Document:

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                                                                     EXHIBIT 4.7

                               SOURCE MEDIA, INC.
                                       and
                    CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

                                  Rights Agent

                                RIGHTS AGREEMENT

                           Dated as of April 24, 1998

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                         TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                       Page
                                                                                       ----

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

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

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

Section 4.            Form of Rights Certificates .......................................9

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

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

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

Section 8.            Cancellation and Destruction of Rights Certificates ..............13

Section 9.            Reservation and Availability of Common Shares ....................13

Section 10.           Record Date ......................................................15

Section 11.           Adjustment of Exercise Price, Number of Shares or
                      Number of Rights .................................................15

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

Section 13.           Consolidation, Merger or Sale or Transfer of
                      Assets or Earning Power ..........................................21

Section 14.           Fractional Rights and Fractional Shares ..........................25

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

Section 16.           Agreement of Rights Holders ......................................26

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

Section 18.           Concerning the Rights Agent ......................................27

Section 19.           Merger or Consolidation or Change of Name of Rights
                      Agent ............................................................27
</TABLE>

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<TABLE>
<S>                      <C>                                                              <C>
Section 20.              Duties of Rights Agent ...........................................28

Section 21.              Change of Rights Agent ...........................................30

Section 22.              Issuance of New Rights Certificates ..............................31

Section 23.              Redemption .......................................................31

Section 24.              Exchange .........................................................32

Section 25.              Notice of Certain Events .........................................34

Section 26.              Notices ..........................................................34

Section 27.              Supplements and Amendments .......................................35

Section 28.              Successors .......................................................36

Section 29.              Determinations and Actions by the Board of Directors, etc. .......36

Section 30.              Benefits of this Agreement .......................................37

Section 31.              Severability .....................................................37

Section 32.              Governing Law ....................................................37

Section 33.              Counterparts .....................................................37

Section 34.              Descriptive Headings .............................................37

EXHIBITS

Exhibit A                Form of Rights Certificate

Exhibit B                Summary of Rights
</TABLE>

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                                RIGHTS AGREEMENT

         Agreement, dated as of April 24, 1998, between Source Media, Inc., a
Delaware corporation and ChaseMellon Shareholder Services, L.L.C.

         On April 22, 1998 (the "RIGHTS DIVIDEND DECLARATION DATE"), the Board
of Directors of the Company authorized and declared a dividend of one Common
Share Purchase Right (a "RIGHT") for each Common Share (as hereinafter defined)
of the Company outstanding as of the Close of Business (as hereinafter defined)
on May 7, 1998 (the "RECORD DATE"), each Right representing the right to
purchase one Common Share (as such number may be adjusted pursuant to the
provisions of this Agreement), upon the terms and subject to the conditions
herein set forth, and further authorized and directed the issuance of one Right
(as such number may be adjusted pursuant to the provisions of this Agreement)
with respect to each Common Share that shall become outstanding between the
Record Date and the earlier of the Distribution Date and the Expiration Date (as
such terms are hereinafter defined), and in certain circumstances after the
Distribution Date.

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

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

                  (a) "ACQUIRING PERSON" shall mean any Person who or which,
together with all Affiliates and Associates of such Person, shall be the
Beneficial Owner of 15% or more of the Common Shares then outstanding, but shall
not include the Company, any Subsidiary of the Company or any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan. Notwithstanding the foregoing, no Person shall be deemed to be
an Acquiring Person as the result of an acquisition of Common Shares by the
Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding; provided, however, that if
a Person shall become the Beneficial Owner of 15% or more of the Common Shares
of the Company then outstanding by reason of share purchases by the Company and
shall, after such share purchases by the Company, become the Beneficial Owner of
any additional Common Shares of the Company (other than pursuant to a dividend
or distribution paid or made by the Company on the outstanding Common Shares in
Common Shares or pursuant to a split or subdivision of the outstanding Common
Shares), then such Person shall be deemed to be an Acquiring Person unless upon
becoming the Beneficial Owner of such additional Common Shares of the Company
such Person does not beneficially own 15% or more of the Common Shares of the
Company then outstanding. Notwithstanding the foregoing, (i) if the Company's
Board of Directors determines in good faith that a Person who would otherwise be
an "Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), has become such inadvertently, including, without

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limitation, because (A) such Person was unaware that it beneficially owned a
percentage of the Common Shares that would otherwise cause such Person to be an
"Acquiring Person," as defined pursuant to the foregoing provisions of this
paragraph (a), or (B) such Person was aware of the extent of the Common Shares
it beneficially owned but had no actual knowledge of the consequences of such
beneficial ownership under this Agreement) and without any intention of changing
or influencing control, of the Company, and if such Person divested or divests
as promptly as practicable a sufficient number of Common Shares so that such
Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be or to have, become an "Acquiring Person" for any purposes of this
Agreement; and (ii) if, as of the date hereof, any Person is the Beneficial
Owner of 15% or more of the Common Shares outstanding, such Person shall not be
or become an "Acquiring Person," as defined pursuant to the foregoing provisions
of this paragraph (a), unless and until such time as such Person shall become
the Beneficial Owner of additional Common Shares (other than pursuant to a
dividend or distribution paid or made by the Company on the outstanding Common
Shares in Common Shares or pursuant to a split or subdivision of the outstanding
Common Shares), unless, upon becoming the Beneficial Owner of such additional
Common Shares, such Person is not then the Beneficial Owner of 15% or more of
the Common Shares then outstanding.

                  (b) "ADJUSTMENT FRACTION" shall have the meaning set forth in
Section 11(a)(i) hereto.

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

                  (d) A Person shall be deemed the "BENEFICIAL OWNER" of and
shall be deemed to "BENEFICIALLY OWN" any securities:

                    (i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly, for purposes of Section
13(d) of the Exchange Act and Rule 13d-3 thereunder (or any comparable or
successor law or regulation);

                    (ii) which such Person or any of such Person's Affiliates or
Associates have (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time pursuant to any agreement,
arrangement or understanding (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities) or upon the exercise of conversion rights, exchange
rights, rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed pursuant to this Section
1(d)(ii)(A) to be the Beneficial Owner of, or to beneficially own, (1)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, or (2) securities
which a Person or any of such Person's Affiliates or Associates may be deemed to
have the right to acquire pursuant to any merger or other acquisition agreement
between the Company and

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<PAGE>   6

such Person (or one or more of its Affiliates or Associates) if such agreement
has been approved by the Board of Directors of the Company prior to there being
an Acquiring Person; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security under this
Section 1(d)(ii)(B) if the agreement. arrangement or understanding to vote such
security (1) arises solely from a revocable proxy or consent given to such
Person in response to a public proxy or consent solicitation made pursuant to,
and in accordance with, the applicable rules and regulations of the Exchange Act
and (2) is not also then reportable on Schedule 13D under the Exchange Act (or
any comparable or successor report); or

                    (iii) which are beneficially owned, directly or indirectly,
by any other Person (or any Affiliate or Associate thereof) with which such
Person or any of such Person's Affiliates or Associates has any agreement,
arrangement or understanding, whether or not in writing (other the customary
agreements with and between underwriters and selling group members with respect
to a bona fide public offering of securities) for the purpose of acquiring,
holding, voting (except to the extent contemplated by the provision to Section
l(d)(ii)(B)) or disposing of any securities of the Company, provided, however,
that in no case shall an officer or director of the Company be deemed (x) the
Beneficial Owner of any securities beneficially owned by another officer or
director of the Company solely by reason of actions undertaken by such persons
in their capacity as officers or directors of the Company or (y) the Beneficial
Owner of securities held of record by the trustee of any employee benefit plan
of the Company or any Subsidiary of the Company for the benefit of any employee
of the Company or any Subsidiary of the Company, other than the officer or
director, by reason of any influence that such officer or director may have over
the voting of the securities held in the plan.

                  (e) "BUSINESS DAY" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in New York are authorized or
obligated by law or executive order to close.

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

                  (g) "COMMON SHARES" when used with reference to the Company
shall mean the shares of Common Stock of the Company, $0.001 par value. Common
Shares when used with reference to any Person other than the Company shall mean
the capital stock (or equity interest) with the greatest voting power of such
other Person or, if such other Person is a Subsidiary of another Person, the
Person or Persons which ultimately control such first-mentioned Person.

                  (h) "COMMON STOCK EQUIVALENTS" shall have the meaning set
forth in Section 11 (a)(iii) hereof.

                  (i) "COMPANY" shall mean Source Media, Inc., a Delaware
corporation, subject to the terms of Section 13(a)(iii)(C) hereof.

