Document:

<PAGE>
                                                                    EXHIBIT 10.4

                              RITE AID CORPORATION

                                  $200,000,000

                        4.75% Convertible Notes Due 2006

                               Purchase Agreement

                                                             New York, New York
                                                              November 13, 2001

Salomon Smith Barney Inc.
J.P. Morgan Securities Inc.
As Representatives of the Initial Purchasers
c/o Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York  10013

Ladies and Gentlemen:

                  Rite Aid Corporation, a corporation organized under the laws
of Delaware (the "Company"), proposes to issue and sell to the several parties
named in Schedule I hereto (the "Initial Purchasers"), for whom you (the
"Representatives") are acting as representatives, $200,000,000 principal amount
of its 4.75% Convertible Notes Due 2006 (the "Firm Securities"), and, at the
election of the Initial Purchasers, up to an aggregate of $50,000,000 additional
principal amount thereof (the "Optional Securities") (the Firm Securities and
any Optional Securities which the Initial Purchasers elect to purchase pursuant
to this Agreement being collectively referred to as the "Securities")
convertible into Common Stock, par value $1.00 ("Stock"), of the Company.

                  The Securities are to be issued under an indenture (the
"Indenture"), to be dated as of November 19, 2001, between the Company and BNY
Midwest Trust Company, as trustee (the "Trustee"). The Securities have the
benefit of a Registration Rights Agreement (the "Registration Rights
Agreement"), to be dated as of November 19, 2001, among the Company and the
Initial Purchasers, pursuant to which the Company has agreed to file with the
United States Securities and Exchange Commission (the "Commission") under the
circumstances set forth therein a shelf registration statement (the "Shelf
Registration Statement") pursuant to Rule 415 of the Securities Act (as defined)
relating to the resale of (i) such Securities and (ii) the shares of Stock
initially issuable upon conversion of the Securities by holders thereof, and to
use its best efforts to cause such shelf registration statement to be declared
effective.

                  To the extent there are no additional parties listed on
Schedule I other than you, the term Representatives as used herein shall mean
you as the Initial Purchasers, and the terms Representatives and Initial
Purchasers shall mean either the singular or plural as the context requires. The
use of the neuter in this Agreement shall include the feminine and masculine
wherever appropriate. The use of the neuter in this Agreement shall include the
feminine and masculine wherever appropriate. Certain terms used herein are
defined in Section 16 hereof.

                  The sale of the Securities to the Initial Purchasers will be
made without registration of the Securities under the Act in reliance upon
exemptions from the registration requirements of the Act.

<PAGE>

                                                                              2

                  In connection with the sale of the Securities, the Company has
prepared a preliminary offering memorandum, dated November 12, 2001 (as amended
or supplemented at the Execution Time, including any and all exhibits thereto
and any information incorporated by reference therein, the "Preliminary
Memorandum"), and a final offering memorandum, dated November 13, 2001 (as
amended or supplemented at the Execution Time, including any and all annexes
forming a part thereof and any information incorporated by reference therein,
the "Final Memorandum"). Each of the Preliminary Memorandum and the Final
Memorandum sets forth certain information concerning the Company and the
Securities. The Company hereby confirms that it has authorized the use of the
Preliminary Memorandum and the Final Memorandum, and any amendment or supplement
thereto, in connection with the offer and sale of the Securities by the Initial
Purchasers.

                  1. Representations and Warranties. The Company represents and
warrants to each Initial Purchaser as set forth below in this Section 1.

                  (a) The Preliminary Memorandum, at the date thereof, did not
         contain any untrue statement of a material fact or omit to state any
         material fact necessary to make the statements therein, in light of the
         circumstances under which they were made, not misleading. At the
         Execution Time and on the Closing Date (as defined in Section 3
         hereof), the Final Memorandum did not, and will not (and any amendment
         or supplement thereto, at the date thereof and at the Closing Date,
         will not), contain any untrue statement of a material fact or omit to
         state any material fact necessary to make the statements therein, in
         light of the circumstances under which they were made, not misleading;
         provided, however, that the Company makes no representation or warranty
         as to the information contained in or omitted from the Preliminary
         Memorandum or the Final Memorandum, or any amendment or supplement
         thereto, in reliance upon and in conformity with information furnished
         in writing to the Company by or on behalf of the Initial Purchasers
         through the Representatives specifically for inclusion therein.

                  (b) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial
         Purchasers, as to whom the Company makes no representation) has,
         directly or indirectly, made offers or sales of any security, or
         solicited offers to buy any security, under circumstances that would
         require the registration of the Securities under the Act.

                  (c) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial
         Purchasers, as to whom the Company makes no representation) has engaged
         in any form of general solicitation or general advertising (within the
         meaning of Regulation D) in connection with any offer or sale of the
         Securities in the United States.

                  (d) The Securities satisfy the eligibility requirements of
         Rule 144A(d)(3) under the Act.

                  (e) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial
         Purchasers, as to whom the Company makes no representation) has engaged
         in any directed selling efforts with respect to the Securities being
         sold in reliance on Regulation S, and each of them has complied with
         the offering restrictions requirements of Regulation S. Terms used in
         this paragraph have the meanings given to them by Regulation S.

<PAGE>

                                                                              3

                  (f) The Company is not, and after giving effect to the
         offering and sale of the Securities and the application of the proceeds
         thereof as described in the Final Memorandum will not be, an
         "investment company" within the meaning of the Investment Company Act.

                  (g) The Company is subject to and in compliance, in all
         material respects, with the reporting requirements of Section 13 or
         Section 15(d) of the Exchange Act.

                  (h) The Company has not paid or agreed to pay to any person
         any compensation for soliciting another to purchase any Securities
         (except as contemplated by this Agreement).

                  (i) The Company has not taken, directly or indirectly, any
         action designed to or that would constitute or that might reasonably be
         expected to cause or result in, under the Exchange Act or otherwise,
         the stabilization or manipulation of the price of any security of the
         Company to facilitate the sale or resale of the Securities.

                  (j) On the Closing Date, the Indenture will conform in all
         material respects to the description thereof contained in the Final
         Memorandum.

                  (k) Each of the Company and its subsidiaries has been duly
         incorporated and is validly existing as a corporation in good standing
         under the laws of the jurisdiction in which it is chartered or
         organized with full corporate power and authority to own or lease, as
         the case may be, and to operate its properties and conduct its business
         as described in the Final Memorandum, and is duly qualified to do
         business as a foreign corporation and is in good standing under the
         laws of each jurisdiction which requires such qualification except to
         the extent that failure to be so qualified or be in good standing would
         not reasonably be expected to have a material adverse effect on the
         condition (financial or otherwise), prospects, earnings, business or
         properties of the Company and its subsidiaries, taken as a whole,
         whether or not arising from transactions in the ordinary course of
         business (a "Material Adverse Effect").

                  (l) All the outstanding shares of capital stock of each
         subsidiary have been duly and validly authorized and issued and are
         fully paid and nonassessable, and, except for Rx USA, Inc., Rite Aid
         Lease Management Corporation and Rite Aid Risk Management Corp., all
         outstanding shares of capital stock of the subsidiaries of the Company
         are owned by the Company either directly or through wholly owned
         subsidiaries free and clear of any perfected security interest or any
         other security interests, claims, liens or encumbrances.

                  (m) The Company's authorized equity capitalization is as set
         forth in the Final Memorandum and the capital stock conforms in all
         material respects to the description thereof contained in the Final
         Memorandum; the shares of Stock initially issuable upon conversion of
         the Securities have been duly and validly authorized and, when issued
         upon conversion in accordance with the terms of the Securities and the
         Indenture, will be validly issued, fully paid and nonassessable; the
         Board of Directors of the Company or a duly constituted committee
         thereof, has duly and validly adopted resolutions reserving such shares
         of Stock for issuance upon conversion; and except as set forth in the
         Final Memorandum, no options, warrants, or other rights to purchase,
         agreements or other obligations to issue, or rights to convert any
         obligations into or exchange any securities for shares of capital stock
         or ownership interest in the Company are outstanding (other than
         warrants held by J.P. Morgan Securities Inc. and its affiliates on the
         date hereof).

<PAGE>

                                                                              4

                  (n) There are no persons with registration rights or other
         similar rights to have any securities of the Company (other than the
         Securities) registered under the Shelf Registration Statement, other
         than the persons holding such rights under those agreements listed on
         Schedule II hereto.

                  (o) None of the holders of outstanding shares of capital stock
         of the Company and no other person has or will have any preemptive or
         other rights to purchase, subscribe for or otherwise acquire (i) the
         Securities or the shares of Stock to be issued upon conversion of the
         Securities or any rights to such shares or (ii) as a result of or in
         connection with the transactions contemplated by the Indenture, this
         Agreement or the Registration Rights Agreement, any other capital stock
         of the Company or rights thereto.

                  (p) The statements in the Final Memorandum under the headings
         "Certain United States Federal Income Tax Considerations for Non-United
         States Holders," "Description of Notes," "Description of Capital
         Stock," "Regulation," "Legal Proceedings," "Description of Other
         Indebtedness" and "Risk Factors" fairly summarize the matters therein
         described.

                  (q) This Agreement has been duly authorized, executed and
         delivered by the Company; the Indenture has been duly authorized and,
         assuming due authorization, execution and delivery thereof by the
         Trustee, when executed and delivered by the Company, will constitute a
         legal, valid and binding instrument enforceable against the Company in
         accordance with its terms (subject, as to the enforcement of remedies,
         to applicable bankruptcy, fraudulent conveyance, reorganization,
         insolvency, moratorium or other laws affecting creditors' rights
         generally from time to time in effect and to general principles of
         equity); the Securities have been duly authorized, and, when executed
         and authenticated in accordance with the provisions of the Indenture
         and delivered to and paid for by the Initial Purchasers, will have been
         duly executed and delivered by the Company and (assuming the due
         authorization, execution and delivery of the Indenture by the Trustee)
         will constitute the legal, valid and binding obligations of the Company
         entitled to the benefits of the Indenture (subject, as to the
         enforcement of remedies, to applicable bankruptcy, fraudulent
         conveyance, reorganization, insolvency, moratorium or other laws
         affecting creditors' rights generally from time to time in effect and
         to general principles of equity) and will be convertible into Stock in
         accordance with their terms; and the Registration Rights Agreement has
         been duly authorized and, when executed and delivered by the Company,
         will constitute a legal, valid and binding instrument enforceable
         against the Company in accordance with its terms (subject, as to the
         enforcement of remedies, to applicable bankruptcy, fraudulent
         conveyance, reorganization, insolvency, moratorium or other laws
         affecting creditors' rights generally from time to time in effect and
         to general principles of equity and except that the enforceability of
         any rights to contribution or indemnification may be violative of
         public policy under any law, rule or regulation).

                  (r) Subject to compliance by the Initial Purchasers with the
         representations, warranties and agreements set forth in Section 4 of
         this Agreement, no consent, approval, authorization, filing with or
         order of any court or governmental agency or body is required in
         connection with the transactions contemplated herein, in the Indenture
         or the Registration Rights Agreement, except such as will be obtained
         under the Act and the Trust Indenture Act, the securities laws of any
         jurisdiction outside the U.S. in which the Securities are offered and
         such as may be required under the blue sky laws of any jurisdiction and
         the National Association of Securities Dealers Inc. in connection with
         the purchase and distribution of the Securities by the Initial
         Purchasers in the manner contemplated herein and in the Final
         Memorandum and the Registration Rights Agreement.

<PAGE>

                                                                              5

                  (s) On the Closing Date, neither the execution and delivery of
         the Indenture, this Agreement or the Registration Rights Agreement, the
         issue and sale of the Securities, nor the fulfillment of the terms
         hereof or thereof will conflict with, result in a breach or violation
         of, or imposition of any lien, charge or encumbrance upon any property
         or assets of the Company or any of its subsidiaries pursuant to, (i)
         the charter or by-laws of either of the Company or any subsidiary, (ii)
         any statute, rule, regulation or order of any governmental agency or
         body or any court, domestic or foreign, having jurisdiction over the
         Company or any subsidiary of the Company or any of their properties, as
         applicable or (iii) any agreement or instrument to which the Company or
         any such subsidiary is a party or by which the Company or any such
         subsidiary is bound or to which any of the properties of the Company or
         any of its subsidiaries is subject.

                  (t) The consolidated historical financial statements and
         schedules of the Company and its consolidated subsidiaries included in
         or incorporated by reference in the Final Memorandum present fairly in
         all material respects the financial condition, results of operations
         and cash flows of the Company as of the dates and for the periods
         indicated, comply as to form with the applicable accounting
         requirements of the Act and have been prepared in conformity with
         generally accepted accounting principles applied on a consistent basis
         throughout the periods involved (except as otherwise noted therein);
         the selected financial data set forth under the caption "Selected
         Consolidated Financial Information" in the Final Memorandum fairly
         present, on the basis stated in the Final Memorandum, the information
         included therein.

                  (u) No action, suit or proceeding by or before any court or
         governmental agency, authority or body or any arbitrator involving the
         Company or any of its subsidiaries or its or their property is pending
         or, to the best knowledge of the Company, threatened that (i) could
         reasonably be expected to have a material adverse effect on the
         performance of this Agreement, the Indenture or the Registration Rights
         Agreement, or the consummation of any of the transactions contemplated
         hereby or thereby; or (ii) could reasonably be expected to have a
         Material Adverse Effect, except as set forth in or contemplated in the
         Final Memorandum (exclusive of any amendment or supplement thereto).

                  (v) The Company and each of its subsidiaries own or lease all
         such properties as are necessary to the conduct of their respective
         operations as presently conducted, except where the failure to own or
         lease such property could not reasonably be expected to have a Material
         Adverse Effect.

                  (w) Neither the Company nor any subsidiary is in violation or
         default of (i) any provision of its charter or bylaws; (ii) the terms
         of any agreement or instrument to which it is a party or bound or to
         which its property is subject; or (iii) any statute, rule, regulation
         or order of any governmental agency or body or any court, domestic or
         foreign, having jurisdiction over the Company or any subsidiary of the
         Company or any of their properties, as applicable, except in the case
         of (ii) and (iii), such violation or default that could not reasonably
         by expected to have a Material Adverse Effect.

<PAGE>

                                                                              6

                  (x) Deloitte & Touche LLP, who have certified certain
         financial statements of the Company and its consolidated subsidiaries
         and delivered their report with respect to the audited consolidated
         financial statements included or incorporated by reference in the Final
         Memorandum, are, to the knowledge of the Company, independent public
         accountants with respect to the Company within the meaning of the Act
         and the applicable published rules and regulations thereunder.

                  (y) There are no stamp or other issuance or transfer taxes or
         duties or other similar fees or charges required to be paid in
         connection with the execution and delivery of this Agreement, the
         issuance or sale by the Company of the Securities or, if issued on the
         date hereof, the issuance of shares of Stock upon conversion of the
         Securities.

                  (z) The Company has filed all foreign, federal, state and
         local tax returns that are required to be filed or has requested
         extensions thereof (except in any case in which the failure so to file
         would not have a material adverse effect on the condition (financial or
         otherwise), prospects, earnings, business or properties of the Company
         and its subsidiaries, taken as a whole, whether or not arising from
         transactions in the ordinary course of business, except as set forth in
         or contemplated in the Final Memorandum (exclusive of any amendment or
         supplement thereto)) and has paid all taxes required to be paid by it
         and any other assessment, fine or penalty levied against it, to the
         extent that any of the foregoing is due and payable, except for any
         such assessment, fine or penalty that is currently being contested in
         good faith or as would not have a material adverse effect on the
         condition (financial or otherwise), prospects, earnings, business or
         properties of the Company and its subsidiaries, taken as a whole,
         whether or not arising from transactions in the ordinary course of
         business, except as set forth in or contemplated in the Final
         Memorandum (exclusive of any amendment or supplement thereto).

                  (aa) No labor problem or dispute with the employees of the
         Company or any of its subsidiaries exists or is threatened or imminent,
         and the Company is not aware of any existing or imminent labor
         disturbance by the employees of any of its or its subsidiaries'
         principal suppliers, contractors or customers that could reasonably be
         expected to have a material adverse effect on the condition (financial
         or otherwise), prospects, earnings, business or properties of the
         Company and its subsidiaries, taken as a whole, whether or not arising
         from transactions in the ordinary course of business, except as set
         forth in or contemplated in the Final Memorandum (exclusive of any
         amendment or supplement thereto).

                  (bb) The Company and each of its subsidiaries are insured by
         insurers of recognized financial responsibility against such losses and
         risks and in such amounts as are prudent and customary in the
         businesses in which they are engaged; the Company and its subsidiaries
         are in compliance with the terms of such policies and instruments in
         all material respects, except where noncompliance could not reasonably
         be expected to have a Material Adverse Effect; and neither the Company
         nor any such subsidiary has any reason to believe that it will not be
         able to renew its existing insurance coverage as and when such coverage
         expires or to obtain similar coverage from similar insurers as may be
         necessary to continue its business at a cost that would not have a
         material adverse effect on the condition (financial or otherwise),
         prospects, earnings, business or properties of the Company and its
         subsidiaries, taken as a whole, whether or not arising from
         transactions in the ordinary course of business, except as set forth in
         or contemplated in the Final Memorandum (exclusive of any amendment or
         supplement thereto).

<PAGE>

                                                                              7

                  (cc) No subsidiary of the Company is currently prohibited,
         directly or indirectly, from paying any dividends to the Company, from
         making any other distribution on such subsidiary's capital stock, from
         repaying to the Company any loans or advances to such subsidiary from
         the Company or from transferring any of such subsidiary's property or
         assets to the Company or any other subsidiary of the Company, except as
         described in or contemplated by the Final Memorandum.

                  (dd) The Company and its subsidiaries possess all licenses,
         certificates, permits and other authorizations issued by the
         appropriate federal, state or foreign regulatory authorities necessary
         to conduct their respective businesses, except where the failure to
         possess such licenses, certificates, permits and other authorizations
         could not reasonably be expected to have a Material Adverse Effect, and
         neither the Company nor any such subsidiary has received any notice of
         proceedings relating to the revocation or modification of any such
         certificate, authorization or permit which, singly or in the aggregate,
         if the subject of an unfavorable decision, ruling or finding, could
         reasonably be expected to have a material adverse effect on the
         condition (financial or otherwise), prospects, earnings, business or
         properties of the Company and its subsidiaries, taken as a whole,
         whether or not arising from transactions in the ordinary course of
         business, except as set forth in or contemplated in the Final
         Memorandum (exclusive of any amendment or supplement thereto).

                  (ee) The Company and its subsidiaries (i) are in compliance
         with any and all applicable foreign, federal, state and local laws and
         regulations relating to the protection of human health and safety, the
         environment or hazardous or toxic substances or wastes, pollutants or
         contaminants ("Environmental Laws"); (ii) have received and are in
         compliance with all permits, licenses or other approvals required of
         them under applicable Environmental Laws to conduct their respective
         businesses; and (iii) have not received notice of any actual or
         potential liability for the investigation or remediation of any
         disposal or release of hazardous or toxic substances or wastes,
         pollutants or contaminants, except where such non- compliance with
         Environmental Laws, failure to receive required permits, licenses or
         other approvals, or liability would not, individually or in the
         aggregate, have a material adverse change in the condition (financial
         or otherwise), prospects, earnings, business or properties of the
         Company and its subsidiaries, taken as a whole, whether or not arising
         from transactions in the ordinary course of business, except as set
         forth in or contemplated in the Final Memorandum (exclusive of any
         amendment or supplement thereto); except as set forth in the Final
         Memorandum, neither the Company nor any of the subsidiaries has been
         named as a "potentially responsible party" under the Comprehensive
         Environmental Response, Compensation, and Liability Act of 1980, as
         amended.

<PAGE>

                                                                              8

                  (ff) Each of the Company and its subsidiaries has fulfilled
         its obligations, if any, under the minimum funding standards of Section
         302 of the United States Employee Retirement Income Security Act of
         1974, as amended ("ERISA"), and the regulations and published
         interpretations thereunder with respect to each "plan" (as defined in
         Section 3(3) of ERISA and such regulations and published
         interpretations) in which employees of the Company and its subsidiaries
         are eligible to participate; the Company and its subsidiaries have not
         incurred any unpaid liability to the Pension Benefit Guaranty
         Corporation (other than for the payment of premiums in the ordinary
         course) or to any such plan under Title IV of ERISA.

                  (gg) The Company and its subsidiaries own, possess, license or
         have other rights to use, on reasonable terms, all patents, patent
         applications, trade and service marks, trade and service mark
         registrations, trade names, copyrights, licenses, inventions, trade
         secrets, technology, know-how and other intellectual property
         (collectively, the "Intellectual Property") necessary for the conduct
         of the Company's business as now conducted or as proposed in the Final
         Memorandum to be conducted, except where the failure to own such
         Intellectual Property could not reasonably be expected to have a
         Material Adverse Effect. Neither the Company nor any of its
         subsidiaries has received any charge, complaint, claim, demand or
         notice alleging any interference, infringement, misappropriation or
         violation of a third party's right in Intellectual Property (including
         any claim that the Company or any of its subsidiaries must license or
         refrain from using such Intellectual Property), which, if the subject
         of any unfavorable ruling, decision or finding could, individually or
         in the aggregate, reasonably be expected to have a Material Adverse
         Effect.

                  (hh) Each executive officer and director of the Company has
         entered into a written agreement with the Company in the form of
         Exhibit B hereto (each such agreement, a "Lock-up Agreement"), and
         executed originals of each Lock-up Agreement have been delivered to
         you.

                  Any certificate signed by any officer of the Company and
delivered to the Initial Representatives or counsel for the Initial Purchasers
in connection with the offering of the Securities shall be deemed a
representation and warranty by the Company, as to matters covered thereby, to
each Initial Purchaser.

                  2. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, (a) the
Company agrees to sell to each Initial Purchaser, and each Initial Purchaser
agrees, severally and not jointly, to purchase from the Company, at a purchase
price of 100% of the principal amount thereof, plus accrued interest, if any,
from November 19, 2001 to the Closing Date, the principal amount of Firm
Securities set forth opposite such Initial Purchaser's name on Schedule I hereto
and (b) in the event and to the extent that the Initial Purchasers shall
exercise the election to purchase Optional Securities as provided below, the
Company agrees to issue and sell to each Initial Purchaser, and each Initial
Purchaser agrees, severally and not jointly, to purchase from the Company, at
the purchase price set forth in clause (a) of this Section 2, the aggregate
principal amount of Optional Securities as to which such election shall have
been exercised (to be adjusted by you so as to eliminate fractions of $1,000).

<PAGE>

                                                                              9

                  The Company hereby grants to Salomon Smith Barney Inc. the
right to purchase at their election up to $50,000,000 aggregate principal amount
of Optional Securities, at the purchase price set forth in clause (a) of this
Section 2, for the sole purpose of covering over-allotments in the sale of the
Firm Securities. Any such election to purchase Optional Securities may be
exercised only by written notice from Salomon Smith Barney Inc. to the Company,
given within a period of 30 calendar days after the date of this Agreement,
setting forth the aggregate principal amount of Optional Securities to be
purchased and the date on which such Optional Securities are to be delivered, as
determined by Salomon Smith Barney Inc. but in no event earlier than the Closing
Date (as defined in Section 3 hereof) or, unless Salomon Smith Barney Inc. and
the Company otherwise agree in writing, earlier than three or later than ten
business days after the date of such notice; provided that this paragraph is
subject to the condition that either (1) the resale of Optional Securities to
investors settles within 12 days after the first date of settlement of the
initial resale of any Firm Securities to one or more investors (the "Initial
Settlement Date"), (2) the resale of Optional Securities to investors settles
within 30 days of the Initial Settlement Date and is at a price that would not
cause the Optional Securities to have original issue discount in more than a "de
minimis" amount for Federal income tax purposes if the Optional Securities were
a separate "issue" for such purposes, or (3) the Representatives have consulted
with their counsel, Cravath, Swaine & Moore, and with counsel to the Company,
Skadden, Arps, Slate, Meagher & Flom LLP, to confirm that the Firm Securities
and the Optional Securities will be treated as part of the same "issue" for
Federal income tax purposes.

                  3. Delivery and Payment. Delivery of and payment for the Firm
Securities and the Optional Securities (if the option provided for in Section
2(b) hereof shall have been exercised on or before the third Business Day prior
to the Closing Date) shall be made at 10:00 A.M., New York City time, on
November 19, 2001, which date and time may be postponed by agreement between
Salomon Smith Barney Inc. and the Company or as provided in Section 9 hereof
(such date and time of delivery and payment for the Securities being herein
called the "Closing Date"). If the option provided for in Section 2(b) hereof is
exercised after the third Business Day prior to the Closing Date, the Company
will deliver the Optional Securities (at the expense of the Company) to Salomon
Smith Barney Inc. for its account on the date specified by Salomon Smith Barney
Inc. (which shall be no fewer than three Business Days and no more than ten
Business Days after exercise of said option).
 Delivery of the Securities shall be made to the Representatives against payment
by the several Initial Purchasers through the Representatives of the purchase
price thereof to or upon the order of the Company by wire transfer payable in
same-day funds to the account specified by the Company. Delivery of the
Securities shall be made through the facilities of The Depository Trust Company
unless Salomon Smith Barney Inc. shall otherwise instruct.

