardless of whether the Options (as
defined below) or Convertible Securities (as defined below) are actually
exercisable or convertible at such time, but excluding any shares of Common
Stock owned or held by or for the account of the Company or issuable upon
exercise of the Warrants.

               (iii)  "Convertible Securities" means any stock or securities
(other than Options) directly or indirectly convertible into or exchangeable for
Common Stock.

               (iv)   "Exempt Issuance" means (A) a loan from a commercial bank
which has only an incidental equity feature, (B) any transaction involving the
Company's issuances of securities (1) as consideration in a merger or
consolidation, (2) in connection with a strategic partnership or joint venture
(the primary purpose of which is not to raise equity capital), or (3) as
consideration for the acquisition of a business, product, license or other
assets by the Company, (C) the issuance of common stock in a firm commitment,
underwritten public offering, (D) the issuance of securities upon exercise or
conversion of the Company's options, warrants or other convertible securities
outstanding as of the date hereof, (E) the grant of additional options or
warrants, or the issuance of additional securities, under any Company stock
option plan, restricted stock plan, stock purchase plan or other plan or written
compensation agreement for the benefit of the Company's employees, directors,
consultants or advisors, or (F) the issuance of securities pursuant to any
shareholder rights plan adopted by the Company prior to the Closing (as defined
in the Securities Purchase Agreement).

               (v)    "Expiration Date" means the date two (2) years from the
date of this Warrant or, if such date falls on a Saturday, Sunday or other day
on which banks are required or authorized to be closed in the City of Chicago or
the State of Illinois or on which trading does not take place on the principal
exchange or automated quotation system on which the Common Stock is traded (a
"Holiday"), the next date that is not a Holiday.

               (vi)   "Options" means any rights, warrants or options to
subscribe for or purchase Common Stock or Convertible Securities.

               (vii)  "Other Securities" means (i) the other Warrants and (ii)
the shares of Common Stock issued from time to time pursuant to the Securities
Purchase Agreement.

               (viii) "Person" means an individual, a limited liability company,
a partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

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               (ix)  "Principal Market" means the Nasdaq National Market.

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

               (xi)  "Warrant" means this Warrant and all Warrants issued in
exchange, transfer or replacement of any thereof.

               (xii) "Warrant Exercise Price" shall be $5.45 per common share,
subject to adjustment as hereinafter provided.

     Section 2.  Exercise of Warrant.
                 -------------------

          (a) Subject to the terms and conditions hereof, this Warrant may be
exercised by the holder hereof then registered on the books of the Company, in
whole or in part, at any time on any business day on or after the opening of
business on the date hereof and prior to 11:59 P.M. Central Time on the
Expiration Date by (i) delivery of a written notice, in the form of the
subscription notice attached as Exhibit A hereto (the "Exercise Notice"), of
                                ---------
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which this Warrant is being exercised (plus any applicable issue or
transfer taxes) (the "Aggregate Exercise Price") in cash or by check or wire
transfer, and (iii) the surrender to a common carrier for delivery to the
Company as soon as practicable following such date, this Warrant (or an
indemnification undertaking with respect to this Warrant in the case of its
loss, theft or destruction); provided, that if such Warrant Shares are to be
issued in any name other than that of the registered holder of this Warrant,
such issuance shall be deemed a transfer and the provisions of Section 7 shall
be applicable.  In the event of any exercise of the rights represented by this
Warrant in compliance with this Section 2(a), a certificate or certificates for
the Warrant Shares so purchased, in such denominations as may be requested by
the holder hereof and registered in the name of, or as directed by, the holder,
shall be delivered at the Company's expense to, or as directed by, such holder
as soon as practicable, and in no event later than two business days, after the
Company's receipt of the Exercise Notice, the Aggregate Exercise Price and this
Warrant (or an indemnification undertaking with respect to this Warrant in the
case of its loss, theft or destruction).  Upon delivery of the Exercise Notice
and Aggregate Exercise Price referred to in clause (ii) above, the holder of
this Warrant shall be deemed for all corporate purposes to have become the
holder of record of the Warrant Shares with respect to which this Warrant has
been exercised, irrespective of the date of delivery of this Warrant as required
by clause (iii) above or the certificates evidencing such Warrant Shares.

          (b) Unless the rights represented by this Warrant shall have expired
or shall have been fully exercised, the Company shall, as soon as practicable
and in no event later than five (5) business days after any exercise and at its
own expense, issue a new Warrant identical in all respects to this Warrant
exercised except it shall represent rights to purchase the number of Warrant
Shares

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purchasable immediately prior to such exercise under this Warrant exercised,
less the number of Warrant Shares with respect to which such Warrant is
exercised.

          (c) No fractional shares of Common Stock are to be issued upon the
exercise of this Warrant, but rather the number of shares of Common Stock issued
upon exercise of this Warrant shall be rounded up or down to the nearest whole
number.

          (d) If the Company shall fail for any reason or for no reason to issue
to the holder on a timely basis as described in this Section 2, a certificate
for the number of shares of Common Stock to which the holder is entitled upon
the holder's exercise of this Warrant or a new Warrant for the number of shares
of Common Stock to which such holder is entitled pursuant to Section 2(b)
hereof, the Company shall, in addition to any other remedies under this Warrant
or the Securities Purchase Agreement or otherwise available to such holder,
including any indemnification under the Securities Purchase Agreement, pay as
additional damages in cash to such holder on each day the issuance of such
Common Stock certificate or new Warrant, as the case may be, is not timely
effected an amount equal to .25% of the product of (A) the sum of the number of
shares of Common Stock not issued to the holder on a timely basis and to which
the holder is entitled and/or, the number of shares represented by the portion
of this Warrant which is not being converted, as the case may be, and (B) the
average of the closing bid price of the Common Stock for the three consecutive
trading days immediately preceding the last possible date which the Company
could have issued such Common Stock or Warrant, as the case may be, to the
holder without violating this Section 2.

          (e) Limitation on Beneficial Ownership.  The Company shall not effect
              ----------------------------------
any exercise of this Warrant and no holder of this Warrant shall have the right
to exercise this Warrant pursuant to Section 2 to the extent that after giving
effect to such exercise such Person (together with such Person's affiliates) (A)
would beneficially own in excess of 4.9% of the outstanding shares of the Common
Stock following such exercise and (B) would have acquired, through exercise of
this Warrant or otherwise, in excess of  4.9% of the outstanding shares of the
Common Stock following such exercise during the 60-day period ending on and
including such date of exercise.  For purposes of the foregoing sentence, the
number of shares of Common Stock beneficially owned by a Person and its
affiliates or acquired by a Person and its affiliates, as the case may be, shall
include the number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is being made,
but shall exclude the number of shares of Common Stock which would be issuable
upon (i) exercise of the remaining, non-exercised Warrant beneficially owned by
such Person and its affiliates and (ii) exercise or conversion of the
unexercised or unconverted portion of any other securities of the Company
(including, without limitation, any warrants) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially
owned by such Person and its affiliates.  Except as set forth in the preceding
sentence, for purposes of this Section 2(e), beneficial ownership shall be
calculated in accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended.  Notwithstanding anything to the contrary contained herein,
each Exercise Notice shall constitute a representation by the holder submitting
such Exercise Notice that, after giving effect to such Exercise Notice, (A) the
holder will not beneficially own (as determined in accordance with this Section
2(e)) and (B) during the 60-day

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period ending on and including such date of exercise, the holder will not have
acquired, through exercise of this Warrant or otherwise, a number of shares of
Common Stock in excess of 4.9% of the outstanding shares of Common Stock as
reflected in the Company's most recent Form 10-Q or Form 10-K, as the case may
be, or more recent public press release or other public notice by the Company
setting forth the number of shares of Common Stock outstanding, but after giving
effect to exercise of this Warrant by such holder since the date as of which
such number of outstanding shares of Common Stock was reported.

     Section 3.  Covenants as to Common Stock.  The Company hereby covenants and
                 ----------------------------
agrees as follows:

          (a) This Warrant is, and any Warrant issued in substitution for or
replacement of this Warrant will upon issuance be, duly authorized and validly
issued.

          (b) All Warrant Shares which may be issued upon the exercise of the
rights represented by this Warrant will, upon issuance, be validly issued, fully
paid and nonassessable and free from all taxes, liens and charges with respect
to the issue thereof.

          (c) During the period within which the rights represented by this
Warrant may be exercised, the Company will at all times have authorized and
reserved at least 100% of the number of shares of Common Stock needed to provide
for the exercise of the rights then represented by this Warrant and the par
value of said shares will at all times be less than or equal to the applicable
Warrant Exercise Price.

          (d) The Company shall promptly secure the listing of the shares of
Common Stock issuable upon exercise of this Warrant upon each national
securities exchange or automated quotation system, if any, upon which shares of
Common Stock are then listed (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed, such listing of all shares of Common Stock from
time to time issuable upon the exercise of this Warrant; and the Company shall
so list on each national securities exchange or automated quotation system, as
the case may be, and shall maintain such listing of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed on such national securities
exchange or automated quotation system.

          (e) The Company will not, by amendment of its Articles of
Incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities, or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed by it hereunder, but will at all times in good faith
assist in the carrying out of all the provisions of this Warrant and in the
taking of all such action as may reasonably be requested by the holder of this
Warrant in order to protect the exercise privilege of the holder of this Warrant
against dilution or other impairment, consistent with the tenor and purpose of
this Warrant will take all such actions as may be necessary or appropriate in
order that the

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Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

     Section 4.  Taxes.  The Company shall pay any and all taxes which may be
                 -----
payable with respect to the issuance and delivery of Warrant Shares upon
exercise of this Warrant.

     Section 5.  Warrant Holder Not Deemed a Stockholder.  Except as otherwise
                 ---------------------------------------
specifically provided herein, no holder, as such, of this Warrant shall be
entitled to vote or receive dividends or be deemed the holder of shares of the
Company for any purpose, nor shall anything contained in this Warrant 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, give or withhold consent to any
corporate action (whether any reorganization, issue of stock, reclassification
of stock, consolidation, merger, conveyance or otherwise), receive notice of
meetings, receive dividends or subscription rights, or otherwise, prior to the
issuance to the holder of this Warrant of the Warrant Shares which he or she is
then entitled to receive upon the due exercise of this Warrant.  In addition,
nothing contained in this Warrant shall be construed as imposing any liabilities
on such holder to purchase any securities (upon exercise of this Warrant or
otherwise) or as a stockholder of the Company, whether such liabilities are
asserted by the Company or by creditors of the Company.  Notwithstanding this
Section 5, the Company will provide the holder of this Warrant with copies of
the same notices and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the stockholders.

     Section 6.  Representations of Holder.  The holder of this Warrant, by the
                 -------------------------
acceptance hereof, represents that it is acquiring this Warrant and the Warrant
Shares for its own account for investment only and not with a view towards, or
for resale in connection with, the public sale or distribution of this Warrant
or the Warrant Shares, except pursuant to sales registered or exempted under the
Securities Act; provided, however, that by making the representations herein,
the holder does not agree to hold this Warrant or any of the Warrant Shares for
any minimum or other specific term and reserves the right to dispose of this
Warrant and the Warrant Shares at any time in accordance with or pursuant to a
registration statement or an exemption under the Securities Act.  The holder of
this Warrant further represents, by acceptance hereof, that, as of this date,
such holder is an  "accredited investor" as such term is defined in Rule 501(a)
of Regulation D promulgated by the Securities and Exchange Commission under the
Securities Act (an "Accredited Investor").

     Section 7.  Ownership and Transfer.
                 ----------------------

          (a) The Company shall maintain at its principal executive offices (or
such other office or agency of the Company as it may designate by notice to the
holder hereof), a register for this Warrant, in which the Company shall record
the name and address of the person in whose name this Warrant has been issued,
as well as the name and address of each transferee.  The Company may treat the
person in whose name any Warrant is registered on the register as the owner and
holder thereof for all purposes, notwithstanding any notice to the contrary, but
in all events recognizing any transfers made in accordance with the terms of
this Warrant.

                                      -6-
<PAGE>

          (b) This Warrant and the rights granted to the holder hereof are
transferable, in whole or in part, upon surrender of this Warrant, together with
a properly executed warrant power in the form of Exhibit B attached hereto;
provided, however, that any transfer or assignment shall be subject to the
conditions set forth in Section 7(c) below.

          (c) The holder of this Warrant understands that this Warrant has not
been and is not expected to be, registered under the Securities Act or any state
securities laws, and may not be offered for sale, sold, assigned or transferred
unless (a) subsequently registered thereunder, or (b) such holder shall have
delivered to the Company an opinion of counsel, in generally acceptable form, to
the effect that the securities to be sold, assigned or transferred may be sold,
assigned or transferred pursuant to an exemption from such registration;
provided that (i) any sale of such securities made in reliance on Rule 144
promulgated under the Securities Act may be made only in accordance with the
terms of said Rule and further, if said Rule is not applicable, any resale of
such securities under circumstances in which the seller (or the person through
whom the sale is made) may be deemed to be an underwriter (as that term is
defined in the Securities Act) may require compliance with some other exemption
under the Securities Act or the rules and regulations of the Securities and
Exchange Commission thereunder; and (ii) neither the Company nor any other
person is under any obligation to register the Warrants under the Securities Act
or any state securities laws or to comply with the terms and conditions of any
exemption thereunder.