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                  (j) "CURRENT PER SHARE MARKET PRICE" of any security (a
"Security" for purposes of this definition), for all computations other than
those made pursuant to Section 11(a)(iii) hereof, shall mean the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days immediately prior to but not including such date, and for purposes
of computations made pursuant to Section 11(a)(iii) hereof, the Current Per
Share Market Price of any Security on any date shall be deemed to be the average
of the daily closing prices per share of such Security for the ten (10)
consecutive Trading Days immediately prior to but not including such date;
provided, however, that in the event that the Current Per Share Market Price of
the Security is determined during a period following the announcement by the
issuer of such Security of (i) a dividend or distribution on such Security
payable in shares of such Security or securities convertible into such shares or
(ii) any subdivision, combination or reclassification of such Security, and
prior to the expiration of the applicable thirty (30) Trading Day or ten (10)
Trading Day period, after the ex-dividend date for such dividend or
distribution, or the record date for such subdivision, combination or
reclassification, then, and in each such case, the Current Per Share Market
Price shall be appropriately adjusted to reflect the current market price per
share equivalent of such Security. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Security is not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Security is listed or admitted to trading or, if the Security is
not listed or admitted to trading on any national securities exchange, the last
sale price or, if such last sale price is not reported, the average of the high
bid and low asked prices in the over-the counter market, as reported by Nasdaq
or such other system then in use, or, if on any such date the Security is not
quoted by any such organization, the average of the closing bid and asked prices
as held by a professional market maker making a market in the Securities
selected by the Board of Directors of the Company. If on any such date the
Security is not publicly held or so listed or traded, Current Per Share Market
Price shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent.

                  (k) "CURRENT VALUE" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                  (l) "DISTRIBUTION DATE" shall mean the earlier of (i) the
Close of Business on the tenth day after the Shares Acquisition Date (or, if the
tenth day after the Shares Acquisition Date occurs before the Record Date, the
Close of Business on the Record Date) or (ii) the Close of Business on the tenth
Business Day (or such later date as may be determined by action of the Company's
Board of Directors) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or of any Subsidiary of the Company, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan) is first published or sent or given within the meaning of Rule
14d-2(a)

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of the General Rules and Regulations under the Exchange Act, if, assuming the
successful consummation thereof, such Person would be an Acquiring Person.

                  (m) "EQUIVALENT SHARES" shall mean Common Shares of the
Company and any other class or series of capital stock of the Company which is
entitled to the same rights, privileges and preferences as the Common Shares.

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

                  (o) "EXCHANGE RATIO" shall have the meaning set forth in
Section 24(a) hereof.

                  (p) "EXERCISE PRICE" shall have the meaning set forth in
Section 4(a) hereof.

                  (q) "EXPIRATION DATE" shall mean the earliest to occur of (i)
the Close of Business on the Final Expiration Date, (ii) the Redemption Date, or
(iii) the time at which the Board of Director orders the exchange of the Rights
as provided in Section 24 hereof.

                  (r) "FINAL EXPIRATION DATE" shall mean May 7, 2008.

                  (s) "INTERESTED PERSON" with respect to a Transaction shall
mean any Person who (i) is or will become an Acquiring Person if the Transaction
were to be consummated or an Affiliate or Associate of such a Person, and (ii)
is, or directly or indirectly proposed, nominated or financially supported, a
director of the Company in office at the time of consideration of the
Transaction in question who was elected by written consent of stockholders.

                  (t) "NASDAQ" shall mean the National Association of Securities
Dealers, Inc. Automated Quotations System.

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

                  (v) "POST-EVENT TRANSFEREE" shall have the meaning set forth
in Section 7(e) hereof.

                  (w) "PRE-EVENT TRANSFEREE" shall have the meaning set forth in
Section 7(e) hereof.

                  (x) "PRINCIPAL PARTY" shall have the meaning set forth in
Section 13 (b) hereof.

                  (y) "RECORD DATE" shall have the meaning set forth in the
recitals at the beginning of this Agreement.

                  (z) "REDEMPTION DATE" shall have the meaning set forth in
Section 23(a) hereof.

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                  (aa) "REDEMPTION PRICE" shall have the meaning set forth in
Section 23(a) hereof.

                  (bb) "RIGHTS" shall have the meaning set forth in the recitals
at the beginning of this Agreement.

                  (cc) "RIGHTS AGENT" shall mean ChaseMellon Shareholder
Services, L.L.C. or its successor or replacement as provided in Sections 19 and
21 hereof.

                  (dd) "RIGHTS CERTIFICATE" shall mean a certificate
substantially in the form attached hereto as Exhibit A.

                  (ee) "RIGHTS DIVIDEND DECLARATION DATE" shall have the meaning
set forth in the recitals at the beginning of this Agreement.

                  (ff) "SECTION 11(a)(ii) TRIGGER DATE" shall have the meaning
set forth in Section 11 (a)(iii) hereof.

                  (gg) "SECTION 13 EVENT" shall mean any event described in
clause (i), (ii) or (iii) or Section 13(a) hereof.

                  (hh) "SECURITIES ACT" shall mean the Securities Act of 1933,
as amended.

                  (ii) "SHARES ACQUISITION DATE" shall mean the first date of
public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed pursuant to Section 13(d) under the Exchange
Act) by the Company or an Acquiring Person that an Acquiring Person has become
such; provided that, if such Person is determined not to have become an
Acquiring Person pursuant to Section 1(a) hereof, then no Shares Acquisition
Date shall be deemed to have occurred.

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

                  (kk) "SUBSIDIARY" of any Person shall mean any corporation or
other entity of which an amount of voting securities sufficient to elect a
majority of the directors or Persons having similar authority of such
corporation or other entity is beneficially owned, directly or indirectly, by
such Person, or any corporation or other entity otherwise controlled by such
Person.

                  (ll) "SUBSTITUTION PERIOD" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                  (mm) "SUMMARY OF RIGHTS" shall means a summary of this
Agreement substantially in the form attached hereto as Exhibit B.

                  (nn) "TOTAL EXERCISE PRICE" shall have the meaning set forth
in Section 4(a) hereof.

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<PAGE>   10

                  (oo) "TRADING DAY" shall mean a day on which the principal
national securities exchange on which a referenced security is listed or
admitted to trading is open for the transaction of business or, if a referenced
security is not listed or admitted to trading on any national securities
exchange, a Business Day.

                  (pp) "TRANSACTION" shall mean any merger, consolidation or
sale of assets described in Section 13(a) hereof or any acquisition of Common
Shares which would result in a Person becoming an Acquiring Person.

                  (qq) A "TRIGGERING EVENT" shall be deemed to have occurred
upon any Person becoming an Acquiring Person.

         Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such co-Rights Agents as it may deem
necessary or desirable.

         Section 3. Issuance of Rights Certificates.

                  (a) Until the Distribution Date, (i) the Rights will be
evidenced (subject to the provisions of Sections 3(b) and 3(c) hereof) by the
certificates for Common Shares registered in the names of the holders thereof
(which certificates shall also be deemed to be Rights Certificates) and not by
separate Rights Certificates and (ii) the Rights will be transferable only in
connection with the transfer of Common Shares. Until the earlier of the
Distribution Date or the Expiration Date, the surrender for transfer of
certificates for Common Shares shall also constitute the surrender for transfer
of the Rights associated with the Common Shares represented thereby. As soon as
practicable after the Distribution Date, the Company will prepare and execute,
the Rights Agent will countersign, and the Company will send or cause to be sent
(and the Rights Agent will, if requested and, if necessary, provided with a
shareholder fist of the Company's Common Shares, send) by first-class,
postage-prepaid mail to each record holder of Common Shares as of the Close of
Business on the Distribution Date, at the address of such holder shown on the
records of the Company, a Rights Certificate evidencing one Right for each
Common Share so held, subject to adjustment as provided herein. In the event
that an adjustment in the number of Rights per Common Share has been made
pursuant to Section 11 hereof, then at the time of distribution of the Rights
Certificates, the Company shall make the necessary and appropriate rounding
adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates and may be
transferred by the transfer of the Rights Certificates as permitted hereby,
separately and apart from any transfer of Common Shares, and the holders of such
Rights Certificates as listed in the records of the Company or any transfer
agent or registrar for the Rights shall be the record holders thereof.

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<PAGE>   11

                  (b) On the Record Date or as soon as practicable thereafter,
the Company will send a copy of the Summary of Rights by first-class,
postage-prepaid mail to each record holder of Common Shares as of the Close of
Business on the Record Date, at the address of such holder shown on the records
of the Company's transfer agent and registrar. With respect to certificates for
Common Shares outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates registered in the names of the
holders thereof together with the Summary of Rights. Until the Distribution Date
(or, if earlier, the Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding on the Record Date, with or without a
copy of the Summary of Rights, shall also constitute the transfer of the Rights
associated with the Common Shares represented thereby.

                  (c) Unless the Board of Directors by resolution adopted at or
before the time of the issuance of any Common Shares specifies to the contrary,
Rights shall be issued in respect of all Common Shares that are issued after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date or, in certain circumstances provided in Section 22 hereof, after the
Distribution Date.