                  If settlement of the Optional Securities occurs after the
Closing Date, the Company will deliver to Salomon Smith Barney Inc. for its
account on the settlement date for the Optional Securities, and the obligation
of Salomon Smith Barney Inc. to purchase the Optional Securities shall be
conditioned upon receipt of, supplemental opinions, certificates and letters
confirming as of such date the opinions, certificates and letters delivered on
the Closing Date pursuant to Section 6 hereof.

                  4. Offering by Initial Purchasers. Each Initial Purchaser,
severally and not jointly, represents and warrants to and agrees with the
Company that:

                  (a) It is a qualified institutional buyer (as defined in Rule
         144A under the Act) or an institutional accredited investor (as defined
         in Rule 501(a) under the Act).

                  (b) It has not offered or sold, and will not offer or sell,
         any Securities except (i) to those persons it reasonably believes to be
         qualified institutional buyers (as defined in Rule 144A under the Act)
         and that, in connection with each such sale, it has taken or will take
         reasonable steps to ensure that the purchaser of such Securities is
         aware that such sale is being made in reliance on Rule 144A; or (ii) in
         accordance with the restrictions set forth in Exhibit A hereto.

<PAGE>

                                                                             10

                  (c) Neither it nor any person acting on its behalf has made or
         will make offers or sales of the Securities in the United States by
         means of any form of general solicitation or general advertising
         (within the meaning of Regulation D) in the United States.

                  5.  Agreements. The Company agrees with each Initial
         Purchaser that:

                  (a) The Company will furnish to each Initial Purchaser and to
         counsel for the Initial Purchasers, without charge, during the period
         referred to in paragraph (c) below, as many copies of the Final
         Memorandum and any amendments and supplements thereto as you may
         reasonably request.

                  (b) The Company will not amend or supplement the Final
         Memorandum without the prior written consent of the Representatives,
         which consent will not be unreasonably withheld or delayed.

                  (c) If at any time prior to the completion of the sale of the
         Securities by the Initial Purchasers (as determined by the
         Representatives), any event occurs as a result of which the Final
         Memorandum, as then amended or supplemented, would include any untrue
         statement of a material fact or omit to state any material fact
         necessary to make the statements therein, in the light of the
         circumstances under which they were made, not misleading, or if it
         shall be necessary to amend or supplement the Final Memorandum to
         comply with applicable law, the Company promptly (i) will notify the
         Representatives of any such event; (ii) subject to the requirements of
         paragraph (b) of this Section 5, will prepare an amendment or
         supplement that will correct such statement or omission or effect such
         compliance; and (iii) will supply any supplemented or amended Final
         Memorandum to the several Initial Purchasers and counsel for the
         Initial Purchasers without charge in such quantities as you may
         reasonably request.

                  (d) The Company will arrange, if necessary, for the
         qualification of the Securities for sale by the Initial Purchasers
         under the laws of such jurisdictions as the Representatives may
         designate and will maintain such qualifications in effect so long as
         required for the sale of the Securities; provided that in no event
         shall the Company be obligated to qualify to do business in any
         jurisdiction where it is not now so qualified or to take any action
         that would subject it to service of process in suits, other than those
         arising out of the offering or sale of the Securities, in any
         jurisdiction where it is not now so subject. The Company will promptly
         advise the Representatives of the receipt by the Company of any
         notification with respect to the suspension of the qualification of the
         Securities for sale in any jurisdiction or the initiation or
         threatening of any proceeding for such purpose.

                  (e) The Company will not, and will not permit any of its
         controlled Affiliates to, and will use its reasonable best efforts not
         to permit any of its other Affiliates to, resell any Securities or
         Stock issuable on conversion thereof that have been acquired by any of
         them.

                  (f) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial
         Purchasers) will, directly or indirectly, make offers or sales of any
         security, or solicit offers to buy any security, under circumstances
         that would require the registration of the Securities or the Stock
         issuable on conversion thereof under the Act.

<PAGE>

                                                                             11

                  (g) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial
         Purchasers) will engage in any form of general solicitation or general
         advertising (within the meaning of Regulation D) in connection with any
         offer or sale of the Securities in the United States.

                  (h) So long as any of the Securities or shares of Stock issued
         or issuable upon conversion of the Securities are "restricted
         securities" within the meaning of Rule 144(a)(3) under the Act, the
         Company will, during any period in which it is not subject to and in
         compliance with Section 13 or 15(d) of the Exchange Act or it is not
         exempt from such reporting requirements pursuant to and in compliance
         with Rule 12g3-2(b) under the Exchange Act, provide to each holder of
         such restricted securities and to each prospective purchaser (as
         designated by such holder) of such restricted securities, upon the
         request of such holder or prospective purchaser, any information
         required to be provided by Rule 144A(d)(4) under the Act. This covenant
         is intended to be for the benefit of the holders, and the prospective
         purchasers designated by such holders, from time to time of such
         restricted securities.

                  (i) Neither the Company, nor any of its Affiliates, nor any
         person acting on its or their behalf (other than the Initial
         Purchasers) will engage in any directed selling efforts with respect to
         the Securities, and each of them will comply with the offering
         restrictions requirements of Regulation S. Terms used in this paragraph
         have the meanings given to them by Regulation S.

                  (j) The Company will cooperate with the Representatives and
         use its best efforts to permit the Securities to be eligible for
         clearance and settlement through The Depository Trust Company.

                  (k) The Company will not for a period of 90 days following the
         Execution Time, without the prior written consent of Salomon Smith
         Barney Inc. (which consent shall not be unreasonably withheld, delayed
         or conditioned), offer, sell, contract to sell, pledge or otherwise
         dispose of, or file (or participate in the filing of) a registration
         statement with the Commission in respect of, or establish or increase a
         put equivalent position or liquidate or decrease a call equivalent
         position within the meaning of Section 16 of the Exchange Act and the
         rules and regulations of the Commission promulgated thereunder with
         respect to, any shares of capital stock of the Company or any
         securities convertible or exercisable or exchangeable for such capital
         stock, or publicly announce an intention to effect any such
         transaction; provided, however, that (i) the Company may issue common
         stock, or grant options to purchase common stock or other awards, in
         each case under its existing stock or bonus plans, to employees,
         directors and consultants of the Company or pursuant to commercial
         arrangements with partners of the Company, (ii) the Company may file
         registration statements in respect of the Securities and shares of
         common stock issuable upon conversion of the Securities and may issue
         common stock upon conversion of the Securities, (iii) the Company may
         issue common stock or securities convertible into common stock and file
         registration statements, in each case in connection with acquisitions,
         the consideration for which includes the issuance of common stock or
         securities convertible into common stock; provided that the parties
         receiving the Class A common stock in any acquisition agree to be bound
         by the foregoing restrictions, (iv) the Company may file a registration
         statement in any instance in which the Company is required to register
         shares of common stock pursuant to registration rights agreements in
         which the Company is a party thereto and (v) the Company may issue
         common stock in exchange for the preferred stock of Rite Aid Lease
         Management Corporation and the Company may file a registration
         statement with respect thereto.

<PAGE>

                                                                             12

                  (l) The Company will not take, directly or indirectly, any
         action designed to or that would constitute or that might reasonably be
         expected to cause or result in, under the Exchange Act or otherwise,
         the stabilization or manipulation of the price of any security of the
         Company to facilitate the sale or resale of the Securities.

                  (m) The Company currently has no plan or intent to be or
         become, or be or become owned by, an open-end investment company, unit
         investment trust or face-amount certificate company that is or is
         required to be registered under Section 8 of the Investment Company
         Act.

                  (n) The Company agrees to pay the costs and expenses relating
         to the following matters: (i) the preparation of the Indenture and the
         Registration Rights Agreement and the issuance of the Securities; (ii)
         the preparation, printing or reproduction of the Preliminary Memorandum
         and Final Memorandum and each amendment or supplement to either of
         them; (iii) the printing (or reproduction) and delivery (including
         postage, air freight charges and charges for counting and packaging) of
         such copies of the Preliminary Memorandum and Final Memorandum, and all
         amendments or supplements to either of them, as may, in each case, be
         reasonably requested for use in connection with the offering and sale
         of the Securities; (iv) the preparation, printing, authentication,
         issuance and delivery of certificates for the Securities, including any
         stamp or transfer taxes in connection with the original issuance and
         sale of the Securities and the shares of Stock issuable upon conversion
         thereof; (v) the printing (or reproduction) and delivery of this
         Agreement, any blue sky memorandum and all other agreements or
         documents printed (or reproduced) and delivered in connection with the
         offering of the Securities; (vi) any registration or qualification of
         the Securities for offer and sale under the securities or blue sky laws
         of the several states (including filing fees and the reasonable fees
         and expenses of counsel for the Initial Purchasers relating to such
         registration and qualification); (vii) admitting the Securities for
         trading in The Portal Market of the NASD and the listing of the shares
         of Stock issuable upon conversion of the Securities; (viii) the
         transportation and other expenses incurred by or on behalf of Company
         representatives in connection with presentations to prospective
         purchasers of the Securities; (ix) the fees and expenses of the
         Company's accountants and the fees and expenses of counsel (including
         local and special counsel) for the Company; and (x) all other costs and
         expenses incident to the performance by the Company of its and their
         obligations hereunder and under the Indenture and the Registration
         Rights Agreement. It is understood, however, that, except as provided
         in Section 5 and Sections 7 and 8 of this Agreement, the Initial
         Purchasers will pay all of their own costs and expenses, including the
         fees of their counsel.

                  (o) The Company will reserve and keep available at all times,
         free of preemptive rights, shares of Stock for the purpose of enabling
         the Company to satisfy its obligations to issue shares of Stock upon
         conversion of the Securities.

<PAGE>

                                                                             13

                  (p) The Company will refuse, and will cause all applicable
         trustees and transfer agents to refuse, to register any transfer of
         Securities or shares of Stock issued upon conversion of Securities if
         such transfer is not made in accordance with the provisions of
         Regulation S under the Securities Act, pursuant to an effective
         registration statement under the Securities Act or pursuant to an
         available exemption from the registration requirements of the
         Securities Act; provided that the provisions of this paragraph shall
         not be applicable to any Security or share of Stock which has been
         transferred pursuant to an effective registration statement Rule 144
         under the Securities Act, and, as a result of which, or otherwise, are
         no longer subject to restrictions on transfer under the Securities Act.

                  (q) All of the Securities and shares of Stock issuable upon
         conversion thereof will contain a legend to the effect that the
         transfer thereof is prohibited except in accordance with the provisions
         of Regulation S, pursuant to an effective registration statement under
         the Securities Act or pursuant to an available exemption from
         registration under the Securities Act and that hedging transactions
         involving those Securities or shares may not be conducted unless in
         compliance with the Securities Act; provided that such legend may be
         removed if such Securities or shares have been transferred pursuant to
         an effective registration statement or or when eligible for resale
         under Rule 144 under the Securities Act, and, as a result of which, or
         otherwise, is no longer subject to restrictions on transfer under the
         Securities Act.

                  (r) Between the date hereof and the Closing Date, the Company
         will not do or authorize any act or thing that would result in an
         adjustment of the conversion price.

                  (s) The Company shall duly list the shares of Stock issuable
         upon conversion of the Securities on the New York Stock Exchange,
         subject to official notice of issuance.

                  6. Conditions to the Obligations of the Initial Purchasers.
The obligations of each Initial Purchaser to purchase the Firm Securities and
the obligation of Salomon Smith Barney Inc. to purchase the Optional Securities,
as the case may be, shall be subject to the accuracy of the representations and
warranties on the part of the Company contained herein at the Execution Time and
the Closing Date (and any settlement date with respect to the Optional
Securities), to the accuracy of the statements of the Company made in any
certificates pursuant to the provisions hereof, to the performance by the
Company of its obligations hereunder and to the following additional conditions:

                  (a) The Initial Purchasers shall have received an opinion,
         dated the Closing Date, of Elliot S. Gerson, Esq., general counsel for
         the Company, substantially to the effect set forth below:

                           (i) each of the Company and its subsidiaries has been
                  duly incorporated and is validly existing as a corporation in
                  good standing under the laws of the jurisdiction in which it
                  is chartered or organized, with full corporate power and
                  authority to own or lease, as the case may be, and to operate
                  its properties and conduct its business as described in the
                  Final Memorandum, and is duly qualified to do business as a
                  foreign corporation and is in good standing under the laws of
                  each jurisdiction which requires such qualification, except to
                  the extent that the failure to be so qualified or in good
                  standing could not reasonably be expected to have a Material
                  Adverse Effect;

<PAGE>

                                                                             14

                           (ii) all the outstanding shares of capital stock of
                  the Company and each subsidiary have been duly and validly
                  authorized and issued and are fully paid and nonassessable,
                  and, except for Rx USA, Inc., Rite Aid Lease Management
                  Corporation and Rite Aid Risk Management Corp., all
                  outstanding shares of capital stock of the Subsidiaries are
                  owned by the Company either directly or through wholly owned
                  subsidiaries free and clear of any perfected security interest
                  and, to the knowledge of such counsel, after due inquiry, any
                  other security interests, claims, liens or encumbrances;

                           (iii) the Company's authorized capital stock is as
                  set forth in the Final Memorandum; the shares conform, as to
                  legal matters, in all material respects to the description
                  thereof contained in the Final Memorandum under the caption
                  "Description of Capital Stock"; the shares of Stock initially
                  issuable upon conversion of the Securities have been duly
                  authorized and, when issued upon conversion in accordance with
                  the Securities and the Indenture, will be validly issued,
                  fully paid and nonassessable; no holder of outstanding shares
                  of capital stock of the Company has any statutory or, to such
                  Counsel's knowledge after due inquiry, contractual preemptive
                  rights to subscribe for the Securities or the shares of Stock
                  issuable upon conversion thereof; and to such counsel's
                  knowledge after due inquiry, except as set forth in the Final
                  Memorandum, no options, warrants or other rights to purchase,
                  agreements or other obligations to issue, or rights to convert
                  any obligations into or exchange any securities for, shares of
                  capital stock or ownership interests in the Company are
                  outstanding;

                           (iv) to the knowledge of such counsel, there is no
                  pending or threatened action, suit or proceeding by or before
                  any court or governmental agency, authority or body or any
                  arbitrator involving the Company or any of its subsidiaries or
                  its or their property that would be required to be disclosed
                  in a registration statement on Form S-1 under the Act and that
                  is not adequately disclosed in the Final Memorandum, except in
                  each case for such proceedings that, if the subject of an
                  unfavorable decision, ruling or finding would not singly or in
                  the aggregate, result in a material adverse change in the
                  condition (financial or otherwise), prospects, earnings,
                  business or properties or results of operations of the Company
                  and its subsidiaries, taken as a whole;

                           (v) each of this Agreement and the Registration
                  Rights Agreement has been duly authorized, executed and
                  delivered by the Company;

                           (vi) neither the execution and delivery of the
                  Indenture, this Agreement or the Registration Rights
                  Agreement, the issue and sale of the Securities, nor the
                  fulfillment of the terms hereof or thereof will conflict with,
                  result in a breach or violation of, or imposition of any lien,
                  charge or encumbrance upon any property or asset of the
                  Company or any of its subsidiaries pursuant to, (i) the
                  charter or by-laws of the Company or any of its subsidiaries;
                  (ii) the terms of any indenture, contract, lease, mortgage,
                  deed of trust, note agreement, loan agreement or other
                  agreement, obligation, condition, covenant or instrument to
                  which the Company or any of its subsidiaries is a party or
                  bound or to which any of their respective properties is
                  subject; or (iii) any statute, law, rule, regulation,
                  judgment, order or decree applicable to the Company or any of
                  its subsidiaries of any court, regulatory body, administrative
                  agency, governmental body, arbitrator or other authority
                  having jurisdiction over the Company, any of its subsidiaries
                  or any of their respective properties, except such conflicts,
                  breaches or violations as could not reasonably be expected to
                  have a Material Adverse Effect; or could not reasonably be
                  expected to have a material adverse effect on the Company's
                  performance of this Agreement, the Indenture or the
                  Registration Rights Agreement, or the consummation of any of
                  the transactions contemplated by the Purchase Agreement or
                  such other agreements;

<PAGE>

                                                                             15

                           (vii) no consent, approval, authorization, filing
                  with or order of any court or governmental agency or body is
                  required in connection with the transactions contemplated
                  herein or in the Indenture or the Registration Rights
                  Agreement, except such as will be obtained under the Act and
                  the Trust Indenture Act in connection with the transactions
                  contemplated by the Registration Rights Agreement and such as
                  may be required under the blue sky or securities laws of any
                  jurisdiction in connection with the transactions contemplated
                  by this Agreement and the Registration Rights Agreement and
                  such other approvals (specified in such opinion) as have been
                  obtained;

                           (viii) the statements in the Final Memorandum under
                  the headings "Regulation" and "Legal Proceedings"; insofar as
                  such statements summarize legal matters, agreements, documents
                  or proceedings discussed therein, are accurate and fair
                  summaries of such legal matters, agreements, documents or
                  proceedings; and

                           (ix) other than the persons holding such rights under
                  those agreements listed on Schedule II to the Purchase
                  Agreement, no holder of any security of the Company has any
                  right (except as has been satisfied or waived) to require
                  registration of shares of Stock or any other security of the
                  Company under the Shelf Registration Statement.

                           (x) all documents filed under the Exchange Act and
                  deemed to be included in the Preliminary Memorandum, or any
                  amendment or supplement thereto and any other documents
                  incorporated by reference in the Preliminary Memorandum as
                  amended or supplemented (other than the financial statements
                  and related schedules therein, as to which such counsel need
                  express no opinion), when they were filed with the Commission,
                  complied as to form in all material respects with the
                  requirements of the Exchange Act, and the rules and
                  regulations of the Commission thereunder; and such counsel has
                  no reason to believe that any of such documents, when they
                  were so filed, contained an untrue statement of a material
                  fact or omitted to state a material fact necessary in order to
                  make the statements therein, in the light of the circumstances
                  under which they were made when such documents were so filed,
                  not misleading.

                           In addition, such counsel will state that he has
                  participated in conferences with officers and other
                  representatives of the Company, counsel for the Company,
                  representatives of the independent accountants of the Company
                  and the Initial Purchasers and its counsel at which the
                  contents of the Final Memorandum and related matters were
                  discussed; although he is not passing upon, and does not
                  assume any responsibility for, the accuracy, completeness or
                  fairness of the statements contained in the Final Memorandum
                  and has made no independent check or verification thereof, on
                  the basis of the foregoing such counsel has no reason to
                  believe that at the Execution Time and on the Closing Date the
                  Final Memorandum contained or contains any untrue statement of
                  a material fact or omitted or omits to state any material fact
                  necessary to make the statements therein, in the light of the
                  circumstances under which they were made, not misleading (in
                  each case, other than the financial statements and other
                  financial information contained therein, as to which such
                  counsel need express no opinion).

<PAGE>

                                                                             16

                  (b) The Initial Purchasers shall have received an opinion,
         dated the Closing Date, of Skadden, Arps, Slate, Meagher & Flom LLP,
         counsel for the Company, substantially to the effect set forth below:

                           (i) Based solely on such counsel's review of
                  good-standing certificates, the Company is validly existing as
                  a corporation in good standing under the laws of the
                  jurisdiction in which it is chartered or organized, with full
                  corporate power and authority to own or lease, as the case may
                  be, and to operate its properties and conduct its business as
                  described in the Final Memorandum;

                           (ii) The shares of Stock initially issuable upon
                  conversion of the Securities have been duly authorized and the
                  resolutions of the Executive Committee of the Board of
                  Directors of the Company approving the issuance of the
                  Securities have reserved for issuance the Stock and, if and
                  when issued and delivered upon conversion of the Securities in
                  accordance with the provisions of the Securities and the
                  Indenture at conversion prices at or in excess of the par
                  value of such Stock, will be duly and validly issued and fully
                  paid and nonassessable, and the shares of common stock into
                  which the Securities are initially convertible conform to the
                  description of the common stock contained in the Final
                  Memorandum;

                           (iii) the Indenture has been duly authorized,
                  executed and delivered, and is a valid and binding agreement
                  of the Company enforceable against the Company in accordance
                  with its terms (subject, as to the enforcement of remedies, to
                  applicable bankruptcy, reorganization, insolvency, moratorium
                  or other laws affecting creditors' rights generally from time
                  to time in effect and to general principles of equity,
                  including, without limitation, concepts of materiality,
                  reasonableness, good faith and fair dealing, regardless of
                  whether considered in a proceeding in equity or at law and
                  such counsel need not express any opinion as to the
                  applicability or effect of any fraudulent transfer, preference
                  or similar law); the Securities have been duly authorized and
                  when executed by the Company and delivered to and paid for by
                  the Initial Purchasers under this Agreement (assuming due
                  execution and authentication of the Securities by the Trustee
                  under the Indenture), will constitute legal, valid and binding
                  obligations of the Company entitled to the benefits of the
                  Indenture (subject, as to the enforcement of remedies, to
                  applicable bankruptcy, reorganization, insolvency, moratorium
                  or other laws affecting creditors' rights generally from time
                  to time in effect and to general principles of equity,
                  including, without limitation, concepts of materiality,
                  reasonableness, good faith and fair dealing, regardless of
                  whether considered in a proceeding in equity or at law and
                  such counsel need not express any opinion as to the
                  applicability or effect of any fraudulent transfer, preference
                  or similar law); the Registration Rights Agreement has been
                  duly authorized, executed and delivered and is a valid and
                  binding agreement by the Company enforceable against the
                  Company in accordance with its terms (subject, as to the
                  enforcement of remedies, to applicable bankruptcy, fraudulent
                  conveyance, reorganization, insolvency, moratorium or other
                  laws affecting creditors' rights generally from time to time
                  in effect and to general principles of equity, including,
                  without limitation, concepts of materiality, reasonableness,
                  good faith and fair dealing, regardless of whether considered
                  in a proceeding in equity or at law and such counsel need not
                  express any opinion as to the applicability or effect of any
                  fraudulent transfer, preference or similar law); and the
                  statements set forth under the heading "Description of Notes"
                  and "Description of Capital Stock" in the Final Memorandum,
                  insofar as such statements purport to summarize certain terms
                  of the Securities, the common stock, the Indenture and the
                  Registration Rights Agreement, fairly summarize such
                  provisions in all material respects;

<PAGE>

                                                                             17

                           (iv) to the knowledge of such counsel, there is no
                  pending or threatened action, suit or proceeding by or before
                  any court or governmental agency, authority or body or any
                  arbitrator involving the Company or any of its subsidiaries or
                  its or their property that is not adequately disclosed in the
                  Final Memorandum, except in each case for such proceedings
                  that, if the subject of an unfavorable decision, ruling or
                  finding would not singly or in the aggregate, result in a
                  material adverse change in the condition (financial or
                  otherwise), prospects, earnings, business or properties or
                  results of operations of the Company and its subsidiaries,
                  taken as a whole; and the statements in the Final Memorandum
                  under the headings "Certain United States Federal Income Tax
                  Considerations for Non-United States Holders" and "Description
                  of Other Indebtedness"; insofar as such statements summarized
                  legal matters, agreements, documents or proceedings discussed
                  therein, are accurate and fair summaries of such legal
                  matters, agreements, documents or proceedings;

                           (v) this Agreement has been duly authorized, executed
                  and delivered by the Company;

                           (vi) the execution and delivery of the Indenture,
                  this Agreement, the Registration Rights Agreement, the issue
                  and sale of the Securities, nor the fulfillment of the terms
                  hereof or thereof will not (i) conflict with the charter or
                  by-laws of the Company; (ii) constitute a violation of, or a
                  breach or default under the terms of any Applicable Contract
                  or (iii) violate or conflict with, or result in any
                  contravention of, any Applicable Law or Applicable Order. Such
                  counsel need not express any opinion, however, as to whether
                  such execution, delivery or performance will constitute a
                  violation of, or default under, any covenant, restriction or
                  provision with respect to financial ratios or tests or any
                  aspect of the financial condition or results of operation of
                  the Company or any of its subsidiaries;

                           (vii) assuming (i) the accuracy of the
                  representations and warranties of the Company set forth in
                  Section 1 of the Purchase Agreement and of you in Section 4 of
                  the Purchase Agreement, (ii) the due performance by the
                  Company of the covenants and agreements set forth in Section 5
                  of the Purchase Agreement and the due performance by you of
                  the covenants and agreements set forth in Section 4 of the
                  Purchase Agreement, (iii) your compliance with the offering
                  and transfer procedures and restrictions described in the
                  Offering Memorandum, and (iv) the accuracy of the
                  representations and warranties made in accordance with the
                  Offering Memorandum by purchasers to whom you initially resell
                  the Securities, the offer, sale and delivery of the Securities
                  to you in the manner contemplated by the Purchase Agreement
                  and the Offering Memorandum and the initial resale of the
                  Securities by you in the manner contemplated in the Offering
                  Memorandum and the Purchase Agreement, do not require
                  registration under the Securities Act of 1933, as amended, and
                  the Indenture does not require qualification under the Trust
                  Indenture Act of 1939, as amended, it being understood that
                  such counsel does not express any opinion as to any subsequent
                  resale of any Security;

<PAGE>

                                                                             18

                           (viii) the Company is not and, after giving effect to
                  the offering and sale of the Securities and the application of
                  the proceeds thereof as described in the Final Memorandum,
                  will not be an "investment company" as defined in the
                  Investment Company Act;

                           (ix) no Governmental Approval is required in
                  connection with the transactions contemplated herein or in the
                  Indenture or the Registration Rights Agreement, except such as
                  will be obtained under the Act and the Trust Indenture Act in
                  connection with the transactions contemplated by the
                  Registration Rights Agreement;

                           (x) The specimen stock certificate evidencing the
                  common stock of the Company complies in all material respects
                  with the applicable requirements of Delaware law; and

                           (xi) such counsel will state that it has participated
                  in conferences with officers and other representatives of the
                  Company, counsel for the Company, representatives of the
                  independent accountants of the Company and you and your
                  counsel at which the contents of the Final Memorandum and
                  related matters were discussed. Although it is not passing
                  upon, and does not assume any responsibility for, the
                  accuracy, completeness or fairness of the statements contained
                  in the Final Memorandum and has made no independent check or
                  verification thereof (except to the limited extent referred to
                  above), on the basis of the foregoing, no facts have come to
                  its attention that have led it to believe that the Final
                  Memorandum, as of its date or as of Closing Date, contained or
                  contains an untrue statement of a material fact or omitted or
                  omits to state a material fact necessary in order to make the
                  statements therein, in light of the circumstances under which
                  they were made, not misleading, except that such counsel need
                  not express any opinion or belief with respect to the
                  financial statements, schedules and other financial data
                  included or excluded therefrom.