          (d) The Company is obligated to register the Warrant Shares for resale
under the Securities Act pursuant to the Registration Rights Agreement dated
June 12, 2000 by and between the Company and the Buyers listed on the signature
page thereto (the "Registration Rights Agreement") and the initial holder of
this Warrant (and certain assignees thereof) is entitled to the registration
rights in respect of the Warrant Shares as set forth in the Registration Rights
Agreement.

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<PAGE>

     Section 8.  Adjustment of Warrant Exercise Price and Number of Shares.  The
                 ---------------------------------------------------------
Warrant Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be adjusted from time to time as follows:

          (a)  Adjustment of Warrant Exercise Price and Number of Shares upon
               --------------------------------------------------------------
Issuance of Common Stock.  If and whenever on or after the date of issuance of
------------------------
this Warrant, the Company issues or sells, or in accordance with Section 8(b) is
deemed to have issued or sold, any shares of Common Stock (including the
issuance or sale of shares of Common Stock owned or held by or for the account
of the Company, but excluding shares of Common Stock deemed to have been issued
by the Company in connection with an Exempt Issuance or upon exercise or
conversion of the Other Securities) for a consideration per share less than the
Warrant Exercise Price in effect immediately prior to such time (the "Applicable
Price"), then immediately after such issue or sale the Warrant Exercise Price
then in effect shall be reduced to an amount equal to the product of (x) the
Warrant Exercise Price in effect immediately prior to such issue or sale and (y)
the quotient determined by dividing (1) the sum of (I) the product derived by
multiplying the Applicable Price by the number of shares of Common Stock Deemed
Outstanding immediately prior to such issue or sale, plus (II) the
consideration, if any, received by the Company upon such issue or sale, by (2)
the product derived by multiplying the (I) Applicable Price by (II) the number
of shares of Common Stock Deemed Outstanding immediately after such issue or
sale.  Upon each such adjustment of the Warrant Exercise Price hereunder, the
number of shares of Common Stock acquirable upon exercise of this Warrant shall
be adjusted to the number of shares determined by multiplying the Warrant
Exercise Price in effect immediately prior to such adjustment by the number of
shares of Common Stock acquirable upon exercise of this Warrant immediately
prior to such adjustment and dividing the product thereof by the Warrant
Exercise Price resulting from such adjustment.

          (b)  Effect on Warrant Exercise Price of Certain Events.  For purposes
               --------------------------------------------------
of determining the adjusted Warrant Exercise Price under Section 8(a) above, the
following shall be applicable:

               (i) Issuance of Options.  If the Company in any manner grants any
                   -------------------
Options and the lowest price per share for which one share of Common Stock is
issuable upon the exercise of any such Option or upon conversion or exchange of
any Convertible Securities issuable upon exercise of any such Option is less
than the Applicable Price, then such share of Common Stock shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share.  For purposes of this
Section 8(b)(i), the "lowest price per share for which one share of Common Stock
is issuable upon exercise of such Options or upon conversion or exchange of such
Convertible Securities" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect to any
one share of Common Stock upon the granting or sale of the Option, upon exercise
of the Option and upon conversion or exchange of any Convertible Security
issuable upon exercise of such Option. No further adjustment of the Warrant
Exercise Price shall be made upon the actual issuance of such Common Stock or of
such Convertible Securities upon the exercise of such Options or upon the actual
issuance of such Common Stock upon conversion or exchange of such

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Convertible Securities. Notwithstanding the foregoing, no adjustment shall be
made pursuant to this Section 8(b)(i) to the extent that such adjustment is
based solely on the fact that the Convertible Securities issuable upon exercise
of such Option are convertible into or exchangeable for Common Stock at a price
which varies with the market price of the Common Stock.

               (ii)  Issuance of Convertible Securities.  If the Company in any
                     ----------------------------------
manner issues or sells any Convertible Securities and the lowest price per share
for which one share of Common Stock is issuable upon such conversion or exchange
thereof is less than the Applicable Price, then such share of Common Stock shall
be deemed to be outstanding and to have been issued and sold by the Company at
the time of the issuance or sale of such Convertible Securities for such price
per share. For the purposes of this Section 8(b)(ii), the "lowest price per
share for which one share of Common Stock is issuable upon such conversion or
exchange" shall be equal to the sum of the lowest amounts of consideration (if
any) received or receivable by the Company with respect to one share of Common
Stock upon the issuance or sale of the Convertible Security and upon conversion
or exchange of such Convertible Security. No further adjustment of the Warrant
Exercise Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities, and if any such issue or
sale of such Convertible Securities is made upon exercise of any Options for
which adjustment of the Warrant Exercise Price had been or are to be made
pursuant to other provisions of this Section 8(b), no further adjustment of the
Warrant Exercise Price shall be made by reason of such issue or sale.
Notwithstanding the foregoing, no adjustment shall be made pursuant to this
Section 8(b)(ii) to the extent that such adjustment is based solely on the fact
that such Convertible Securities are convertible into or exchangeable for Common
Stock at a price which varies with the market price of the Common Stock.

               (iii) Change in Option Price or Rate of Conversion.  If the
                     --------------------------------------------
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock changes at any time, the Warrant Exercise Price
in effect at the time of such change shall be adjusted to the Warrant Exercise
Price which would have been in effect at such time had such Options or
Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold and the number of shares of Common Stock
acquirable hereunder shall be correspondingly readjusted.  For purposes of this
Section 8(b)(iii), if the terms of any Option or Convertible Security that was
outstanding as of the date of issuance of this Warrant are changed in the manner
described in the immediately preceding sentence, then such Option or Convertible
Security and the Common Stock deemed issuable upon exercise, conversion or
exchange thereof shall be deemed to have been issued as of the date of such
change.  No adjustment shall be made if such adjustment would result in an
increase of the Warrant Exercise Price then in effect.

               (iv)  Treatment of Expired Options and Unexercised Convertible
                     --------------------------------------------------------
Securities.  If, in any case, the total number of shares of Common Stock
----------
issuable upon the exercise of any Option or upon exercise, conversion or
exchange of any Convertible Security is not, in fact, issued and the rights to
exercise such Option or to exercise, convert or exchange such Convertible

                                      -9-
<PAGE>

Securities shall have expired or terminated, the Warrant Exercise Price then in
effect will be readjusted to the Warrant Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination (other than in respect of the actual number of shares
of Common Stock issued upon exercise or conversion thereof) never been issued.

          (c)  Effect on Warrant Exercise Price of Certain Events.  For purposes
               --------------------------------------------------
of determining the adjusted Warrant Exercise Price under Sections 8(a) and 8(b),
the following shall be applicable:

               (i)  Calculation of Consideration Received.  In case any Option
                    -------------------------------------
is issued in connection with the issue or sale of other securities of the
Company, together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $.01. If any Common
Stock, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the amount received by the Company therefor before deduction of reasonable
commissions, underwriting discounts or allowances or other similar reasonable
expenses incurred by the Company.  If any Common Stock, Options or Convertible
Securities are issued or sold for a consideration other than cash, the amount of
such consideration received by the Company will be the fair value of such
consideration, except where such consideration consists of securities, in which
case the amount of consideration received by the Company will be the market
price of such securities for the twenty (20) consecutive trading days
immediately preceding the date of receipt.  If any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity in
connection with any merger in which the Company is the surviving entity, the
amount of consideration therefor will be deemed to be the fair value of such
portion of the net assets and business of the non-surviving entity as is
attributable to such Common Stock, Options or Convertible Securities, as the
case may be.  The fair value of any consideration other than cash or securities
will be determined jointly by the Company and the holders of Warrants
representing a majority of the shares of Common Stock obtainable upon exercise
of the Warrants then outstanding.  If such parties are unable to reach agreement
within ten (10) days after the occurrence of an event requiring valuation (the
"Valuation Event"), the fair value of such consideration will be determined
within five business days after the tenth (10th) day following the Valuation
Event by an independent, reputable appraiser jointly selected by the Company and
the holders of Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Warrants then outstanding.  The determination of
such appraiser shall be final and binding upon all parties and the fees and
expenses of such appraiser shall be borne by the Company.

               (ii) Record Date.  If the Company takes a record of the holders
                    -----------
of Common Stock for the purpose of entitling them (1) to receive a dividend or
other distribution payable in Common Stock, Options or in Convertible Securities
or (2) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date will be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon

                                      -10-
<PAGE>

the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

          (d)  Adjustment of Warrant Exercise Price upon Subdivision or
               --------------------------------------------------------
Combination of Common Stock.  If the Company at any time after the date of
---------------------------
issuance of this Warrant subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding shares of
Common Stock into a greater number of shares, the Warrant Exercise Price in
effect immediately prior to such subdivision will be proportionately reduced and
the number of shares of Common Stock obtainable upon exercise of this Warrant
will be proportionately increased.  If the Company at any time after the date of
issuance of this Warrant combines (by combination, reverse stock split or
otherwise) one or more classes of its outstanding shares of Common Stock into a
smaller number of shares, the Warrant Exercise Price in effect immediately prior
to such combination will be proportionately increased and the number of shares
of Common Stock obtainable upon exercise of this Warrant will be proportionately
decreased.

          (e)  Distribution of Assets.  If the Company shall declare or make any
               ----------------------
distribution of its assets (or rights to acquire its assets) to holders of
Common Stock as a partial liquidating dividend, by way of return of capital or
otherwise (including, without limitation, any distribution of cash, property or
securities of a subsidiary) (a "Distribution"), at any time after the issuance
of this Warrant, then, in each such case:

               (i)  the Warrant Exercise Price in effect immediately prior to
the close of business on the record date fixed for the determination of holders
of Common Stock entitled to receive the Distribution shall be reduced, effective
as of the close of business on such record date, to a price determined by
multiplying such Warrant Exercise Price by a fraction of which (A) the numerator
shall be the Closing bid price on the trading day immediately preceding such
record date minus the value of the Distribution (as determined in good faith by
the Company's Board of Directors) applicable to one share of Common Stock, and
(B) the denominator shall be the Closing bid price on the trading day
immediately preceding such record date; and

               (ii) either (A) the number of Warrant Shares obtainable upon
exercise of this Warrant shall be increased to a number of shares equal to the
number of shares of Common Stock obtainable immediately prior to the close of
business on the record date fixed for the determination of holders of Common
Stock entitled to receive the Distribution multiplied by the reciprocal of the
fraction set forth in the immediately preceding clause (i), or (B) in the event
that the Distribution is of common stock of a company whose common stock is
traded on a national securities exchange or a national automated quotation
system, then the holder of this Warrant shall receive an additional warrant to
purchase Common Stock, the terms of which shall be identical to those of this
Warrant, except that such warrant shall be exercisable into the amount of the
assets that would have been payable to the holder of this Warrant pursuant to
the Distribution had the holder exercised this Warrant immediately prior to such
record date and with an exercise price equal to the amount by which the exercise
price of this Warrant was decreased with respect to the Distribution pursuant to
the terms of the immediately preceding clause (i).

                                      -11-
<PAGE>

          (f)  Certain Events.  If any event occurs of the type contemplated by
               --------------
the provisions of this Section 8 but not expressly provided for by such
provisions (including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then the
Company's Board of Directors will make an appropriate adjustment in the Warrant
Exercise Price and the number of shares of Common Stock obtainable upon exercise
of this Warrant so as to protect the rights of the holders of the Warrants;
provided that no such adjustment will increase the Warrant Exercise Price or
decrease the number of shares of Common Stock obtainable as otherwise determined
pursuant to this Section 8.

          (g)  Notices.
               -------

               (i)   Immediately upon any adjustment of the Warrant Exercise
Price, the Company will give written notice thereof to the holder of this
Warrant, setting forth in reasonable detail, and certifying, the calculation of
such adjustment.

               (ii)  The Company will give written notice to the holder of this
Warrant at least twenty (20) days prior to the date on which the Company closes
its books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer to
holders of Common Stock or (C) for determining rights to vote with respect to
any Organic Change (as defined below), dissolution or liquidation, provided that
such information shall be made known to the public prior to or in conjunction
with such notice being provided to such holder.

               (iii) The Company will also give written notice to the holder of
this Warrant at least twenty (20) days prior to the date on which any Organic
Change, dissolution or liquidation will take place, provided that such
information shall be made known to the public prior to or in conjunction with
such notice being provided to such holder.