Certificates representing such Common Shares shall also be deemed to be
certificates for Rights, and shall bear the following legend:

           THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER HEREOF TO
           CERTAIN RIGHTS AS SET FORTH IN A RIGHTS AGREEMENT BETWEEN SOURCE
           MEDIA, INC. AND CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS THE
           RIGHTS AGENT, DATED AS OF APRIL 24,1998, (THE "RIGHTS AGREEMENT"),
           THE TERMS OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A
           COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF SOURCE
           MEDIA, INC. UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS
           AGREEMENT, SUCH RIGHTS WILL BE EVIDENCED BY SEPARATE CERTIFICATES AND
           WHICH NO LONGER BE EVIDENCED BY THIS CERTIFICATE. SOURCE MEDIA, INC.
           WILL MAIL TO THE HOLDER OF THIS CERTIFICATE A COPY OF THE RIGHTS
           AGREEMENT WITHOUT CHARGE AFTER RECEIPT OF A WRITTEN REQUEST THEREFOR.
           UNDER CERTAIN CIRCUMSTANCES SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS
           ISSUED TO, OR HELD BY, ANY PERSON WHO IS, WAS OR BECOMES AN ACQUIRING
           PERSON OR ANY AFFILIATE OR ASSOCIATE THEREOF (AS SUCH TERMS ARE
           DEFINED IN THE RIGHTS AGREEMENT), WHETHER CURRENTLY HELD BY OR ON
           BEHALF OF SUCH PERSON OR BY ANY SUBSEQUENT HOLDER, MAY BECOME NULL
           AND VOID.

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

                                       8
<PAGE>   12

                  (d) In the event that the Company purchases or acquires any
Common Shares after the Record Date but prior to the Distribution Date, any
Rights associated with such Common Shares shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the Common Shares which are no longer outstanding.

         Section 4. Form of Rights Certificates.

                  (a) The Rights Certificates (and the forms of election to
purchase Common Shares and of assignment to be printed on the reverse thereof)
shall be substantially in the form of Exhibit A hereto and may have such marks
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement (subject to the consent of the Rights
Agent, not to be unreasonably withheld, for any changes to the Rights
Certificate which affect the duties or responsibilities of the Rights Agent), or
as may be required to comply with any applicable law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange or automated quotation system, on which the Rights may from time to
time be listed or included, or to conform to usage. Subject to the provisions of
Section 11 and Section 22 hereof, the Rights Certificates, whenever distributed,
shall be dated as of the Record Date (or in the case of Rights issued with
respect to Common Shares issued by the Company after the Record Date, as of the
date of issuance of such Common Shares) and on their face shall entitle the
holders thereof to purchase such number of Common Shares as shall be set forth
therein at the price set forth therein (such exercise price per Common Share
being hereinafter referred to as the "EXERCISE PRICE" and the aggregate Exercise
Price of all Common Shares issuable upon exercise of one Right being hereinafter
referred to as the "TOTAL EXERCISE PRICE"), but the number and type of
securities purchasable upon the exercise of each Right and the Exercise Price
shall be subject to adjustment as provided herein.

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

                                       9
<PAGE>   13

         THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE
         BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR
         AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE
         DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE
         AND THE RIGHTS REPRESENTED Y MAY BECOME NULL AND VOID IN THE
         CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT.

         Section 5. Countersignature and Registration.

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

                  (b) Following the Distribution Date and, if necessary, receipt
by the Rights Agent of a list of record holders of Common Shares, the Rights
Agent will keep or cause to be kept, at its office designated for such purposes,
books for registration and transfer of the Rights Certificates issued hereunder.
Such books shall show the names and addresses of the respective holders of the
Rights Certificates, the number of Rights evidenced on its face by each of the
Rights Certificates and the date of each of the Rights Certificates.

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

                  (a) Subject to the provisions of Sections 7(e), 14 and 24
hereof, at any time after the Close of Business on the Distribution Date, and at
or prior to the Close of Business on the Expiration Date, any Rights Certificate
or Rights Certificates may be transferred, split up, combined or exchanged for
another Rights Certificate or Rights Certificates, entitling the registered
holder to purchase a like number of Common Shares (or, following a Triggering
Event, other securities, cash or other assets, as the case may be) as the Rights
Certificate or Rights Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer, split up, combine or
exchange any Rights Certificate or Rights Certificates shall make such request
in writing delivered to the Rights Agent, and shall surrender the Rights
Certificate or Rights Certificates to be

                                       10
<PAGE>   14

transferred, split up, combined or exchanged at the principal Dallas office of
the Rights Agent (the "DESIGNATED OFFICE"). Neither the Rights Agent nor the
Company shall be obligated to take any action whatsoever with respect to the
transfer of any such surrendered Rights Certificate until the registered holder
shall have completed and signed the certificate contained in the form of
assignment on the reverse side of such Rights Certificate and shall have
provided such additional evidence of the identity of the Beneficial Owner (or
former Beneficial Owner) or Affiliate or Associates thereof as the Company shall
reasonably request. Thereupon the Rights Agent shall, subject to Sections 7(e),
14 and 24 hereof, countersign and deliver to the person entitled thereto a
Rights Certificate or Rights Certificates, as the case may be, as so requested.
The Company may require payment of a sum sufficient to cover any tax or
governmental charge that may be imposed in connection with any transfer, split
up, combination or exchange of Rights Certificates.

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

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

                  (a) Subject to Sections 7(e), 23(b) and 24(b) hereof, the
registered holder of any Rights Certificate may exercise the Rights evidenced
thereby (except as otherwise provided herein) in whole or in part at any time
after the Distribution Date and prior to the Close of Business on the Expiration
Date by surrender of the Rights Certificate, with the form of election to
purchase on the reverse side thereof duly executed, to the Rights Agent at the
Designated Office, together with payment of the Exercise Price for each Common
Share (or, following a Triggering Event, other securities, cash or other assets
as the case may be) as to which the Rights are exercised.

                  (b) The Exercise Price for each Common Share issuable pursuant
to the exercise of a Right shall initially be Sixty-Five Dollars ($65.00), shall
be subject to adjustment from time to time as provided in Sections 11 and 13
hereof and shall be payable in lawful money of the United States of America in
accordance with paragraph (c) below.

                  (c) Upon receipt of a Rights Certificate representing
exercisable Rights, with the form of election to purchase duly executed,
accompanied by payment of the Exercise Price for the number of Common Shares
(or, following a Triggering Event, other securities, cash or other assets as the
case may be) to be purchased and an amount equal to any applicable tax or
governmental charge required to be paid by the holder of such Rights Certificate
in accordance with Section 9(e) hereof, the Rights Agent shall, subject to
Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer
agent of the Common Shares (or make available, if the Rights Agent is the
transfer agent

                                       11
<PAGE>   15

for the Common Shares) a certificate or certificates for the number of Common
Shares (or, following a Triggering Event, other securities, cash or other assets
as the case may be) to be purchased and the Company hereby irrevocably
authorizes its transfer agent to comply with all such requests or (B) if the
Company shall have elected to deposit the total number of Common Shares (or,
following a Triggering Event, other securities, cash or other assets as the case
may be) issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of Common Shares (or, following a Triggering Event, other securities,
cash or other assets as the case may be) as are to be purchased (in which case
certificates for the Common Shares (or, following a Triggering Event, other
securities, cash or other assets as the case may be) represented by such
receipts shall be deposited by the transfer agent with the depositary agent) and
the Company hereby directs the depositary agent to comply with such request,
(ii) when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuance of fractional shares in accordance with Section 14
hereof, (iii) after receipt of such certificates or depositary receipts, cause
the same to be delivered to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names as may be designated by
such holder and (iv) when appropriate, after receipt thereof, deliver such cash
to or upon the order of the registered holder of such Rights Certificate. The
payment of the Exercise Price (as such amount may be reduced (including to zero)
pursuant to Section 11(a)(iii) hereof) and an amount equal to any applicable tax
or governmental charge required to be paid by the holder of such Rights
Certificate in accordance with Section 9(e) hereof may be made in cash or by
certified bank check, cashier's check or bank draft payable to the order of the
Company. In the event that the Company is obligated to issue securities of the
Company other than Common Shares, pay cash and/or distribute other property
pursuant to Section 11(a) hereof, the Company will make all arrangements
necessary so that such other securities, cash and/or other property are
available for distribution by the Rights Agent, if and when necessary to comply
with this Agreement.

                  (d) In case the registered holder of any Rights Certificate
shall exercise less than the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent to the registered holder of such Rights Certificate to his
or her duly authorized assigns, subject to the provisions of Section 6 and
Section 14 hereof.