                  The following definitions apply to this paragraph (b):

                           "Applicable Contracts" means those agreements or
                  instruments identified in a schedule to the opinion reasonably
                  satisfactory to the Initial Purchasers.

<PAGE>

                                                                             19

                           "Applicable Laws" means Delaware General Corporation
                  Law (the "DGCL") and those laws, rules and regulations of the
                  State of New York and the federal laws of the United States of
                  America, in each case, which, in our experience, are normally
                  applicable to transactions of the type contemplated by the
                  Agreement, the Indenture and the Registration Rights Agreement
                  (other than the United States Federal securities laws, state
                  and foreign securities or blue sky laws, antifraud laws and
                  the rules and regulations of the National Association of
                  Securities Dealers Inc.), but without such counsel having made
                  any investigation as to any other laws, rules or regulations,
                  and which are not the subject of a specific opinion therein
                  referring expressly to a particular law or laws.

                           "Governmental Authorities" means any court,
                  regulatory body, administrative agency or governmental body of
                  the State of New York or the United States of America having
                  jurisdiction over the Company under Applicable Laws.

                           "Governmental Approval" means any consent, approval,
                  license, authorization or validation of, or filing,
                  qualification or registration with, any Governmental Authority
                  required to be made or obtained by the Company pursuant to
                  Applicable Laws.

                           "Applicable Orders" means those judgments, orders or
                  decrees, if any, of any Governmental Authority.

                  In rendering such opinion, such counsel may rely (A) as to
matters involving the application of laws of any jurisdiction other than the
jurisdiction of incorporation of the Company, the State of New York or the
Federal laws of the United States, to the extent they deem proper and specified
in such opinion, upon the opinion of other counsel of good standing whom they
believe to be reliable and who are satisfactory to counsel for the Initial
Purchasers; and (B) as to matters of fact, to the extent they deem proper, on
certificates of responsible officers of the Company and public officials.
References to the Final Memorandum in this Section 6(a) include any amendment or
supplement thereto at the Closing Date.

                  (c) The Representatives shall have received from Cravath,
         Swaine & Moore, counsel for the Initial Purchasers, such opinion or
         opinions, dated the Closing Date and addressed to the Representatives,
         with respect to the issuance and sale of the Securities, the Indenture,
         the Registration Rights Agreement, the Final Memorandum (as amended or
         supplemented at the Closing Date) and other related matters as the
         Representatives may reasonably require, and the Company shall have
         furnished to such counsel such documents as they reasonably request for
         the purpose of enabling them to pass upon such matters.

                  (d) The Company shall have furnished to the Representatives a
         certificate of the Company, signed by the Chairman of the Board or the
         President and the principal financial or accounting officer of the
         Company, dated the Closing Date, to the effect that the signers of such
         certificate have carefully examined the Final Memorandum, any amendment
         or supplement to the Final Memorandum and this Agreement and that:

                           (i) the representations and warranties of the Company
                  in this Agreement are true and correct on and as of the
                  Closing Date with the same effect as if made on the Closing
                  Date, and the Company has complied with all the agreements and
                  satisfied all the conditions on its part to be performed or
                  satisfied hereunder at or prior to the Closing Date; and

<PAGE>

                                                                             20

                           (ii) since the date of the most recent financial
                  statements included in the Final Memorandum (exclusive of any
                  amendment or supplement thereto), there has been no material
                  adverse change in the condition (financial or otherwise),
                  prospects, earnings, business or properties of the Company and
                  its subsidiaries, taken as a whole, whether or not arising
                  from transactions in the ordinary course of business, except
                  as set forth in or contemplated by the Final Memorandum
                  (exclusive of any amendment or supplement thereto).

                  (e) At the Execution Time and at the Closing Date, the Company
         shall have requested and caused Deloitte & Touche LLP to furnish to the
         Representatives letters, dated respectively as of the Execution Time
         and as of the Closing Date, in form and substance satisfactory to the
         Representatives, confirming that they are independent accountants
         within the meaning of the Act and the Exchange Act and the respective
         applicable rules and regulations adopted by the Commission thereunder,
         that they have performed a review of the unaudited interim financial
         information of the Company for the six-month period ended September 1,
         2001 and as at September 1, 2001, and stating in effect that:

                           (i) in their opinion the audited financial statements
                  and financial statement schedules included or incorporated by
                  reference in the Final Memorandum and reported on by them
                  comply as to form in all material respects with the applicable
                  accounting requirements of the Exchange Act and the related
                  rules and regulations adopted by the Commission thereunder
                  that would apply to the Final Memorandum if the Final
                  Memorandum were a prospectus included in a registration
                  statement on Form S-1 under the Act;

                           (ii) on the basis of a reading of the latest
                  unaudited financial statements made available by the Company
                  and its subsidiaries; their limited review, in accordance with
                  the standards established under Statement on Auditing
                  Standards No. 71, of the unaudited interim financial
                  information for the six-month period ended September 1, 2001,
                  and as at September 1, 2001; carrying out certain specified
                  procedures (but not an examination in accordance with
                  generally accepted auditing standards) which would not
                  necessarily reveal matters of significance with respect to the
                  comments set forth in such letter; a reading of the minutes of
                  the meetings of the stockholders, directors and audit,
                  executive and compensation committees of the Company and the
                  Subsidiaries; and inquiries of certain officials of the
                  Company who have responsibility for financial and accounting
                  matters of the Company and its subsidiaries as to transactions
                  and events subsequent to September 1, 2001, nothing came to
                  their attention which caused them to believe that:

                                    (1) any unaudited financial statements
                           included or incorporated in the Final Memorandum do
                           not comply in form in all material respects with
                           applicable accounting requirements and with the
                           related rules and regulations adopted by the
                           Commission with respect to financial statements
                           included or incorporated in quarterly reports on Form
                           10-Q under the Exchange Act; and said unaudited
                           financial statements are not in conformity with
                           generally accepted accounting principles applied on a
                           basis substantially consistent with that of the
                           audited financial statements included or incorporated
                           in the Final Memorandum;

<PAGE>

                                                                             21

                                    (2) with respect to the period subsequent to
                           September 1, 2001, there were any changes, at a
                           specified date not more than five days prior to the
                           date of the letter, in the long-term debt less
                           current maturities of the Company and its
                           subsidiaries or common stock of the Company or
                           decreases in the stockholders' equity (deficit) of
                           the Company as compared with the amounts shown on the
                           September 1, 2001 consolidated balance sheet included
                           or incorporated in the Final Memorandum, or for the
                           period from September 2, 2001 to such specified date
                           there were any decreases, as compared with the
                           corresponding period in the preceding year in
                           revenues, net loss or loss from continuing operations
                           before income taxes and cumulative effect of
                           accounting change or in net loss per share of the
                           Company and its subsidiaries, except in all instances
                           for changes or decreases set forth in such letter, in
                           which case the letter shall be accompanied by an
                           explanation by the Company as to the significance
                           thereof unless said explanation is not deemed
                           necessary by the Representatives; or

                                    (3) the information included in response to
                           Regulation S-K, Item 301 (Selected Financial Data),
                           Item 302 (Supplementary Financial Information), Item
                           402 (Executive Compensation) and Item 503(d) (Ratio
                           of Earnings to Fixed Charges) is not in conformity
                           with the disclosure requirements of Regulation S-K.

                              (iii) they have performed certain other specified
                  procedures as a result of which they determined that certain
                  information of an accounting, financial or statistical nature
                  (which is limited to accounting, financial or statistical
                  information derived from the general accounting records of the
                  Company and its subsidiaries) set forth in the Final
                  Memorandum, including the information set forth under the
                  captions "Offering Memorandum Summary", "Risk Factors", "Use
                  of Proceeds", "Capitalization", "Selected Consolidated
                  Financial Data", "Management's Discussion and Analysis of
                  Financial Condition and Results of Operations", "Business",
                  "Management", "Executive Officer Compensation", "Security
                  Ownership of Certain Beneficial Owners and Management",
                  "Certain Relationships and Related Transactions," "Description
                  of Capital Stock" and "Description of Other Indebtedness" in
                  the Final Memorandum, agrees with the accounting records of
                  the Company and its subsidiaries, excluding any questions of
                  legal interpretation;

                  References to the Final Memorandum in this Section 6(e)
         include any amendment or supplement thereto at the date of the
         applicable letter.

                  (f) Subsequent to the Execution Time or, if earlier, the dates
         as of which information is given in the Final Memorandum (exclusive of
         any amendment or supplement thereto), there shall not have been (i) any
         change or decrease specified in the letter or letters referred to in
         paragraph (e) of this Section 6; or (ii) any change, or any development
         involving a prospective change, in or affecting the condition
         (financial or otherwise), prospects, earnings, business or properties
         of the Company and its subsidiaries, taken as a whole, whether or not
         arising from transactions in the ordinary course of business, except as
         set forth in or contemplated in the Final Memorandum (exclusive of any
         amendment or supplement thereto) the effect of which, in any case
         referred to in clause (i) or (ii) above, is, in the sole judgment of
         the Representatives, so material and adverse as to make it impractical
         or inadvisable to market the Securities as contemplated by the Final
         Memorandum (exclusive of any amendment or supplement thereto).

<PAGE>

                                                                             22

                  (g) The Securities shall have been designated as
         Portal-eligible securities in accordance with the rules and regulations
         of the NASD, and the Securities shall be eligible for clearance and
         settlement through The Depository Trust Company.

                  (h) Subsequent to the Execution Time, there shall not have
         been any decrease in the rating of any of the Company's debt securities
         by any "nationally recognized statistical rating organization" (as
         defined for purposes of Rule 436(g) under the Act), any notice given of
         any intended or potential decrease in any such rating (including notice
         of an adverse change in the outlook for such rating) or of a possible
         change in any such rating that does not indicate the direction of the
         possible change.

                  (i) Each Lock-up Agreement shall have been duly executed and
         delivered to the Company and you and there shall have occurred no
         breach of any Lock-up Agreement.

                  (j) The shares of Stock issuable upon conversion of the
         Securities shall have been duly listed, subject to notice of issuance,
         on the New York Stock Exchange.

                  (k) Prior to the Closing Date, the Company shall have
         furnished to the Representatives such further information, certificates
         and documents as the Representatives may reasonably request.

                  If any of the conditions specified in this Section 6 shall not
have been fulfilled in all material respects when and as provided in this
Agreement, or if any of the opinions and certificates mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to the Representatives and counsel for the
Initial Purchasers, this Agreement and all obligations of the Initial Purchasers
hereunder may be canceled at, or at any time prior to, the Closing Date by the
Representatives. Notice of such cancellation shall be given to the Company in
writing or by telephone or facsimile confirmed in writing.

                  The documents required to be delivered by this Section 6 will
be delivered at the office of counsel for the Initial Purchasers, at Cravath,
Swaine & Moore, 825 Eighth Avenue, New York, NY 10019, on the Closing Date.

                  7. Reimbursement of Expenses. If the sale of the Securities
provided for herein is not consummated because any condition to the obligations
of the Initial Purchasers set forth in Section 6 hereof is not satisfied,
because of any termination pursuant to Section 10 hereof or because of any
refusal, inability or failure on the part of the Company to perform any
agreement herein or comply with any provision hereof other than by reason of a
default by any of the Initial Purchasers, the Company will reimburse the Initial
Purchasers severally through Salomon Smith Barney Inc. on demand for all
reasonable out-of-pocket expenses (including reasonable fees and disbursements
of counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities.

<PAGE>

                                                                             23

                  8. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, the directors, officers,
employees and agents of each Initial Purchaser and each person who controls any
Initial Purchaser within the meaning of either the Act or the Exchange Act
against any and all losses, claims, damages or liabilities, joint or several, to
which they or any of them may become subject under the Act, the Exchange Act or
other Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact contained in the Preliminary Memorandum, the Final
Memorandum (or in any supplement or amendment thereto), or arise out of or are
based upon the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, and agrees to reimburse each such
indemnified party, as incurred, for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action; provided, however, that the Company will not
be liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made in the Preliminary
Memorandum or the Final Memorandum, or in any amendment thereof or supplement
thereto, in reliance upon and in conformity with written information furnished
to the Company by or on behalf of any Initial Purchaser through the
Representatives specifically for inclusion therein; provided further, that with
respect to any untrue statement or omission of material fact made in any
Preliminary Memorandum, the indemnity agreement contained in this Section 8(a)
shall not inure to the benefit of any Initial Purchaser from whom the person
asserting any such loss, claim, damage or liability purchased the securities
concerned, to the extent that any such loss, claim, damage or liability of such
Initial Purchaser occurs under the circumstance where it shall have been
determined by a court of competent jurisdiction by final and nonappealable
judgment that (x) the Company had previously furnished copies of the Final
Memorandum to the Representatives, (y) the untrue statement or omission of a
material fact contained in the Preliminary Memorandum was corrected in the Final
Memorandum and (z) there was not sent or given to such person, at or prior to
the written confirmation of the sale of such securities to such person, a copy
of the Final Memorandum. This indemnity agreement will be in addition to any
liability which the Company may otherwise have.

                  (b) Each Initial Purchaser severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its
officers, and each person who controls the Company within the meaning of either
the Act or the Exchange Act, to the same extent as the foregoing indemnity from
the Company to each Initial Purchaser, but only with reference to written
information relating to such Initial Purchaser furnished to the Company by or on
behalf of the Initial Purchaser through the Representatives specifically for
inclusion in the Preliminary Memorandum or the Final Memorandum (or in any
amendment or supplement thereto). This indemnity agreement will be in addition
to any liability which any Initial Purchaser may otherwise have. The Company
acknowledges that the statements set forth in the last paragraph of the cover
page regarding the delivery of the Securities and, under the heading "Plan of
Distribution," (i) the list of Initial Purchasers and their respective
participation in the sale of the Securities and (ii) the paragraph related to
stabilization and syndicate covering transactions in the Preliminary Memorandum
and the Final Memorandum, constitute the only information furnished in writing
by or on behalf of the Initial Purchasers for inclusion in the Preliminary
Memorandum or the Final Memorandum (or in any amendment or supplement thereto).

<PAGE>

                                                                             24

                  (c) Promptly after receipt by an indemnified party under this
Section 8 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 8, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses;
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be reasonably satisfactory to the
indemnified party. Notwithstanding the indemnifying party's election to appoint
counsel to represent the indemnified party in an action, the indemnified party
shall have the right to employ separate counsel (including local counsel), and
the indemnifying party shall bear the reasonable fees, costs and expenses of
such separate counsel if (i) the use of counsel chosen by the indemnifying party
to represent the indemnified party would present such counsel with a conflict of
interest; (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party; (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action; or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties (which consent shall not be
unreasonably withheld), settle or compromise or consent to the entry of any
judgment with respect to any pending or threatened claim, action, suit or
proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential
parties to such claim or action) unless such settlement, compromise or consent
includes an unconditional release of each indemnified party from all liability
arising out of such claim, action, suit or proceeding.

                  (d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 8 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Company and the Initial Purchasers
severally agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the
Company and one or more of the Initial Purchasers may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and by the Initial Purchasers on the other from the
offering of the Securities; provided, however, that in no case shall any Initial
Purchaser (except as may be provided in any agreeement among the Initial
Purchasers relating to the offering of the Securities) be responsible for any
amount in excess of the purchase discount or commission applicable to the
Securities purchased by such Initial Purchaser hereunder. If the allocation
provided by the immediately preceding sentence is unavailable for any reason,
the Company and the Initial Purchasers severally shall contribute in such
proportion as is appropriate to reflect not only such relative benefits but also
the relative fault of the Company on the one hand and of the Initial Purchasers
on the other in connection with the statements or omissions which resulted in
such Losses, as well as any other relevant equitable considerations. Benefits

<PAGE>

                                                                             25

received by the Company shall be deemed to be equal to the total net proceeds
from the offering (before deducting expenses) received by the Company, and
benefits received by the Initial Purchasers shall be deemed to be equal to the
total purchase discounts and commissions in each case set forth on the cover of
the Final Memorandum. Relative fault shall be determined by reference to, among
other things, whether any untrue or any alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information provided by the Company on the one hand or the Initial Purchasers on
the other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Company and the Initial Purchasers agree that it would not be just
and equitable if contribution were determined by pro rata allocation or any
other method of allocation which does not take account of the equitable
considerations referred to above. Notwithstanding the provisions of this
paragraph (d), no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Act) shall be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 8, each person who controls an Initial Purchaser within the meaning
of either the Act or the Exchange Act and each director, officer, employee and
agent of an Initial Purchaser shall have the same rights to contribution as such
Initial Purchaser, and each person who controls the Company within the meaning
of either the Act or the Exchange Act and each officer and director of the
Company shall have the same rights to contribution as the Company, subject in
each case to the applicable terms and conditions of this paragraph (d).

                  9. Default by an Initial Purchaser. If any one or more Initial
Purchasers shall fail to purchase and pay for any of the Securities agreed to be
purchased by such Initial Purchaser hereunder and such failure to purchase shall
constitute a default in the performance of its or their obligations under this
Agreement, the remaining Initial Purchasers shall be obligated severally to take
up and pay for (in the respective proportions which the principal amount of
Securities set forth opposite their names on Schedule I hereto bears to the
aggregate principal amount of Securities set forth opposite the names of all the
remaining Initial Purchasers) the Securities which the defaulting Initial
Purchaser or Initial Purchasers agreed but failed to purchase; provided,
however, that in the event that the aggregate principal amount of Securities
which the defaulting Initial Purchaser or Initial Purchasers agreed but failed
to purchase shall exceed 10% of the aggregate principal amount of Securities set
forth on Schedule I hereto, the remaining Initial Purchasers shall have the
right to purchase all, but shall not be under any obligation to purchase any, of
the Securities, and if such nondefaulting Initial Purchasers do not purchase all
the Securities, this Agreement will terminate without liability to any
nondefaulting Initial Purchaser or the Company. In the event of a default by any
Initial Purchaser as set forth in this Section 9, the Closing Date shall be
postponed for such period, not exceeding two Business Days, as the
Representatives and the Company shall determine in order that the required
changes in the Final Memorandum or in any other documents or arrangements may be
effected. Nothing contained in this Agreement shall relieve any defaulting
Initial Purchaser of its liability, if any, to the Company or any nondefaulting
Initial Purchaser for damages occasioned by its default hereunder.

                  10. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representatives, by notice given
to the Company prior to delivery of and payment for the Securities, if at any
time prior to such time (i) trading in the Company's Common Stock shall have
been suspended by the Commission, the New York Stock Exchange or the Pacific
Stock Exchange or trading in securities generally on the New York Stock Exchange
or the Pacific Stock Exchange shall have been suspended or limited or minimum
prices shall have been established on either such Exchange; (ii) a banking
moratorium shall have been declared either by Federal or New York State
authorities; or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war or
other calamity or crisis the effect of which on financial markets is such as to
make it, in the sole judgment of the Representatives, impracticable or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Final Memorandum (exclusive of any amendment or supplement
thereto).

<PAGE>

                                                                             26

                  10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company or its officers and of the Initial Purchasers set forth in or made
pursuant to this Agreement will remain in full force and effect, regardless of
any investigation made by or on behalf of the Initial Purchasers or the Company
or any of the officers, directors, employees, agents or controlling persons
referred to in Section 8 hereof, and will survive delivery of and payment for
the Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.

                  11. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representatives, will be
mailed, delivered or telefaxed to Salomon Smith Barney Inc. General Counsel (fax
no.: (212) 816-7912) and confirmed to the General Counsel, Salomon Smith Barney
Inc. at 388 Greenwich Street, New York, New York 10013, Attention: General
Counsel; or, if sent to the Company, will be mailed, delivered or telefaxed to
Elliot S. Gerson, Esq. (fax no.: (717) 760-7867) and confirmed to Elliot S.
Gerson, Esq., Rite Aid Corporation, 30 Hunter Lane, Camp Hill, Pennsylvania
17011.

                  12. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, directors, employees, agents and controlling persons referred to in
Section 8 hereof, and, except as expressly set forth in Section 5(h) hereof, no
other person will have any right or obligation hereunder.

                  13. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

                  14. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same instrument.

                  15. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.

                  16. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.

                  "Act" shall mean the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.

<PAGE>

                                                                             27

                  "Affiliate" shall have the meaning specified in Rule 501(b) of
Regulation D.

                  "Business Day" shall mean any day other than a Saturday, a
Sunday or a legal holiday or a day on which banking institutions or trust
companies are authorized or obligated by law to close in The City of New York.

                  "Commission" shall mean the Securities and Exchange
Commission.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission promulgated
thereunder.

                  "Execution Time" shall mean the date and time that this
Agreement is executed and delivered by the parties hereto.

                  "Investment Company Act" shall mean the Investment Company Act
of 1940, as amended, and the rules and regulations of the Commission promulgated
thereunder.

                  "NASD" shall mean the National Association of Securities
Dealers, Inc.

                  "Regulation D" shall mean Regulation D under the Act.

                  "Regulation S" shall mean Regulation S under the Act.

                  "Trust Indenture Act" shall mean the Trust Indenture Act of
1939, as amended, and the rules and regulations of the Commission promulgated
thereunder.

<PAGE>

                                                                             28

                  If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this Agreement and your acceptance shall represent a binding agreement
between the Company and the several Initial Purchasers.

                                       Very truly yours,

                                       Rite Aid Corporation,

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

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

Salomon Smith Barney Inc.
J.P. Morgan Securities Inc.

By: Salomon Smith Barney Inc.

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

For themselves and the other several Initial
Purchasers named in Schedule I to the
foregoing Agreement

<PAGE>

                                   SCHEDULE I

<TABLE>
<CAPTION>

                                                                                            Principal Amount of
                                                                                         Optional Securities to be
                                                                                            Purchased if Over-
                                                    Principal Amount of Firm                Allotment Option is
             Initial Purchasers                    Securities to be Purchased                    Exercised
             ------------------                    --------------------------                    ---------
<S>                                                <C>                                   <C>
Salomon Smith Barney Inc............                      $168,750,000                          $50,000,000
J.P. Morgan Securities Inc.............                    $31,250,000                              $0
                                       Total              $200,000,000                          $50,000,000
                                                          ============                          ===========

</TABLE>

<PAGE>

                                   SCHEDULE II

                  1. Registration Rights Agreement dated as of October 27, 1999
by and between Rite Aid Corporation and Green Equity Investors III, L.P.

                  2. Registration Rights Agreement dated as of October 27, 1999
by and between Rite Aid Corporation and J.P. Morgan Ventures Corporation.

                  3. Registration Rights Agreement dated as of June 14, 2001, by
and among Rite Aid Corporation and the Lenders listed therein.

                  4. Registration Rights Agreement dated as of June 27, 2001
between Rite Aid Corporation and the Exchanging Holders listed therein.

                  5. Registration Rights Agreement dated as of June 27, 2001
between Rite Aid Corporation and the Purchasers listed therein.

                  6. Registration Rights Agreement dated as of June 27, 2001
between Rite Aid Corporation, Transamerica Investment Management LLC, and the
Other Purchasers listed therein.

<PAGE>

                                                                      EXHIBIT A

                       Selling Restrictions for Offers and
                         Sales outside the United States

                  (1)(a) The Securities and the Stock issuable upon conversion
thereof have not been and will not be registered under the Act and may not be
offered or sold within the United States or to, or for the account or benefit
of, U.S. persons except in accordance with Regulation S under the Act or
pursuant to an exemption from the registration requirements of the Act or unless
registered under the Act. The Initial Purchaser represents and agrees that,
except as otherwise permitted by Section 4(a)(i) or (ii) of the Agreement to
which this is an exhibit, it has offered and sold the Securities, and will offer
and sell the Securities, (i) as part of their distribution at any time; and (ii)
otherwise until one year after the later of the commencement of the offering and
the Closing Date, only in accordance with Rule 903 of Regulation S under the
Act. Accordingly, each Initial Purchaser represents and agrees that neither it,
nor any of its Affiliates nor any person acting on its or their behalf has
engaged or will engage in any directed selling efforts with respect to the
Securities, and that it and they have complied and will comply with the offering
restrictions requirement of Regulation S. Each Initial Purchaser agrees that it
will not engage, directly or indirectly, in hedging transactions with regard to
the Securities or the shares of Stock issuable upon conversion thereof prior to
the expiration of one year after the later of the commencement of the offering
and the Closing Date unless in compliance with the Act. Each Initial Purchaser
agrees that, at or prior to the confirmation of sale of Securities (other than a
sale of Securities pursuant to Section 4(a)(i) or (ii) of the Agreement to which
this is an exhibit), it shall have sent to each distributor, dealer or person
receiving a selling concession, fee or other remuneration that purchases
Securities from it during the one year distribution compliance period a
confirmation or notice to substantially the following effect:

                  "The Securities covered hereby have not been registered under
                  the U.S. Securities Act of 1933 (the "Act") and may not be
                  offered or sold within the United States or to, or for the
                  account or benefit of, U.S. persons (i) as part of their
                  distribution at any time or (ii) otherwise until one year
                  after the later of the commencement of the offering and
                  November 19, 2001, except in either case in accordance with
                  Regulation S or Rule 144A under the Act. Hedging transactions
                  with regard to the Securities or the shares of Stock issuable
                  upon conversion of the Securities may not be conducted,
                  directly or indirectly, prior to the expiration of one year
                  after the later of the commencement of the offering and
                  January 26, 2000 unless in compliance with the Act. Terms used
                  above have the meanings given to them by Regulation S."