                                      -12-
<PAGE>

     Section 9.  Purchase Rights; Reorganization, Reclassification,
                 --------------------------------------------------
Consolidation, Merger or Sale.
-----------------------------

          (a) If at any time after the date hereof, the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of any
class of Common Stock (the "Purchase Rights"), then the holder of this Warrant
will be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Common Stock acquirable upon complete
exercise of this Warrant immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights, or, if no such record
is taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

          (b) Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's assets
to another Person or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as "Organic Change."  Prior to
the consummation of any (i) sale of all or substantially all of the Company's
assets to an acquiring Person or (ii) other Organic Change following which the
Company is not a surviving entity, the Company will use its best efforts to
secure from the Person purchasing such assets or the successor resulting from
such Organic Change (in each case, the "Acquiring Entity") written agreement (in
form and substance satisfactory to the holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of the Warrants
then outstanding) to deliver to each holder of Warrants in exchange for such
Warrants, a security of the Acquiring Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant and satisfactory to
the holders of the Warrants (including, an adjusted warrant exercise price equal
to the value for the Common Stock reflected by the terms of such consolidation,
merger or sale, and exercisable for a corresponding number of shares of Common
Stock acquirable and receivable upon exercise of the Warrants, if the value so
reflected is less than the Warrant Exercise Price in effect immediately prior to
such consolidation, merger or sale).  Prior to the consummation of any other
Organic Change, the Company shall use its best efforts to make appropriate
provision (in form and substance satisfactory to the holders of Warrants
representing a majority of the shares of Common Stock obtainable upon exercise
of the Warrants then outstanding) to insure that each of the holders of the
Warrants will thereafter have the right to acquire and receive in lieu of or in
addition to (as the case may be) the shares of Common Stock immediately
theretofore acquirable and receivable upon the exercise of such holder's
Warrants, such shares of stock, securities or assets that would have been issued
or payable in such Organic Change with respect to or in exchange  for the number
of shares of Common Stock which would have been acquirable and receivable upon
the exercise of such holder's Warrant as of the date of such Organic Change
(without taking into account any limitations or restrictions on the
exerciseability of this Warrant).

          (c) In the event the Company proposes to effect an Organic Change,
then in addition to any other rights the holder may have, the holder shall have
the right to effect a Cashless

                                      -13-
<PAGE>

Exercise (as defined below), by presentation and surrender of this Warrant to
the Company at its principal executive offices with a written notice of the
holder's intention to effect a Cashless Exercise, including a calculation of the
number of shares of Common Stock to be issued upon such exercise in accordance
with the terms hereof. A "Cashless Exercise" shall mean that, in lieu of paying
the Warrant Exercise Price in cash, the holder shall surrender this Warrant for
that number of Warrant Shares determined by subtracting from the number of
Warrant Shares otherwise issuable to the holder upon such exercise, an amount of
Warrant Shares (the "Surrendered Shares") having a closing bid price (as
reported by Bloomberg) on the date immediately preceding the date of the
exercise notice equal to the Aggregate Exercise Price (as defined in Section 2)
of the Warrant Shares for which this Warrant is being exercised; and thereafter
the Surrendered Shares shall no longer be available for issuance hereunder.

     Section 10.  Lost, Stolen, Mutilated or Destroyed Warrant.  If this Warrant
                  --------------------------------------------
is lost, stolen, mutilated or destroyed, the Company shall, on receipt of an
indemnification undertaking, issue a new Warrant of like denomination and tenor
as this Warrant so lost, stolen, mutilated or destroyed.

     Section 11.  Notice.  Any notices, consents, waivers or other
                  ------
communications required or permitted to be given under the terms of this Warrant
must be in writing and will be deemed to have been delivered:  (i) upon receipt,
when delivered personally; (ii) upon receipt, when sent by facsimile (provided
confirmation of transmission is mechanically  or electronically generated and
kept on file by the sending party); or (iii) one business day after deposit with
a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same.  The addresses and facsimile numbers
for such communications shall be:

          If to the Company:

               Data Race Inc.
               12400 Network Blvd.
               San Antonio, TX 78249-3341
               Telephone: (210) 263-2000
               Facsimile: (210) 558-0365
               Attention: Jim Scogin

          With copy to:

               Akin, Gump, Strauss, Hauer & Feld, L.L.P.
               300 Convent Street, Suite 1500
               San Antonio, Texas 78205
               Telephone: (210) 281-7000
               Facsimile: (210) 224-2035
               Attention: Pat Ryan, Esq.

                                      -14-
<PAGE>

If to a holder of this Warrant, to it at the address and facsimile number set
forth on the Schedule of Buyers to the Securities Purchase Agreement, with
copies to such holder's representatives as set forth on such Schedule of Buyers,
or at such other address and facsimile as shall be delivered to the Company upon
the issuance or transfer of this Warrant.  Each party shall provide five days'
prior written notice to the other party of any change in address or facsimile
number.  Written confirmation of receipt (A) given by the recipient of such
notice, consent, waiver or other communication, (B) mechanically or
electronically generated by the sender's facsimile machine containing the time,
date, recipient facsimile number and an image of the first page of such
transmission or (C) provided by a nationally recognized overnight delivery
service shall be rebuttable evidence of personal service, receipt by facsimile
or receipt from a nationally recognized overnight delivery service in accordance
with clause (i), (ii) or (iii) above, respectively.

     Section 12.  [Reserved.]

     Section 13.  Date.  The date of this Warrant is June 12, 2000.  This
                  ----
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 7 shall continue in full force and
effect after such date as to any Warrant Shares or other securities issued upon
the exercise of this Warrant.

     Section 14.  Amendment and Waiver.  Except as otherwise provided herein,
                  --------------------
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the written consent of the
holders of Warrants representing a majority of the shares of Common Stock
obtainable upon exercise of the Warrants then outstanding; provided that no such
action may increase the Warrant Exercise Price of the Warrants or decrease the
number of shares or class of stock obtainable upon exercise of any Warrants
without the written consent of the holder of such Warrant.

     Section 15.  Descriptive Headings; Governing Law.  The descriptive headings
                  -----------------------------------
of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant.  This Warrant
shall be governed by the internal laws of the State of Illinois, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Illinois or any other jurisdictions) that would cause the application
of the laws of any jurisdictions other than the State of Illinois.

                           [Signature Page Follows]

                                      -15-
<PAGE>

     This Warrant has been duly executed by the Company as of the date first set
forth above.

                                        DATA RACE INC.

                                        By: /s/ James G. Scogin
                                        Name: James G. Scogin
                                        Title: SVP - Chief Financial Officer

<PAGE>

                             EXHIBIT A TO WARRANT
                             --------------------

                               SUBSCRIPTION FORM

       TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS WARRANT

                                DATA RACE INC.

     The undersigned holder hereby exercises the right to purchase ____________
of the shares of Common Stock ("Warrant Shares") of Data Race Inc., a Texas
corporation (the "Company"), evidenced by the attached Warrant (the "Warrant").
Capitalized terms used herein and not otherwise defined shall have the
respective meanings set forth in the Warrant.

     1.  Payment of Warrant Exercise Price.  The holder shall pay the sum of
$___________________ to the Company in accordance with the terms of the Warrant.

     2.  Delivery of Warrant Shares.  The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the Warrant.

Date:____________ ____, _________

Name of Registered Holder

By:________________________
Name:______________________
Title:_____________________

<PAGE>

                             EXHIBIT B TO WARRANT
                             --------------------

                             FORM OF WARRANT POWER

FOR VALUE RECEIVED, the undersigned does hereby assign and transfer to
________________, Federal Identification No. __________, a warrant to purchase
____________ shares of the capital stock of Data Race Inc., a Texas corporation,
represented by warrant certificate no. _____, standing in the name of the
undersigned on the books of said corporation.  The undersigned does hereby
irrevocably constitute and appoint ______________, attorney to transfer the
warrants of said corporation, with full power of substitution in the premises.

Dated: _________, 200_

                                                       _________________________

                                                       By:______________________
                                                       Name:____________________
                                                       Title:___________________<PAGE>

                                                                     EXHIBIT 4.1

                          VESTA INSURANCE GROUP, INC.

                                      and

                          FIRST CHICAGO TRUST COMPANY

                                 Rights Agent

                               Rights Agreement

                           Dated as of June 15, 2000
<PAGE>

                              Table of Contents
                              -----------------

<TABLE>
<CAPTION>
                                                                                                                             Page
                                                                                                                             ----
<S>                                                                                                                          <C>
Section 1.   Certain Definitions........................................................................................       1
Section 2.   Appointment of Rights Agent................................................................................       5
Section 3.   Issue of Rights Certificates...............................................................................       5
Section 4.   Form of Rights Certificates................................................................................       7
Section 5.   Countersignature and Registration..........................................................................       8
Section 6.   Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed, Lost or Stolen
               Rights Certificates......................................................................................       8
Section 7.   Exercise of Rights; Purchase Price; Expiration Date of Rights..............................................       9
Section 8.   Cancellation and Destruction of Rights Certificates........................................................      11
Section 9.   Reservation and Availability of Capital Stock..............................................................      11
Section 10.  Preferred Stock Record Date................................................................................      12
Section 11.  Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights................................      13
Section 12.  Certificate of Adjusted Purchase Price or Number of Shares.................................................      20
Section 13.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power.......................................      21
Section 14.  Fractional Rights and Fractional Shares....................................................................      23
Section 15.  Rights of Action...........................................................................................      24
Section 16.  Agreement of Rights Holders................................................................................      24
Section 17.  Rights Certificate Holder Not Deemed a Stockholder.........................................................      25
Section 18.  Concerning the Rights Agent................................................................................      25
Section 19.  Merger or Consolidation or Change of Name of Rights Agent..................................................      26
</TABLE>

                                       i
<PAGE>

                               Table of Contents
                               -----------------
                                  (continued)

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Section 20.  Duties of Rights Agent........................................  26
Section 21.  Change of Rights Agent........................................  28
Section 22.  Issuance of New Rights Certificates...........................  29
Section 23.  Redemption and Termination....................................  29
Section 24.  Exchange......................................................  30
Section 25.  Notice of Certain Events......................................  31
Section 26.  Notices.......................................................  32
Section 27.  Supplements and Amendments....................................  33
Section 28.  Successors....................................................  33
Section 29.  Determination and Actions by the Board of Directors, etc......  33
Section 30.  Benefits of this Agreement....................................  34
Section 31.  Severability..................................................  34
Section 32.  Governing Law.................................................  34
Section 33.  Counterparts..................................................  34
Section 34.  Descriptive Headings..........................................  34
</TABLE>

                                      ii
<PAGE>

                                RIGHTS AGREEMENT

          RIGHTS AGREEMENT, dated as of June 15, 2000 (the "Agreement"), between
Vesta Insurance Group, Inc., a Delaware corporation (the "Company"), and First
Chicago Trust Company, a limited trust company incorporated under the laws of
the state of New York (the "Rights Agent").

                             W I T N E S S E T H:

          WHEREAS, on June 15, 2000 (the "Rights Dividend Declaration Date"),
the Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of Common
Stock (as hereinafter defined) of the Company outstanding at the Close of
Business on June 19, 2000, (the "Record Date"), each Right initially
representing the right to purchase one one-hundredth of a share of Series B
Junior Participating Preferred Stock of the Company having the rights, powers
and preferences set forth in the form of the Certificate of Designation attached
hereto as Exhibit A, upon the terms and subject to the conditions hereinafter
set forth (the "Rights"), and has further authorized the issuance of one Right
(as such number may hereinafter be adjusted pursuant to the provisions of
Section 11(p)) for each share of Common Stock of the Company issued between the
Record Date (whether originally issued or delivered from the Company's treasury)
and the earlier of the Distribution Date and the Expiration Date (as such terms
are hereinafter defined) or, in certain circumstances provided in Section 22,
after the Distribution Date;

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

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

          (a)   "Acquiring Person" shall mean any Person who or which, together
     with all Affiliates and Associates of such Person, shall be the Beneficial
     Owner of 10% or more of the shares of Common Stock then outstanding, but
     shall not include (i) the Company, (ii) any Subsidiary of the Company,
     (iii) any employee or director benefit plan or insurance agent plan of the
     Company or of any Subsidiary of the Company, (iv) any Person organized,
     appointed or established by the Company for or pursuant to the terms of any
     such plan or (v) any Excepted Person (but only to the extent provided in
     Section 1(h) herein). Notwithstanding the foregoing, no Person shall become
     an "Acquiring Person" as the result of an acquisition of shares of Common
     Stock by the Company which, by reducing the number of shares outstanding,
     increases the proportionate number of shares beneficially owned by such
     Person to 10% or more of the shares of Common Stock then outstanding;
     provided, however, that if a Person shall become the Beneficial
     --------  -------

<PAGE>

     Owner of 10% or more of the shares of Common Stock then outstanding by
     reason of share purchases by the Company and shall, after such share
     purchases by the Company, 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 or pursuant to
     a split or subdivision of the outstanding Common Stock), then such Person
     shall be deemed to be an "Acquiring Person". Notwithstanding the foregoing,
     if the Board of Directors of the Company determines in good faith that a
     Person who would otherwise be an "Acquiring Person" (as defined pursuant to
     the foregoing provisions of this paragraph (a)) has become such
     inadvertently, and such Person divests as promptly as practicable a
     sufficient number of shares of Common Stock or Series A Preferred Stock so
     that such Person would no longer be an "Acquiring Person" (as defined
     pursuant to the foregoing provisions of this paragraph (a)), then such
     Person shall not be deemed to be an "Acquiring Person" for any purposes of
     this Agreement.

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

          (c)   "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.