                  (e) Notwithstanding anything in this Agreement to the
contrary, from and after the first occurrence of a Triggering Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such (a "POST EVENT TRANSFEREE"), (iii) a transferee of an Acquiring
Person (or of any such Associate or Affiliate) who becomes a transferee prior to
or concurrently with the Acquiring Person becoming such and receives such Rights
pursuant to either (A) a transfer (whether or not for consideration) from the
Acquiring Person, holders of equity interests in such Acquiring Person or to any
Person with whom the Acquiring Person has any continuing agreement arrangement
or understanding regarding the transferee Rights or (B) transfer which the
Company's Board of Directors has determined is part of a plan, arrangement
understanding which has as a primary purpose or effect

                                       12
<PAGE>   16

the avoidance of this Section 7(e) (a "PRE-EVENT TRANSFEREE") or (iv) any
subsequent transferee receiving transferred Rights from a Post-Event Transferee
or a Pre-Event Transferee, either directly or through one or more intermediate
transferees, shall become null and void without any further action and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e)
and Section 4(b) here(are complied with, but neither the Company nor the Rights
Agent shall have any liability to any hold of Rights Certificates or to any
other Person as a result of the Company to make any determinations with respect
to an Acquiring Person or any of such Acquiring Person's Affiliate Associates or
transferees hereunder.

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

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

         Section 9. Reservation and Availability of Common Shares.

                  (a) The Company covenants and agrees that it will use its best
efforts to cause to be reserved and kept available out of and to the extent of
its authorized and unissued Common Shares not reserved for another purpose (and,
following the occurrence of a Triggering Event, out of its authorized and
unissued Common Shares and/or other securities), the number of Common Shares
(and, following the occurrence of the Triggering Event, Common Shares and/or
other securities) that will be sufficient to permit the exercise in full of all
outstanding Rights.

                  (b) If the Company has in the past or shall hereafter list any
of its Common Shares on a national securities exchange or quotation system, then
so long as the Common Shares (and, following the occurrence of a Triggering
Event, Common Shares and/or other securities) issuable

                                       13
<PAGE>   17

and deliverable upon exercise of the Rights may be listed on such exchange or
quotation system, the Company shall us its best efforts to cause, from and after
such time as the Rights become exercisable (but only to the extent that it is
reasonably likely that the Rights will be exercised), all shares reserved for
such issuance to be listed on such exchange upon official notice of issuance
upon such exercise.

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

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

                  (e) The Company further covenants and agrees that it will pay
when due and pay any and all taxes and governmental charges which may be payable
in respect of the original issuance delivery of the Rights Certificates or of
any Common Shares (or other securities) upon the exercise Rights. The Company
shall not, however, be required to pay any tax or governmental charge which may
be payable in respect to any transfer or delivery of Rights Certificates to a
person other than, or the issuance of delivery of certificates or depositary
receipts for the Common Shares (or other securities of the Company) in the name
other than that of, the registered holder of the Rights Certificate evidencing
Rights surrendered for exercise or to issue or deliver any certificates or
depositary receipts Common Shares (or other securities of the Company) upon the
exercise of any

                                       14
<PAGE>   18

Rights until any such tax or governmental charge shall have been paid (any such
tax or governmental charge being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company's satisfaction that no such tax is due.

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

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

         (a) (i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Common Shares payable in Common
Shares, (B) subdivide the outstanding Common Shares, (C) combine the outstanding
Common Shares (by reverse stock split or otherwise) into a smaller number of
Common Shares, or (D) issue any shares of its capital stock in the
reclassification of the Common Shares (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), then, in each such event, except as otherwise
provided in this Section 11 and Section 7(e) hereof: (1) the Exercise Price in
effect at the time the record date for such dividend or of the effective date of
such subdivision, combination or reclassification shall be adjusted so that the
Exercise Price thereafter shall equal the result obtained by dividing the
Exercise Price in effect immediately prior to such time by a fraction (the
"ADJUSTMENT FRACTION") the numerator of which shall be the total number of
Common Shares (or shares of capital stock issued in such reclassification of the
Common Shares) outstanding immediately following such time and the denominator
of which shall be the total number of Common Shares outstanding immediately
prior to such time; provided, however, that in no event shall the consideration
to be paid upon the exercise of one Right be less than the aggregate par value
of the shares of capital stock of the Company issuable upon exercise of such
Right; and

                                       15
<PAGE>   19

(2) the number of Common Shares (or shares of such other capital stock) issuable
upon the exercise of each Right shall equal the number of Common Shares (or
shares of such other capital stock) as were issuable upon exercise of a Right
immediately prior to the occurrence of the event described in clauses (A)-(D) of
this Section 11(a)(i), multiplied by the Adjustment Fraction. Each Common Share
that shall become outstanding after an adjustment has been made pursuant to this
Section 11(a)(i) shall have associated with it the number of Rights, exercisable
at the Exercise Price and for the number of Common Shares (or shares of such
other capital stock) as one Common Share has associated with it immediately
following the adjustment made pursuant to this Section 11(a)(i).

                  (ii) Subject to Section 24 of this Agreement, in the event a
Triggering Event shall have occurred, then promptly following such Triggering
Event each holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive for each Right, upon exercise thereof in
accordance with the terms of this Agreement and payment of the Exercise Price in
effect immediately prior to the occurrence of the Triggering Event, such number
of Common Shares of the Company as shall equal the result obtained by
multiplying the Exercise Price in effect immediately prior to the occurrence of
the Triggering Event by the number of Common Shares for which a Right was
exercisable (or would have been exercisable if the Distribution Date had
occurred) immediately prior to the first occurrence of a Triggering Event, and
dividing that product by 50% of the Current Per Share Market Price for Common
Shares on the date of occurrence of the Triggering Event; provided, however,
that the Exercise Price and the number of Common Shares of the Company so
receivable upon exercise of a Right shall be subject to further adjustment as
appropriate in accordance with Section 11(e) hereof to reflect any events
occurring in respect of the Common Shares of the Company after the occurrence of
the Triggering Event.

                  (iii) In lieu of issuing Common Shares in accordance with
Section 11(a)(ii) hereof, the Company may, if the Company's Board of Directors
determines that such action is necessary or appropriate and not contrary to the
interest of holders of Rights and, in the event that the number of Common Shares
which are authorized by the Company's Certificate of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights are not sufficient to permit the exercise in full of the Rights, or
if any necessary regulatory approval for such issuance has not been obtained by
the Company, the Company shall: (A) determine the excess of (1) the value of the
Common Shares issuable upon the exercise of a Right (the "CURRENT VALUE") over
(2) the Exercise Price (such excess, the "SPREAD") and (B) with respect to each
Right, make adequate provision to substitute for such Common Shares, upon
exercise of the Rights, (1) cash, (2) a reduction in the Exercise Price, (3)
other equity securities of the Company (including, without limitation, shares or
units of shares of any series of preferred stock which the Company's Board of
Directors has deemed to have the same value as Common Shares (such shares or
units of shares of preferred stock are herein called "COMMON STOCK
EQUIVALENTS")), except to the extent that the Company has not obtained any
necessary stockholder or regulatory approval for such issuance, (4) debt
securities of the Company, except to the extent that the Company has not
obtained any necessary stockholder or regulatory approval for such issuance, (5)
other assets or (6) any combination of the foregoing, having an aggregate value
equal to the Current Value where such aggregate value has been determined by the
Company's Board of Directors based upon the advice

                                       16
<PAGE>   20

of a nationally recognized investment banking firm selected by the Company's
Board of Directors, provided, however, if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) the first occurrence of a Triggering Event
and (y) the date on which the Company's right of redemption pursuant to Section
23 (a) expires (the later of (x) and (y) being referred to herein as the
"SECTION 11(a)(ii) TRIGGER Date"), then the Company shall be obligated to
deliver, upon the surrender for exercise of a Right and without requiring
payment of the Exercise Price, Common Shares (to the extent available), except
to the extent that the Company has not obtained any necessary stockholder or
regulatory approval for such issuance, and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread. If the Company's
Board of Directors shall determine in good faith that it is likely that
sufficient additional Common Shares could be authorized for issuance upon
exercise in full of the Rights or that any necessary regulatory approval for
such issuance will be obtained, the thirty (30) day period set forth above may
be extended to the extent necessary, but not more than ninety (90) days after
the Section 11 (a)(ii) Trigger Date, in order that the Company may seek
stockholder approval for the authorization of such additional shares or take
action to obtain such regulatory approval (such period, as it may be extended,
the "SUBSTITUTION PERIOD"). To the extent that the Company determines that some
action need be taken pursuant to the first and/or second sentences of this
Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e)
hereof, that such action shall apply uniformly to all outstanding Rights and (y)
may suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares, to
take any action to obtain any required regulatory approval and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall notify the Rights Agent thereof and issue a public announcement stating
that the exercisability of the Rights has been temporarily suspended, as well as
notify the Rights Agent and issue a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of the Common Shares shall be the Current Per Share Market Price of the
Common Shares on the Section 11(a)(ii) Trigger Date and the value of any Common
Stock Equivalent shall be deemed to have the same value as the Common Shares on
such date.