                  (b) Each Initial Purchaser also represents and agrees that it
has not entered and will not enter into any contractual arrangement with any
distributor with respect to the distribution of the Securities, except with its
Affiliates or with the prior written consent of the Company.

                  (c) Terms used in this section have the meanings given to them
by Regulation S.

                  (2) Each Initial Purchaser represents and agrees that (i) it
has not offered or sold, and prior to the expiration of the period of six months
from the issue date of the Securities will not offer or sell, any Securities in
the United Kingdom, other than to persons whose ordinary business it is to buy,
hold, manage or dispose of investments (whether as principal or agent) for the
purposes of their businesses or otherwise in circumstances which do not
constitute an offer to the public within the meaning of the Public Offers of
Securities Regulation 1995 or the Financial Services Act 1986 of the United
Kingdom; (ii) it has complied and will comply with all applicable provisions of
the Financial Services Act 1986 of the United Kingdom with respect to anything
done by it in relation to the notes in, from or otherwise involving the United
Kingdom and (iii) it has only issued or passed on and will only issue or pass
on, in the United Kingdom, any document received by it in connection with the
issue of the notes, if that person is of a kind described in Article 11(3) of
the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order
1996 or is a person to whom the document may otherwise lawfully be issued or
passed on.

                                       A-1

<PAGE>

                                                                      EXHIBIT B

                           [Form of Lock-Up Agreement]

                       [Letterhead of officer or director]

                              Rite Aid Corporation

Salomon Smith Barney Inc.
J.P. Morgan Securities Inc.
388 Greenwich Street
New York, New York  10013

Ladies and Gentlemen:

                  This letter is being delivered to you in connection with the
proposed Purchase Agreement (the "Purchase Agreement"), between Rite Aid
Corporation, a Delaware corporation (the "Company"), and you as Representatives
of the several Initial Purchasers named therein, relating to a placement of
$200,000,000 aggregate principal amount of Convertible Notes Due 2006
($250,000,000 if the over-allotment option is exercised by the Initial
Purchaser).

                  In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the undersigned will not, without the prior written consent
of Salomon Smith Barney Inc., offer, sell, contract to sell, pledge or otherwise
dispose of (or enter into any transaction which is designed to, or might
reasonably be expected to, result in the disposition of (whether by actual
disposition or effective economic disposition due to cash settlement or
otherwise) directly or indirectly, including the filing of (or participation in
the filing of)), a registration statement with the Securities and Exchange
Commission in respect of, or establish or increase a put equivalent position or
liquidate or decrease a call equivalent position within the meaning of Section
16 of the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Securities and Exchange Commission promulgated thereunder
with respect to, any shares of common stock ("Common Stock") of the Company or
any securities convertible into, or exercisable or exchangeable for such Common
Stock, or publicly announce an intention to effect any such transaction, for a
period of 90 days after the date of the Purchase Agreement, other than shares of
Common Stock disposed of as bona fide gifts approved by Salomon Smith Barney
Inc.; provided, however, that, without such consent, the undersigned may
participate in the filing of any registration statement which the Company is
permitted to file pursuant to the Purchase Agreement.

                  If for any reason the Purchase Agreement shall be terminated
prior to the Closing Date (as defined in the Purchase Agreement), the agreement
set forth above shall likewise be terminated.

                                    Very truly yours,

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

                                    ------------------------------------
                                    Print Name

                                       B-1EXHIBIT 4.1

                           TRIMBLE NAVIGATION LIMITED

                           FIRST AMENDED AND RESTATED
                      STOCK AND WARRANT PURCHASE AGREEMENT

THIS FIRST AMENDED AND RESTATED STOCK AND WARRANT  PURCHASE  AGREEMENT (the
"Agreement")  is made  effective as of the 14th day of January 2002 by and among
Trimble  Navigation Limited (the "Company"),  a corporation  organized under the
laws of the State of  California,  with its principal  offices at 645 North Mary
Avenue,  Sunnyvale,  California  94086,  and the  entities  listed on Schedule A
hereto (each a "Purchaser").

IN CONSIDERATION of the mutual covenants contained in this Agreement, the
Company and the Purchasers hereby agree as follows:

SECTION 1.  PURCHASE AND SALE OF STOCK.

Subject to the terms and conditions of this Agreement,  the Purchasers  agree to
purchase  severally and not jointly at the First Closing or Second Closing (both
terms as defined  below) and the Company agrees to sell and issue to each of the
Purchasers  severally and not jointly at the First Closing or Second Closing (i)
that number of whole shares of the Company's  common stock ("Common  Stock") set
forth opposite each  Purchaser's  name on Schedule A hereto for each Closing (as
defined  below)  (collectively,  the  "Shares"),  at that purchase price that is
equal to $15.00  per  Share,  and (ii)  warrants  (the  "Warrants")  in the form
attached  hereto as Exhibit A giving the Purchasers the right for five (5) years
from the First Closing Date to purchase at an exercise  price per share equal to
one hundred  twenty-five  percent  (125%) of the Fair  Market  Value (as defined
below) of a share of Common Stock (as subject to  adjustment as set forth in the
Warrant,  the "Warrant  Shares") and as set forth opposite each Purchaser's name
on  Schedule A hereto for each  Closing (as  defined  below),  which is equal to
twenty  percent  (20%) of the  number  of  Shares  purchased  by such  Purchaser
hereunder.  For purposes of this  Agreement  and the  Warrant,  the "Fair Market
Value" of a share of Common  Stock  shall be deemed to be  $15.58,  which is the
closing  price per share of the Common Stock as reported on the Nasdaq  National
Market System for December 18, 2001. The Shares, Warrant, and Warrant Shares are
herein sometimes collectively referred to as the "Securities."

SECTION 2.  CLOSINGS.

2.1.  CLOSINGS.  The purchase  and sale of the Shares and the Warrants  upon the
terms and  conditions  hereof will take place at two closings  (each a "Closing"
and  respectively,  the "First Closing" and "Second  Closing") to be held at the
offices  of Wilson  Sonsini  Goodrich & Rosati,  650 Page Mill Road,  Palo Alto,
California,  on December 21, 2001, at 2:00 p.m.  Pacific  Standard  Time, and on
January 14, 2002, at 2:00 p.m.  Pacific Standard Time,  respectively  (each such
date and time referred to herein as a "Closing  Date," and  respectively  as the
"First Closing Date" and "Second Closing Date"). At the respective  Closing Date
identified  opposite  each  Purchaser's  name on Schedule A hereto,  the Company
shall issue  irrevocable  instructions  to its transfer agent to deliver to such
Purchaser  one or  more  stock  certificates  registered  in the  name  of  such
Purchaser,  or in such  nominee  name(s)  as  designated  by such  Purchaser  in
writing,  representing  the number of Shares set forth opposite each Purchaser's
name on Schedule A hereto for such

                                       1
<PAGE>

Closing,  and shall  issue one or more  Warrants  in the name of each  Purchaser
representing  the right to  purchase  the  number of  Warrant  Shares  set forth
opposite each Purchaser's name on Schedule A hereto for such Closing.

2.2      CONDITIONS TO CLOSING.

     (a) The  Company's  obligation  to complete  the  purchase  and sale of the
Shares and deliver such stock  certificate(s)  and Warrants to each Purchaser is
subject to (i) receipt by the  Company of  same-day  funds in the full amount of
the purchase  price for the Shares being  purchased  hereunder on the respective
Closing Date identified opposite each Purchaser's name on Schedule A hereto, and
(ii) the accuracy in all  material  respects as of the  respective  Closing Date
identified   opposite  each  Purchaser's  name  on  Schedule  A  hereto  of  the
representations  and warranties made by the Purchasers in this Agreement and the
fulfillment in all material respects of those  undertakings of the Purchasers in
this Agreement to be fulfilled on or prior to such Closing Date.

     (b) The  Purchasers'  obligation  to complete  the purchase and sale of the
Shares and the Warrants is  conditioned  upon the close of at least  twenty-five
million dollars ($25,000,000)  aggregate consideration at the First Closing Date
and  is  subject  to  delivery  by  the  Company  to the  Purchasers  of:  (i) a
certificate,  dated as of the respective First or Second Closing Date,  executed
by the chief executive officer and the chief financial or accounting  officer of
the  Company,  to the effect  that the  representations  and  warranties  of the
Company set forth in Section 3 below are accurate in all material respects as of
such respective Closing Date and to the effect that the Company has fulfilled in
all material  respects those  undertakings  of the Company to be fulfilled on or
prior  to such  respective  Closing  Date;  (ii)  an  opinion,  dated  as of the
respective  First or Second Closing Date, from Wilson Sonsini Goodrich & Rosati,
P.C.,  corporate  counsel  to the  Company,  in the form  attached  as Exhibit B
hereto; and (iii) the Company shall deliver instructions in the form attached as
Exhibit C hereto to the transfer  agent to deliver the Shares to the  Purchasers
at each respective Closing.

SECTION 3.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY

The  Company  hereby  represents  and  warrants  to,  and  covenants  with,  the
respective Purchasers as of the First Closing Date as follows, and except as set
forth on the Schedule of Exceptions  attached as Schedule B hereto,  the Company
hereby represents and warrants to, and covenants with, the respective Purchasers
as of the Second Closing Date as follows:

3.1.  ORGANIZATION  AND  QUALIFICATION.  The Company and any of its subsidiaries
("Subsidiaries,"   which  for  purposes  of  this  Agreement  means  any  entity
constituting  greater than 10% of the Company's  consolidated annual revenue and
in which the Company,  directly or  indirectly,  owns 25% or more of the capital
stock or other equity or similar  interests  or owns  capital  stock or holds an
equity or similar interest which ownership  entitles the Company to elect 25% or
more of the board of directors or similar  governing  body of such entity;  such
Subsidiaries are set forth on Schedule C hereto) are corporations,  partnerships
or limited  liability  companies  duly  organized  and validly  existing in good
standing  (to the extent such  concepts  are  applicable)  under the laws of the
jurisdiction in which they are incorporated or organized, and have the requisite
corporate,  limited  liability company or partnership power and authorization to
own their properties and to carry on their business as now being conducted. Each
of the Company and its

                                       2
<PAGE>

Subsidiaries  is duly  qualified as a foreign  corporation,  partnership or
limited  liability company to do business and is in good standing (to the extent
such concepts are  applicable) in every  jurisdiction  in which its ownership of
property or the nature of the business  conducted by it makes such qualification
necessary,  except to the extent  that the failure to be so  qualified  or be in
good  standing  would  not  have a  Material  Adverse  Effect.  As  used in this
Agreement,  "Material  Adverse Effect" means any material  adverse effect on the
business, properties,  assets, operations,  results of operations,  prospects or
condition (financial or otherwise) of the Company and its subsidiaries, taken as
a whole,  or on the  transactions  contemplated  hereby or by the agreements and
instruments  to be entered into in connection  herewith,  or on the authority or
ability of the Company to timely perform its  obligations  under the Transaction
Documents (as defined below).

3.2.  AUTHORIZATION,  ENFORCEMENT,  AND VALIDITY.  The Company has the requisite
corporate  power and authority to enter into and perform its  obligations  under
this Agreement,  the Warrants and each of the other  agreements  entered into by
the parties  hereto in connection  with the  transactions  contemplated  by this
Agreement  (collectively,   the  "Transaction  Documents"),  and  to  issue  the
Securities  in accordance  with the terms hereof and thereof.  The execution and
delivery of the Transaction  Documents by the Company and the consummation by it
of  the  transactions  contemplated  hereby  and  thereby,  including,   without
limitation,  the issuance of the Warrants and the  reservation  for issuance and
the issuance of the Warrant Shares issuable upon exercise of the Warrants,  have
been duly  authorized by the Company's Board of Directors and no further consent
or   authorization   is  required  of  the  Company's   Board  of  Directors  or
shareholders. The Transaction Documents have been duly executed and delivered by
the  Company.  The  Transaction  Documents  constitute  the  valid  and  binding
obligations of the Company  enforceable  against the Company in accordance  with
their terms,  except as such enforceability may be limited by general principles
of equity or  applicable  bankruptcy,  insolvency,  reorganization,  moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of creditors' rights and remedies.

3.3.  CAPITALIZATION.  As of the First Closing Date, the authorized stock of the
Company  is  40,000,000   shares  of  Common  Stock,  of  which  24,971,079  are
outstanding,  and 3,000,000  shares of Preferred  Stock,  of which 65,000 shares
have been designated  Series A  Participating  Preferred Stock and of which none
are  outstanding.  Except as  disclosed  in Schedule D hereto and as provided in
this Agreement, no party has any rights to cause the Company to prepare and file
a registration  statement for the resale of any Common Stock held by or issuable
to such party, and there are no outstanding options,  warrants, script rights to
subscribe to, calls or commitments of any character  whatsoever  relating to, or
securities,  rights or  obligations  convertible  into or  exchangeable  for, or
giving any person or entity any right to subscribe for or acquire, any shares of
Common Stock, or contracts, commitments, understandings or arrangements by which
the Company or any Subsidiary is or may become bound to issue additional  shares
of Common Stock, or securities or rights convertible or exchangeable into shares
of Common  Stock.  The issue and sale of the  Securities  will not  obligate the
Company to issue  shares of Common  Stock or other  securities  to any person or
entity (other than the  Purchasers) and will not result in a right of any holder
of Company  securities  to adjust the  exercise,  conversion,  exchange or reset
price  under  such  securities.  The  offer  and sale of the  Securities  to the
Purchasers  pursuant  to this  Agreement  will,  subject to the  accuracy of the
Purchaser's  representations  set forth in Sections  4.2, 4.3 and 4.4 below,  be
made in accordance  with the provisions and  requirements of Section 4(2) of the
Securities  Act of 1933,  as amended  (the  "Securities  Act") or  Regulation  D
promulgated under the Securities Act and any applicable state law.

                                       3
<PAGE>

3.4.  ISSUANCE OF  SECURITIES.  The  Securities  are duly  authorized  and, upon
issuance in accordance with the terms of the applicable  Transaction  Documents,
shall be: (i) validly issued,  fully paid and  non-assessable and (ii) free from
all taxes,  liens and charges with respect to the issuance  thereof  (other than
any such  taxes,  liens and  charges  created by any  Purchaser  or  assignee or
transferee),  and shall not be subject  to  preemptive  rights or other  similar
rights of the  shareholders  of the Company.  As of the First Closing,  at least
356,670  shares of Common Stock will have been duly  authorized and reserved for
issuance  upon exercise of the  Warrants.  Upon exercise in accordance  with the
Warrants,   the  Warrant  Shares  will  be  validly   issued,   fully  paid  and
non-assessable  and free from all taxes,  liens and charges  with respect to the
issue  thereof  (other  than any such taxes,  liens and  charges  created by any
Purchaser or any assignee or transferee), with the holders being entitled to all
rights accorded to a holder of Common Stock.

3.5 NO CONFLICTS.  The execution,  delivery and  performance of the  Transaction
Documents by the Company and the consummation by the Company of the transactions
contemplated hereby and thereby (including,  without limitation, the reservation
for  issuance  and  issuance  of the  Warrant  Shares)  will not (i) result in a
violation of the Company's  articles of incorporation  or bylaws;  (ii) conflict
with, or constitute a default (or an event which with notice or lapse of time or
both would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, any material agreement, indenture or
instrument  to which the Company or any of its  Subsidiaries  is a party (except
for  such  conflicts,   defaults,   terminations,   amendments,   accelerations,
cancellations  and  violations as would not,  individually  or in the aggregate,
have a Material  Adverse  Effect);  or (iii)  result in a violation  of any law,
rule,  regulation,  order,  judgment  or  decree  (including  federal  and state
securities  laws and  regulations  and the rules and  regulations  of the Nasdaq
National  Market)  applicable  to the Company or any of its  Subsidiaries  or by
which any property or asset of the Company or any of its  Subsidiaries  is bound
or  affected.  Neither the Company nor its  Subsidiaries  is in violation of any
term of or in default under its respective articles of incorporation,  bylaws or
other  organizational  charter or  document.  To the  knowledge  of the Company,
neither the Company nor any of its  Subsidiaries  is in violation of any term of
or in default under any contract, agreement, mortgage, indebtedness,  indenture,
instrument,  judgment,  decree  or  order  or any  statute,  rule or  regulation
applicable to the Company or its Subsidiaries,  except where such violations and
defaults  would  not  result,  either  individually  or in the  aggregate,  in a
Material Adverse Effect. The business of the Company and its Subsidiaries is not
being  conducted  in  violation  of any  law,  ordinance  or  regulation  of any
governmental  entity,  except  where such  violations  would not result,  either
individually  or in the  aggregate,  in a  Material  Adverse  Effect.  Except as
specifically  contemplated by this  Agreement,  as required under the Securities
Act, and as required by Blue Sky filings,  the Company is not required to obtain
any consent, authorization or order of, or make any filing or registration with,
any court or governmental agency or any regulatory or self-regulatory  agency in
order for it to  execute,  deliver or perform  any of its  obligations  under or
contemplated by the Transaction Documents. All consents, authorizations, orders,
filings and registrations that the Company is required to obtain pursuant to the
preceding  sentence  have  been  obtained  or  effected  on or prior to the date
hereof.  The Company and its Subsidiaries are currently  unaware of any facts or
circumstances  that might give rise to any of the foregoing  events set forth in
this paragraph.  The Company is not in violation of the listing  requirements of
the Nasdaq National Market,  and has no actual knowledge of any facts which with
notice or lapse of time would  reasonably lead to delisting or suspension of the
Common  Stock  by  the  Nasdaq  National  Market  either  immediately  or in the
foreseeable future.

                                       4
<PAGE>

3.6. SEC DOCUMENTS; FINANCIAL STATEMENTS. Since January 1, 2001, the Company has
timely filed all  reports,  schedules,  forms,  statements  and other  documents
required to be filed by it with the  Securities  and  Exchange  Commission  (the
"SEC") pursuant to the reporting  requirements of the Securities Exchange Act of
1934, as amended (the "Exchange Act") (all of the foregoing filed prior to or on
the  First  Closing  Date  and  all  exhibits  included  therein  and  financial
statements and schedules thereto and documents incorporated by reference therein
being hereinafter referred to as the "SEC Documents").  As of the date of filing
of such SEC  Documents,  each  such SEC  Document,  as it may  timely  have been
subsequently  amended by filings  made by the Company  with the SEC prior to the
First Closing Date,  complied in all material  respects with the requirements of
the Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such SEC Document. None of the SEC Documents, as of the date filed
and as they may have been  subsequently  amended by filings  made by the Company
with the SEC prior to the First Closing Date,  contained any untrue statement of
a  material  fact or  omitted to state a  material  fact  required  to be stated
therein or necessary in order to make the  statements  therein,  in the light of
the circumstances  under which they were made, not misleading.  To the knowledge
of the Company,  as of their respective  dates, the financial  statements of the
Company  included  in the SEC  Documents  complied  as to  form in all  material
respects  with  applicable  accounting  requirements  and  published  rules  and
regulations of the SEC with respect thereto. Such financial statements have been
prepared  in  accordance   with  generally   accepted   accounting   principles,
consistently  applied,  during  the  periods  involved  (except  (i)  as  may be
otherwise indicated in such financial  statements or the notes thereto, and (ii)
in the case of  unaudited  interim  statements,  to the extent  they may exclude
footnotes or may be condensed or summary  statements)  and fairly present in all
material respects the financial  position of the Company as of the dates thereof
and the  results of its  operations  and cash flows for the  periods  then ended
(subject,  in the  case  of  unaudited  statements,  to  normal  year-end  audit
adjustments).  The  Company is not  required to file and will not be required to
file any agreement, note, lease, mortgage, deed or other instrument entered into
prior to the First  Closing Date and to which the Company is a party or by which
the  Company is bound which has not been  previously  filed as an exhibit to its
reports  filed with the SEC under the Exchange  Act.  Except as set forth in the
financial statements of the Company included in the SEC Documents filed prior to
the First Closing Date, the Company has no liabilities, contingent or otherwise,
other than (i)  liabilities  incurred  subsequent to the date of such  financial
statements and (ii) obligations under contracts and commitments  incurred in the
ordinary  course of business and not required under GAAP to be reflected in such
financial statements, which, regarding such liabilities and obligations referred
to in the foregoing clauses (i) and (ii), would individually or in the aggregate
not have a Material Adverse Effect.

3.7. ABSENCE OF CERTAIN  CHANGES.  Since the date of the Company's most recently
filed SEC  Document,  there has been no  change or  development  that has had or
could reasonably be expected to have, either individually or in the aggregate, a
Material  Adverse  Effect.  The  Company  has not taken any steps,  and does not
currently  expect  to  take  any  steps,  to  seek  protection  pursuant  to any
bankruptcy  law  nor  does  the  Company  or any of its  Subsidiaries  have  any
knowledge or reason to believe that its creditors intend to initiate involuntary
bankruptcy  proceedings  or  any  actual  knowledge  of  any  fact  which  would
reasonably lead a creditor to do so.

3.8. ABSENCE OF LITIGATION.  Except as disclosed in the SEC Documents,  there is
no action,  suit,  proceeding,  inquiry or investigation before or by any court,
public board,  government agency,  self-regulatory  organization or body pending
or, to the  knowledge of the

                                       5
<PAGE>

Company or any of its Subsidiaries, threatened in writing against the Company or
any of the Company's  Subsidiaries or any of the Company's or the  Subsidiaries'
officers or directors in their  capacities  as such,  that would  reasonably  be
expected to result in a Material Adverse Effect.

3.9. NO INTEGRATED OFFERING. Neither the Company, nor any of its affiliates, nor
any person acting on its or their behalf has,  directly or indirectly,  made any
offers or sales of any  security or  solicited  any offers to buy any  security,
under  circumstances  that would  cause this  offering of the  Securities  to be
integrated  with prior  offerings by the Company for purposes of the  Securities
Act  or any  applicable  shareholder  approval  provisions,  including,  without
limitation,  under  the rules  and  regulations  of any  exchange  or  automated
quotation  system on which any of the  securities  of the  Company are listed or
designated,  nor will the Company or any of its Subsidiaries  take any action or
steps that would cause the  offering of the  Securities  to be  integrated  with
other offerings.

3.10.  INTELLECTUAL  PROPERTY RIGHTS.  The Company and its Subsidiaries have the
right to use trademarks, trade names and other rights to copyrights, inventions,
know-how,  patents,  confidential  information and other  intellectual  property
rights necessary to conduct their respective businesses as now conducted, except
where the  failure to own,  possess or protect  such  rights  would not,  either
individually or in the aggregate, reasonably be expected to result in a Material
Adverse  Effect,  and the  Company is not aware of any  infringement  by a third
party with  respect to such rights or any  infringement  by it or conflict  with
asserted  rights of others,  that, in any such case, if determined  adversely to
the Company  could  individually  or in the  aggregate  have a Material  Adverse
Effect.  The Company and its  Subsidiaries  have complied with their  respective
contractual  obligations relating to the protection of any intellectual property
licensed from any third party, except where non-compliance with such obligations
would not have a Material Adverse Effect.

3.11.  APPLICATION  OF  TAKEOVER  PROTECTIONS.  Subject to the  accuracy  of the
representations  and  warranties  of each  Purchaser as set forth in Section 4.8
below, the Company and its board of directors have taken all necessary corporate
action,  if any, in order to render  inapplicable  any  anti-takeover or similar
provision  (including  any  distribution  under a rights  agreement)  under  the
Company's articles of incorporation, other applicable documents, the laws of the
state of its  incorporation  or the laws of any  other  state  which is or could
become applicable to the Purchasers as a result of the transactions contemplated
by this Agreement,  including, without limitation, the Company's issuance of the
Securities and the Purchasers' ownership of the Securities.

3.12.  DISCLOSURE.  The Company  confirms  that  neither it nor any other person
acting on its behalf has  provided  any  Purchaser or its agents or counsel with
any  information  that  constitutes  or  might  constitute  material,  nonpublic
information,  and will not provide  such  information  to any  Purchaser  or its
agents or  counsel  unless  such  Purchaser  consents  in  writing in advance to
receive such information.