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

               (i)  which such Person or any of such Person's Affiliates or
          Associates, directly or indirectly, has the right to acquire (whether
          such right is exercisable immediately or only after the passage of
          time) pursuant to any agreement, arrangement or understanding (whether
          or not in writing) or upon the exercise of conversion rights
          (including, without limitation the conversion right of the Series A
          Convertible Preferred Stock), exchange rights, rights, warrants or
          options, or otherwise; provided, however, that a Person shall not be
                                 --------  -------
          deemed the "Beneficial Owner" of, or to "beneficially own," (A)
          securities tendered pursuant to a tender or exchange offer made by
          such Person or any of such Person's Affiliates or Associates until
          such tendered securities are accepted for purchase or exchange, or (B)
          securities issuable upon exercise of Rights at any time prior to the
          occurrence of a Triggering Event, or (C) securities issuable upon
          exercise of Rights from and after the occurrence of a Triggering Event
          which Rights were acquired by such Person or any such

2
<PAGE>

          Person's Affiliates or Associates prior to the Distribution Date or
          pursuant to Section 3(a) or Section 22 (the "Original Rights") or
          pursuant to Section 11(i) in connection with an adjustment made with
          respect to any Original Rights;

               (ii)   which such Person or any of such Person's Affiliates or
          Associates, directly or indirectly, has the right to vote or dispose
          of or has "beneficial ownership" of (as determined pursuant to Rule
          13d-3 of the General Rules and Regulations under the Exchange Act),
          including pursuant to any agreement, arrangement or understanding,
          whether or not in writing; provided, however, that a Person shall not
                                     --------  -------
          be deemed the "Beneficial Owner" of, or to "beneficially own," any
          security under this subparagraph (ii) as a result of an agreement,
          arrangement or understanding to vote such security if such agreement,
          arrangement or understanding: (A) arises solely from a revocable proxy
          given in response to a public proxy or consent solicitation made
          pursuant to, and in accordance with, the applicable provisions of the
          General Rules and Regulations under the Exchange Act, and (B) is not
          also then reportable by such Person on Schedule 13D under the Exchange
          Act (or any comparable or successor report); or

               (iii)  which are beneficially owned, directly or indirectly, by
          any other Person (or any Affiliate or Associate thereof) with which
          such Person (or any of such Person's Affiliates or Associates) has any
          agreement, arrangement or understanding (whether or not in writing),
          for the purpose of acquiring, holding, voting (except pursuant to a
          revocable proxy as described in the proviso to subparagraph (ii) of
          this paragraph (d)) or disposing of any voting securities of the
          Company;

     provided, however, that nothing in this paragraph (d) shall cause a Person
     --------  -------
     engaged in business as an underwriter of securities to be the "Beneficial
     Owner" of, or to "beneficially own," any securities acquired through such
     Person's participation in good faith in a firm commitment underwriting
     until the expiration of forty days after the date of such acquisition.

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

3
<PAGE>

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

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

          (h)   "Excepted Person" shall mean Birmingham Investment Group, LLC, a
     Delaware limited liability company ("BIG") to the extent such Person owns
     up to 2,950,000 shares of Series A Preferred Stock, any shares of Common
     Stock acquired by BIG as a result of the conversion of such Series A
     Preferred Stock, and any additional voting securities of the Company which
     are acquired by BIG (not exceeding 40% of the voting securities of the
     Company in the aggregate) if BIG has given the Company advance written
     notice of its intention to acquire such securities prior to agreeing to
     acquire such securities and has, as determined by a majority of the Board
     of Directors of the Company (excluding any member of the Board who is an
     Affiliate of or investor in BIG), fully complied with applicable law and
     the Convertible Preferred Stock Purchase Agreement entered into in June,
     1999 between the Company and BIG; provided, however, that this provision
                                       --------  -------
     shall not include any shares of equity securities owned by an Excepted
     Person which are not described above; and provided, further, that nothing
                                               --------  -------
     herein shall constitute a waiver of the requirements of Section 203 of the
     Delaware General Corporation Law, Article VIII 1/2 of the Illinois
     Insurance Code or any other applicable law except to the extent that the
     Company has agreed in writing to such waiver and such waiver is legally
     enforceable.

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

          (j)   "Preferred Stock" shall mean shares of Series B Junior
     Participating Preferred Stock, par value $.01 per share, of the Company,
     and, to the extent that there is not a sufficient number of shares of
     Series B Junior Participating Preferred Stock authorized to permit the full
     exercise of the Rights, any other series of preferred stock, par value $.01
     per share, of the Company designated for such purpose containing terms
     substantially similar to the terms of the Series B Junior Participating
     Preferred Stock.

4
<PAGE>

          (k)   "Section 11(a)(ii) Event" shall mean the event described in
     Section 11(a)(ii).

          (l)   "Series A Preferred Stock" shall mean the Series A Convertible
     Preferred Stock of the Company, par value $.01 per share.

          (m)   "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) under the
     Exchange Act) by the Company or an Acquiring Person that an Acquiring
     Person has become such.

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

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

          In addition, for purposes of this Agreement, the following terms have
the meanings indicated in specified sections of this Agreement:  (i) "Adjustment
Shares" shall have the meaning set forth in Section 11(a)(ii); (ii) "common
stock equivalents" shall have the meaning set forth in Section 11(a)(iii); (iii)
"current market price" shall have the meaning set forth in Section 11(d); (iv)
"Current Value" shall have the meaning set forth in Section 11(a)(iii); (v)
"Distribution Date" shall have the meaning set forth in Section 3(a); (vi)
"equivalent preferred stock" shall have the meaning set forth in Section 11(b);
(vii) "Exchange Ratio" shall have the meaning set forth in Section 24(a); (viii)
"Expiration Date" shall have the meaning set forth in Section 7(a); (ix) "Final
Expiration Date" shall have the meaning set forth in Section 7(a); (x) "NASDAQ"
shall have the meaning set forth in Section 11(d)(i); (xi) "Principal Party"
shall have the meaning set forth in Section 13(b); (xii) "Purchase Price" shall
have the meaning set forth in Section 4(a); (xiii) "Record Date" shall have the
meaning set forth in the recitals of this Agreement; (xiv) "Redemption Price"
shall have the meaning set forth in Section 23(a); (xv) "Rights" shall have the
meaning set forth in the recitals of this Agreement; (xvi) "Rights Certificates"
shall have the meaning set forth in Section 3(a); (xvii) "Rights Dividend
Declaration Date" shall have the meaning set forth in the recitals of this
Agreement; (xviii) "Section 11(a)(ii) Trigger Date" shall have the meaning set
forth in Section 11(a)(iii); (xix) "Section 13 Event" shall have the meaning set
forth in Section 13; (xx) "Spread" shall have the meaning set forth in Section
11(a)(iii); (xxi) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii); (xxii) "Summary of Rights" shall have the meaning set forth
in Section 3(b); and (xxiii) "Trading Day" shall have the meaning set forth in
Section 11(d)(i).

5
<PAGE>

          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, shall prior to the Distribution Date
also be the holders of the Common Stock) in accordance with the terms and
conditions of this Agreement, and the Rights Agent hereby accepts such
appointment.  The Company may from time to time appoint such Co-Rights Agents as
it may deem necessary or desirable upon ten (10) days prior written notice to
the Rights Agent.  The Rights Agent shall have no duty to supervise, and shall
in no event be liable for the acts or omissions of any such Co-Rights Agents.

          Section 3.    Issue of Rights Certificates.
                        ----------------------------

          (a)   Until the earlier of (i) the Close of Business on the tenth
Business day after the Stock Acquisition Date (or, if the tenth Business day
after the Stock Acquisition Date occurs before the Record Date, the Close of
Business on the Record Date) or (ii) the Close of Business on the tenth Business
Day (or such later date as may be determined by action of the Board of Directors
of the Company prior to such time as any Person becomes an Acquiring Person)
after the date that a tender or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee benefit plan or insurance
agent plan of the Company or of any Subsidiary of the Company, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a) of the General Rules and Regulations under the Exchange Act, if upon
consummation thereof, such Person would become an Acquiring Person (the earlier
of (i) and (ii) being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section 3) by the certificates for the Common Stock registered in the names of
the holders of the Common Stock (which certificates for Common Stock shall be
deemed also to be certificates for Rights) and not by separate certificates and
(y) the Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company).  As
soon as practicable after the Distribution Date, the Rights Agent will send by
first-class, insured, postage prepaid mail, to each record holder of the Common
Stock as of the Close of Business on the Distribution Date, at the address of
such holder shown on the records of the Company, one or more Rights
certificates, in substantially the form of Exhibit B (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein.  In the event that an adjustment in
the number of Rights per share of Common Stock has been made pursuant to Section
11, at the time of distribution of the Rights Certificates, the Company shall
make the necessary and appropriate rounding adjustments (in accordance with
Section 14(a)) so that Rights Certificates representing only whole numbers of
Rights are distributed and cash is paid in lieu of any fractional Rights.  As of
and after the Distribution Date, the Rights will be evidenced solely by such
Rights Certificates.

6
<PAGE>

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

          (c)   Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or from the Company's treasury)
after the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date or, in certain circumstances provided in Section 22, after the
Distribution Date.  Certificates representing such shares of Common Stock shall
also be deemed to be certificates for Rights, and shall bear a legend
substantially in the following form:

          This certificate also evidences and entitles the holder hereof to
     certain Rights as set forth in the Rights Agreement between Vesta
     Insurance Group, Inc. (the "Company") and First Chicago Trust Company
     (the "Rights Agent") dated as of June 15, 2000, 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 offices of the Company. Under certain
     circumstances, as set forth in the Rights Agreement, such Rights will
     be evidenced by separate certificates and will no longer be evidenced
     by this certificate. The Company will mail to the holder of this
     certificate a copy of the Rights Agreement, as in effect on the date
     of mailing, without charge promptly after receipt of a written request
     therefor. Under certain circumstances set forth in the Rights
     Agreement, Rights issued to, or held by, any Person who is, was or
     becomes an Acquiring Person or any Affiliate or Associate thereof (as
     such terms are defined in the Rights Agreement), whether currently
     held by or on behalf of such Person or by any subsequent holder, may
     become null and void.

With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the surrender
for transfer of any of such certificates shall also constitute the transfer of
the Rights associated with the Common Stock represented by such certificates.
In the event the Company purchases or acquires any shares of its Common Stock
after the Record Date but prior to the

7
<PAGE>

Distribution Date, any Rights associated with such shares shall be deemed
cancelled and retired so that the Company shall not be entitled to exercise any
Rights associated with shares of Common Stock that are not outstanding.

          Section 4.    Form of Rights Certificates.
                        ---------------------------

          (a)   The Rights Certificates (and the forms of election to purchase
and of assignment to be printed on the reverse thereof) shall each be
substantially in the form set forth in Exhibit B and may have such marks of
identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with any
rule or regulation of any stock exchange on which the Rights may from time to
time be listed, or to conform to usage.  Subject to the provisions of Section 11
and Section 22, the Rights Certificates, whenever distributed, shall be dated as
of the Record Date or, in the case of Rights with respect to shares of Common
Stock issued or becoming outstanding after the Record Date, the same date as the
date of the stock certificate evidencing such shares, and on their face 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 set forth
therein (such exercise price per one one-hundredth of a share, the "Purchase
Price"), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment from
time to time as provided in Sections 11 and 13(a).

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

8
<PAGE>

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

          The absence of the foregoing legend on any Rights Certificate shall in
no way affect any of the other provisions of this Agreement, including, without
limitation, the provisions of Section 7(e).

          Section 5.    Countersignature and Registration.
                        ---------------------------------

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

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

          Section 6.    Transfer, Split Up, Combination and Exchange of Rights
                        ------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.  (a)
----------------------------------------------------------------------
Subject to the provisions of Section 4(b), Section 7(e) and Section 14, at any
time after the Close of Business on the Distribution Date, and at or prior to
the Close of Business on the Expiration Date, any

9
<PAGE>

Rights Certificate or Certificates (other than Rights Certificates representing
Rights that have become null and void pursuant to Section 7(e) or that have been
exchanged pursuant to Section 24) may be transferred, split up, combined or
exchanged for another Rights Certificate or Certificates, entitling the
registered holder to purchase a like number of one one-hundredths of a share of
Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company or the Rights Agent shall reasonably request.
Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section
14 and Section 24, countersign and deliver to the Person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.

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

          Section 7.    Exercise of Rights; Purchase Price; Expiration Date of
                        ------------------------------------------------------
Rights.  (a)  Subject to Section 7(e), the registered holder of any Rights
------
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a))
in whole or in part at any time after the Distribution Date upon surrender of
the Rights Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the principal office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one one-hundredths of a share of Preferred Stock (or Common Stock,
other securities, cash or

10
<PAGE>

other assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earliest of (i) the Close of Business on June
15, 2010 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 or (iii) the time at which such Rights are
exchanged pursuant to Section 24 (the earliest of (i), (ii) and (iii) being
herein referred to as the "Expiration Date").

          (b)  The Purchase Price for each one one-hundredth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $30.00,
and shall be subject to adjustment from time to time as provided in Sections 11
and 13(a) and shall be payable in accordance with paragraph (c) below.