                  (b) In case the Company shall, at any time after the date of
this Agreement, fix a record date for the issuance of rights, options or
warrants to all holders of Common Shares or of any class or series of Equivalent
Shares entitling such holders (for a period expiring within forty-five (45)
calendar days after such record date) to subscribe for or purchase Common Shares
or Equivalent Shares or securities convertible into Common Shares or Equivalent
Shares at a price per share (or having a conversion price per share, if a
security convertible into Common Shares or Equivalent Shares) less than the then
Current Per Share Market Price of the Common Shares or Equivalent Shares on such
record date, there in each such case, the Exercise Price to be in effect after
such record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of Common Shares and Equivalent Shares (if any) outstanding
on such record date, plus the number of Common Shares or Equivalent Shares, as
the case may be, which the aggregate-offering price of the total number of
Common Shares or Equivalent Shares, as the case may be, to be offered or issued
(and/or the

                                       17
<PAGE>   21

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

                  (c) In case the Company shall, at any time after the date of
this Agreement, fix a record date for the making of a distribution to all
holders of the Common Shares or of any class or series of Equivalent Shares
(including any such distribution made in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation) of
evidences of indebtedness or assets (other than a regular quarterly cash
dividend, if any, or a dividend payable in Common Shares) or subscription
rights, options or warrants (excluding those referred to in Section 11 (b)),
then, in each such case, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction, the numerator of which shall be the
Current Per Share Market Price of a Common Share or an Equivalent Share on such
record date, less the fair market value per Common Share or Equivalent Share (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets or evidences of indebtedness so to be
distributed or on such subscription rights or warrants applicable to a Common
Share or Equivalent Share, as the case may be, and the denominator of which
shall be such Current Per Share Market Price of a Common Share or Equivalent
Share on such record date; provided, however, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. Such adjustments shall be made successively whenever such
a record date is fixed, and in the event that such distribution is not so made,
the Exercise Price shall be adjusted to be the Exercise Price which would have
been in effect if such record date had not been fixed.

                  (d) Anything herein to the contrary notwithstanding, no
adjustment in the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Exercise Price; provided,
however, that any adjustments which by reason of this Section 11(d) are not
required to be made shall be carried forward and taken into account in any
subsequent

                                       18
<PAGE>   22

adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest ten-thousandth on a Common Share or other share, as the
case may be. Notwithstanding the first sentence of this Section 11(d), any
adjustment required by this Section 11 shall be made no later than the earlier
(i) three (3) years from the date of the transaction which requires such
adjustment or (ii) the Expiration Date.

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

                  (f) All Rights originally issued by the Company subsequent to
any adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of Common Shares
purchasable from time to time hereunder upon exercise of the Rights, all subject
to further adjustment as provided herein.

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

                  (h) The Company may elect on or after the date of any
adjustment of the Exercise Price as a result of the calculations made in Section
11(b) to adjust the number of Rights, in substitution for any adjustment in the
number of Common Shares purchasable upon the exercise of a Right. Each of the
Rights outstanding after such adjustment of the number of Rights shall be
exercisable for the number of Common Shares for which a Right was exercisable
immediately prior to such adjustment. Each Right held of record prior to such
adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest ten-thousandth) obtained by dividing the Exercise
Price in effect immediately prior to adjustment of the Exercise Price by the
Exercise Price in effect immediately after adjustment of the Exercise Price. The
Company shall make a public announcement of its election to adjust the number of
Rights (with notice thereof to the Rights Agent), indicating the record date for
the adjustment, and, if known at the time, the amount of the adjustment to be
made. This record date may be the date on which the Exercise Price is adjusted
or any day thereafter, but if the Rights Certificates have been issued shall be
at least ten (10) days later than the date of the public announcement. If Rights
Certificates have been issued, upon each

                                       19
<PAGE>   23

adjustment of the number of Rights pursuant to this Section 11(h), the Company
shall, as promptly as practicable, cause to be distributed to holders of record
of Rights Certificates or such record date Rights Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such adjustment, or, at the option of the Company,
shall cause to be distributed to such holders of record in substitution and
replacement for the Rights Certificates held by such holders prior to the date
of adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall be
entitled after such adjustment. Rights Certificates so to be distributed shall
be issued, executed and countersigned in the manner provided for herein (and may
bear, at the option of the Company, the adjusted Exercise Price) and shall be
registered in the names of the holders of record of Rights Certificates on the
record date specified in the public announcement.

                  (i) Irrespective of any adjustment or change in the Exercise
Price or the number of Common Shares issuable upon the exercise of the Rights,
the Rights Certificates theretofore and thereafter issued may continue to
express the Exercise Price per Common Share and the number of Common Shares
which were expressed in the initial Rights Certificates issued hereunder.

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

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

                  (l) Anything in this Section 11 to the contrary
notwithstanding, prior to the Distribution Date, the Company shall be entitled
to make such reductions in the Exercise Price, in addition to those adjustments
expressly required by this Section 11, as and to the extent that it in its sole
discretion shall determine to be advisable in order that any (i) consolidation
or subdivision of the Common Shares or any Equivalent Shares, (ii) issuance
wholly for cash of any Common Shares or Equivalent Shares at less than the
current market price, (iii) issuance wholly for cash of Common Share or
Equivalent Shares or securities which by their terms are convertible into or
exchangeable for Common Shares or Equivalent Shares, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Common Shares shall not be
taxable to such stockholders.

                                       20
<PAGE>   24

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

         Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 or 13 hereof, the
Company shall promptly (a) prepare a certificate setting forth such adjustment
and a brief statement of the facts and computations accounting for such
adjustment, (b) file with the Rights Agent and with each transfer agent for the
Common Shares, a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Rights Certificate in accordance with Section 26 hereof.
Notwithstanding the foregoing sentence, the failure of the Company to make such
certification or give such notice shall not affect the validity of such
adjustment or the force or effect of the requirement for such adjustment. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment contained therein, shall have no duty with respect to and shall
not be deemed to have knowledge of such adjustment unless and until it shall
have received such certificate.

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

                  (a) In the event that, following a Triggering Event, directly
or indirectly:

                    (i) the Company shall consolidate with, or merge with and
into, any other Person (other than a wholly-owned Subsidiary of the Company in a
transaction the principal purpose of which is to change the state of
incorporation of the Company and which complies with Section 11(m) hereof);

                    (ii) any Person (other than a Subsidiary of the Company in a
transaction that complies with Section 11(m) hereof) shall consolidate with the
Company, or merge with and into the Company and the Company shall be the
continuing or surviving corporation of such consolidation or merger; or

                    (iii) the Company shall sell or otherwise transfer (or one
or more of its Subsidiaries shall sell or otherwise transfer), in one or more
transactions, assets or earning power aggregating 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to any
other Person or Persons (other than the Company or one or more of its wholly
owned Subsidiaries in one or more transactions, each of which individually (and
together) complies with Section 11(m) hereto,

                    then, concurrent with and in each such case,

                                       21
<PAGE>   25

                    (A) each holder of a Right (except as provided in Section
7(e) hereof) shall thereafter have the right to receive, upon the exercise
thereof at a price equal to the Total Exercise Price applicable immediately
prior to the occurrence of the Section 13 Event in accordance with the terms of
this Agreement, such number of validly authorized and issued, fully paid,
nonassessable and freely tradeable Common Shares of the Principal Party (as
hereinafter defined), free of any liens, encumbrances, rights of first refusal
or other adverse claims, as shall be equal to the result obtained by dividing
such Total Exercise Price by 50% of the Current Per Share Market Price of the
Common Shares of such Principal Party on the date of consummation of such
Section 13 Event, provided, however, that the Exercise Price and the number of
Common Shares of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(e) hereof;

                    (B) such Principal Party shall thereafter be liable for, and
shall assume, by virtue of such Section 13 Event, all the obligations and duties
of the Company pursuant to this Agreement;

                    (C) the term "Company" shall thereafter be deemed to refer
to such Principal Party, it being specifically intended that the provisions of
Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event;

                    (D) such Principal Party shall take such steps (including,
but not limited to, the reservation of a sufficient number of its Common Shares)
in connection with the consummation of any such transaction as may be necessary
to ensure that the provisions hereof shall thereafter be applicable, as nearly
as reasonably may be, in relation to its Common Shares thereafter deliverable
upon the exercise of the Rights; and

                    (E) upon the subsequent occurrence of any consolidation,
merger, sale or transfer of assets or other extraordinary transaction in respect
of such Principal Party, each holder of a Right shall thereupon be entitled to
receive, upon exercise of a Right and payment of the Total Exercise Price as
provided in this Section 13(a), such cash, shares, rights, warrants and other
property which such holder would have been entitled to receive had such holder,
at the time of such transaction, owned the Common Shares of the Principal Party
receivable upon the exercise of such Right pursuant to this Section 13(a), and
such Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may be necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.