3.13.  LOCK-UP.  The  Company  agrees  that until such date as the  Registration
Statement (as defined below) is declared  effective by the SEC, the Company will
not register,  file a registration  statement  under the Securities Act, sell or
issue any equity  securities of the Company or other securities that entitle the
holder thereof to receive Common Stock,  including without  limitation any debt,
preferred stock or other  instrument or security that is, at any time during its
life and under any circumstances,  convertible or exchangeable for Common Stock;
provided,  however,

                                       6
<PAGE>

that (i) the Company  may  register,  file a  registration  statement  under the
Securities Act, sell or issue any equity  securities or other  securities of the
Company relating solely to any merger or reorganization of the Company or to any
employee  stock option or benefit plan of the Company,  and (ii) the Company may
issue any equity  securities or other securities of the Company as consideration
for  acquisitions  of assets or  businesses of third parties that do not, in the
aggregate,  exceed ten million  dollars  ($10,000,000)  based upon the then fair
market value of such equity  securities  on the closing date of such issuance or
sale,  including  but not limited to issuances or sales of equity  securities of
the Company  that are  exempted  from  registration  by reason of  qualification
pursuant to Section  3(a)(10) of the Securities  Act. The Company further agrees
that if the  Company  sells or  issues  any  equity  securities  of the  Company
pursuant  to an equity  line of credit at any time prior to the date that is one
hundred  twenty  (120)  days  after  the  date  the  Registration  Statement  is
effective, the Company will not offer such equity securities at a purchase price
per share less than the purchase price per Share  determined in accordance  with
this Agreement.

SECTION 4.  REPRESENTATIONS, WARRANTIES AND COVENANTS OF EACH PURCHASER.

As of the respective  Closing Date or Dates set forth opposite such  Purchaser's
name on  Schedule A hereto,  each  Purchaser  hereby  severally  represents  and
warrants to, and covenants with, the Company as follows, as applicable:

4.1. DUE EXECUTION,  DELIVERY AND PERFORMANCE OF THIS AGREEMENT.  Such Purchaser
has full right,  power,  authority and capacity to enter into this Agreement and
to consummate  the  transactions  contemplated  hereby,  has taken all necessary
action to authorize the  execution,  delivery and  performance of this Agreement
and, if applicable,  such Purchaser is duly organized,  validly  existing and in
good  standing  under  the  laws of its  jurisdiction.  Upon the  execution  and
delivery of this Agreement,  this Agreement shall constitute a valid and binding
obligation of the Purchaser  enforceable in accordance with its terms, except as
enforceability   may  be   limited   by   applicable   bankruptcy,   insolvency,
reorganization,  moratorium or similar laws affecting creditors' and contracting
parties' rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in
a proceeding in equity or at law) and except as the  indemnification  agreements
of the Purchaser in Section 7 below may be legally unenforceable.

4.2. INVESTMENT  EXPERIENCE.  Such Purchaser is an "accredited  investor" within
the meaning of Rule 501 of Regulation D promulgated under the Securities Act, is
knowledgeable,  sophisticated  and  experienced  in making,  and is qualified to
make, decisions with respect to investments in shares representing an investment
decision like that involved in the purchase of the Securities.

4.3.  INVESTMENT  INTENT AND  LIMITATION  ON  DISPOSITIONS.  Such  Purchaser  is
acquiring Shares and Warrants for its own account for investment only and has no
present  intention  of  distributing  any of  such  Shares  or  Warrants  or any
arrangement or understanding  with any other persons  regarding the distribution
of such Shares or Warrants.  The  Purchasers  will not,  directly or indirectly,
offer, sell, pledge,  transfer or otherwise dispose of (or solicit any offers to
buy,  purchase or otherwise  acquire or take a pledge of) any of the  Securities
except in accordance with the provisions of Section 6 below.

                                       7
<PAGE>

4.4      INFORMATION AND RISK.

     (a) Such  Purchaser has  requested,  received,  reviewed and considered all
information  such  Purchaser  deems  relevant in making an informed  decision to
purchase the Shares and  Warrants.  Such  Purchaser  has had an  opportunity  to
discuss the  Company's  business,  management  and  financial  affairs  with its
management  and also had an  opportunity  to ask  questions  of  officers of the
Company that were answered to such Purchaser's satisfaction,  provided that such
inquiries  do  not  impair  the  rights  of  the   Purchasers  to  rely  on  the
representations and warranties of the Company as set forth in Section 3 above.

     (b) Such Purchaser recognizes that an investment in the Securities involves
a high  degree  of  risk,  including  a risk of total  loss of such  Purchaser's
investment.

     (c) Such Purchaser  has, in connection  with such  Purchaser's  decision to
purchase  Shares and  Warrants,  not relied  upon any  representations  or other
information   (whether  oral  or  written)  other  than  as  set  forth  in  the
representations  and  warranties  of the  Company  contained  herein and the SEC
Documents,  and such Purchaser has, with respect to all matters relating to this
Agreement  and the  offer and sale of the  Securities,  relied  solely  upon the
advice of the  Purchaser's  own counsel and has not relied upon or consulted any
counsel to Salomon Smith Barney Inc. (the  "Placement  Agent") or counsel to the
Company.

4.5. DISCLOSURES TO THE COMPANY.  Such Purchaser understands that the Company is
relying on the  statements  contained  herein to  establish  an  exemption  from
registration  under  federal and state  securities  laws.  Such  Purchaser  will
promptly  notify the Company of any changes in the  information set forth in the
Registration Statement regarding such Purchaser.

4.6.  LEGENDS.  Such Purchaser  understands and agrees that each  certificate or
other  document  evidencing  any of the  Securities  shall be endorsed  with the
legend in the form set  forth  below,  and such  Purchaser  covenants  that such
Purchaser  will not  transfer  the shares  represented  by any such  certificate
without  complying  with the  restrictions  on transfer  described in the legend
endorsed on such certificate (unless there is in effect a registration statement
under the Securities Act covering such proposed  transfer,  such securities have
been sold under Rule 144 promulgated under the Securities Act ("Rule 144") or as
otherwise permitted by the provisions of Section 6.3 below) and understands that
the Company  will refuse to  register a transfer  of any  Securities  unless the
conditions specified in the following legend are satisfied:

     THE SHARES  REPRESENTED  BY THIS  CERTIFICATE  HAVE BEEN  ACQUIRED FOR
     INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER THE
     SECURITIES  ACT OF 1933, AS AMENDED,  OR ANY STATE  SECURITIES  LAWS.  SUCH
     SHARES  MAY NOT BE SOLD,  OFFERED  FOR SALE,  PLEDGED OR  HYPOTHECATED,  OR
     OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION  STATEMENT IN EFFECT
     WITH  RESPECT  THERETO  UNDER SUCH ACT UNLESS SOLD  PURSUANT TO RULE 144 OF
     SUCH  ACT OR  UNLESS  SUCH  SALE,  PLEDGE,  HYPOTHECATION  OR  TRANSFER  IS
     OTHERWISE  EXEMPT FROM  REGISTRATION  AND ANY APPLICABLE  STATE  SECURITIES
     LAWS.  THE  COMPANY  MAY  REQUEST A WRITTEN  OPINION OF COUNSEL  REASONABLY
     SATISFACTORY  TO  THE  COMPANY,  TO THE  EFFECT  THAT  REGISTRATION  IS NOT
     REQUIRED IN CONNECTION WITH SUCH SALE OR OTHER TRANSFER.  THIS  CERTIFICATE

                                       8
<PAGE>

     MUST BE  SURRENDERED  TO THE  CORPORATION  OR ITS TRANSFER  AGENT AS A
     CONDITION  PRECEDENT  TO THE SALE OR ANY OTHER  TRANSFER OF ANY INTEREST IN
     ANY OF THE SHARES REPRESENTED BY THIS CERTIFICATE.

     THESE  SECURITIES AND THE  SECURITIES  ISSUABLE UPON EXERCISE OF THESE
     SECURITIES MAY BE PLEDGED IN CONNECTION  WITH A BONA FIDE MARGIN ACCOUNT OR
     OTHER LOAN SECURED BY SUCH SECURITIES.

Such  certificates  shall not be  required  to contain  such  legend (i) while a
Registration Statement (as defined below) covering the resale of such Securities
is  effective  under  the  Securities  Act,  (ii)  following  any  sale  of such
Securities  pursuant to Rule 144, or (iii) if such  Securities  are eligible for
sale  under  Rule  144(k).  Following  the  effective  date of the  Registration
Statement or at such earlier time as a legend is no longer  required for certain
Securities,  the Company will,  no later than three  trading days  following the
delivery by a  Purchaser  to the Company or the  Company's  transfer  agent of a
legended  certificate  representing  such  securities,  deliver  or  cause to be
delivered to such Purchaser a certificate  representing  such securities that is
free from all restrictive and other legends.

Such  Purchaser  covenants  that such  Purchaser will not transfer the Shares or
Warrant Shares  represented by any such certificate  without  complying with any
applicable requirements under the Securities Act to deliver the final prospectus
included in the effective  Registration  Statement to any offeree of such Shares
or Warrant Shares.  Such Purchaser agrees to severally and not jointly indemnify
and hold  harmless  the Company  from and against all claims,  losses,  damages,
costs and expenses arising out of any failure to deliver such final prospectus.

The  Company  acknowledges  and agrees  that a  Purchaser  may from time to time
pledge pursuant to a bona fide margin agreement or grant a security  interest in
some  or all of the  Securities  and,  if  required  under  the  terms  of  such
arrangement,  such Purchaser may transfer  pledged or secured  Securities to the
pledgees or secured  parties.  Such a pledge or transfer would not be subject to
approval of the Company and no legal  opinion of the pledgee,  secured  party or
pledgor shall be required in connection therewith, unless the Company's transfer
agent requires a legal opinion to issue a certificate in the name of the pledgee
or secured  party.  Further,  no notice  shall be required of such  pledge.  The
Company will execute and deliver such reasonable  documentation  as a pledgee or
secured party of Securities may reasonably  request in connection  with a pledge
or transfer  of the  Securities,  including  the  preparation  and filing of any
required  prospectus  supplement  under Rule  424(b)(3) of the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of selling shareholders thereunder.

The  Company  acknowledges  and agrees that no  Purchaser  makes or has made any
representations  or warranties with respect to the transactions  contemplated by
this Agreement other than those specifically set forth in this Section 4.

4.7.  NATURE  OF  PURCHASERS.  Except as set forth in  Schedule  A hereto,  such
Purchaser:  (i) is not an  affiliate  (as such term is defined  pursuant to Rule
12b-2  promulgated  under the Exchange Act) of any other Purchaser,  (ii) is not
constituted  as a partnership,  association,  joint venture or any other type of
joint entity with any other Purchaser,  and (iii) is in no way acting as a group
(as such term is defined under Section 13(d) of the Exchange Act) with any other
Purchaser. If at any time after the First Closing Date such Purchaser becomes an
affiliate  (as

                                       9
<PAGE>

defined  herein) of any other  Purchaser,  such  Purchaser  will provide  prompt
written notice to the Company.

4.8.  OWNERSHIP.  Such Purchaser  (including  any person or entity  controlling,
controlled by, or under common control with such  Purchaser)  does not, and upon
the  consummation of the  transactions  contemplated by this Agreement will not,
hold voting  securities  of the Company  equal to or exceeding (i) the aggregate
fair  market  value  as of the  Second  Closing  Date of fifty  million  dollars
($50,000,000),   calculated   pursuant   to  the   Hart-Scott-Rodino   Antitrust
Improvements Act of 1976, as amended, and its implementing regulations (the "HSR
Act"), or (ii) fifteen  percent (15%) of the outstanding  Common Stock as of the
Second Closing Date.  Notwithstanding  any other  provision of this Agreement or
the Warrant to the contrary,  if such Purchaser  (including any person or entity
controlling,  controlled by, or under common control with such Purchaser)  will,
upon any  exercise of the Warrant,  beneficially  own voting  securities  of the
Company  equal to or  exceeding  (i) the  aggregate  fair market  value of fifty
million  dollars  ($50,000,000),  calculated  pursuant  to the  HSR  Act  and as
determined as of the date such  exercise,  or (ii) fifteen  percent (15%) of the
outstanding  Common Stock as of the date of such  exercise,  then such Purchaser
will provide  reasonable written notice to the Company and such Purchaser agrees
that the Company may restrict such exercise  until the waiting  period  required
pursuant to the HSR Act has expired or been early terminated.

SECTION 5.  SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

Notwithstanding  any investigation made by any party to this Agreement or by the
Placement Agent, all covenants, agreements, representations and warranties as to
each  respective  Closing  made by the Company and the  Purchasers  herein shall
survive for a period of one (1) year following such respective Closing Date.

SECTION 6.  REGISTRATION OF THE SHARES; COMPLIANCE WITH THE SECURITIES ACT.

6.1.REGISTRATION  PROCEDURES AND EXPENSES.  Except for such times as the Company
may be  required  to  suspend  the  use of a  prospectus  forming  a part of the
Registration Statement, the Company will:

     (a) as soon as  practicable,  but in no event  later than  thirty (30) days
following the First Closing Date, use commercially reasonable efforts to prepare
and file with the SEC a  registration  statement on Form S-3 (the  "Registration
Statement")  covering  the  resale of the Shares  and at least  612,672  Warrant
Shares by the  Purchaser  and which shall  contain the Plan of  Distribution  as
attached hereto as Exhibit D;

     (b) use commercially reasonable efforts to cause the Registration Statement
to become effective under the Securities Act no later than sixty (60) days after
the First  Closing Date,  if the  Registration  Statement is not reviewed by the
SEC, or no later than one hundred ten (110) days after the First  Closing  Date,
if the Registration Statement is reviewed by the SEC;

     (c) prepare and file with the SEC such  amendments  and  supplements to the
Registration Statement and the prospectus used in connection therewith as may be
necessary to keep the Registration  Statement  continuously  effective until the
earliest of (i) the second

                                       10
<PAGE>

anniversary of the First Closing Date,  (ii) the date on which the Purchaser may
sell all Shares then held by the Purchaser and all Warrant Shares purchasable by
Purchaser without volume limitations and without  registration by reason of Rule
144 or any other  rule of similar  effect,  or (iii) such time as all Shares and
Warrant Shares purchased by the Purchasers have been sold;

     (d) so long as the Registration  Statement is effective covering the resale
of Shares and Warrant Shares owned by the Purchasers,  furnish to the Purchasers
with respect to the Shares and Warrant Shares  registered under the Registration
Statement  (and to each  underwriter,  if any, of such Shares)  such  reasonable
number of copies of  prospectuses  and such other documents as the Purchaser may
reasonably  request, in order to facilitate the public sale or other disposition
of all or any of the  Shares and  Warrant  Shares by the  Purchasers;  provided,
however, that the obligation of the Company to deliver copies of prospectuses to
the  Purchasers  shall be subject to the  receipt by the  Company of  reasonable
assurances  from  the  Purchasers  that  the  Purchasers  will  comply  with the
applicable provisions of the Securities Act and of such other securities laws as
may be applicable in connection with any use of such prospectuses;

     (e) use commercially  reasonable  efforts to file documents required of the
Company  for normal Blue Sky  clearance  in states  specified  in writing by the
Purchasers; provided, however, that the Company shall not be required to qualify
to do business or consent to service of process in any jurisdiction in which the
Company is not now so qualified or has not so consented; and

     (f) bear all expenses in connection  with the  procedures in paragraphs (a)
through (e) of this Section 6.1 and the  registration  of the Shares and Warrant
Shares pursuant to the Registration Statement,  other than fees and expenses, if
any, of counsel or other advisers to the Purchasers or  underwriting  discounts,
brokerage fees and commissions incurred by the Purchasers, if any.

6.2 DELAY IN  EFFECTIVENESS  OF  REGISTRATION  STATEMENT.  In the event that the
Registration  Statement is not declared effective by the SEC by the date that is
one hundred ten (110) days after the First Closing  Date,  the Company shall pay
to each Purchaser  liquidated damages in a cash amount equal to one-thirtieth of
one percent (1/30 of 1%) of the total purchase price of the Shares  purchased by
such  Purchaser  pursuant to this  Agreement for each day that the  Registration
Statement  is not  declared  effective  by the SEC  after  the date  that is one
hundred ten (110) days after the First Closing Date.

6.3.     RESTRICTIONS ON TRANSFERABILITY.

     (a) Each  Purchaser  agrees that it will not effect any  disposition of the
Securities that would constitute a sale within the meaning of the Securities Act
or pursuant  to any  applicable  state  securities  or Blue Sky laws,  except as
contemplated in the Registration  Statement  referred to in Section 6.1 above or
pursuant to: (i) a written opinion of legal counsel  reasonably  satisfactory to
the Company and addressed to the Company to the effect that  registration is not
required in connection with the proposed  transfer;  (ii) Rule 144A  promulgated
under the  Securities  Act;  or (iii) a  "no-action"  letter from the SEC to the
effect that the transfer of such securities without registration will not result
in a  recommendation  by the staff of the SEC that action be taken with  respect
thereto,  whereupon the holder of such securities  shall be entitled to transfer
such  securities  in  accordance  with the terms of the notice  delivered by the
holder to the

                                       11
<PAGE>

Company.  Each certificate,  warrant or other security evidencing the securities
transferred as above provided shall bear the appropriate restrictive legends set
forth in Section 4.6.

     (b) Each Purchaser  acknowledges  that there may occasionally be times when
the  Company  must  suspend  the  use of the  prospectus  forming  a part of the
Registration  Statement  until such time as an  amendment or  supplement  to the
Registration Statement has been filed by the Company and declared effective,  or
until such time as the  Company  has filed an  appropriate  report  with the SEC
pursuant  to the  Exchange  Act.  Each  Purchaser  hereby  covenants  that  such
Purchaser will not sell any Shares or Warrant Shares pursuant to said prospectus
during  the  period  commencing  at the  time at which  the  Company  gives  the
Purchasers  written notice of the  suspension of the use of said  prospectus and
ending at the time the  Company  gives the  Purchasers  written  notice that the
Purchasers   may   thereafter   effect  sales   pursuant  to  said   prospectus.
Notwithstanding  the  foregoing,  the Company  will not suspend  such use of the
prospectus  for  reason  of  the  occurrence  of  any  non-material  events,  as
determined in good faith by the Company's board of directors.  In the event that
the  Purchasers  are  prohibited  for any reason from selling  Shares or Warrant
Shares in excess of thirty (30)  business days but less than sixty (60) business
days in any three hundred  sixty-five  (365) day period,  the Company  agrees as
liquidated  damages (until the  Expiration  Date, as such term is defined in the
Section 1.1 of the Warrant) to increase the number of shares  purchasable  under
the  Warrants  by a number of  Warrant  Shares  (collectively,  the  "Additional
Warrant Shares") which is equal to: (i)  one-thirtieth of two point five percent
(1/30th of 2.5%) of the number of Warrant Shares then exercisable times (ii) the
total number of calendar  days over such thirty (30) business day limit but less
than sixty (60) business days (such last business day, a "Target Date"), rounded
to the nearest whole share. In the event that the Purchasers are prohibited from
selling  Shares or Warrant  Shares in excess of sixty (60)  business days in any
three  hundred  sixty five (365) day  period,  then,  in  addition  to any other
remedies  available  under this Agreement and applicable  law, the Company shall
pay to each Purchaser liquidated damages in a cash amount which is equal to: (i)
one-thirtieth  of one percent  (1/30 of 1%) of the total  purchase  price of the
Shares  purchased  by  such  Purchaser  pursuant  to  this  Agreement  and  then
beneficially  owned by such  Purchaser,  (ii) times the number of calendar  days
over such sixty (60)  business  day limit.  On each  Target  Date (if any),  the
Company will file with the SEC a new registration  statement covering the resale
of the Additional Warrant Shares. Such registration  statement shall be included
within the  definition  of  "Registration  Statement"  and,  with respect to the
Additional  Warrant Shares, the holders of the Warrants shall be entitled to all
of the rights and obligations  under Sections 6 and 7 with respect to the Shares
and Warrant  Shares  (including,  but not limited to, the receipt of  liquidated
damages  pursuant  to  Sections  6.2 and  6.3(b) (it being  understood  that for
purposes of this  sentence,  "First Closing Date" shall be replaced with "Target
Date")).

     (c) None of the Securities shall be transferable except upon the conditions
specified in this Section 6, which are  intended to ensure  compliance  with the
provisions  of the  Securities  Act.  Each  Purchaser  will  cause any  proposed
transferee of the  Securities  held by such  Purchaser to agree to take and hold
such Securities  subject to the provisions and upon the conditions  specified in
this  Section  6 if  and to the  extent  that  such  Securities  continue  to be
restricted securities in the hands of the transferee.

6.4. TERMINATION OF CONDITIONS AND OBLIGATIONS. The conditions precedent imposed
by Section 6.3 above  regarding  the  transferability  of the Shares and Warrant
Shares shall cease and  terminate as to any  particular  number of the Shares or
Warrant  Shares upon the date on which the  Purchaser  may sell  without  volume
limitations all such Shares or Warrant

                                       12
<PAGE>

Shares then held by the Purchaser without  registration by reason of Rule 144 or
any other rule of similar effect.

6.5. THIRD PARTY REGISTRATION  RIGHTS.  The Purchasers  acknowledge the existing
registration  rights of John  Hancock  Mutual  Life  Insurance  Company and John
Hancock Life Insurance  Company pursuant to a Warrant  Purchase  Agreement dated
June 13, 1994,  for an aggregate of 400,000  shares of Common Stock,  and hereby
expressly  agree to the inclusion of any or all such shares in any  Registration
Statement or amendment thereto.

SECTION 7.  INDEMNIFICATION.

     (a) For purposes of this Section 7:

                  (i) the term "Purchaser" shall include the Purchaser and any
affiliate (as such term is defined pursuant to Rule 12b-2 promulgated under the
Exchange Act) of such Purchaser;

                  (ii) the term "Prospectus" shall mean the prospectus and any
amendment or supplement thereto in the form first filed with the SEC pursuant to
Rule 424(b) promulgated under the Securities Act or, if no Rule 424(b) filing is
required, filed as part of the Registration Statement at the time of
effectiveness; and

                  (iii) the term "Registration Statement" shall include any
final prospectus, exhibit, supplement or amendment included in or relating to
the Registration Statement.

     (b)  The  Company  agrees  to  indemnify  and  hold  harmless  each  of the
Purchasers  and each  person,  if any, who  controls  any  Purchaser  within the
meaning of the Securities Act, against any losses, claims, damages,  liabilities
or expenses,  joint or several,  to which such  Purchasers  or such  controlling
person may become  subject,  under the Securities  Act, the Exchange Act, or any
other  federal  or  state  statutory  law or  regulation,  or at  common  law or
otherwise  (including  in settlement of any  litigation,  if such  settlement is
effected  with the  written  consent of the  Company),  insofar as such  losses,
claims,  damages,  liabilities  or expenses  (or  actions in respect  thereof as
contemplated  below)  arise out of or are based  upon any  untrue  statement  or
alleged  untrue  statement of any material  fact  contained in the  Registration
Statement  or  Prospectus,  or arise out of or are based  upon the  omission  or
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the statements  therein,  in light of the  circumstances in
which they were made, not  misleading,  or arise out of or are based in whole or
in part on any inaccuracy in the  representations  and warranties of the Company
contained  in this  Agreement,  or any  failure of the  Company  to perform  its
obligations  hereunder,   and  will  reimburse  each  Purchaser  and  each  such
controlling person for any legal and other expenses  reasonably incurred as such
expenses are reasonably incurred by such Purchaser or such controlling person in
connection with investigating,  defending, settling,  compromising or paying any
such loss, claim, damage, liability,  expense or action; provided, however, that
the  Company  will not be liable in any such  case to the  extent  that any such
loss, claim, damage,  liability or expense arises out of or is based upon (i) an
untrue  statement or alleged  untrue  statement or omission or alleged  omission
made in the  Registration  Statement  or  Prospectus  in  reliance  upon  and in
conformity with written information  furnished to the Company by or on behalf of
the Purchaser  expressly for use therein,  (ii) the failure of such Purchaser to
comply  with the  covenants  and  agreements  contained  in  Section  6.3  above
respecting sale of the Securities,  (iii) the inaccuracy of any  representations
made by  such  Purchaser  herein  or  (iv)  any  statement  or

                                       13
<PAGE>

omission in any Prospectus  that is corrected in any subsequent  Prospectus that
was  delivered  to the  Purchaser  prior to the  pertinent  sale or sales by the
Purchaser.

     (c) Each Purchaser will severally  indemnify and hold harmless the Company,
each  of its  directors,  each  of its  officers  who  signed  the  Registration
Statement and each person,  if any, who controls the Company  within the meaning
of the  Securities  Act,  against any losses,  claims,  damages,  liabilities or
expenses to which the Company,  each of its directors,  each of its officers who
signed the  Registration  Statement or  controlling  person may become  subject,
under the  Securities  Act,  the  Exchange  Act,  or any other  federal or state
statutory  law or  regulation,  or at  common  law or  otherwise  (including  in
settlement of any  litigation,  if such  settlement is effected with the written
consent of such Purchaser) insofar as such losses, claims, damages,  liabilities
or expenses (or actions in respect thereof as  contemplated  below) arise out of
or are based upon (i) any failure by such Purchaser to comply with the covenants
and  agreements  contained  in  Sections  6.3 above  respecting  the sale of the
Securities,  (ii) the  inaccuracy of any  representation  made by such Purchaser
herein or (iii) any untrue or alleged  untrue  statement  of any  material  fact
contained in the  Registration  Statement or the Prospectus,  or the omission or
alleged  omission to state therein a material fact required to be stated therein
or necessary to make the statements  therein,  in light of the  circumstances in
which they were made, not  misleading,  in each case to the extent,  but only to
the extent,  that such untrue  statement or alleged untrue statement or omission
or alleged  omission was made in the  Registration  Statement or  Prospectus  in
reliance  upon and in  conformity  with  written  information  furnished  to the
Company by or on behalf of such  Purchaser  expressly for use therein,  and will
reimburse the Company,  each of its  directors,  each of its officers who signed
the Registration Statement or controlling person for any legal and other expense
reasonably  incurred,  as such expenses are reasonably  incurred by the Company,
each  of its  directors,  each  of its  officers  who  signed  the  Registration
Statement or controlling  person in connection  with  investigating,  defending,
settling,  compromising  or paying  any such  loss,  claim,  damage,  liability,
expense or action;  provided,  however,  that in no event will any  Purchaser be
required  to  reimburse  the  Company  in  excess  of an  amount  equal  to  the
consideration  paid by such Purchaser to the Company on the respective  First or
Second Closing Date.