          (c)  Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one one-hundredth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax required to be
paid by the holder of the Rights Certificate in accordance with Section 9(e),
the Rights Agent shall, subject to Section 20(k), thereupon promptly (i) (A)
requisition from any transfer agent of the shares of Preferred Stock (or make
available, if the Rights Agent is the transfer agent for such shares)
certificates for the total number of one one-hundredths of a share of Preferred
Stock to be purchased and the Company hereby irrevocably authorizes its transfer
agent to comply with all such requests, or (B) if the Company shall have elected
to deposit the total number of shares of Preferred Stock issuable upon exercise
of the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one one-hundredths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii)) shall be made in cash or by certified bank check
or bank draft payable to the order of the Company. In the event that the Company
is obligated to issue other securities (including Common Stock) of the Company,
pay cash and/or distribute other property pursuant to Section 11(a), the Company
will make all arrangements necessary so that such other securities, cash and/or
other property are available for distribution by the Rights Agent, if and when
necessary to comply with the terms of this Agreement. The Company reserves the
right to require prior to the occurrence of a Triggering Event that, upon any
exercise

11
<PAGE>

of Rights, a number of Rights be exercised so that only whole shares of
Preferred Stock would be issued.

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

          (e)  Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a) (ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(A) a transfer (whether or not for consideration) from the Acquiring Person (or
any Affiliate or Associate thereof) to holders of equity interests in such
Acquiring Person (or any Affiliate or Associate thereof) or to any Person with
whom the Acquiring Person (or any Affiliate or Associate thereof) has any
continuing agreement, arrangement or understanding regarding the transferred
Rights or (B) a transfer which the Board of Directors of the Company has
determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
ensure that the provisions of this Section 7(e) and Section 4(b) are complied
with, but neither the Company nor the Rights Agent shall have any liability to
any holder of Rights Certificates or other Person as a result of the Company's
failure to make any determinations with respect to an Acquiring Person or any of
its Affiliates, Associates or transferees hereunder.

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

          Section 8.     Cancellation and Destruction of Rights Certificates.
                         ---------------------------------------------------
All Rights Certificates surrendered for the purpose of exercise, transfer, split
up, combination or exchange

12
<PAGE>

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

          Section 9.     Reservation and Availability of Capital Stock. (a) The
                         ---------------------------------------------
Company covenants and agrees that it will cause to be reserved and kept
available out of its authorized and unissued shares of Preferred Stock (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or other
securities) that, as provided in this Agreement, including Section 11(a)(iii),
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
occurrence of a Triggering Event, Common Stock and/or other securities) issuable
and deliverable upon the exercise of the Rights may be listed on any national
securities exchange or the NASDAQ National Market (or any successor), the
Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange or the NASDAQ National Market, upon official notice of issuance
upon such exercise.

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

13
<PAGE>

announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. In addition, if the Company shall determine that a
registration statement is required following the Distribution Date, and a
Section 11(a)(ii) Event has not occurred, the Company may temporarily suspend
(and shall give the Rights Agent prompt notice thereof) the exercisability of
Rights until such time as a registration statement has been declared effective.
Notwithstanding any provision of this Agreement to the contrary, the Rights
shall not be exercisable in any jurisdiction if the requisite qualification or
exemption in such jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law or a registration statement
shall not have been declared effective.

          (d)  The Company covenants and agrees that it will take all such
actions as may be necessary to ensure that all one one-hundredths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, shares of
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.

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

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

14
<PAGE>

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

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

          (a)   (i) In the event the Company shall at any time after the date of
     this Agreement (A) declare a dividend on the Preferred Stock payable in
     shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
     (C) combine the outstanding Preferred Stock into a smaller number of
     shares, or (D) issue any shares of its capital stock in a reclassification
     of the Preferred Stock (including any such reclassification in connection
     with a consolidation or merger in which the Company is the continuing or
     surviving corporation), except as otherwise provided in this Section 11(a)
     and Section 7(e), the Purchase Price in effect at the time of the record
     date for such dividend or of the effective date of such subdivision,
     combination or reclassification, and the number and kind of shares of
     Preferred Stock or capital stock, as the case may be, issuable on such
     date, shall be proportionately adjusted so that the holder of any Right
     exercised after such time shall be entitled to receive, upon payment of the
     Purchase Price then in effect, the aggregate number and kind of shares of
     Preferred Stock or capital stock, as the case may be, which, if such Right
     had been exercised immediately prior to such date and at a time when the
     Preferred Stock transfer books of the Company were open, such holder would
     have owned upon such exercise and been entitled to receive by virtue of
     such dividend, subdivision, combination or reclassification. If an event
     occurs which would require an adjustment under both this Section 11(a)(i)
     and Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i)
     shall be in addition to, and shall be made prior to, any adjustment
     required pursuant to Section 11(a)(ii).

          (ii)  Subject to Section 24, in the event any Person becomes an
     Acquiring Person, then each holder of a Right (except as provided below and
     in Section 7(e)) shall thereafter have the right to receive, upon exercise
     thereof at a price equal to the then current Purchase Price in accordance
     with the terms of this Agreement, in lieu

15
<PAGE>

     of a number of one one-hundredths of a share of Preferred Stock, such
     number of shares of Common Stock of the Company as shall equal the result
     obtained by (x) multiplying the then current Purchase Price by the then
     number of one one-hundredths of a share of Preferred Stock for which a
     Right was exercisable immediately prior to the first occurrence of a
     Section 11(a)(ii) Event and (y) dividing that product (which, following
     such first occurrence shall thereafter be referred to as the "Purchase
     Price" for each Right and for all purposes of this Agreement) by 50% of the
     current market price (determined pursuant to Section 11(d)) per share of
     Common Stock on the date of such first occurrence (such number of shares,
     the "Adjustment Shares").

          (iii)  In the event that the number of shares of Common Stock which
     are authorized by the Company's certificate of incorporation but not
     outstanding or reserved for issuance for purposes other than upon exercise
     of the Rights, is not sufficient to permit the exercise in full of the
     Rights in accordance with the foregoing subparagraph (ii) of this Section
     11(a), the Company shall: (A) determine the value of the Adjustment Shares
     issuable upon the exercise of a Right (the "Current Value"), and (B) with
     respect to each Right, make adequate provision to substitute for the
     Adjustment Shares, upon the exercise of a Right and payment of the
     applicable Purchase Price, (1) cash, (2) a reduction in the Purchase Price,
     (3) Common Stock or other equity securities of the Company (including,
     without limitation, shares, or units of shares, of preferred stock, such as
     the Preferred Stock, which the Board of Directors of the Company has deemed
     to have substantially the same value or economic rights as shares of Common
     Stock (such shares or units of shares of preferred stock, "common stock
     equivalents")), (4) debt securities of the Company, (5) other assets, or
     (6) any combination of the foregoing, having an aggregate value equal to
     the Current Value (less the amount of any reduction in the Purchase Price),
     where such aggregate value has been determined by the Board of Directors of
     the Company based upon the advice of a nationally recognized investment
     banking firm selected by the Board of Directors of the Company; provided,
                                                                     --------
     however, if the Company shall not have made adequate provision to deliver
     -------
     value pursuant to clause (B) above within thirty (30) days following the
     later of (x) the first occurrence of a Section 11(a)(ii) Event and (y) the
     date on which the Company's right of redemption pursuant to Section 23(a)
     expires (the later of (x) and (y) being referred to herein as the "Section
     11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver,
     upon the surrender for exercise of a Right and without requiring payment of
     the Purchase Price, shares of Common Stock (to the extent available) and
     then, if necessary, cash, which shares and/or cash have an aggregate value
     equal to the Spread. For purposes of the preceding sentence, the term
     "Spread" shall mean the excess of (i) the Current Value over (ii) the
     Purchase Price. If the Board of Directors

16
<PAGE>

     of the Company 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, 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, the
     "Substitution Period"). To the extent the Company determines that action
     should be taken pursuant to the first and/or third sentences of this
     Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e),
     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 such stockholder approval for such
     authorization of additional shares and/or to decide the appropriate form of
     distribution to be made pursuant to such first sentence and to determine
     the value thereof. In the event of any such suspension, the Company shall
     issue a public announcement stating that the exercisability of the Rights
     has been temporarily suspended, as well as a public announcement at such
     time as the suspension is no longer in effect (with prompt notice of such
     announcements to the Rights Agent). For purposes of this Section
     11(a)(iii), the value of each Adjustment Share shall be the current market
     price (as determined pursuant to Section 11(d)) per share of Common Stock
     on the Section 11(a)(ii) Trigger Date and the value of any "common stock
     equivalent" shall be deemed to equal the current market price (as
     determined pursuant to Section 11(d)) per share of the Common Stock on such
     date.

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

17
<PAGE>

preferred stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In case such
subscription price may be paid by delivery of consideration part or all of which
may be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Shares of
Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustment
shall be made successively whenever such a record date is fixed, and in the
event that such rights, 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 a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of indebtedness, cash (other than a regular periodic
cash dividend out of the earnings or retained earnings of the Company), assets
(other than a dividend payable in Preferred Stock, but including any dividend
payable in stock other than Preferred Stock) or subscription rights or warrants
(excluding those referred to in Section 11(b)), the Purchase Price to be in
effect after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined pursuant to
Section 11(d)) per share of Preferred Stock 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 and shall be binding on the Rights Agent and the holders of the
Rights) of the portion of the cash, assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Preferred Stock and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d)) per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.

          (d)  (i) For the purpose of any computation hereunder, other than
     computations made pursuant to Section 11(a)(iii), the "current market
     price" per share of Common Stock on any date shall be deemed to be the
     average of the daily closing prices per share of such Common Stock for the
     thirty (30) consecutive Trading Days immediately prior to but not including
     such date, and for purposes of computations made pursuant to Section
     11(a)(iii), the "current market price" per share of Common Stock on any
     date shall be deemed to be the average of the daily closing prices per
     share of such Common Stock for the ten (10) consecutive Trading Days
     immediately following but not including

18
<PAGE>

     such date; provided, however, that in the event that the current market
                --------  -------
     price per share of the Common Stock is determined during a period following
     the announcement by the issuer of such Common Stock of (A) a dividend or
     distribution on such Common Stock payable in shares of such Common Stock or
     securities convertible into shares of such Common Stock (other than the
     Rights), or (B) any subdivision, combination or reclassification of such
     Common Stock, and the ex-dividend date for such dividend or distribution,
     or the record date for such subdivision, combination or reclassification
     shall not have occurred prior to the commencement of the requisite thirty
     (30) Trading Day or ten (10) Trading Day period, as set forth above, then,
     and in each such case, the "current market price" shall be properly
     adjusted to take into account any trading during the period prior to such
     ex-dividend date or record date. The closing price for each day shall be
     the last sale price, regular way, or, in case no such sale takes place on
     such day, the average of the closing bid and asked prices, regular way, in
     either case as reported in the principal consolidated transaction reporting
     system with respect to securities listed or admitted to trading on the New
     York Stock Exchange or, if the shares of Common Stock are not listed or
     admitted to trading on the New York Stock Exchange, as reported in the
     principal consolidated transaction reporting system with respect to
     securities listed on the principal national securities exchange on which
     the shares of Common Stock are listed or admitted to trading or, if the
     shares of Common Stock are not listed or admitted to trading on any
     national securities exchange, the last quoted price or, if not so quoted,
     the average of the high bid and low asked prices in the over-the-counter
     market, as reported by the National Association of Securities Dealers, Inc.
     Automated Quotation System ("NASDAQ") or such other quotation system then
     in use, or, if on any such date the shares of Common Stock are not quoted
     by any such organization, the average of the closing bid and asked prices
     as furnished by a professional market maker making a market in the Common
     Stock selected by the Board of Directors of the Company. If on any such
     date no market maker is making a market in the Common Stock, the fair value
     of such shares on such date as determined in good faith by the Board of
     Directors of the Company shall be used. The term "Trading Day" shall mean a
     day on which the principal national securities exchange on which the shares
     of Common Stock are listed or admitted to trading is open for the
     transaction of business or, if the shares of Common Stock are not listed or
     admitted to trading on any national securities exchange, a Business Day. If
     the Common Stock is not publicly held or not so listed or traded, "current
     market price" per share shall mean the fair value per share as determined
     in good faith by the Board of Directors of the Company, whose determination
     shall be described in a statement filed with the Rights Agent and shall be
     conclusive for all purposes.

          (ii) For the purpose of any computation hereunder, the "current market
     price" per share of Preferred Stock shall be determined in the same manner
     as set forth above for the Common Stock in clause (i) of this Section 11(d)
     (other than the last

19
<PAGE>

     sentence thereof). If the current market price per share of Preferred Stock
     cannot be determined in the manner provided above, or if the Preferred
     Stock is not publicly held or listed or traded in a manner described in
     clause (i) of this Section 11(d), the "current market price" per share of
     Preferred Stock shall be conclusively deemed to be an amount equal to 100
     (as such number may be appropriately adjusted for such events as stock
     splits, stock dividends and recapitalizations with respect to the Common
     Stock occurring after the date of this Agreement) multiplied by the current
     market price per share of the Common Stock. If neither the Common Stock nor
     the Preferred Stock is publicly held or so listed or traded, "current
     market price" per share of the Preferred Stock shall mean the fair value
     per share as determined in good faith by the Board of Directors of the
     Company, whose determination shall be described in a statement filed with
     the Rights Agent and shall be binding on the Rights Agent and the holders
     of the Rights. For all purposes of this Agreement, the "current market
     price" of one one-hundredth of a share of Preferred Stock shall be equal to
     the "current market price" of one share of Preferred Stock divided by 100.