                    (F) For purposes hereof the "earning power" of the Company
and its Subsidiaries shall be determined in good faith by the Company's Board of
Directors on the basis of the operating earnings of each business operated by
the Company and its Subsidiaries during the three fiscal years preceding the
date of such determination (or, in the case of any business not operated by the
Company or any Subsidiary during three full fiscal years preceding such date,
during the period such business was operated by the Company or any Subsidiary).

                                       22
<PAGE>   26

                  (b) For purposes of this Agreement, the term "PRINCIPAL PARTY"
shall mean:

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

                    (ii) in the case of any transaction described in clause
(iii) of Section 13(a) hereof, the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions, or, if more than one Person that is a party to such
transaction or transactions receives the same portion of the assets or earning
power so transferred and each such portion would, were it not for the other
equal portions, constitute the greatest portion of the assets or earning power
so transferred, or if the Person receiving the greatest portion of the assets or
earning power cannot be determined, whichever of such Persons is the issuer of
Common Shares having the greatest aggregate market value of shares outstanding;

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

                    (c) The Company shall not consummate any Section 13 Event
unless the Principal Party shall have a sufficient number of authorized Common
Shares that have not been issued or reserved for issuance to permit the exercise
in full of the Rights in accordance with this Section 13 and unless prior
thereto the Company and such issuer shall have executed and delivered to the
Rights Agent a supplemental agreement confirming that such Principal Party
shall, upon consummation of such Section 13 Event, assume this Agreement in
accordance with Sections 13(a) and 13(b) hereof, that all rights of first
refusal or preemptive rights in respect of the issuance of

                                       23
<PAGE>   27

Common Shares of such Principal Party upon exercise of outstanding Rights have
been waived, that there are no rights, warrants, instruments or securities
outstanding or any agreements or arrangements which, as a result of the
consummation of such transaction, would eliminate or substantially diminish the
benefits intended to be afforded by the Rights and that such transaction shall
not result in a default by such Principal Party under this Agreement, and
further providing that as soon as practicable after the date of such Section 13
Event, such Principal Party will:

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

                    (ii) use its best efforts to list (or continue the listing
of) the Rights and the securities purchasable upon exercise of the Rights on a
national securities exchange or to meet the eligibility requirements for
quotation on Nasdaq and list (or continue the listing of) the Rights and the
securities purchasable upon exercise of the Rights on Nasdaq; and

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

             In the event that at any time after the occurrence of a Triggering
Event some or all of the Rights shall not have been exercised at the time of a
transaction described in this Section 13, the Rights which have not theretofore
been exercised shall thereafter be exercisable in the manner described in
Section 13(a) (without taking into account any prior adjustment required by
Section 11(a)(ii)).

                  (d) In case the "Principal Party" for purposes of Section
13(b) hereof has provision in any of its authorized securities or in its
certificate of incorporation or by-laws or other instrument governing its
corporate affairs, which provision would have the effect of (i) causing such
Principal Party to issue (other than to holders of Rights pursuant to Section 13
hereof), in connection with, or as a consequence of, the consummation of a
Section 13 Event, Common Shares or Equivalent Shares of such Principal Party at
less than the then Current Per Share Market Price thereof or securities
exercisable for, or convertible into, Common Shares or Equivalent Shares of such
Principal Party at less than such then Current Per Share Market Price, or (ii)
providing for any special payment, tax or similar provision in connection with
the issuance of the Common Shares of such Principal Party pursuant to the
provisions of Section 13 hereof, then, in such event, the Company hereby agrees
with each holder of Rights that it shall not consummate any such transaction
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been canceled, waived
or amended, or that the authorized securities shall be redeemed, so that the

                                       24
<PAGE>   28
applicable provision will have no effect in connection with or as a consequence
of, the consummation of the proposed transaction.

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

                  (f) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers.

         Section 14. Fractional Rights and Fractional Shares

                  (a) The Company shall not be required to issue fractions of
Rights or to distribute Rights Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the registered holders of
the Rights Certificates with regard to which such fractional Rights would
otherwise be issuable, an amount in cash equal to the same fraction of the
current market value of a whole Right. For the purposes of this Section 14(a),
the current market value of a whole Right shall be the closing price of the
Rights for the Trading Day immediately prior to the date on which such
fractional Rights would have been otherwise issuable, as determined pursuant to
the second sentence of Section 1(j) hereof.

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

                  (c) The holder of a Right by the acceptance of the Right
expressly waives his or her right to receive any fractional Rights or any
fractional shares upon exercise of a Right.

         Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Shares); and any registered holder of any Rights Certificate (or, prior
to the

                                       25
<PAGE>   29

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

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

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

                  (b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered at
the Designated Office, duly endorsed or accompanied by a proper instrument of
transfer and with the appropriate forms and certificates fully and properly
executed; and

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

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

                                       26
<PAGE>   30

         Section 18. Concerning the Rights Agent.

                  (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration, execution and any amendment
of this Agreement and the exercise and performance of its duties hereunder. The
Company also agrees to indemnify the Rights Agent for, and to hold it harmless
against, any loss, liability, damage, judgment, fine, penalty, claim, demand,
settlement, cost or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for any action taken,
suffered or omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses of defending
against any claim of liability in the premises. In no event will the Rights
Agent be liable for special indirect, incidental or consequential loss or damage
of any kind whatsoever, even if the Rights Agent has been advised of the
possibility of such loss or damage.

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

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

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

                                       27
<PAGE>   31

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

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

                  (a) The Rights Agent may consult with legal counsel (who may
be legal counsel for the Company), and the written advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent, and the Rights Agent shall incur no liability for, or in respect of, any
action taken, suffered or omitted by it in good faith and in accordance with
such written advice or opinion.

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

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

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

                  (e) The Rights Agent shall not have any liability for nor be
under any responsibility in respect of the validity of this Agreement or the
execution and delivery hereof (except the due execution hereof by the Rights
Agent) or in respect of the validity or execution of any Rights Certificate
(except its countersignature thereof); nor shall it be responsible for any
breach by the

                                       28
<PAGE>   32

Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights or any adjustment in the terms of the Rights
(including the manner, method or amount thereof) provided for in Sections 3, 11,
13, 23 or 24, or the ascertaining of the existence of facts that would require
any such change or adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after receipt by the Rights Agent of a
certificate furnished pursuant to Section 12 describing such change or
adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Common
Shares to be issued pursuant to this Agreement or any Rights Certificate or as
to whether any Common Shares will, when issued, be validly authorized and
issued, fully paid and nonassessable.

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

                  (g) The Rights Agent is hereby authorized and directed to
accept instructions with respect to the performance of its duties hereunder from
any one of the Chairman of the Board, the Chief Executive Officer, the
President, any Vice President, the Chief Financial Officer, the Secretary or any
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and it shall not be liable for any
action taken, omitted or suffered by it in good faith in accordance with
instructions of any such officer or for any delay in acting while waiting for
those instructions. Any application by the Rights Agent for written instructions
from the Company may, at the option of the Rights Agent, set forth in writing
any action proposed to be taken, suffered or omitted by the Rights Agent under
this Rights Agreement and the date on and/or after which such action shall be
taken or such omission shall be effective. The Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date specified in such
application (which date shall not be less than five (5) Business Days after the
date any officer of the Company actually receives such application, unless any
such officer shall have consented in writing to an earlier date) unless, prior
to taking any such action (or the effective date in the case of an omission),
the Rights Agent shall have received written instructions in response to such
application specifying the action to be taken, suffered or omitted.

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

                  (i) The Rights Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder either itself
or by or through its attorneys or agents, and

                                       29
<PAGE>   33

the Rights Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect, misconduct, absent gross
negligence, bad faith or willful misconduct.

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

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

         Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company and to each
transfer agent of the Common Shares by registered or certified mail and to the
holders of the Rights Certificates by first-class mail. The Company may remove
the Rights Agent or any successor Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent, or successor Rights Agent, as the case may
be, and to each transfer agent of the Common Shares by registered or certified
mail and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within period of thirty (30) days
after giving notice of such removal or after it has been notified in writing of
such resignation or incapacity by the resigning or incapacitated Rights Agent or
by the holder of a Rights Certificate (who shall, with such notice, submit his
or her Rights Certificate for inspection by the Company), then the registered
holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court shall be (i) a
corporation, partnership or similar entity organized and doing business under
the laws of the United States or of any state of the United States, in good
standing, which is authorized under such laws to exercise corporate trust or
stockholder services powers and subject to supervision or examination by federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $50 million or (ii) a wholly-owned
subsidiary of one or more such corporations, partnerships or similar entities.
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if had been originally named as
Rights Agent without further act or deed; but the predecessor Rights Agent shall
deliver and transfer to the successor Rights Agent any property at the time held
by it hereunder, and execute and deliver any other assurance, conveyance, act or
deed necessary for the purpose. Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares, and mail
a notice

                                       30
<PAGE>   34

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

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

         Section 23. Redemption.