     (d) Promptly after receipt by an indemnified  party under this Section 7 of
notice of the threat or commencement of any action, such indemnified party will,
if a claim in respect thereof is to be made against an indemnifying  party under
this Section 7, promptly notify the indemnifying  party in writing thereof,  but
the  omission so to notify the  indemnifying  party will not relieve it from any
liability  which  it may  have to any  indemnified  party  for  contribution  or
otherwise to the extent it is not  prejudiced  as a result of such  failure.  In
case  any  such  action  is  brought  against  any  indemnified  party  and such
indemnified party seeks or intends to seek indemnity from an indemnifying party,
the  indemnifying  party will be entitled to participate  in, and, to the extent
that  it may  wish,  jointly  with  all  other  indemnifying  parties  similarly
notified, to assume the defense thereof with counsel reasonably  satisfactory to
such indemnified party; provided,  however, if the defendants in any such action
include  both  the  indemnified  party  and  the  indemnifying   party  and  the
indemnified  party shall have reasonably  concluded that there may be a conflict
between the positions of the  indemnifying  party and the  indemnified  party in
conducting  the defense of any such  action or that there may be legal  defenses
available to it and/or other  indemnified  parties which are  different  from or
additional to those available to the indemnifying  party, the indemnified  party
or parties shall have the right to select separate  counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties.  Upon receipt of notice from the indemnifying

                                       14
<PAGE>

party to such  indemnified  party of its  election to assume the defense of such
action and approval by the indemnified party of counsel,  the indemnifying party
will not be liable to such indemnified  party under this Section 7 for any legal
or other expenses  subsequently incurred by such indemnified party in connection
with the defense  thereof unless (i) the  indemnified  party shall have employed
such counsel in connection  with the  assumption of legal defenses in accordance
with the proviso to the preceding sentence (it being understood,  however,  that
the  indemnifying  party  shall not be liable for the  expenses of more than one
separate   counsel,   reasonably   satisfactory  to  the   indemnifying   party,
representing the indemnified parties who are parties to such action) or (ii) the
indemnified party shall not have employed counsel reasonably satisfactory to the
indemnified  party to represent the  indemnified  party within a reasonable time
after notice of  commencement  of action,  in each of which cases the reasonable
fees and expenses of counsel shall be at the expense of the indemnifying party.

SECTION 8.  NOTICES.

     (a) All  notices,  requests,  consents and other  communications  hereunder
shall be in writing,  shall be mailed by  first-class  registered  or  certified
airmail,  confirmed facsimile or nationally recognized overnight express courier
postage prepaid, and shall be as addressed as follows:

         if to the Company, to:

         Trimble Navigation Limited
         645 North Mary Avenue
         Sunnyvale, California 94086
         Attn:  Chief Executive Officer

     or to such other person at such other place as the Company shall  designate
to the Purchasers in writing in accordance with this Section 8;

         with a copy to:

         Wilson Sonsini Goodrich & Rosati, P.C.
         650 Page Mill Road
         Palo Alto, California 94304-1050
         Attn:  Thomas C. Klein, Esq.

     and if to the  Purchasers,  at their  addresses  as set forth in Schedule A
hereto,  or at such  other  address  or  addresses  as may have been  previously
furnished to the Company in writing in accordance with this Section 8.

     (b) Such notices or other  communications  shall be deemed  delivered  upon
receipt,  in the case of  overnight  delivery,  personal  delivery or  facsimile
transmission (as evidenced by the confirmation  thereof),  or two (2) days after
deposit in the mail (as determined by reference to the postmark).

                                       15
<PAGE>

SECTION 9.  MISCELLANEOUS.

9.1. AMENDMENTS. Any term of this Agreement may be amended and the observance of
any term of this  Agreement may be waived  (either  generally or in a particular
instance  and  either  retroactively  or  prospectively)  only with the  written
consent of the Company and each  Purchaser.  Any amendment or waiver effected in
accordance  with  this  paragraph  shall be  binding  upon  each  holder  of any
securities  purchased  under this Agreement at the time  outstanding  (including
securities  into which such securities are  convertible),  each future holder of
all such securities, and the Company.

9.2.  HEADINGS.  The headings of the various  sections of this Agreement are for
convenience  of  reference  only  and  shall  not be  deemed  to be part of this
Agreement.

9.3. SEVERABILITY.  In the event that any provision in this Agreement is held to
be invalid, illegal or unenforceable in any respect, the validity,  legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.

9.4.  GOVERNING LAW AND FORUM. This Agreement shall be governed by and construed
in accordance  with the laws of the State of New York,  without giving effect to
any choice of law provisions  thereof,  and the federal law of the United States
of America. The parties hereto agree to submit to the exclusive  jurisdiction of
the  federal  and state  courts of the  State of New York  with  respect  to the
interpretation  of this  Agreement or for the purposes of any action arising out
of or related to this Agreement.

9.5.  COUNTERPARTS.  This Agreement may be executed in two or more counterparts,
each of which shall  constitute  an original,  and all of which  together  shall
constitute  one and the same  instrument.  In the event  that any  signature  is
delivered via facsimile  transmission,  such signature  shall create a valid and
binding  obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile signature
page were an original hereof.

9.6.  ENTIRE  AGREEMENT.  This Agreement and the instruments  referenced  herein
contain  the entire  understanding  of the parties  with  respect to the matters
covered herein and therein,  supersede all prior  agreements and  understandings
with respect to such matters,  including that certain Stock and Warrant Purchase
Agreement dated December 21, 2001, and executed by and among the Company and the
purchasers  set forth on Schedule A thereto,  and,  except as  specifically  set
forth  herein  or  therein,   neither  the  Company  nor  Purchasers   make  any
representation, warranty, covenant or undertaking with respect to such matters.

9.7.  INDEPENDENT NATURE OF PURCHASERS'  OBLIGATIONS AND RIGHTS. The obligations
of each Purchaser under any Transaction  Document are several and not joint with
the obligations of any other Purchaser, and no Purchaser shall be responsible in
any way for the  performance of the obligations of any other Purchaser under any
Transaction  Document.  Nothing contained herein or in any Transaction Document,
and no  action  taken by any  Purchaser  pursuant  thereto,  shall be  deemed to
constitute the Purchasers as a partnership,  an association,  a joint venture or
any other kind of entity, or create a presumption that the Purchasers are in any
way acting in concert or as a group,  or are deemed  affiliates (as such term is
defined  under  the  Exchange  Act)  with  respect  to such  obligations  or the
transactions  contemplated by the Transaction Document.  Each Purchaser shall be
entitled to  independently  protect and  enforce its

                                       16
<PAGE>

rights, including without limitation the rights arising out of this Agreement or
out of the other  Transaction  Documents,  and it shall not be necessary for any
other  Purchaser to be joined as an additional  party in any proceeding for such
purpose.

9.8. EXPENSES. Each party hereto shall pay all costs and expenses incurred by it
in connection  with the execution and delivery of this  Agreement,  the Warrant,
and all the transactions contemplated thereby,  including fees of legal counsel;
provided,  however,  that at the First Closing Date, the Company shall reimburse
Pine  Ridge  Financial  Inc.  $25,000  for legal  fees and  expenses  payable to
Robinson  Silverman  Pearce  Aronsohn  & Berman  LLP in  connection  with  legal
services  provided to Pine Ridge Financial Inc. in regard to such  transactions.
Such $25,000  payment shall be deducted from the cash  consideration  payable by
Pine Ridge Financial Inc. for the Shares.

                  [Remainder of Page Intentionally Left Blank]

                                       17
<PAGE>

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

                  TRIMBLE NAVIGATION LIMITED

                  By:  /s/ Steven W. Berglund
                     -----------------------------------------------------------

                  Its:  President and CEO
                      ----------------------------------------------------------

                  PURCHASERS

                  Name of Entity

                  By:
                     --------------------------------------------------

                  Name:
                       ------------------------------------------------

                  Title:
                        -----------------------------------------------

[Conformed  Signature  Blocks  of Each of the  Purchasers  hereto  as  listed on
Schedule A not included]

            [Signature Page to Stock and Warrant Purchase Agreement]

                                       18
<PAGE>

                                   SCHEDULE A

                                   PURCHASERS

                                                   LIST OF PURCHASERS

<TABLE>
<CAPTION>

                                         Number of      Number of Shares
                                          Shares       Purchasable under     Purchase Price
                                        Purchased,       Warrant, First     to be Delivered,
Name and Address of Purchaser          First Closing        Closing           First Closing
------------------------------------------------------ ------------------- -------------------
<S>                                      <C>                <C>               <C>
Pine Ridge Financial Inc.                 466,667            93,334            $7,000,005

c/o Cavallo Capital Corp.
660 Madison Ave.
New York, NY 10022
Attn: Mor Sagi

cc: Sharon Azulay, Esq.
c/o Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
First Investors Holding Co., Inc.         333,334            66,667            $5,000,010
c/o Cavallo Capital Corp.
660 Madison Ave.
New York, NY 10022
Attn: Mor Sagi

cc: Sharon Azulay, Esq.
c/o Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104

                                       19
<PAGE>

Castle Creek Technology Partners LLC      266,667            53,334            $4,000,005

c/o Castle Creek Partners, LLC
111 West Jackson Blvd., Suite 2020
Chicago, IL 60604
Attn: Thomas A. Frei

AIG SoundShore Holdings Ltd.              86,333             17,267            $1,294,995

Certificates and Notices to:
c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

29 Richmond Road, 4th Floor
Pembroke HM08 Bermuda

AIG SoundShore Opportunity Holding
Fund Ltd.                                 57,000             11,400             $855,000

Certificates and Notices to:

c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

                                       20
<PAGE>

29 Richmond Road
Pembroke HM08 Bermuda

AIG SoundShore Strategic Holding
Fund Ltd.                                  40,000             8,000              $600,000

Certificates and Notices to:
c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

29 Richmond Road
Pembroke HM08 Bermuda

AIG SoundShore Private Investors
Holding Fund Ltd                               50,000             10,000             $750,000

Certificates and Notices to:
c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

                                       21
<PAGE>

29 Richmond Road
Pembroke HM08 Bermuda

Cranshire Capital, L.P.                   63,334             25,334            $1,900,005
Cranshire Capital, L.P.                   63,333

666 Dundee Road, Suite 1901
Northbrook, IL 60062
Attn: Mitchell P. Kopin

Euram Cap Strat. "A" Fund Limited         20,000             8,000              $600,000
Euram Cap Strat. "A" Fund Limited         20,000

666 Dundee Road, Suite 1901
Northbrook, IL 60062
Attn: Mitchell P. Kopin

ZLP Master Technology Fund, LTD           133,335            26,667            2,000,025
Notice and Certificates Delivered to:
Zimmer Lucas Partners, LLC
45 Broadway - 28th Floor
New York, NY   10006
Attn: Rita Patel

Goldman Sachs (Cayman) Trust, Ltd.
2nd Floor, Harbour Centre, George Town
Grand Cayman, Cayman Islands, B.W.I.

                                       22
<PAGE>

Steelhead Investments Ltd.                133,334            26,667            $2,000,010

Notice and Certificates:
c/o HBK Investments L.P.
300 Crescent Court, Suite 700
Dallas, TX   75201
Attn: Kim Rozman

Maples and Calder
Ugland House, S. Church Street
Grand Cayman Islands

cc: Sharon Azulay, Esq.
c/o Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104

Cleveland Overseas Ltd.                   50,000             10,000             $750,000

900 3rd Avenue, 26th Floor
New York, NY  10022
Attn: Josh Silverman

c/o Primeway S.A.
Rue du Rhone 7
CH-1204 Geneva

------------------------------------------------------ ------------------- -------------------
Total                                    1,783,337          356,670           $26,750,055
====================================================== =================== ===================
</TABLE>

                                       23
<PAGE>

                                                LIST OF PURCHASERS

<TABLE>
<CAPTION>

                                                                 Number of
                                              Number of           Shares
                                               Shares           Purchasable      Purchase Price to
                                             Purchased,        Under Warrant,      be Delivered,
Name and Address of Purchaser               Second Closing     Second Closing      Second Closing
------------------------------------------ ------------------- ------------------ -------------------
------------------------------------------ ------------------- ------------------ -------------------
<S>                                            <C>                 <C>                   <C>
Pine Ridge Financial Inc.                       333,334             66,667                $5,000,010

c/o Cavallo Capital Corp.
660 Madison Ave.
New York, NY 10022
Attn: Mor Sagi

cc: Sharon Azulay, Esq.
c/o Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104
First Investors Holding Co., Inc.               200,000             40,000            $3,000,000

c/o Cavallo Capital Corp.
660 Madison Ave.
New York, NY 10022
Attn: Mor Sagi

cc: Sharon Azulay, Esq.
c/o Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104

                                       24
<PAGE>

Castle Creek Technology Partners LLC            133,335             26,667            $2,000,025

c/o Castle Creek Partners, LLC
111 West Jackson Blvd., Suite 2020
Chicago, IL 60604
Attn: Thomas A. Frei

AIG SoundShore Holdings Ltd.                     37,600              7,520             $564,000

Certificates and Notices to:
c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

                                       25
<PAGE>

29 Richmond Road, 4th Floor
Pembroke HM08 Bermuda

AIG SoundShore Opportunity Holding
Fund Ltd.                                        24,900              4,980             $373,500

Certificates and Notices to:

c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

29 Richmond Road
Pembroke HM08 Bermuda

AIG SoundShore Strategic Holding
Fund Ltd.                                         17,500              3,500             $262,500

Certificates and Notices to:
c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

29 Richmond Road
Pembroke HM08 Bermuda

AIG SoundShore Private Investors
Holding Fund Ltd                      000               0                   0                  0

Certificates and Notices to:
c/o DKR Capital Inc.
1281 East Main Street, 3rd Floor
Stamford, CT   06902
Attn: Michael Hamblett

                                       26
<PAGE>

29 Richmond Road
Pembroke HM08 Bermuda

Cranshire Capital, L.P.                          63,334             25,334            $1,900,005
Cranshire Capital, L.P.                          63,333

666 Dundee Road, Suite 1901
Northbrook, IL 60062
Attn: Mitchell P. Kopin

Euram Cap Strat. "A" Fund Limited                20,000              8,000             $600,000
Euram Cap Strat. "A" Fund Limited                20,000

666 Dundee Road, Suite 1901
Northbrook, IL 60062
Attn: Mitchell P. Kopin

ZLP Master Technology Fund, LTD                 333,334             66,667            $5,000,010

Notice and Certificates Delivered to:
Zimmer Lucas Partners, LLC
45 Broadway - 28th Floor
New York, NY   10006
Attn: Rita Patel

Goldman Sachs (Cayman) Trust, Ltd.
2nd Floor, Harbour Centre, George Town
Grand Cayman, Cayman Islands, B.W.I.

                                       27
<PAGE>

Steelhead Investments Ltd.                         0                   0                  0

Notice and Certificates:
c/o HBK Investments L.P.
300 Crescent Court, Suite 700
Dallas, TX   75201
Attn: Kim Rozman

Maples and Calder
Ugland House, S. Church Street
Grand Cayman Islands

cc: Sharon Azulay, Esq.
c/o Robinson Silverman Pearce
Aronsohn & Berman LLP
1290 Avenue of the Americas
New York, NY 10104

Cleveland Overseas Ltd.                          33,334              6,667             $500,010

(Contact/Address for Certificates)
900 3rd Avenue, 26th Floor
New York, NY  10022
Attn: Josh Silverman

c/o Primeway S.A.
Rue du Rhone 7
CH-1204 Geneva

------------------------------------------ ------------------- ------------------ -------------------
Total                                          1,280,004            256,002          $19,200,060
========================================== =================== ================== ===================

</TABLE>

                                       28
<PAGE>

                                   SCHEDULE B

                             SCHEDULE OF EXCEPTIONS

     Pursuant to Section 3 of the First  Amended and Restated  Stock and Warrant
Purchase  Agreement (the  "Agreement"),  by and among Trimble Navigation Limited
(the  "Company"),  and  the  entities  listed  on  Schedule  A  thereto  (each a
"Purchaser"),  the Company hereby  provides to the  Purchasers  this Schedule of
Exceptions.  Unless the context otherwise requires, all capitalized terms herein
have the same meanings as defined in the Agreement. For convenience, the Company
has stated  exceptions  and listed  information  by  reference  to the  numbered
representations,  warranties  and  covenants  set  forth  in  Section  3 of  the
Agreement.

3.1      Organization and Qualification

     On December 28, 2001,  Spectra  Precision USA, Inc. was merged into Spectra
Precision Inc., which was then merged into the Company. As of the Second Closing
Date,  Trimble  AB is the  sole  entity  constituting  greater  than  10% of the
Company's  consolidated  annual  revenue and in which the  Company,  directly or
indirectly,  owns 25% or more of the  capital  stock or other  equity or similar
interests or owns  capital  stock or holds an equity or similar  interest  which
ownership entitles the Company to elect 25% or more of the board of directors or
similar governing body of such entity.

3.3      Capitalization

     As of the Second  Closing  Date,  the  authorized  stock of the  Company is
40,000,000  shares of Common Stock,  of which  26,864,912 are  outstanding,  and
3,000,000 shares of Preferred Stock, of which 65,000 shares have been designated
Series A Participating Preferred Stock and of which none are outstanding.

     The Company  hereby  corrects  Schedule D to the Agreement as follows:  the
number  of stock  rights  outstanding  under  the  1993  Stock  Option  Plan has
decreased  from  4,300,750  to  4,289,134.  The total  number  of stock  options
outstanding has therefore decreased from 4,624,083 to 4,612,467.

3.4      Issuance of Securities

     As of the Second Closing Date, at least 800,000 shares of Common Stock will
have been duly  authorized  and  reserved  for  issuance  upon  exercise  of the
Warrants.

3.5      No Conflicts

     The offering of  additional  Shares and Warrants in the Second  Closing has
created a requirement  that the Company file with the Nasdaq a  Notification  of
Listing of Additional Shares, which the Company has filed less than the required
fifteen (15) days prior to the Second Closing Date but for which the Company has
received an oral waiver from Nasdaq of the fifteen-day period.

                                       29
<PAGE>

                                   SCHEDULE C

                                  SUBSIDIARIES

1.  Spectra Precision, Inc.

2.  Spectra Precision USA, Inc.

3.  Trimble AB

                                       30
<PAGE>

                                   SCHEDULE D

                            STOCK RIGHTS OUTSTANDING
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

1990 Director Stock Option Plan                                         198,333

1992 Management Discount Stock Option Plan                              125,000

1993 Stock Option Plan                                                4,300,750
                                                             -------------------

Total Stock Options Outstanding                                       4,624,083
                                                             ===================

Additionally,  John Hancock Mutual Life Insurance  Company and John Hancock Life
Insurance  Company of America own an aggregate of 400,000 shares of Common Stock
and have certain demand and piggyback  registration rights pursuant to a Warrant
Purchase Agreement dated June 13, 1994.

                                       31
<PAGE>

                                    EXHIBIT A

                                 FORM OF WARRANT

THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT
BEEN  REGISTERED  UNDER THE  SECURITIES  ACT OF 1933,  AS AMENDED,  OR ANY STATE
SECURITIES  LAWS.  SUCH  SECURITIES,  INCLUDING THE SHARES OF COMMON STOCK TO BE
ISSUED UPON EXERCISE,  MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF
AN EFFECTIVE  REGISTRATION  STATEMENT RELATED THERETO OR AN EXEMPTION  THEREFROM
UNDER SAID ACT, AND ANY  APPLICABLE  STATE  SECURITIES  LAWS,  AND AN OPINION OF
COUNSEL  FOR THE  HOLDER,  REASONABLY  SATISFACTORY  TO THE  COMPANY,  THAT SUCH
REGISTRATION  IS NOT REQUIRED UNDER THE SECURITIES ACT OR RECEIPT OF A NO-ACTION
LETTER FROM THE  SECURITIES  AND EXCHANGE  COMMISSION.  COPIES OF THE  AGREEMENT
COVERING THE PURCHASE OF THESE SECURITIES AND RESTRICTING  THEIR TRANSFER MAY BE
OBTAINED  AT NO COST BY  WRITTEN  REQUEST  MADE BY THE HOLDER OF RECORD OF THESE
SECURITIES  TO THE  SECRETARY  OF THE  CORPORATION  AT THE  PRINCIPAL  EXECUTIVE
OFFICES OF THE CORPORATION.

Date of Issuance: January 14, 2002

                               WARRANT TO PURCHASE
                      __________ SHARES OF COMMON STOCK OF
                           TRIMBLE NAVIGATION LIMITED

No. W2001-___

     FOR  VALUE  RECEIVED,  the  receipt  and  sufficiency  of which  is  hereby
acknowledged,  this  warrant has been issued by Trimble  Navigation  Limited,  a
California  corporation  (the  "Company") to  ______________  (the  "Purchaser")
pursuant to the terms and  conditions of that certain First Amended and Restated
Stock and Warrant Purchase  Agreement dated as of the date hereof (the "Purchase
Agreement").  This warrant  certifies that Purchaser and its nominees or assigns
hereunder  (the  "Holder")  is  entitled  to  purchase  from the  Company  up to
______________  (________) fully paid and nonassessable  shares of the Company's
common stock ("Common Stock"), at a price of $19.475 per share (which is 125% of
the "Fair Market Value" of a share of Common  Stock,  as defined in the Purchase
Agreement,  hereinafter the "Exercise Price"),  at any time or from time to time
up to and  including  5:00 p.m.  (California  time) on the  Expiration  Date (as
hereinafter  defined),  upon surrender to the Company at its principal office at
645 North Mary Avenue, Sunnyvale, California 94088 (or at such other location as
the Company may advise the Holder in writing) of this Warrant properly  endorsed
with the Form of  Subscription  attached  as Exhibit A hereto duly filled in and
signed  and upon  payment,  in any  manner set forth  herein,  of the  aggregate
Exercise  Price for the  number  of  shares  for  which  this  Warrant  is being
exercised  determined in accordance  with the

                                       32
<PAGE>

provisions  hereof.  The  Exercise  Price and the  number of shares  purchasable
hereunder are subject to additional  adjustments  and limitations as provided in
Section 4 of this Warrant.

         This Warrant is subject to the following terms and conditions:

1.   Exercise.

     1.1  Issuance  of  Certificates;   Payment  for  Shares.  This  Warrant  is
exercisable  only by the  Holder of record  hereof,  at any time or from time to
time, in whole or in part, until 5:00 p.m., California time, on January 14, 2007
(the  "Expiration  Date").  The Company  agrees that the shares of Common  Stock
purchased  under this Warrant  shall be deemed to be issued to the Holder hereof
as the record  owner of such  shares as of the close of  business on the date on
which  this  Warrant  shall  have  been  properly   surrendered   for  exercise.
Certificates  for the shares of Common  Stock so  purchased,  together  with any
other  securities  or property to which the Holder  hereof is entitled upon such
exercise,  shall be  delivered,  free of any  legends  except as provided in the
Purchase Agreement, to the Holder hereof by the Company at the Company's expense
as soon as practicable  but, in any event,  within three (3) trading days, after
the rights  represented  by this Warrant have been so exercised.  In case of the
purchase of less than all the shares which may be purchased  under this Warrant,
the Company shall cancel this Warrant upon its surrender and execute and deliver
a new  Warrant  or  Warrants  of  like  tenor  for  the  balance  of the  shares
purchasable  under the  Warrant  surrendered  upon such  purchase  to the Holder
hereof as soon as practicable  but within said three (3) day period.  Each stock
certificate so delivered shall be in such  denominations  of Common Stock as may
be requested by the Holder  hereof and shall be  registered  in the name of such
Holder or such other name as shall be designated by such Holder,  subject to the
limitations contained in Section 10.

     1.2 Buy-In. In addition to any other rights available to the Holder, if the
Company  fails  to  deliver  to  the  Holder  a  certificate   or   certificates
representing  the shares of Common Stock  issuable  upon exercise of the Warrant
(the "Warrant Stock") pursuant to an exercise by the third trading day after the
date of exercise,  and if after such third trading day the Holder  purchases (in
an open market  transaction  or otherwise)  shares of Common Stock to deliver in
satisfaction  of a sale by the  Holder of the  Warrant  Stock  which the  Holder
anticipated  receiving  upon such exercise (a "Buy-In"),  then the Company shall
(i) pay in cash to the  Holder  the  amount  by  which  (x) the  Holder's  total
purchase  price  (including  brokerage  commissions,  if any) for the  shares of
Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant  Stock that the Company was  required to deliver to the Holder
in  connection  with the  exercise  at issue by (B) the closing bid price of the
Common  Stock  at the  time of the  obligation  giving  rise  to  such  purchase
obligation  and (ii) at the option of the Holder,  reinstate  the portion of the
Warrant and  equivalent  number of Warrant Stock for which such exercise was not
honored or deliver to the Holder the number of shares of Common Stock that would
have been issued had the Company timely  complied with its exercise and delivery
obligations  hereunder.  The Holder  shall  provide the Company  written  notice
indicating the amounts payable to the Holder in respect of the Buy-In.