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

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

          (g)   All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable

20
<PAGE>

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-hundredths of a
share of Preferred Stock (calculated to the nearest one-millionth) obtained by
(i) multiplying (x) the number of one one-hundredths of a share covered by a
Right immediately prior to this adjustment, by (y) the Purchase Price in effect
immediately prior to such adjustment of the Purchase Price, and (ii) dividing
the product so obtained by the Purchase Price in effect immediately after such
adjustment of the Purchase Price.

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

21
<PAGE>

          (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 Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-hundredth of a
share and the number of one one-hundredths of a share which were expressed in
the initial Rights Certificates issued hereunder.

          (k)   Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-hundredths of a share of Preferred 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 at such adjusted
Purchase Price.

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

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

          (n)   The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)),
(ii) merge with or into any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o)), or

22
<PAGE>

(iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o)), if (x) at the time of or immediately after such
consolidation, merger, sale or transfer there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger, sale or transfer, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.

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

          (p)  In the event that the Company shall at any time after the Rights
Dividend Declaration Date and prior to the Distribution Date (i) declare a
dividend on the outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide the outstanding shares of Common Stock, or (iii) combine
the outstanding shares of Common Stock into a smaller number of shares, the
number of Rights associated with each share of Common Stock then outstanding, or
issued or delivered thereafter but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal the result
obtained by multiplying the number of Rights associated with each share of
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Common Stock outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of shares of Common Stock outstanding immediately
following the occurrence of such event.

          Section 12.    Certificate of Adjusted Purchase Price or Number of
                         ---------------------------------------------------
Shares.  Whenever an adjustment is made as provided in Section 11 or Section 13,
------
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts and computations accounting for
such adjustment, (b) promptly file with the Rights Agent, and with each transfer
agent for the Preferred Stock and the Common Stock, a copy of such certificate,
and (c) if a Distribution Date has occurred, mail a brief summary thereof to
each holder of a Rights Certificate in accordance with Section 26.  The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not

23
<PAGE>

be deemed to have knowledge of such adjustment unless and until it shall have
received such certificate.

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

          (a)   In the event that, following the Stock Acquisition Date,
directly or indirectly, (x) the Company shall consolidate with, or merge with
and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o)), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction which complies
with Section 11(o)) shall engage in a share exchange with or shall consolidate
with, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in
connection with such share exchange, consolidation or merger, all or part of the
outstanding shares of Common Stock shall be changed into or exchanged for stock
or other securities of any other Person or cash or any other property, or (z)
the Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o)) (any event
described in clauses (x), (y) or (z) of this Section 13(a) following the Stock
Acquisition Date, a "Section 13 Event"), then, and in each such case, proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e), shall thereafter have the right to receive upon the exercise
thereof at the then current Purchase Price in accordance with the terms of this
Agreement, in lieu of a number of one one-hundredths of a share of Preferred
Stock, such number of validly authorized and issued, fully paid, nonassessable
and freely tradeable shares of Common Stock of the Principal Party (as such term
is hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal or other adverse claims, as shall be equal to the result obtained by (l)
multiplying the then current Purchase Price by the number of one one-hundredths
of a share of Preferred Stock for which a Right is exercisable immediately prior
to the first occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event
has occurred prior to the first occurrence of a Section 13 Event, multiplying
the number of such one one-hundredths of a share of Preferred Stock for which a
Right was exercisable immediately prior to the first occurrence of a Section
11(a)(ii) Event by the Purchase Price in effect immediately prior to such first
occurrence), and dividing that product (which, following the first occurrence of
a Section 13 Event, shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the current market price
(determined pursuant to Section 11(d)(i)) per share of the Common Stock of such
Principal Party on the date of consummation of such Section 13 Event; (ii) such
Principal Party shall thereafter be liable for, and shall assume, by virtue of

24
<PAGE>

such Section 13 Event, all the obligations and duties of the Company pursuant to
this Agreement; (iii) the term "Company" shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of
Section 11 shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to its
shares of Common Stock thereafter deliverable upon the exercise of the Rights;
and (v) the provisions of Section 11(a)(ii) shall be of no effect following the
first occurrence of any Section 13 Event.

          (b)     "Principal Party" shall mean:

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

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

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

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

25
<PAGE>

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

          (ii)  use its best efforts to qualify or register the Rights and the
     securities purchasable upon exercise of the Rights under blue sky laws of
     such jurisdiction, as may be necessary or appropriate; and

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

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

26
<PAGE>

          Section 14.    Fractional Rights and Fractional Shares.
                         ---------------------------------------

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

          (b)   The Company shall not be required to issue fractions of shares
of Preferred Stock (other than fractions 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).  Fractions of shares of Preferred Stock in integral
multiples of one one-hundredth of a share may, at the election of the Company,
be evidenced by depositary receipts pursuant to an appropriate agreement between
the Company and a depositary selected by it; provided, however, that such
                                             --------  -------
agreement shall provide that the holders of such depositary receipts shall have
all the rights, privileges and preferences to which they are entitled as
beneficial owners of the shares 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 Rights Certificates at the time such Rights are exercised
as herein provided an amount in cash equal to the same fraction of the current
market value of one one-hundredth of a share of Preferred Stock.  For purposes
of this Section 14(b), the current market value of one one-hundredth of a share
of Preferred Stock shall

27
<PAGE>

be one one-hundredth of the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(ii)) for the Trading Day immediately prior
to the date of such exercise.

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

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

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

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

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

28
<PAGE>

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

          (c)   subject to Section 6(a) and Section 7(f), the Company and the
     Rights Agent may deem and treat the person in whose name a Rights
     Certificate (or, prior to the Distribution Date, the associated Common
     Stock certificate) is registered as the absolute owner thereof and of the
     Rights evidenced thereby (notwithstanding any notations of ownership or
     writing on the Rights Certificates or the associated Common Stock
     certificates made by anyone other than the Company or the Rights Agent) for
     all purposes whatsoever, and neither the Company nor the Rights Agent,
     subject to the last sentence of Section 7(e), shall be required to be
     affected by any notice to the contrary; and

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

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

29
<PAGE>

          Section 18.    Concerning the Rights Agent.
                         ---------------------------

          (a)   The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the preparation, execution,
delivery and amendment of this Agreement and the exercise and performance of its
duties hereunder.  The Company also agrees to indemnify the Rights Agent for,
and to hold it harmless against, any loss, liability, damage, judgment, fine,
penalty, claim, demand, settlement, cost or expense incurred without gross
negligence, bad faith or willful misconduct on the part of the Rights Agent for
any action taken, suffered or omitted by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability in the premises.

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

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

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

30
<PAGE>

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

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

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

          (b)   Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "current market price") be proved or established by the Company
prior to taking or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically prescribed) may be
deemed to be conclusively proved and established by a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the Company and
delivered to the Rights Agent; and such certificate shall be full authorization
and protection to the Rights Agent, and the Rights Agent shall incur no
liability for or in respect of any action taken, suffered or omitted by it in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.

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

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

31
<PAGE>

          (e)   The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Rights Certificate;
nor shall it be responsible for any adjustment required under the provisions of
Section 11, Section 13 or Section 24 or responsible for the manner, method or
amount of any such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.

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

          (g)   The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company,
and to apply to such officers for advice or instructions in connection with its
duties, and it shall incur no liability for or in respect of any action taken,
suffered or omitted by it in good faith in accordance with instructions of any
such officer.

          (h)   The Rights Agent and any stockholder, director, Affiliate,
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 Person.

          (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

32
<PAGE>

attorneys or agents, and the Rights Agent shall not be answerable or accountable
for any act, default, neglect or misconduct of any such attorneys or agents or
for any loss to the Company resulting from any such act, default, neglect or
misconduct; provided, however, that reasonable care was exercised in the
            --------  -------
selection and continued employment thereof.

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

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

          Section 21.    Change of Rights Agent.  The Rights Agent or any
                         ----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty (30) days' notice in writing mailed to the Company, and to
each transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail.  The Company may remove the Rights Agent or any successor Rights Agent
upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Stock and Preferred Stock, by registered or certified mail, and to the
holders of the Rights Certificates by first-class mail.  If the Rights Agent
shall resign or be removed or shall otherwise become incapable of acting, the
Company shall appoint a successor to the Rights Agent.  If the Company shall
fail to make such appointment within a period of thirty (30) days after giving
notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
any registered holder of a Rights Certificate (who shall, with such notice,
submit such holder's Rights Certificate for inspection by the Company), then any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent.  Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be (i) a
Person organized and doing business under the laws of the United States or of
the State of Alabama or the State of New York (or of any other state of the
United States so long as such Person is authorized to do business in the State
of Alabama or the State of New York), in good standing, having an office or
agency in the State of Alabama or the State of New York, which is authorized
under such laws to exercise stock transfer powers and is subject to supervision
or examination by federal or state authority and which has at the time of its

33
<PAGE>

appointment as Rights Agent a combined capital and surplus of at least
$50,000,000 or (ii) an Affiliate of such Person. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further reasonable assurance, conveyance, act or deed
necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock and the
Preferred Stock, and mail a notice thereof in writing to the registered holders
of the Rights Certificates. Failure to give any notice provided for in this
Section 21 or any defect therein shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

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

34
<PAGE>

          Section 23.    Redemption and Termination.
                         --------------------------

          (a)   The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the Close of Business on the tenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the Close of Business on the tenth day
following the Record Date), or (ii) the Final Expiration Date, redeem all but
not less than all of the then outstanding Rights at a redemption price of $.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding anything contained in this Agreement to the contrary, the Rights
shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company's right of redemption hereunder has expired.  The
Company may, at its option, pay the Redemption Price in cash, shares of Common
Stock (based on the "current market price", as defined in Section 11(d)(i), of
the Common Stock at the time of redemption) or any other form of consideration
deemed appropriate by the Board of Directors.  The redemption of the Rights 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 action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held.  Promptly after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to the Rights Agent and to all such holders at each holder's
last address as it appears upon the registry books of the Rights Agent or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Stock.  Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice.  Each such notice
of redemption will state the method by which the payment of the Redemption Price
will be made.

35
<PAGE>

          Section 24.    Exchange.
                         --------

          (a)   The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person, exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become null and void pursuant to the provisions of Section 7(e)) for shares
of Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio").  Notwithstanding the
foregoing, the Board of Directors of the Company shall not be empowered to
effect such exchange at any time after any Person (other than the Company, any
Subsidiary of the Company, any employee benefit plan of the Company or of any
Subsidiary of the Company, or any Person organized, appointed or established by
the Company for or pursuant to the terms of any such plan), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of fifty
percent (50%) or more of the Common Stock then outstanding.

          (b)   Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (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 any 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 (with prompt
notice thereof to the Rights Agent) of any exchange; provided, however, that the
                                                     --------  -------
failure to give, or any defect in, such notice shall not affect the validity of
such exchange.  The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights 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 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 will be effected pro rata based on the number of Rights (other than
Rights which have become null and void pursuant to the provisions of Section
7(e)) held by each holder of Rights.

          (c)   In any exchange pursuant to this Section 24, the Company, at its
option, may substitute shares of Preferred Stock (or equivalent preferred stock,
as such term is defined in paragraph (b) of Section 11) for shares of Common
Stock exchangeable for Rights, at the initial rate of one one-hundredth of a
share of Preferred Stock (or equivalent preferred stock) for each share of
Common Stock, as appropriately adjusted to reflect adjustments in the voting
rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a share of Preferred

36
<PAGE>

Stock delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.

          (d)   In the event that there shall not be sufficient shares of Common
Stock issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with this Section 24, the
Company shall take all such actions as may be necessary to authorize additional
shares of Common Stock for issuance upon exchange of the Rights.

          (e)   The Company shall not be required to issue fractions of shares
of Common Stock or to distribute certificates which evidence fractional shares
of Common Stock.  In lieu of such fractional shares of Common Stock, there shall
be paid to the registered holders of the Rights 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.  For the purposes of this subsection (e), the current
market value of a whole share of Common Stock shall be the closing price of a
share of Common Stock (as determined pursuant to the second sentence of Section
11(d)(i)) for the Trading Day immediately prior to the date of exchange pursuant
to this Section 24.