                  (a) The Company may, at its option and with the approval of
the Board of Directors, at any time prior to the earlier of (i) the Distribution
Date or (ii) the Close of Business on the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $0.001
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such redemption price being
herein referred to as the "REDEMPTION PRICE") and the Company may, at its
option, pay the Redemption Price either in Common Shares (based on the Current
Per Share Market Price thereof at the time of redemption) or cash. Such
redemption of the Rights by the Company may be made effective at such time, on
such basis and with such conditions as the Board of Directors in its sole
discretion may establish. The date on which the Board of Directors of the
Company elects to make the redemption effective shall be referred to as the
"REDEMPTION DATE".

                  (b) Immediately upon the action of the Board of Directors of
the Company ordering the redemption of the Rights, evidence of which shall have
been filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and

                                       31
<PAGE>   35

the only right thereafter of the holders of Rights shall be to receive the
Redemption Price. The Company shall promptly give public notice of any such
redemption, provided, however, that the failure to give or any defect in, any
such notice shall not affect the validity of such redemption. Within ten (10)
days after the action of the Board of Directors ordering the redemption of the
Rights, the Company shall give notice of such redemption to the Rights Agent and
the holders of the then outstanding Rights by mailing such notice to all such
holders at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Shares. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or in Section 24 hereof, and other than in connection with the purchase of
Common Shares prior to the Distribution Date.

                  (c) Notwithstanding the provisions of Section 23(a), in the
event that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the 180th day following the
effectiveness of such election the Rights shall not be redeemed if such
redemption is reasonably likely to have the purpose or effect of facilitating a
Transaction with an Interested Person.

         Section 24. Exchange.

                  (a) Subject to applicable laws, rules and regulations, and
subject to subsection 24(c) below, the Company may, at its option, by action of
its Board of Directors, at any time after the occurrence of a Triggering Event,
exchange all or part of the then outstanding and exercisable Rights (which shall
not include Rights that have become null and void pursuant to the provisions of
Section 7(e) hereof) for Common Shares at an exchange ratio of one Common Share
per Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "EXCHANGE RATIO"). Notwithstanding the foregoing,
such Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than the Company, any Subsidiary of the Company,
any employee benefit plan of the Company or any such Subsidiary, or any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan), together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 50% or more of the Common Shares then
outstanding.

                  (b) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 23(c), 24(a), 24(g)
and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of the holders of such
Rights shall be to receive that number of Common Shares equal to the number of
such Rights held by such holder multiplied by the Exchange Ratio. The Company
shall give public notice of any such exchange (with notice thereof to the Rights
Agent); provided, however, that the failure to give,

                                       32
<PAGE>   36

or any defect in, such notice shall not affect the validity of such exchange.
The Company shall mail a notice of any such exchange to all of the holders of
such Rights at their last addresses as they appear upon the registry books of
the Rights Agent. Any notice which is mailed in the manner herein provided shall
be deemed given, whether or not the holder receives the notice. Each such notice
of exchange will state the method by which the exchange of the Common Shares for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.

                  (c) In the event that there shall not be sufficient Common
Shares issued but not outstanding or authorized but unissued to permit any
exchange of Rights as contemplated in accordance with Section 23(c), 24(a),
24(g), the Company shall either take such action as may be necessary to
authorize additional Common Shares for issuance upon exchange of the Rights or
alternatively, at the option of a majority of the Board of Directors, with
respect to each Right (i) pay cash in an amount equal to the Current Value (as
hereinafter defined), in lieu of issuing Common Shares in exchange therefor,
(ii) issue debt or equity securities or a combination thereof, having a value
equal to the Current Value in lieu of issuing Common Shares in exchange for each
such Right, where the value of such securities shall be determined by a
nationally recognized investment banking firm selected by majority vote of the
Board of Directors, or (iii) deliver any combination of cash, property, Common
Shares and/or other securities having a value equal to the Current Value in
exchange for each Right. For purposes of this Section 24(c) only, the "Current
Value" shall mean the product of the Current Per Share Market Price of Common
Shares on the date of the occurrence of the event described above in
subparagraph (a) multiplied by the number of Common Shares for which the Right
otherwise would be exchangeable in there were sufficient shares available. To
the extent that the Company determines that some action need be taken pursuant
to clauses (i), (ii) or (iii) of this Section 24(c), the Board of Directors may
temporarily suspend the exercisability of the Rights for a period of up to sixty
(60) days following the date on which the event described in Section 23(c),
24(a), 24(g) shall have occurred, in order to seek any authorization of
additional Common Shares and/or to decide the appropriate form of distribution
to be made pursuant to the above provision and to determine the value thereof in
the event of any such suspension, the Company shall issue a public announcement
stating that the exercisability of the Rights has been temporarily suspended
(with notice thereof to the Rights Agent).

                  (d) The Company shall not be required to issue fractions of
Common Shares or to distribute certificates which evidence fractional Common
Shares. In lieu of such fractional Common Shares, there shall be paid to the
registered holders of the Rights Certificates with regard to which such
fractional Common Shares would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Common Share (as
determined pursuant to the second sentence of Section 1(j) hereof).

                  (e) The Company may, at its option, by majority vote of its
Board of Directors, at any time before any Person has become an Acquiring
Person, exchange all or part of the then outstanding

                                       33
<PAGE>   37

Rights for rights of substantially equivalent value, as determined reasonably
and with good faith by the Board of Directors, based upon the advice of one or
more nationally recognized investment banking firms.

                  (f) Immediately upon the action of the Board of Directors
ordering the exchange of any Rights pursuant to subsection 24(e) of this Section
24 and without any further action and without any notice, the right to exercise
such Rights shall terminate and the only right thereafter of a holder of such
Rights shall be to receive that number of rights in exchange therefor as has
been determined by the Board of Directors in accordance with subsection 24(e)
above. The Company shall give public notice of any such exchange (with notice
thereof to the Rights Agent); provided, however, that the failure to give, or
any defect in, such notice shall not affect the validity of such exchange. The
Company shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
transfer agent for the Common Shares of the Company. Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice. Each such notice of exchange will state the method by which
the exchange of the Rights will be effected.

                  (g) Notwithstanding the provisions of this Section 24, in the
event that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the 180th day following the
effectiveness of such election the Rights shall not be exchanged for Common
Shares or rights of substantially equivalent value if such exchange is
reasonably likely to have the purpose or effect of facilitating a Transaction
with an Interested Person.

         Section 25. Notice of Certain Events.

                  (a) In case the Company shall propose to effect or permit to
occur any Triggering Event or Section 13 Event, the Company shall give notice
thereof to the Rights Agent and to each holder of Rights in accordance with
Section 26 hereof at least twenty (20) days prior to occurrence of such
Triggering Event or such Section 13 Event.

                  (b) In case any Triggering Event or Section 13 Event shall
occur, then, in any such case, the Company shall as soon as practicable
thereafter give to the Rights Agent and each holder of a Rights Certificate, in
accordance with Section 26 hereof, a notice of the occurrence of such event,
which shall specify the event and the consequences of the event to holders of
Rights under Sections 11(a)(ii) and 13 hereof.

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

                                       34
<PAGE>   38

                                  Source Media, Inc.
                                  5400 LBJ Freeway
                                  Suite 680
                                  Dallas, Texas 75240
                                  Telephone: (972) 701-5558
                                  Facsimile: (972) 701-5567
                                  Attention: General Counsel

                                  with a copy to:
                                  Wilson Sonsini Goodrich & Rosati
                                  Professional Corporation
                                  650 Page Mill Road
                                  Palo Alto, California 94304-1050
                                  Telephone: (650) 493-9300
                                  Facsimile: (650) 493-6811
                                  Attention: Marty Korman

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

                                  ChaseMellon Shareholder Services, L.],.C.
                                  2323 Bryan Street
                                  Suite 2300
                                  Dallas, Texas 75201
                                  Telephone: (214) 965-2222
                                  Facsimile: (213) 965-2233
                                  Attention: Cindy Bennet

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

                  Section 27.  Supplements and Amendments.

                  (a) Prior to the Distribution Date, the Company may supplement
or amend this Agreement in any respect without the approval of any holders of
Rights and the Rights Agent shall, if the Company so directs (subject to the
Rights Agent's consent, not to be unreasonably withheld, if such supplement or
amendment changes or increases the Rights Agreement duties, liabilities or
obligation hereunder), execute such supplement or amendment. From and after the
Distribution Date, the Company and the Rights Agent may from time to time
supplement or amend this Agreement without the approval of any holders of Rights
in order to (i) cure any ambiguity,

                                       35
<PAGE>   39

(ii) correct or supplement any provision contained herein which may be defective
or inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner that the Company may deem necessary or desirable and that shall
not adversely affect the interests of the Rights Agent or the holders of Rights
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, this Agreement may not be supplemented or amended to lengthen
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable or
(B) any other t me period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of and/or the benefits to, the
holder of Rights (other than an Acquiring Person or an Affiliate or Associate of
an Acquiring Person). Upon the delivery of a certificate from an appropriate
officer of the Company that states that the propose supplement or amendment is
in compliance with the terms of this Section 27, the Rights Agent shall execute
such supplement or amendment. Prior to the Distribution Date, the interests of
the holders Rights shall be deemed coincident with the interests of the holders
of Common Shares.