                                       33
<PAGE>

     2. Shares to be Fully Paid;  Reservation of Shares.  The Company  covenants
and agrees that all shares of Common Stock which may be issued upon the exercise
of the  rights  represented  by  this  Warrant  shall,  upon  issuance,  be duly
authorized,  validly  issued,  fully  paid and  nonassessable  and free from all
preemptive  rights of any shareholder  and free of all taxes,  liens and charges
with respect to the issue thereof. The Company further covenants and agrees that
during the period  within  which the rights  represented  by this Warrant may be
exercised,  the Company shall at all times have authorized and reserved, for the
purpose of issue or  transfer  upon  exercise  of the rights  evidenced  by this
Warrant,  a sufficient number of shares of authorized but unissued Common Stock,
or other  securities  and  property,  when and as  required  to provide  for the
exercise of the rights  represented by this Warrant.  The Company shall take all
such action as may be  necessary  to assure that such shares of Common Stock may
be  issued  as  provided  herein  without  violation  of any  applicable  law or
regulation,  or of any  requirements  of any domestic  securities  exchange upon
which the Common  Stock may be  listed.  The  Company  shall not take any action
which  would  result in any  adjustment  (pursuant  to  Section 4 hereof) of the
Exercise Price if the total number of shares of Common Stock issuable after such
action,  together  with all  shares of Common  Stock then  outstanding  and then
issuable  upon  exercise  of all  options  and all  similar  rights and upon the
conversion of all convertible securities then outstanding would exceed the total
number of shares of Common Stock then  authorized by the  Company's  articles of
incorporation.

3.   Exercise.

     3.1 Payment of Exercise  Price.  Payment of the Exercise Price may be made,
at the option of the Holder, (i) in cash or by check, (ii) by canceling all or a
portion of any indebtedness of the Company to the Holder,  in an amount equal to
the aggregate  Exercise  Price of the shares of Common Stock then being acquired
by the Holder upon exercise of this Warrant,  (iii) by a combination of cash and
cancellation of such  indebtedness,  or (iv) by electing a net issue exercise in
the manner  described in Section 3.2 below.

     3.2 Net Issue  Exercise.  In lieu of exercising  this Warrant by payment of
the  Exercise  Price  pursuant  to Section  3.1  above,  the Holder may elect to
convert this Warrant (the  "Conversion  Right"),  in whole or in part,  into the
number of shares of Common Stock calculated  pursuant to the following  formula,
by surrendering this Warrant and specifying the number of shares of Common Stock
which the Holder desires to convert:

                  X = Y (A - B)
                   ---------
                     A

where:            X = the number of shares of Common Stock to be issued to the
                      Holder;

                  Y = the number of shares of Common Stock subject to this
                      Warrant for which the Conversion Right is being exercised;

                  A = the fair market value of one share of Common Stock; and

                  B = the Exercise Price, as adjusted.

                                       34
<PAGE>

     As used  herein,  the fair market  value of one share of Common Stock shall
mean the closing price per share of the Company's  Common Stock on the principal
securities  exchange  on which the Common  Stock is then  listed or  admitted to
trading or, if not then listed or admitted to trading on any such  exchange,  on
the NASDAQ National Market System, or if not then listed or traded on the NASDAQ
National  Market  System,  the  average of the bid and offer  price per share on
NASDAQ,  in each case averaged over the ten (10) trading days  consisting of the
day  preceding  the date upon which the  Warrant is  exercised  and the nine (9)
consecutive  trading  days prior to such day. If at any time the Common Stock is
not listed or traded on any exchange or system, the current fair market value of
a share of Common  Stock shall be the price per share  which the  Company  could
obtain from a willing buyer (not a current employee, consultant or director) for
shares of Common Stock sold by the Company,  as  determined in good faith by the
Company's board of directors.  Notwithstanding  the preceding  sentence,  if the
Company  shall become a party to a merger,  acquisition  or other  consolidation
pursuant  to which the Company is not the  surviving  entity,  the current  fair
market value of a share of Common Stock shall be deemed to be the value received
by the holders of the Company's Common Stock pursuant to such transaction.

     In the event of any conversion of this Warrant, certificates for the shares
of stock so converted  shall be  delivered to the Holder as soon as  practicable
but, in any event, within three (3) days thereafter and, unless this Warrant has
been fully converted or has expired,  a new Warrant  representing the portion of
the  shares,  if any,  with  respect to which this  Warrant  shall not have been
converted,  shall also be issued to the Holder as soon as practicable but within
such three (3) day period.

     4.  Adjustment of Exercise  Price and Number of Shares.  The Exercise Price
and/or the  number  and kind of shares  purchasable  upon the  exercise  of this
Warrant shall be subject to adjustment  from time to time upon the occurrence of
certain  events  described in this Section 4.

     4.1  Subdivision or Combination of Stock.  In case the Company shall at any
time subdivide its  outstanding  shares of Common Stock into a greater number of
shares,  the number of shares  purchasable  hereunder  shall be  proportionately
increased and the Exercise Price in effect immediately prior to such subdivision
shall be proportionately reduced and, conversely, in case the outstanding shares
of Common  Stock of the  Company  shall be  combined  into a  smaller  number of
shares,  the number of shares  purchasable  hereunder  shall be  proportionately
reduced and the Exercise Price in effect  immediately  prior to such combination
shall be  proportionately  increased.

     4.2 Dividends or Distributions  in Common Stock,  Other Stock, or Property.
If at any time or from time to time the  holders of Common  Stock (or any shares
of capital stock or other securities at the time receivable upon the exercise of
this Warrant) shall have received or become entitled to receive, without payment
therefore,

     (a) Common  Stock or any shares of stock or other  securities  which are at
any time  directly or indirectly  convertible  into or  exchangeable  for Common
Stock, or any rights or options to subscribe for,  purchase or otherwise acquire
any of the foregoing by way of dividend or other distribution,

                                       35
<PAGE>

     (b) any cash paid or  payable  otherwise  than as a regular  periodic  cash
dividend at a rate which is substantially  consistent with past practice (or, in
the case of an initial  dividend,  at a rate which is  substantially  consistent
with  industry  practice),  or

     (c) Common Stock or other or additional  capital stock or other  securities
or property (including cash) by way of spin-off,  split-up, or similar corporate
distribution  (other  than  shares of  Common  Stock  issued  as a stock  split,
adjustments  in  respect of which  shall be covered by the terms of Section  4.1
above),

then and in each such case,  the Holder hereof shall,  upon the exercise of this
Warrant,  be entitled to receive,  in addition to the number of shares of Common
Stock receivable thereupon,  and without payment of any additional consideration
thereof,  the amount of stock and other securities and property  (including cash
in the cases  referred to in clauses (b) and (c) above)  which such Holder would
hold on the date of such  exercise  had it been the  holder  of  record  of such
Common Stock as of the date on which holders of Common Stock  received or became
entitled to receive such shares  and/or all other  additional  capital stock and
other   securities   and   property.

     4.3 Reorganization,  Reclassification,  Consolidation or Merger. If, at any
time while this Warrant is  outstanding,  (i) the Company  effects any merger or
consolidation  of the  Company  with or into  another  entity,  (ii) the Company
effects any sale of all or substantially all of its assets in one or a series of
related  transactions,  (iii) any tender offer or exchange offer (whether by the
Company or another  entity) is  completed  pursuant  to which  holders of Common
Stock are  permitted to tender or exchange  their  shares for other  securities,
cash or property, or (iv) the Company effects any reclassification of the Common
Stock or any  compulsory  share  exchange  pursuant to which the Common Stock is
effectively  converted into or exchanged for other securities,  cash or property
(in any such case, a "Fundamental Transaction"),  then the Holder shall have the
right thereafter to receive,  upon exercise of this Warrant, the same amount and
kind of  securities,  cash or property as it would have been entitled to receive
upon the occurrence of such Fundamental  Transaction if it had been, immediately
prior to such Fundamental Transaction, the holder of the number of Warrant Stock
then  issuable   upon   exercise  in  full  of  this  Warrant  (the   "Alternate
Consideration").  The  aggregate  Exercise  Price for this  Warrant  will not be
affected by any such  Fundamental  Transaction,  but the Company shall apportion
such aggregate Exercise Price among the Alternate  Consideration in a reasonable
manner  reflecting  the  relative  value  of  any  different  components  of the
Alternate  Consideration.  If holders of Common Stock are given any choice as to
the  securities,  cash or property to be received in a Fundamental  Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration
it  receives  upon any  exercise  of this  Warrant  following  such  Fundamental
Transaction.  At the Holder's request, any successor to the Company or surviving
entity in such Fundamental  Transaction  shall issue to the Holder a new warrant
consistent  with the foregoing  provisions  and evidencing the Holder's right to
purchase the  Alternate  Consideration  for the  aggregate  Exercise  Price upon
exercise  thereof.  The terms of any  agreement  pursuant to which a Fundamental
Transaction  is effected  shall  include terms  requiring any such  successor or
surviving  entity  to  comply  with the  provisions  of this  paragraph  (c) and
ensuring that the Warrant (or any such  replacement  security) will be similarly
adjusted upon any subsequent transaction analogous to a Fundamental Transaction.
If any Fundamental  Transaction constitutes or results in a change of control of
the  Company,  then at the request of the Holder  delivered  before the 90th day
after such  Fundamental  Transaction,  the  Company  (or any such  successor  or
surviving

                                       36
<PAGE>

entity) will purchase the Warrant from the Holder for a purchase price,  payable
in cash within  five  trading  days after such  request  (or,  if later,  on the
effective  date of the  Fundamental  Transaction),  equal  to the  value  of the
Warrant on the effective date of the Fundamental Transaction, determined using a
Black Scholes valuation model and assumptions  reasonably mutually acceptable to
the Company and Holder,  provided  that for  purposes of such  calculation,  the
market  price of the Common  Stock shall be the higher of the  closing  price on
trading  day  immediately  preceeding  or the  closing  price on the trading day
immediately  following the public announcement of such Fundamental  Transaction,
and in no event will the volatility  factor be greater than fifty percent (50%).
For  purposes of this Section  4.3,  "change of control"  means a sale of all or
substantially  all of the assets of the Company or a consolidation  or merger of
the  Company  into or with any entity or  entities  after  which the  holders of
capital stock of the Company hold less than fifty percent (50%) of the aggregate
outstanding  voting securities of the surviving entity.

     4.4 Additional  Shares.  The number of shares purchasable upon the exercise
of this  Warrant  shall be subject to increase  from time to time in  accordance
with the  provisions  of  Section  6.3(b)  of the  Purchase  Agreement  upon the
occurrence of certain events as set forth in that section.

     4.5 Sale or Issuance Below Warrant Price.

     (a) Adjustment to Warrant  Price.  The "Warrant  Price" shall  initially be
equal to the Fair Market Value, as defined in the Purchase Agreement,  and shall
be subject to adjustment and readjustment from time to time, as required by this
Section 4.5. If the Company shall at any time or from time to time issue or sell
any of its Common Stock, convertible preferred stock, warrants,  options, or any
other rights or securities convertible into or exchangeable for Common Stock for
a  consideration  per share less than the  Warrant  Price in effect  immediately
prior  to the  time of such  issue  or sale  (excluding  certain  securities  as
described  below),  the Warrant  Price shall be reduced  concurrently  with such
issue or sale to a price  (calculated to the nearest tenth of a cent) determined
by dividing  (A) the number of shares of Common  Stock  Outstanding  immediately
prior  to such  issue  or sale  multiplied  by the  Warrant  Price  plus (B) the
aggregate consideration received for such issue or sale, by the number of shares
of Common Stock Outstanding immediately after such issue or sale.

     The  Exercise  Price  shall  also  be  concurrently   reduced  to  a  price
(calculated to the nearest tenth of a cent)  determined by  multiplying  1.25 by
the reduced Warrant Price.

     The number of shares of Common Stock "outstanding" as used in the foregoing
calculation  shall  mean the  number  of  shares  of  Common  Stock  issued  and
outstanding  plus the  number of shares of Common  Stock  issuable  upon (x) the
exercise of all  outstanding  options and warrants to purchase  Common Stock and
(y) the conversion of all outstanding  convertible preferred stock,  convertible
debentures,  or any other rights or securities  convertible into or exchangeable
for Common  Stock.

     (b)  Exceptions to Adjustment  of the Warrant  Price.  No adjustment to the
Warrant  Price or the  Exercise  Price shall be made under this Section 4.5 as a
result of any grant or

                                       37
<PAGE>

issuance by the Company of any rights or  securities  approved by the  Company's
board of directors in good faith,  as follows:

     (i) Any  grant  or  exercise  of any  shares  of  Common  Stock  issued  to
employees,  officers and directors of or consultants to the Company  pursuant to
any stock option plan, employee stock purchase plan or similar plan or incentive
arrangement  approved by the  Company's  board of  directors;

     (ii) Any options,  warrants or other  convertible  securities  or rights or
agreements to purchase securities of the Company outstanding on the date hereof;

     (iii) Any  underwritten  public  offerings of the equity  securities of the
Company (excluding any equity line of credit);

     (iv) Any  equity  securities  issued  for  consideration  other  than  cash
pursuant  to a merger,  consolidation,  acquisition  or other  similar  business
combination;

     (v) Any equity securities issued in connection with any stock split,  stock
dividend or recapitalization  of the Company;

     (vi) Any  equity  securities  of the  Company  issued  in  connection  with
strategic  transactions involving the Company and other entities in a similar or
complementary  business  of the  Company,  such as, but not  limited  to,  joint
ventures,  manufacturing,   marketing  or  distribution  agreements,  technology
transfer agreements, research and development agreements; provided that, in each
case, the primary purpose of such  transaction is not the raising of capital for
the  Company  and the  primary  business  purpose  of such  other  entity is not
investing  in  securities;

     (vii) Any equity securities of the Company issued pursuant to any equipment
leasing   arrangement  or  debt  financing  from  a  bank  or  other   financial
institution;  provided that, in each case, the primary  business purpose of such
other  entity is not  investing in  securities;  and

     (viii) Any shares of Common  Stock issued upon the exercise of this Warrant
or any similar  warrant  issued  pursuant to the Purchase  Agreement.

     (c) Other Factors.  No adjustment shall be made under this Section 4.5 upon
the issuance of any additional  shares of Common Stock which are issued pursuant
to the exercise of any options or warrants or other rights or the  conversion of
any  convertible  securities if any adjustment  shall  previously have been made
upon the issuance of any such options,  warrants or rights or the  conversion of
any convertible securities as provided above. If the maximum number of shares of
Common Stock otherwise  issuable or deemed issued for purposes of this Section 4
upon the  exercise of any options,  warrants,  convertible  securities  or other
rights or  agreements  is not in fact issued and the  remaining  portion of such
options, warrants,  convertible securities or other rights or agreements expires
or otherwise terminates,  then the Exercise Price of this Warrant, as previously
adjusted pursuant to this Section 4.5, shall be readjusted as if such expired or
terminated  portions  had not been  considered  issuable  or deemed  issued  for
purposes of this Section 4.5. In the case of the issuance or deemed  issuance of
shares of Common Stock for a  consideration  other than cash, the

                                       38
<PAGE>

consideration  received by the Company  therefor  shall be deemed to be the fair
value of such  consideration  as determined in good faith by the Company's board
of directors.

     4.6 Limitations on Exercise.

     (a)  Notwithstanding  anything to the contrary contained herein, the number
of shares of Common  Stock that may be acquired by the Holder upon any  exercise
of this Warrant (or otherwise in respect  hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially  owned by such Holder and its
Affiliates (as defined in Rule 501(b) of Regulation D under the Securities  Act)
under  Section  13(d) of the  Securities  Exchange Act of 1934,  as amended (the
"Exchange  Act"),  does not  exceed  4.999%  of the total  number of issued  and
outstanding  shares of Common Stock  (including  for such purposes the shares of
Common  Stock  issuable  upon  such  exercise).  For such  purposes,  beneficial
ownership  shall be determined in accordance  with Section 13(d) of the Exchange
Act and the rules and regulations  promulgated  thereunder.  Each delivery of an
Exercise Notice hereunder will constitute a representation by the Holder that it
has evaluated the limitation set forth in this paragraph and determined that the
issuance of the full number of shares of Common  Stock to be issued as requested
in such  Exercise  Notice is  permitted  under  this  paragraph.  The  Company's
obligation to issue shares of Common Stock in excess of the limitation  referred
to in this  Section  shall be  suspended  (and  shall  not  terminate  or expire
notwithstanding any contrary provisions hereof) until such time, if any, as such
shares of Common  Stock may be issued in  compliance  with such  limitation.  By
written  notice to the  Company,  the  Holder may waive the  provisions  of this
Section but (i) any such waiver,  including such increase in shares, will not be
effective until the 61st day after such notice is delivered to the Company,  and
(ii) any such waiver  will apply only to the Holder and not to any other  holder
of Warrants.

     (b)  Notwithstanding  anything to the contrary contained herein, the number
of shares of Common  Stock that may be acquired by the Holder upon any  exercise
of this Warrant (or otherwise in respect  hereof) shall be limited to the extent
necessary to insure that, following such exercise (or other issuance), the total
number of shares of Common Stock then beneficially  owned by such Holder and its
Affiliates (as defined in Rule 501(b) of Regulation D under the Securities  Act)
under  Section 13(d) of the  Securities  Exchange Act, does not exceed 9.999% of
the total number of issued and outstanding shares of Common Stock (including for
such purposes the shares of Common Stock issuable upon such exercise).  For such
purposes,  beneficial  ownership  shall be determined in accordance with Section
13(d) of the Exchange Act and the rules and regulations  promulgated thereunder.
Each delivery of an Exercise Notice  hereunder will constitute a  representation
by the Holder that it has evaluated the  limitation  set forth in this paragraph
and determined that the issuance of the full number of shares of Common Stock to
be  issued  as  requested  in such  Exercise  Notice  is  permitted  under  this
paragraph. The Company's obligation to issue shares of Common Stock in excess of
the  limitation  referred to in this Section  shall be suspended  (and shall not
terminate or expire  notwithstanding  any contrary provisions hereof) until such
time,  if any, as such shares of Common Stock may be issued in  compliance  with
such  limitation.  By written  notice to the  Company,  the Holder may waive the
provisions of this Section but (i) any such waiver,  including  such increase in
shares,  will not be effective until the 61st day after such notice is delivered
to the  Company,  and (ii) any such waiver will apply only to the Holder and not
to any other holder of Warrants.

                                       39
<PAGE>

     4.7 Notice of Adjustment. Upon any adjustment of the Exercise Price, and/or
any increase or decrease in the number of shares  purchasable  upon the exercise
of this Warrant, the Company shall issue a certificate prepared by the Company's
chief  financial  officer,  stating  the  Exercise  Price  resulting  from  such
adjustment  and the  increase  or  decrease,  if any,  in the  number  of shares
purchasable  at such price upon the exercise of this Warrant,  and setting forth
in  reasonable  detail the method of  calculation  and the facts upon which such
calculation is based.  The Company shall send a copy of such  certificate to the
Holder of this Warrant,  by first class mail, postage prepaid, at the address of
such Holder as shown on the books of the Company,  promptly after the occurrence
of the event  triggering an adjustment  under this Section 4.

     4.8 Other  Notices.  If at any time:

     (a) the Company shall declare any cash dividend or distribution upon shares
of its Common Stock;

     (b) the Company shall declare any dividend upon its Common Stock payable in
stock or make any special  dividend or other  distribution to the holders of its
Common  Stock;

     (c) the Company shall offer for subscription pro rata to the holders of its
Common Stock any  additional  shares of stock of any class or other  rights,  or
shall offer any of its securities pursuant to a public offering;

     (d) there shall be any capital  reorganization or  reclassification  of the
capital stock of the Company,  or consolidation or merger of the Company with or
into, or sale of all or substantially all of its assets to, another corporation;

     (e) there shall be a voluntary or involuntary  dissolution,  liquidation or
winding-up of the Company;  or

     (f) the Company shall take or propose to take any other  action,  notice of
which is  actually  provided  (or is required  to be  provided,  pursuant to any
written agreement) to holders of Common Stock;

then,  in any one or more of said cases,  the Company shall give, by first class
mail, postage prepaid, addressed to the Holder of this Warrant at the address of
such Holder as shown on the books of the Company,  written  notice setting forth
the  principal  terms of such event (i) at least  twenty  (20) days prior to the
date on which the books of the Company  shall  close or a record  shall be taken
for such dividend, distribution or subscription rights or for determining rights
to vote in respect of any such reorganization, reclassification,  consolidation,
merger, sale, dissolution,  liquidation or winding-up, or other action described
in  clause  (f)  above  and  (ii)  in the  case  of any  such  public  offering,
reorganization,  reclassification,  consolidation,  merger,  sale,  dissolution,
liquidation  or  winding-up,  or other  action  described in clause (f) above at
least  twenty  (20) days prior to the date when the same shall take  place.  Any
notice given in accordance with the foregoing clause (i) shall also specify,  in
the case of any such dividend,  distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto. Any notice given in
accordance  with the  foregoing  clause

                                       40
<PAGE>

(ii) shall also specify the  approximate  date after which the holders of Common
Stock shall be entitled to exchange  their Common Stock for  securities or other
property deliverable upon such reorganization, reclassification,  consolidation,
merger, sale dissolution,  liquidation or winding-up,  or other action described
in clause (f) above, as the case may be.

     5. Cash  Dividends.  If the Company,  at any time while this Warrant or any
portion hereof remains  outstanding and unexpired,  shall pay or elect to pay or
declare and set apart for payment a regular periodic cash dividend on any shares
of Common  Stock,  the Holder of this Warrant  shall be entitled to receive such
dividend as if this Warrant had then been exercised.

     6. Issue Tax. The issuance of certificates  for shares of Common Stock upon
the exercise of this Warrant shall be made without  charge to the Holder of this
Warrant  for any issue  tax in  respect  thereof;  provided,  however,  that the
Company  shall not be required to pay any tax which may be payable in respect of
any transfer  involved in the issuance and delivery of any certificate in a name
other than that of the then Holder of the Warrant being exercised.

     7. Closing of Books.  The Company will at no time close its transfer  books
against the  transfer of this Warrant or of any shares of Common Stock issued or
issuable upon the exercise of this Warrant in any manner during normal  business
hours which  interferes with the timely  exercise of this Warrant.

     8. No Voting  Rights;  Limitation of Liability.  Nothing  contained in this
Warrant  shall be construed as  conferring  upon the Holder  hereof the right to
vote or to consent as a shareholder in respect of meetings of  shareholders  for
the  election of  directors  of the  Company or any other  matters or any rights
whatsoever as a shareholder of the Company. No provisions hereof, in the absence
of affirmative  action by the Holder to purchase shares of Common Stock,  and no
mere enumeration herein of the rights or privileges of the Holder hereof,  shall
give  rise to any  liability  of such  holder  for the  Exercise  Price  or as a
shareholder of the Company, whether such liability is asserted by the Company or
by its creditors.

     9.  Registration  Rights.  The  Holder  hereof  shall  be  entitled  to the
registration rights set forth in the Purchase Agreement.

     10.  Transferability of Securities.

     10.1 Transferability.  The Warrant and Warrant Stock shall be transferable,
in whole or in part,  without  charge to the Holder hereof  (except for transfer
taxes),  upon surrender of this Warrant  properly  endorsed and upon delivery of
the Assignment in  substantially  the form attached hereto as Exhibit B, subject
to  the  conditions   specified  in  this  Section  10  and  by  any  applicable
restrictions  set  forth  in  Section  6.3  of  the  Purchase  Agreement,  which
conditions  and  restrictions  are  intended  to  insure   compliance  with  the
provisions of the Securities Act. Each Holder will cause any proposed transferee
of the  Warrant  or  Warrant  Stock to agree  to take and hold  such  securities
subject to the provisions  and upon the conditions  specified in this Section 10
and by the restrictions set forth in the Purchase Agreement if and to the extent
that such  securities  continue to be restricted  securities in the hands of the
transferee.  Each taker and  Holder of this  Warrant,  by taking or holding  the
same,  consents and agrees that this Warrant,  when endorsed in blank,  shall be

                                       41
<PAGE>

deemed negotiable, and that the Holder hereof, when this Warrant shall have been
so endorsed,  may be treated by the Company and all other  persons  dealing with
this  Warrant as the  absolute  owner  hereof for any  purpose and as the person
entitled to  exercise  the rights  represented  by this  Warrant;  but until the
transfer  hereof  on the  books  of the  Company,  the  Company  may  treat  the
registered owner hereof as the owner for all purposes.

     10.2  Restrictive  Legend and  Restrictions  on  Transfer.  The Warrant and
Warrant Stock shall be subject to the legend  requirements  and  restrictions on
transfer as set forth in the Purchase Agreement.

     10.3 Rights and  Obligations  Survive  Exercise of Warrant.  The rights and
obligations of the holder of the Warrant Stock  contained in this Section 10 and
the Purchase Agreement shall survive the exercise of this Warrant.

     11.  Modification and Waiver.  This Warrant and any provision hereof may be
changed,  waived,  discharged  or  terminated  only by an  instrument in writing
signed  by the  party  against  which  enforcement  of the same is  sought.