37
<PAGE>

          Section 25.    Notice of Certain Events.
                         ------------------------

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

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

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

38
<PAGE>

          Vesta Insurance Group, Inc.
          3760 River Run Drive
          Birmingham, Alabama 35243
          Attention:  General Counsel and Secretary

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

          First Chicago Trust Company
          c/o Equiserve
          525 Washington Blvd.
          Third Floor
          Jersey City, N.J.  07310
          Attention: Director, Corporate Actions

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

          Section 27.    Supplements and Amendments.  The Company may from time
                         --------------------------
to time supplement or amend this Agreement without the approval of any holders
of Rights Certificates in order to cure any ambiguity, to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provision herein, or to make any other provisions with respect to the
Rights which the Company may deem necessary or desirable, any such supplement or
amendment to be evidenced by a writing signed by the Company and the Rights
Agent; provided, however, that from and after such time as any Person becomes an
       --------  -------
Acquiring Person, this Agreement shall not be amended in any manner which would
adversely affect the interests of the holders of Rights.  Prior to the
Distribution Date, the interest of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.  Without limiting
the foregoing, the Company may at any time prior to such time as any Person
becomes an Acquiring Person amend this Agreement to lower the thresholds set
forth in Sections 1(a) and 3(a) to a percentage that (subject to exceptions for
specified Persons or groups excepted from the definition of "Acquiring Person")
is not less than the greater of (i) the sum of .001% and the largest percentage
of the outstanding shares of Common Stock then known by the Company to be
beneficially owned by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan or insurance agent plan of the Company or of
any

39
<PAGE>

Subsidiary of the Company, any Person organized, appointed or established by the
Company for or pursuant to the terms of any such plan or, to the extent excepted
from the definition of "Acquiring Person and required by contractual obligations
to which the Company is a party", other specified Persons or groups) and (ii)
10.0%.

          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.    Determination and Actions by the Board of Directors,
                         ----------------------------------------------------
etc.  For all purposes of this Agreement, any calculation of the number of
---
shares of Common Stock or any other class of 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)(l)(i) of the
General Rules and Regulations under the Exchange Act.  The Board of Directors of
the Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board of Directors 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, but not limited to, a
determination to redeem or not redeem the Rights or to amend this Agreement).
All such actions, calculations, interpretations and determinations (including,
for purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors of the Company in good faith
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other Persons, and (y) not subject the Board of
Directors of the Company to any liability to the holders of the Rights.

          Section 30.    Benefits of this Agreement.  Nothing in this Agreement
                         --------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).

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

40
<PAGE>

invalidated; provided, however, that notwithstanding anything in this Agreement
             --------  -------
to the contrary, if any such term, provision, covenant or restriction is held by
such court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 shall
be reinstated and shall not expire until the Close of Business on the tenth day
following the date of such determination by the Board of Directors of the
Company.

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

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

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

41
<PAGE>

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

Witness:                             VESTA INSURANCE GROUP, INC.

By: /s/ Nancy Norred                    By: /s/ Donald W. Thornton
   --------------------------------        -------------------------------
   Name:  Nancy Norred                     Name:  Donald W.  Thornton
                                           Title: Senior Vice President, General
                                                  Counsel & Secretary

Witness:                             FIRST CHICAGO TRUST COMPANY

By: /s/ Mark Gherzo                     By: /s/ Michael S. Duncan
   --------------------------------        -------------------------------
   Name:  Mark Gherzo                      Name:  Michael S.  Duncan
   Title: Assistant Vice President,        Title: Director, Corporate Actions
          Corporate Actions

42
<PAGE>

                                                                       Exhibit A
                                                                       ---------

                           CERTIFICATE OF DESIGNATION

                                      OF

                 SERIES B JUNIOR PARTICIPATING PREFERRED STOCK

                                      OF

                          VESTA INSURANCE GROUP, INC.

                        Pursuant to Section 151 of the

               General Corporation Law of the State of Delaware

          The undersigned does hereby certify that the following resolution was
duly adopted by the Board of Directors of Vesta Insurance Group, Inc., a
Delaware corporation (the "Corporation"), on June 15, 2000:

          RESOLVED, that pursuant to the authority vested in the board of
directors of the Corporation by the Certificate of Incorporation, as amended
(the "Charter"), the Board of Directors does hereby create, authorize and
provide for the issue of a series of Preferred Stock, par value $.01 per share,
of the Corporation, to be designated "Series B Junior Participating Preferred
Stock" (hereinafter referred to as the "Series B Preferred Stock"), initially
consisting of 300,000 shares, and to the extent that the designations, powers,
preferences and relative and other

                                      A-1
<PAGE>

special rights and the qualifications, limitations or restrictions of the Series
B Preferred Stock are not stated and expressed in the Charter, does hereby fix
and herein state and express such designations, powers, preferences and relative
and other special rights and the qualifications, limitations and restrictions
thereof, as follows (all terms used herein which are defined in the Charter
shall be deemed to have the meanings provided therein):

          Section 1.  Designation and Amount.  The shares of such series shall
                      ----------------------
be designated as "Series B Junior Participating Preferred Stock" and the number
of shares constituting such series shall be 300,000.

          Section 2.  Dividends and Distributions.
                      ---------------------------

          (A)  Subject to the prior and superior rights of the holders of any
shares of any series of Preferred Stock ranking prior and superior to the shares
of Series B Preferred Stock with respect to dividends, the holders of shares of
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 first business day of January, April,
July and October in each year (each such date being referred to herein as a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of a share or fraction of a share of
Series B Preferred Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (a) $1.00 or (b) subject to the provision for adjustment
hereinafter set forth, 100 times the aggregate per share amount of all cash
dividends, plus 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 or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series B Preferred Stock.  In the event the Corporation
shall at any time after June 15, 2000 (the "Rights Declaration Date") (i)
declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each 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 Corporation shall declare a dividend or distribution on the
Series B Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided, however, that, in the event no
                                    --------  -------
dividend or distribution shall have been declared on the Common Stock during

                                      A-2
<PAGE>

the period between any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, subject to the prior and superior rights of the
holders of any shares of any series of Preferred Stock ranking prior to and
superior to the shares of Series B Preferred Stock with respect to dividends, a
dividend of $1.00 per share on the Series B Preferred Stock shall nevertheless
by payable on such subsequent Quarterly Dividend Payment Date.

          (C)  Dividends shall begin to accrue and be cumulative on outstanding
shares of Series B Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series B Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series B Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date.  Accrued but unpaid dividends shall
not bear interest.  Dividends paid on the shares of Series 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 no more than 60 days prior to the date fixed
for the payment thereof.

          Section 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,
each share of Series B Preferred Stock shall entitle the holder thereof to 100
votes on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the 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 or by law, the holders of
shares of Series B Preferred Stock and the holders of shares of Common Stock
shall vote collectively as one class on all matters submitted to a vote of
stockholders of the Corporation.

                                      A-3
<PAGE>

          (C)   (i)  If at any time dividends on any Series B Preferred Stock
shall be in arrears in an amount equal to six (6) quarterly dividends thereon,
the occurrence of such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time when all accrued
and unpaid dividends for all previous quarterly dividend periods and for the
current quarterly dividend period on all shares of Series B Preferred Stock then
outstanding shall have been declared and paid or set apart for payment.  During
each default period, all holders of Preferred Stock (including holders of the
Series B Preferred Stock) with dividends in arrears in an amount equal to six
(6) quarterly dividends thereon, voting as a class, irrespective of series,
shall have the right to elect two (2) Directors.

          (ii)  During any default period, such voting right of the holders of
     Series B Preferred Stock may be exercised initially at a special meeting
     called pursuant to subparagraph (iii) of this Section 3(C) or at any annual
     meeting of stockholders, and thereafter at annual meetings of stockholders,
     provided that such voting right shall not be exercised unless the holders
     of ten percent (10%) in number of shares of Preferred Stock outstanding
     shall be present in person or by proxy. The absence of a quorum of the
     holders of Common Stock shall not affect the exercise by the holders of
     Preferred Stock of such voting rights. At any meeting at which the holders
     of Preferred Stock shall exercise such voting right initially during an
     existing default period, they shall have the right, voting as a class, to
     elect Directors to fill such vacancies, if any, in the Board of Directors
     as may then exist up to two (2) Directors or, if such right is exercised at
     an annual meeting, to elect two (2) Directors. If the number which may be
     so elected at any special meeting does not amount to the required number,
     the holders of the Preferred Stock shall have the right to make such
     increase in the number of Directors as shall be necessary to permit the
     election by them of the required number. After the holders of the Preferred
     Stock shall have exercised their right to elect Directors in any default
     period and during the continuance of such period, the number of Directors
     shall not be increased or decreased except by vote of the holders of
     Preferred Stock as herein provided or pursuant to the rights of any equity
     securities ranking senior to or pari passu with the Series B Preferred
                                     ---- -----
     Stock.

          (iii) Unless the holders of Preferred Stock shall, during an existing
     default period, have previously exercised their right to elect Directors,
     the Board of Directors may order, or any stockholder or stockholders owning
     in the aggregate not less than ten percent (10%) of the total number of
     shares of Preferred Stock outstanding, irrespective of series, may request,
     the calling of special meeting of the holders of Preferred Stock, which
     meeting shall thereupon be called by the Chairman of the Board, the
     President, a Vice President or the Secretary of the Corporation. Notice of
     such meeting and of any annual meeting at which holders of Preferred Stock
     are entitled to vote pursuant to this paragraph (C)(iii) shall be given to
     each holder of record of Preferred Stock by mailing a copy of such notice
     to him or her at his or her last address as the same appears on the books
     of the Corporation. Such meeting shall be called for a time not earlier
     than 10 days and not later than 50 days after

                                      A-4
<PAGE>

     such order or request, or in default of the calling of such meeting within
     50 days after such order or request, such meeting may be called on similar
     notice by any stockholder or stockholders owning in the aggregate not less
     than ten percent (10%) of the total number of shares of Preferred Stock
     outstanding. Notwithstanding the provisions of this paragraph (C)(iii), no
     such special meeting shall be called during the period within 50 days
     immediately preceding the date fixed for the next annual meeting of the
     stockholders.

          (iv) In any default period, the holders of Common Stock, and, if
     applicable, other classes of capital stock of the Corporation, shall
     continue to be entitled to elect the whole number of Directors until the
     holders of Preferred Stock shall have exercised their right to elect two
     (2) Directors voting as a class, after the exercise of which right (x) the
     Directors so elected by the holders of Preferred Stock shall continue in
     office until their successors shall have been elected by such holders or
     until the expiration of the default period, and (y) any vacancy in the
     Board of Directors may (except as provided in paragraph (C)(ii) of this
     Section 3) be filled by vote of a majority of the remaining Directors
     theretofore elected by the holders of the class of capital stock which
     elected the Director whose office shall have become vacant. References in
     this paragraph (C) to Directors elected by the holders of a particular
     class of stock shall include Directors appointed by such Directors to fill
     vacancies as provided in clause (y) of the foregoing sentence.

          (v)  Immediately upon the expiration of a default period, (x) the
     right of the holders of Preferred Stock as a class to elect Directors shall
     cease, (y) the term of any Directors elected by the holders of Preferred
     Stock as a class shall terminate, and (z) the number of Directors shall be
     such number as may be provided for in the certificate of incorporation or
     by-laws irrespective of any increase made pursuant to the provisions of
     paragraph (C)(ii) of this Section 3 (such number being subject, however, to
     change thereafter in any manner provided by law or in the certificate of
     incorporation or by-laws). Any vacancies in the Board of Directors effected
     by the provisions of clauses (y) and (z) in the preceding sentence may be
     filled by a majority of the remaining Directors.

          (D)  Except as set forth herein, 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.

          Section 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 declared, on shares of Series B Preferred Stock outstanding shall have
been paid in full, the Corporation shall not:

                                      A-5
<PAGE>

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

          (ii)  declare or pay dividends on or make any other distributions on
     any shares of stock ranking on a parity (either as to dividends or upon
     liquidation, dissolution or winding up) with the Series B 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 capital stock ranking on a parity (either as to dividends or
     upon liquidation, dissolution or winding up) with the Series B Preferred
     Stock, provided that the Corporation may at any time redeem, purchase or
     otherwise acquire shares of any such parity stock in exchange for shares of
     any capital stock of the Corporation ranking junior (either as to dividends
     or upon dissolution, liquidation or winding up) to the Series B Preferred
     Stock; or

          (iv)  purchase or otherwise acquire for consideration any shares of
     Series B Preferred Stock, or any shares of capital stock ranking on a
     parity 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 Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 4, purchase or otherwise acquire such shares at such time and in
such manner.

                                      A-6
<PAGE>

          Section 5.  Reacquired Shares.
                      -----------------

          Any shares of Series B Preferred Stock purchased or otherwise acquired
by the Corporation in any manner whatsoever shall be retired and cancelled
promptly after the acquisition thereof.  All such shares shall upon their
cancellation 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 the conditions and
restrictions on issuance set forth herein.

          Section 6.  Liquidation, Dissolution or Winding Up.
                      --------------------------------------

          (A)  Upon any liquidation (voluntary or otherwise), dissolution or
winding up of the Corporation, no distribution shall be made to the holders of
shares of capital stock ranking junior (either as to dividends or 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 declared, to the date of such payment
(the "Series B Liquidation Preference").  Following the payment of the full
amount of the Series B Liquidation Preference, no additional distributions shall
be made to the holders of shares of Series B Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series B Liquidation Preference by (ii) 100 (as appropriately adjusted as
set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number").  Following the payment of the
full amount of the Series B Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series B Preferred Stock and Common Stock,
respectively, and the payment of liquidation preferences of all other shares of
capital stock which rank prior to or on a parity with Series B Preferred Stock,
holders of Series B Preferred Stock and holders of shares of Common Stock shall
receive their ratable and proportionate share of the remaining assets to be
distributed in the ratio of the Adjustment Number to 1 with respect to such
Preferred Stock and Common Stock, on a per share basis, respectively.

          (B)  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 series of Preferred Stock, if any,
which rank on a parity with the Series B Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of such parity shares in
proportion to their respective liquidation preferences.  In the event, however,
that there are not sufficient assets available to permit payment in full of the
Common Adjustment, then such remaining assets shall be distributed ratably to
the holders of Common Stock.

          (C)  In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the

                                      A-7
<PAGE>

outstanding Common Stock, or (iii) combine the outstanding Common Stock into a
smaller number of shares, then in each such case the Adjustment Number in effect
immediately prior to such event shall be adjusted by multiplying such Adjustment
Number by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

          Section 7.  Consolidation, Merger, etc.
                      --------------------------

          In case the Corporation shall enter into any consolidation, merger,
combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or securities, cash and/or any other
property, then in any such case the shares of Series B Preferred Stock shall at
the same time be similarly exchanged or changed into an amount per share
(subject to the provision for adjustment hereinafter set forth) equal to 100
times the aggregate amount of capital stock, securities, cash and/or any other
property (payable in kind), as the case may be, for which or into which each
share of Common Stock is exchanged or changed.  In the event the Corporation
shall at any time after the Rights Declaration Date (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount set forth in the preceding
sentence with respect to the 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.

          Section 8.  No Redemption.
                      -------------

          The shares of Series B Preferred Stock shall not be redeemable.

          Section 9.  Ranking.
                      -------

          The Series B Preferred Stock shall rank junior to all other series of
the Corporation's Preferred Stock as to the payment of dividends and the
distribution of assets, whether or not upon the dissolution, liquidation or
winding up of the Corporation, unless the terms of any such series shall provide
otherwise.

          Section 10.  Amendment.
                       ---------

          The Charter shall not be amended in any manner which would materially
alter or change the powers, preferences or special rights of the Series B
Preferred Stock so as to affect them adversely without the affirmative vote of
the holders of a majority of the outstanding shares of Series B Preferred Stock,
voting separately as a class.

                                      A-8
<PAGE>

          Section 11.  Fractional Shares.
                       -----------------

          Series B Preferred Stock may be issued in fractions of a share which
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.

                                      A-9
<PAGE>

          IN WITNESS WHEREOF, Vesta Insurance Group, Inc.  has caused its
corporate seal to be hereunto affixed and this certificate to be signed by
          , its           , and the same to be attested to by           , its
          , this ____ day of June, 2000.

                                    VESTA INSURANCE GROUP, INC.

                                    By:________________________________
                                       Name:
                                       Title:

(Corporate Seal)

Attest:

                                      A-10
<PAGE>

                                                                       Exhibit B
                                                                       ---------

                         [Form of Rights Certificate]

Certificate No. R-                                             __________ Rights

NOT EXERCISABLE AFTER ________ __, 2010 OR EARLIER IF REDEEMED OR EXCHANGED BY
THE COMPANY. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY,
AT $.01 PER RIGHT, AND TO EXCHANGE ON THE TERMS SET FORTH IN THE RIGHTS
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON (AS SUCH TERM IS DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE RIGHTS
REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A
PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT).
ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY
BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.]

*

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

                                      B-1
<PAGE>

                               Rights Certificate

                          VESTA INSURANCE GROUP, 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 June 15, 2000 (the "Rights Agreement"), between Vesta
Insurance Group, Inc., a Delaware corporation (the "Company"), and
_______________________, a ________ corporation (the "Rights Agent"), to
purchase from the Company at any time prior to 5:00 P.M. (central time) on June
15, 2010 at the office or offices of the Rights Agent designated for such
purpose, or its successors as Rights Agent, one one-hundredth of a fully paid,
nonassessable share of Series B Junior Participating Preferred Stock, par value
$.01 per share (the "Preferred Stock"), of the Company, at a purchase price of
$30 per one one-hundredth of a share (the "Purchase Price"), upon presentation
and surrender of this Rights Certificate with the Form of Election to Purchase
and related Certificate duly executed. The number of Rights evidenced by this
Rights Certificate (and the number of shares which may be purchased upon
exercise thereof) set forth above, and the Purchase Price per share set forth
above, are the number and Purchase Price as of June 15, 2000, based on the
Preferred Stock as constituted at such date. The Company reserves the right to
require prior to the occurrence of a Triggering Event (as such term is defined
in the Rights Agreement) that, upon any exercise of Rights, a number of Rights
be exercised so that only whole shares of Preferred Stock will be issued.

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

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

          This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full

                                      B-2
<PAGE>

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

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

          Subject to the provisions of the Rights Agreement, the Rights
evidenced by this Certificate may, in each case at the option of the Company, be
(i) redeemed by the Company at its option at a redemption price of $.01 per
Right or (ii) exchanged in whole or in part for shares of Common Stock or other
securities of the Company. Immediately upon the action of the Board of Directors
of the Company authorizing redemption, the Rights will terminate and the only
right of the holders of Rights will be to receive the redemption price.

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

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

                                      B-3
<PAGE>

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

                                      B-4
<PAGE>

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

Dated as of _______ __, ____

ATTEST:                             VESTA INSURANCE GROUP, INC.

______________________________      By:____________________________
Secretary                              Name:
                                       Title:

Countersigned:

[RIGHTS AGENT]

By:

   Authorized Signature

                                      B-5
<PAGE>

                 [Form of Reverse Side of Rights Certificate]

                              FORM OF ASSIGNMENT

               (To be executed by the registered holder if such

              holder desires to transfer the Rights Certificate.)

FOR VALUE RECEIVED ________________________________________ hereby sells,

assigns and transfers unto _______________________________________________

__________________________________________________________________________
          (Please print name and address of transferee)

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

Dated: ___________________, ____

                                      _____________________________
                                      Signature

Signature Guaranteed:

                                    Certificate

          The undersigned hereby certifies by checking the appropriate boxes
that:

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

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

Dated: ___________________, ____    _____________________________
                                    Signature

                                      B-6
<PAGE>

Signature Guaranteed:

                                      B-7
<PAGE>

                                     NOTICE

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

                          FORM OF ELECTION TO PURCHASE

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

TO:  VESTA INSURANCE GROUP, INC.

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

Please insert social security
or other identifying number: ______________________

________________________________________________________________
                    (Please print name and address)
________________________________________________________________

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

Please insert social security
or other identifying number: ______________________

_________________________________________________________________
               (Please print name and address)
_________________________________________________________________

Dated: ______________, ____

                                     _____________________________
                                     Signature

                                      B-8
<PAGE>

Signature Guaranteed:

                                      B-9
<PAGE>

                                  Certificate

          The undersigned hereby certifies by checking the appropriate boxes
that:

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

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

Dated: ___________________, ____   ______________________________
                                    Signature

Signature Guaranteed:

                                    NOTICE

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

                                      B-10
<PAGE>

                                                                       Exhibit C
                                                                       ---------

                 SUMMARY OF RIGHTS TO PURCHASE PREFERRED STOCK

          On June 15, 2000, the board of directors of Vesta Insurance Group,
Inc. ("Vesta") adopted a stockholders rights plan and declared a dividend
distribution of one right for each outstanding share of Vesta's common stock to
stockholders of record at the close of business on June 19, 2000.  Each right
will entitle its holder, under the circumstances described below, to purchase
from us one one-hundredth of a share of our Series B Junior Participating
Preferred Stock at an exercise price of $30 per right, subject to adjustment.
The description and terms of the rights are set forth in a rights agreement
between us and __________________________, as rights agent.

          Initially, the rights will be associated with our common stock and
evidenced by common stock certificates, which will contain a notation
incorporation the rights agreement by reference, and will be transferred with
and only with underlying shares of common stock.  Subject to certain exceptions,
the rights will become exercisable and trade separately from the common stock
only upon the "distribution date", will occur upon the earlier of:

     .    10 days following a public announcement that a person or group of
          affiliated or associated persons (an "acquiring person") has acquired,
          or obtained the right to acquire, beneficial ownership of 10% or more
          of Vesta's outstanding shares of common stock (the "stock acquisition
          date"), or

     .    10 business days (or later date if determined by Vesta's board of
          directors prior to such time as any person or group becomes an
          acquiring person) following the commencement of a tender offer or
          exchange offer which, if consummated, would result in a person or
          group becoming an acquiring person.

          Until the distribution date, the surrender for transfer of any shares
of common stock outstanding will also constitute the transfer of the rights
associated with those shares.

          As soon as practicable after the distribution date, separate
certificates or book-entry statements will be mailed to holders of record of the
common stock as of the close of business on the distribution date.  From and
after the distribution date, the separate rights certificates or book-entry
statements alone will represent the rights.  Except as otherwise provided in the
rights agreement, only shares of common stock issued prior to the distribution
date will be issued with rights.

                                      C-1
<PAGE>

          The rights are not exercisable until the distribution date and will
expire at the close of business on June 15, 2010, unless earlier redeemed or
exchanged by us as described below.

          In the event that a person or group becomes an acquiring person (a
"flip-in event"), each holder of a right (other than any acquiring person and
certain related parties, whose rights automatically become null and void) will
have the right to receive, upon exercise, common stock having a value equal to
two times the exercise price of the right.  If an insufficient number of shares
of common stock is available for issuance, then Vesta's board of directors would
be required to substitute cash, property or other securities of Vesta for the
common stock.  The rights may not be exercised following a flip-in event while
Vesta has the ability to cause the rights to be redeemed, as described later in
this summary.

          For example, at an exercise price of $30 per right, each right not
owned by an acquiring person (or by certain related parties) following a flip-in
event would entitle its holder to purchase $60 worth of common stock (or other
consideration, as noted above) for $30.  Assuming that the common stock had a
per share value of $15 at that time, the holder of each valid right would be
entitled to purchase two shares of Common Stock for $15.

          In the event (a "flip-over event") that, at any time following the
stock acquisition date:

     .    Vesta is acquired in a merger or other business combination
          transaction in which Vesta is not the surviving corporation,

     .    Vesta is acquired in a merger or other business combination
          transaction in which it is the surviving entity and all or part of its
          common stock is converted into securities of another entity, cash or
          other property, or

     .    50% or more of Vesta's assets or earning power is sold or transferred,

each holder of a right (except rights which previously have been voided as
described above) will have the right to receive, upon exercise, common stock of
the acquiring company having a value equal to two times the exercise price of
the right.  Flip-in events and flip-over events are collectively referred to as
"triggering events".

          The exercise 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:

     .    in the event of a stock dividend on, or a subdivision, combination or
          reclassification of, the preferred stock,

                                      C-2
<PAGE>

     .    if holders of the preferred stock are granted certain rights, options
          or warrants to subscribe for preferred stock or convertible securities
          at less than the current market price of the preferred stock, or

     .    upon the distribution to holders of the preferred stock of evidences
          of indebtedness or assets (excluding regular quarterly cash dividends)
          or of subscription rights or warrants (other than those referred to
          above).

          With certain exceptions, no adjustment in the exercise price will be
required until cumulative adjustments amount to at least 1% of the exercise
price.  No fractional shares of preferred stock will be issued and, 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.

          In general, Vesta may redeem the rights in whole, but not in part, at
a price of $.01 per right (subject to adjustment and payable in cash, common
stock or other consideration deemed appropriate by Vesta's board of directors)
at any time until ten days following the stock acquisition date.  Immediately
upon the action of the board of directors authorizing any redemption, the rights
will terminate and the only right of the holders of rights will be to receive
the redemption price.

          At any time after there is an acquiring person and prior to the
acquisition by the acquiring person of 50% or more of the outstanding shares of
common stock, we may exchange the rights (other than rights owned by the
acquiring person 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 Vesta's preferred stock
having equivalent rights, preferences and privileges), per right (subject to
adjustment).

          Until a right is exercised, its holder will have no rights as a
stockholder of Vesta, including, without limitation, the right to vote or to
receive dividends.  While the distribution of the rights will not result in the
recognition of taxable income by Vesta or its stockholders, stockholders may,
depending upon the circumstances, recognize taxable income after a triggering
event.

          The terms of the rights may be amended by Vesta's board of directors
without the consent of the holders of the rights including an amendment to lower
certain thresholds described above to not less than the greater of 10% or .001%
more than the largest percentage of the outstanding shares of common stock then
known to us to be beneficially owned by any person or group of affiliated or
associated persons.  Once there is an acquiring person, however, no amendment
can adversely affect the interests of the holders of the rights.

                                      C-3
<PAGE>

          A copy of the rights agreement is available free of charge from the
rights agent.  This description of the rights does not purport to be complete
and is qualified in its entirety by reference to the rights agreement, which is
incorporated herein by reference.

                                      C-4

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