     12. Notices. Any notice, request or other document required or permitted to
be given or delivered to the Holder  hereof or the Company shall be delivered or
shall be sent by certified or registered  mail,  postage  prepaid,  to each such
Holder at its  address as shown on the books of the Company or to the Company at
the address indicated in the first paragraph of this Warrant or shall be sent by
facsimile transmission to any number provided by a Holder or the Company for the
purpose of this Section 12.

     13. Binding  Effect on  Successors.  This Warrant shall be binding upon any
corporation  succeeding the Company by merger,  consolidation  or acquisition of
all or substantially all of the Company's assets.  All of the obligations of the
Company relating to the Warrant Stock shall survive the exercise and termination
of this Warrant.  All of the covenants and agreements of the Company shall inure
to  the  benefit  of the  successors  and  assigns  of the  Holder  hereof.

     14. Descriptive Headings and 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.

     15.  Governing  Law and  Forum.  This  Warrant  shall  be  governed  by and
construed in accordance  with the laws of the State of New York,  without giving
effect to any  choice of law  provisions  thereof,  and the  federal  law of the
United  States of America.  The parties  hereto agree to submit to the exclusive
jurisdiction  of the  federal  and  state  courts  of the State of New York with
respect to the  interpretation of this Warrant or for the purposes of any action
arising  out  of or  related  to  this  Warrant.

     16.  Lost  Warrants  or Stock  Certificates.  The  Company  represents  and
warrants  to  the  Holder  hereof  that  upon  receipt  of  evidence  reasonably
satisfactory to the Company of the loss,  theft,  destruction,  or mutilation of
any Warrant or stock  certificate  and,  in the case of any such loss,  theft or
destruction,  upon  receipt  of an  indemnity  reasonably  satisfactory  to  the
Company,  or in the case of any such mutilation upon surrender and  cancellation
of such Warrant or stock  certificate,  the

                                       42
<PAGE>

Company at its expense will make and deliver a new Warrant or stock certificate,
of like tenor, in lieu of the lost,  stolen,  destroyed or mutilated  Warrant or
stock certificate.

     17.  Fractional  Shares. No fractional shares shall be issued upon exercise
of this Warrant. The Company shall, in lieu of issuing any fractional share, pay
to the Holder  entitled  to such  fraction a sum in cash equal to such  fraction
multiplied by the then fair market value of a share of Common Stock, which shall
be determined in accordance with the provisions of Section 3 of this Warrant.

     IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered by its officers, thereunto duly authorized as of January 14, 2002.

                                          COMPANY:

                                          TRIMBLE NAVIGATION LIMITED

                                          By:  ________________________________

                                          Print Name: _________________________

                                          Title: ______________________________

ACKNOWLEDGED AND AGREED:

HOLDER:

_______________________________________

By: ___________________________________

Print Name: ___________________________

Title: ________________________________

Address: ______________________________

         ______________________________

         ______________________________

                                       43
<PAGE>

                                    EXHIBIT A

                              FORM OF SUBSCRIPTION

                  (To be signed only upon exercise of warrant)

TO:      Chief Financial Officer
         Trimble Navigation Limited
         645 North Mary Avenue
         Sunnyvale, California   94088

     The  undersigned,  the holder of the  within  Warrant,  hereby  irrevocably
elects to exercise the purchase  right  represented  by such Warrant for, and to
thereunder:

          (a)  purchase  _____________  shares of the  Common  Stock of  Trimble
     Navigation Limited and herewith tenders full payment of  $________________,
     representing  the full purchase price for such shares at the Exercise Price
     per share provided for in such Warrant;

            (Leave blank if you choose the second alternative below.)

or

          (b) effect Conversion Right provisions as provided for in Section 3 of
     the Warrant with respect to  _______________  shares otherwise  exercisable
     pursuant to the Warrant and receive  that number of shares of Common  Stock
     of Trimble Navigation Limited as determined in accordance with terms of the
     Conversion  Right  provided for in the Warrant,  in lieu of exercising  the
     attached  Warrant  for cash,  check or  consideration  as  provided  for in
     Section 3 of the Warrant.

   (Initial here if the undersigned elects this second alternative. _______)

     The  undersigned  represents that it is acquiring such Common Stock for its
own account for investment and not with a view to or for sale in connection with
any distribution  thereof (subject,  however, to any requirement of law that the
disposition thereof shall at all times be within its control).

 Dated:  ___________________
                                    __________________________________________
                                    (Signature must conform in all respects to
                                     name of holder as specified on the face of
                                     the Warrant)

                                    ___________________________________________
                                    ___________________________________________
                                    (Address)

                                       44
<PAGE>

                                    EXHIBIT B

                               FORM OF ASSIGNMENT

     FOR VALUE  RECEIVED,  the  undersigned,  the holder of the within  Warrant,
hereby sells,  assigns and transfers all of the rights of the undersigned  under
the within Warrant, with respect to the number of shares of Common Stock covered
thereby set forth hereinbelow, unto:

 Name of Assignee(s)             Address                         No. of Shares

Dated:  ___________________

                                      _________________________________________
                                      (Signature must conform in all respects to
                                       name of holder as specified on the face
                                       of the Warrant)

                                       45
<PAGE>

                                    EXHIBIT B

                              FORM OF LEGAL OPINION

                                January 14, 2002

To the Purchasers in the Second Closing Listed in
Schedule A to the Trimble Navigation Limited
First Amended and Restated
Stock and Warrant Purchase Agreement
Dated as of January 14, 2002

Ladies and Gentlemen:

     Reference  is made to the First  Amended  and  Restated  Stock and  Warrant
Purchase Agreement dated as of January 14, 2002 (the "Agreement"),  by and among
Trimble Navigation  Limited, a California  corporation (the "Company"),  and the
persons and entities  listed in Schedule A to the Agreement (the  "Purchasers"),
which  provides for the issuance by the Company to the  Purchasers  of shares of
Common Stock of the Company  ("Shares")  and  Warrants to purchase  Common Stock
("Warrants").  This opinion is rendered to the  Purchasers in the Second Closing
pursuant to Section  2.2(b) of the  Agreement,  and all  capitalized  terms used
herein have the  meanings  defined for them in the  Agreement  unless  otherwise
defined herein. Reference in this opinion to the Agreement excludes any schedule
or  substantive  agreement  attached  as an  exhibit  to the  Agreement,  unless
otherwise indicated herein.

     We have acted as counsel for the Company in connection with the negotiation
of the Agreement and the Warrants (collectively,  the "Transaction  Documents").
As such counsel, we have made such legal examination as we have deemed advisable
or necessary for the purpose of rendering  this  opinion.  As to matters of fact
material to the opinions expressed herein, we have relied, with your permission,
solely upon the  representations  and warranties as to factual matters contained
in,  and  made by the  Company  and the  Purchasers,  in the  Agreement  and the
Warrants,  and certificates of certain  government  officials and of officers of
the Company as required by the Agreement. In such examinations,  we have assumed
the genuineness of all signatures on original  documents,  the  authenticity and
completeness  of all documents  submitted to us as originals,  the conformity to
original  documents  of all copies  submitted  to us and the due  execution  and
delivery  of all  documents  (except as to due  execution  and  delivery  by the
Company)   where  due  execution  and  delivery  are  a   prerequisite   to  the
effectiveness thereof.

     As used in this opinion,  the expression "to our knowledge,"  "known to us"
or similar  language  with  reference  to matters of fact  refers to the current
actual  knowledge  of the  attorneys of this firm who have worked on matters for
the Company in connection with the Agreement and the  transactions  contemplated
thereby.  Except to the extent  expressly  set forth  herein or as we  otherwise
believe to be necessary to our opinion,  we have not undertaken any  independent
investigation  to  determine  the  existence  or  absence  of any  fact,  and no
inference as to our  knowledge of the existence or absence of any fact should be
drawn from our representation of the Company or the rendering of the opinion set
forth below.

                                      -1-

                                       46
<PAGE>

The Purchasers in the Second Closing
in the Trimble Navigation Limited
First Amended and Restated
Stock and Warrant Purchase Agreement
January 14, 2002
Page 2

     In rendering this opinion, we have assumed,  with your permission:  (a) the
authenticity and completeness of all documents submitted to us as originals, (b)
the  conformity  to original  documents of all copies  submitted to us as copies
thereof,  (c) the  genuineness  of all  signatures,  (d) the legal  capacity  of
natural persons, (e) the truth,  accuracy,  and completeness of the information,
factual  matters,  representations  and  warranties  contained  in  all  of  the
documents related to this transaction, (f) the due execution and delivery by the
Purchasers of all documents  when due execution and delivery are a  prerequisite
to the effectiveness  thereof,  (g) that the parties will act in accordance with
their respective representations,  warranties,  covenants, and agreements as set
forth  in  the  Agreement,   the  Warrants,  and  the  other  documents  to  the
transaction,  (h) that there are no extrinsic agreements or understandings among
any of the parties to the  Agreement  that would modify any of the terms thereof
or the respective  rights or obligations of any of the parties  thereunder,  (i)
the Agreement and the Warrants are binding and  enforceable  obligations  of the
Purchasers in accordance with their terms, and (j) that there has been no fraud,
duress, undue influence,  or mutual mistake of fact or misunderstanding.  We are
also assuming  that the  Purchasers  have  purchased the Shares and Warrants for
value, in good faith and without notice of any adverse claims within the meaning
of the California Uniform Commercial Code.

     We are  members  of the Bar of the State of  California  and we  express no
opinion as to any matter relating to the laws of any jurisdiction other than the
federal  laws of the  United  States  of  America  and the laws of the  State of
California.  We  note  that  the  parties  to  the  Transaction  Documents  have
designated  the  laws  of the  State  of New  York  as the  laws  governing  the
Transaction  Documents.  We assume for purposes of this opinion that the laws of
the State of New York are identical to the laws of the State of California.

     We do not assume  any  responsibility  for the  accuracy,  completeness  or
fairness  of  any  information,   including,   but  not  limited  to,  financial
information,  furnished  to you by the  Company,  or  any  of  their  agents  or
representatives  concerning  the business or affairs of the Company or any other
information  of a factual  nature.  This opinion is provided as a legal  opinion
only, and not as a guaranty or warranty of the matters  discussed  herein.  This
opinion is limited to the matters  stated  herein,  and no opinion is implied or
may be inferred beyond the matters expressly stated.

     The opinions hereinafter  expressed are subject to the following additional
qualifications:

     (a) We  express  no  opinion  as to the  effect of  applicable  bankruptcy,
insolvency,  reorganization,  moratorium, fraudulent conveyance or other similar
federal or state laws affecting the rights of creditors;

                                       -2-

                                       47
<PAGE>

The Purchasers in the Second Closing
in the Trimble Navigation Limited
First Amended and Restated
Stock and Warrant Purchase Agreement
January 14, 2002
Page 3

     (b) We  express no  opinion  as to the  effect of  limitations  that may be
imposed  as a matter  of  public  policy,  or as to the  effect  of rules of law
governing specific performance, injunctive relief or other equitable remedies or
principles,  including,  without  limitation,   considerations  of  materiality,
reasonableness,  good faith and fair  dealing  (regardless  of whether  any such
remedy or principle is considered  in a proceeding at law or in equity);

     (c) We express no opinion as to compliance  with the anti-fraud  provisions
of  applicable   securities   laws;

     (d) We express no opinion as to the enforceability of the  indemnification,
reimbursement  or  contribution  provisions of the Agreement;

     (e) We  express  no  opinion  as to the  enforceability  of  choice  of law
provisions or provisions that exclude  conflicts of law principles under certain
circumstances  (conflicts of law principles  may require the  application of the
law of another jurisdiction if the agreement violates a public policy of another
jurisdiction  related to the transaction or another  jurisdiction has a stronger
governmental interest in having its own laws applied);

     (f) We express no opinion as to the enforceability of provisions that waive
jury  trials,  service  of process or  objections  to venue or forum,  establish
particular  courts,  laws  or  evidentiary  standards  for the  adjudication  of
disputes,  or provide for arbitration of disputes;

     (g) We  express  no opinion as to the  enforceability  of  provisions  that
provide  that  rights  or  remedies  may  be  exercised  without  notice  or are
cumulative  or that the failure to exercise  particular  rights or remedies will
not  operate as a waiver of such  right or remedy;

     (h) We express no opinion as the legality,  validity,  binding  nature,  or
enforceability  of  (i)  provisions  regarding  a  party's  ability  to  collect
attorneys' fees and costs, (ii) any provision imposing penalties,  late charges,
increases in the interest rate, or forfeitures,  upon  delinquency in payment or
the  occurrence  of a default  to the  extent  that they  constitute  penalties,
forfeitures,  or are contrary to public  policy,  or (iii) any  provision to the
effect that a statement,  certificate,  determination  of record shall be deemed
conclusive  or prima facie  evidence of a fact;

     (i) We express no opinion as to the enforceability of provisions that waive
broadly or vaguely stated rights, unknown future rights or rights or defenses to
obligations  granted by law;

                                      -3-

                                       48
<PAGE>

The Purchasers in the Second Closing
in the Trimble Navigation Limited
First Amended and Restated
Stock and Warrant Purchase Agreement
January 14, 2002
Page 4

     (j) We express no opinion as to matters of patent, trademark,  copyright or
antitrust law; and

     (k) We express no opinion  regarding  the effect of  exercise  of  judicial
discretion, whether in a proceeding at law or in equity.

     Based upon and subject to the foregoing, we are of the opinion that:

     1.  Each  of  the  Company  and  the  Subsidiaries  is a  corporation  duly
incorporated  and  validly  existing  under,  and by virtue  of, the laws of the
jurisdiction  of its  incorporation  and is in good standing (to the extent such
concept is applicable) under such laws, and based solely upon the certificate of
good  standing or  equivalent  issued by each of the  Company  and  Subsidiary's
jurisdiction  of  incorporation,  each of the Company and  Subsidiaries  has the
requisite corporate power and authority to own and use its properties and assets
and to carry on its  business  as  currently  conducted.

     2. The Company has all requisite  legal and  corporate  power to enter into
and consummate the transactions contemplated by the Transaction Documents and to
carry  out and  perform  its  obligations  under  the  terms of the  Transaction
Documents.

     3. All  corporate  action  on the  part of the  Company  necessary  for the
authorization,  execution  and delivery of the  Agreement  by the  Company,  the
authorization,  sale,  issuance  and delivery of the Shares and Warrants and the
performance by the Company of its obligations  under the  Transaction  Documents
has been taken.  Each of the  Agreement  and  Warrants has been duly and validly
executed  and  delivered  by the  Company  and  constitutes  a valid and binding
obligation of the Company,  enforceable  against the Company in accordance  with
its terms.

     4. The  Shares,  when  issued  in  compliance  with the  provisions  of the
Agreement,  will be validly issued, fully paid and nonassessable and free of any
liens,  encumbrances  and preemptive or similar rights contained in the Articles
of  Incorporation or Bylaws of the Company,  except as specifically  provided in
the Agreement; provided, however, that the Shares may be subject to restrictions
on transfer under  applicable  state and federal  securities laws. The Warrants,
when issued in compliance with the provisions of the Agreement,  will be validly
issued,  nonassessable  and free of any liens,  encumbrances  and  preemptive or
similar  rights  contained  in the  Articles of  Incorporation  or Bylaws of the
Company,  except as specifically provided in the Agreement;  provided,  however,
that the Warrants may be subject to  restrictions  on transfer under  applicable
state and federal  securities  laws. The Common Stock issuable upon the exercise
of the Warrants (the "Warrant  Stock") has been duly and validly  reserved,  and
when  issued in  accordance  with the

                                      -4-

                                       49
<PAGE>

The Purchasers in the Second Closing
in the Trimble Navigation Limited
First Amended and Restated
Stock and Warrant Purchase Agreement
January 14, 2002
Page 5

Warrants and the Company's  Articles of  Incorporation  will be validly  issued,
fully paid and nonassessable.

     5. The execution and delivery by the Company of the  Transaction  Documents
and the  performance  by the Company of its  obligations  under the  Transaction
Documents  do  not  violate  any   provision  of  the   Company's   Articles  of
Incorporation  or Bylaws  or, to our  knowledge,  result in a  violation  of any
statute,  rule  or  regulation  applicable  to  the  Company  that  an  attorney
practicing in  California  exercising  customary  professional  diligence  would
reasonably recognize to be typically applicable to similar transactions.

     6. No consent, approval or authorization of or designation,  declaration or
filing with any federal or State of  California  governmental  authority  on the
part of the Company is required in connection with the execution and delivery of
the  Agreement,  or the offer,  sale or issuance of the Shares and Warrants.

     7.   Subject   to  the   accuracy   of  the  Second   Closing   Purchasers'
representations  and warranties in Section 4 of the Agreement,  the offer,  sale
and issuance in the Second Closing of the Shares,  Warrants and Warrant Stock in
conformity with the terms of the Agreement and Warrants constitute  transactions
exempt from the registration  requirements of Section 5 of the Securities Act of
1933, as amended.

     This  opinion is  rendered  as of the date  hereof and  addresses  only the
matters  specifically set forth herein, and we undertake no, and hereby disclaim
any,  obligation to update or advise you of any  circumstances or events, or any
changes in the law, that may hereafter be brought to our attention  even if they
may affect or modify the opinions expressed herein. This opinion is furnished by
us, as counsel to the Company, to you solely for your benefit, and it may not be
relied upon by any other person or for any other  purpose and may not be quoted,
disclosed,  filed  with any public or  governmental  entity,  without  our prior
written consent.

                                             Very truly yours,

                                             WILSON SONSINI GOODRICH & ROSATI
                                             Professional Corporation

                                      -5-

                                       50
<PAGE>

<PAGE>

                                    EXHIBIT C

                           TRANSFER AGENT INSTRUCTIONS

                                January 14, 2002

Mellon Investor Services
235 Montgomery Street, 23rd Floor
San Francisco, CA 94104
Attn:  Ms. Kerri Altig

         Re:      Issuance of Trimble Navigation Limited Stock Certificates

Dear Ms. Altig:

     In connection with a private  offering of securities by Trimble  Navigation
Limited (the "Company"), enclosed please find the following:

1.       Deliverable Shares: Attached as Exhibit A is a list of new shareholders
         ("Purchasers") of the Company who will be issued shares of common stock
         of the Company, including shareholder name, address, and the number of
         deliverable shares of the Company. The date of issuance will be January
         14, 2002, and the share certificates will bear the legends as described
         below.

         You have agreed to prepare the share certificates no later than 1:00
         p.m., January 15, 2002, and upon our instruction to deliver the final
         share certificates via overnight courier to the respective Purchasers,
         with a copy of each certificate to:

                  John T. McFarland
                  Wilson Sonsini Goodrich & Rosati, P.C.
                  650 Page Mill Road
                  Palo Alto, California  94304-1050

2.       Legend:  All of the share certificates will bear the following legend:

         THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
         INVESTMENT AND NOT FOR DISTRIBUTION, AND HAVE NOT BEEN REGISTERED UNDER
         THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.
         SUCH SHARES MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED,
         OR OTHERWISE TRANSFERRED IN THE ABSENCE OF A REGISTRATION STATEMENT IN
         EFFECT WITH RESPECT THERETO UNDER SUCH ACT UNLESS SOLD PURSUANT TO RULE
         144 OF SUCH ACT OR UNLESS SUCH SALE, PLEDGE, HYPOTHECATION OR TRANSFER
         IS OTHERWISE EXEMPT FROM REGISTRATION AND ANY APPLICABLE STATE
         SECURITIES LAWS. THE COMPANY MAY REQUEST A

                                       51
<PAGE>
Mellon Investor Services
January 14, 2002
Page 2

         WRITTEN OPINION OF COUNSEL REASONABLY  SATISFACTORY TO THE COMPANY, TO
         THE EFFECT THAT  REGISTRATION  IS NOT REQUIRED IN CONNECTION WITH SUCH
         SALE OR OTHER TRANSFER.  THIS  CERTIFICATE  MUST BE SURRENDERED TO THE
         CORPORATION OR ITS TRANSFER AGENT AS A CONDITION PRECEDENT TO THE SALE
         OR ANY OTHER TRANSFER OF ANY INTEREST IN ANY OF THE SHARES REPRESENTED
         BY THIS CERTIFICATE.

         THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
         SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT
         OR OTHER LOAN SECURED BY SUCH SECURITIES.

3.       As Exhibit B, a copy of the Board resolution of the Company approving
         the transaction, along with an executed secretarial certificate
         affirming the copy.

4.       As Exhibit C, a copy of the Wilson Sonsini Goodrich & Rosati, P.C.
         legal opinion regarding the share certificates, dated January 14, 2002.

         Additionally, we offer the following instructions:

         Reference is made to that certain First Amended and Restated Stock and
Warrant Purchase Agreement dated January 14, 2002, by and among the Company and
the Purchasers, pursuant to which the Company is issuing to the Purchasers
shares (the "Shares") of its common stock (the "Common Stock") together with and
certain warrants that are exercisable for additional shares of Common Stock (the
"Warrants"). The shares of Common Stock sold to the Purchasers together with the
shares of Common Stock issuable upon the exercise of the Warrants are
collectively referred hereto as the "Underlying Shares". We have agreed with the
Purchasers that we will deliver to them the certificates evidencing the
Underlying Shares free of all restrictive legends when there is an effective
registration statement covering the resale of the Underlying Shares.
Accordingly, if our outside counsel shall have previously informed you through a
form of legal opinion (attached as Exhibit D) that a registration statement was
declared effective with respect to the Underlying Shares, then you are hereby
irrevocably authorized and directed to deliver to the Purchasers certificates
evidencing the Underlying Shares free of all restrictive legends upon receiving
notice to issue new shares upon the exercise of the Warrants or upon the
surrender of such original certificates for the Shares. You need not require
further letters from us or our counsel to effect the issuance of certificates
evidencing the shares, and in the future this letter shall serve as our standing
instructions with regard to this matter.

                                       52
<PAGE>

Mellon Investor Services
January 14, 2002
Page 3

         We may notify you to place stop-transfer restrictions on the
certificates evidencing the shares in the event, but only in the event, a
registration statement is subject to amendment for events then current. In such
cases, we will notify you when such stop order may be properly lifted.

         Please feel free to contact me should you have any questions regarding
the enclosed.

                                       Sincerely,

                                       Trimble Navigation Limited

                                       By:____________________________________
                                          Mary Ellen Genovese
                                          Chief Financial Officer

                                       53
<PAGE>

                                    EXHIBIT D

                              PLAN OF DISTRIBUTION

     The  Selling  Shareholders  and  any  of  their  pledgees,   assignees  and
successors-in-interest  named in the  Registration on Form S-3 may, from time to
time,  sell any or all of their  shares of Common  Stock on any stock  exchange,
market  or  trading  facility  on which the  shares  are  traded  or in  private
transactions.  These  sales may be at fixed or  negotiated  prices.  The Selling
Shareholders  may use any one or more  of the  following  methods  when  selling
shares:

o    ordinary brokerage transactions and transactions in which the broker-dealer
     solicits purchasers;

o    block trades in which the broker-dealer  will attempt to sell the shares as
     agent but may  position  and resell a portion of the block as  principal to
     facilitate the transaction;

o    purchases by a broker-dealer  as principal and resale by the  broker-dealer
     for its account;

o    an exchange  distribution  in accordance  with the rules of the  applicable
     exchange;

o    privately negotiated transactions;

o    short sales;

o    broker-dealers may agree with the Selling  Shareholders to sell a specified
     number of such shares at a stipulated price per share;

o    a combination of any such methods of sale; and

o    any other method permitted pursuant to applicable law.

     The  Selling  Shareholders  may also sell  shares  under Rule 144 under the
Securities Act, if available, rather than under this prospectus.

     The Selling  Shareholders  may also engage in short sales  against the box,
puts  and  calls  and  other  transactions  in  securities  of  the  Company  or
derivatives  of Company  securities and may sell or deliver shares in connection
with these  trades.  The Selling  Shareholders  may pledge their shares to their
brokers  under  the  margin  provisions  of  customer  agreements.  If a Selling
Shareholder  defaults on a margin loan, the broker may, from time to time, offer
and sell the pledged shares.

     Broker-dealers  engaged by the Selling  Shareholders  may arrange for other
brokers-dealers to participate in sales.  Broker-dealers may receive commissions
or discounts from the Selling  Shareholders  (or, if any  broker-dealer  acts as
agent  for the  purchaser  of  shares,  from the  purchaser)  in  amounts  to be
negotiated.  The  Selling  Shareholders  do not  expect  these  commissions  and
discounts to exceed what is customary in the types of transactions involved.

     The Selling Shareholders and any broker-dealers or agents that are involved
in selling the shares may be deemed to be  "underwriters"  within the meaning of
the Securities Act in

                                       54
<PAGE>

connection  with such sales.  In such event,  any  commissions  received by such
broker-dealers or agents and any profit on the resale of the shares purchased by
them may be  deemed  to be  underwriting  commissions  or  discounts  under  the
Securities Act.

     The  Company  is  required  to pay all fees and  expenses  incident  to the
registration of the shares,  including fees and  disbursements of one counsel to
the  Selling  Shareholders.  The  Company  has agreed to  indemnify  the Selling
Shareholders against certain losses, claims, damages and liabilities,  including
liabilities  under the Securities Act, and the Selling  Shareholders have agreed
to  indemnify  the  Company  against  certain   losses,   claims,   damages  and
liabilities, including liabilities under the Securities Act.

                                       55
<PAGE>

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00033-of-00352.parquet"}]]