                  (b) Notwithstanding the provisions of Section 27(a), in the
event that a majority of the Board of Directors of the Company is elected by
stockholder action by written consent, then until the 180th day following the
effectiveness of such election, this Rights Agreement shall not be supplemented
or amended in any manner reasonably likely to have the purpose or effect of
facilitating a Transaction with an Interested Person.

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

                  Section 29. Determinations and Actions by the Board of
Directors, etc. For all purposes of this Agreement, any calculation of the
number of Common Shares outstanding at any particular time, including for
purposes of determining the particular percentage of such outstanding Common
Shares of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act. The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board, or the
Company, or as may be necessary or advisable in the administration of this
Agreement, including, without limitation, the right and power (i) interpret the
provisions of this Agreement and (ii) make all determinations deemed necessary
or advisable for the administration of this Agreement (including a determination
to redeem or not redeem the Rights or to amend the Agreement). All such actions,
calculations, interpretations and determination (including, for purposes of
clause (y) below, all omissions with respect to the foregoing) which are done or
made by the Board in good faith, shall (x) be final, conclusive and binding on
the Company, the Rights Agent, the holders of the Rights Certificates and all
other parties and (y) not subject the Board to any liability to the holders of
the Rights and (y) not subject liability to the holders of the Rights. The
Rights Agent shall be entitled to assume that the Company's Board of Directors
acts in good faith at all times and shall incur no liability for such reliance.

                                       36
<PAGE>   40

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

                  Section 31. Severability. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the Close of Business on the
tenth day following the date of such determination by the Company's Board of
Directors.

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

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

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

                                       37
<PAGE>   41

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

"COMPANY"                                    SOURCE MEDIA, INC.

                                             By:    /s/ John J. Reed
                                             Name:  John J. Reed
                                             Title: President

"RIGHTS AGENT"                               CHASEMELLON SHAREHOLDER
                                             SERVICES, L.L.C.

                                             By:    /s/ Cindy Bennett
                                             Name:  Cindy Bennett
                                             Title: Relationship Manager

                                       38<PAGE>   1

                                                                    EXHIBIT 10.6

NEITHER THIS WARRANT NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE CORPORATION AND ITS COUNSEL THAT SUCH
REGISTRATION IS NOT REQUIRED.

                             STOCK PURCHASE WARRANT

     THIS STOCK PURCHASE WARRANT CERTIFIES THAT, for the agreed upon value of
$10.00 and for other good and valuable consideration, INSIGHT INTERACTIVE, LLC
or its registered successors and assigns (collectively, the "Holder"), is
entitled to purchase fully paid and nonassessable shares of the $.001 par value
per share common stock (the "Common Stock") of SOURCE MEDIA, INC., a Delaware
corporation (the "Company") at $20.00 per share (the "Exercise Price") all as
set forth herein and as adjusted pursuant to Article 2 of this Warrant, subject
to the provisions and upon the terms and conditions set forth in this Warrant.
This Warrant allows the Holder to purchase 4,596,786 shares of Common Stock,
subject to adjustment as provided herein, and the shares so subject to purchase
hereunder shall be referred to herein as the "Warrant Shares". This Warrant is
issued pursuant to the terms of the Common Stock and Warrants Purchase
Agreement, dated as of July 29, 1999 (the "Purchase Agreement") between the
Company and the Holder, as well as pursuant to the terms of the Contribution
Agreement dated as of July 29, 1999 ("Contribution Agreement") among the Holder,
the Company and SourceSuite LLC ("SourceSuite") and the Limited Liability
Company Agreement of SourceSuite LLC ("Operating Agreement") which will be
executed and delivered at the Closing of the Contribution Agreement and which
was made and entered into by and between the Company and the Holder, pursuant to
which the Company and the Holder have agreed to form, capitalize and thereafter
manage SourceSuite to conduct certain specified businesses previously conducted
separately. Capitalized terms used herein but not otherwise defined herein shall
have the meanings set forth for such terms in the Purchase Agreement. The amount
and kind of securities receivable pursuant to the rights granted hereunder are
subject to adjustment pursuant to the provisions contained in this Warrant.

         This Warrant is subject to the following provisions:

                                    ARTICLE 1
                                    EXERCISE

     1.1 Method of Exercise. The Holder may exercise this Warrant in whole or in
part at any time and from time to time after the date of issuance up to and
including the fifth anniversary of the date of issuance (the "Expiration Date");
provided, however, that until (a) April 1, 2004, the Holder may exercise only
such portion of this Warrant that would entitle the Holder to own up to
forty-five percent (45%) of the Common Stock of the Company, on a Fully Diluted
basis and (b) June 24, 2000 the Holder may exercise only such portion of this
Warrant that would entitle the Holder to own up to 24.99% of the outstanding
Common Stock of the Company. Deferral of the exercise of a portion of this
Warrant shall not affect or limit in any manner the anti-dilution provisions of
Article 2, which shall apply as if this Warrant were exercisable at any time.
Between April 1, 2004 and the Expiration Date, the Holder may exercise this

                                       1
<PAGE>   2

Warrant in whole or in part without restriction. The Holder may exercise this
Warrant by delivering a duly executed Notice of Exercise in substantially the
form attached as Appendix 1, to the principal office of the Company. The Holder
shall also deliver to the Company a check for the aggregate Exercise Price for
the Warrant Shares being purchased.

     1.2 [Intentionally Omitted]

     1.3 Share Coverage. The number of Warrant Shares for which this Warrant may
be exercised shall be 4,596,786 shares of Common Stock, subject to adjustment as
provided herein.

     1.4 Fair Market Value. The fair market value of the Warrant Shares for
purposes of Section 2.1.1(a) below shall be the higher of (i) the average
closing price of the Warrant Shares reported for the five (5) Trading Days
immediately before the Holder delivers its Notice of Exercise to the Company, or
the date of the issuance of additional shares under Section 2.1.1(a) below, as
applicable; or (ii) the average closing price of the Warrant Shares reported for
the thirty (30) Trading Days immediately before the Holder delivers its Notice
of Exercise, or the date of the issuance of additional shares under Section
2.1.1(a) below, as applicable. The reported closing price for each day shall be
the reported closing price (and if no sales take place on any day, such day
shall not be a Trading Day), as reported in the principal consolidated or
composite transaction reporting system on the principal national securities
exchange on which such security is listed or admitted to trading or, if not
listed or admitted to trading on any national securities exchange, on the Nasdaq
National Market or, if such security is not quoted on the Nasdaq National
Market, the average of the closing bid and asked prices on such day in the
over-the-counter market as reported by Nasdaq. As used herein, the term "Trading
Day" means a day on which the New York Stock Exchange, each national securities
exchange on which the Warrant Shares is listed and the Nasdaq National Market
are open for business. If the Warrant Shares are not then traded in a public
market, the Board of Directors of the Company shall propose the fair market
value in its reasonable good faith judgment. The foregoing notwithstanding, if
the Holder advises the Board of Directors in writing that the Holder disagrees
with such proposed fair market value, then each of the Company and the Holder
shall select a reputable investment banking firm, and the two firms so selected
shall promptly agree upon a third reputable investment banking firm, and the
three firms shall undertake such valuation. If the valuation of such investment
banking firms is greater than that determined by the Board of Directors, then
all fees and expenses of such investment banking firms shall be paid by the
Company. In all other circumstances, such fees and expenses shall be paid by the
Holder.

     1.5 Delivery of Certificate and New Warrant. In the event of any exercise
of this Warrant, in whole or in part, certificates for the Warrant Shares so
purchased representing the aggregate number of shares specified in the Notice of
Exercise, shall be delivered to the Holder within a reasonable time, not
exceeding seven business days, after this Warrant shall have been so exercised.
If this Warrant shall have been exercised only in part, then, unless this
Warrant has expired, the Company shall, at its expense, at the time of delivery
of said certificates representing the Warrant Shares, deliver to the Holder a
new Warrant representing the Warrant Shares not so exercised. The Company will
pay all taxes and other expenses in connection with the preparation, execution
and delivery of the certificates except that, in the case such certificates are
to be registered in a name or names other than the Holder, the Holder will pay
any and all stock transfer taxes associated with such transfer.

     1.6 Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on

                                       2
<PAGE>   3

delivery of an indemnity agreement reasonably satisfactory in form and amount to
the Company or, in the case of mutilation, on surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver in lieu of this
Warrant, a new warrant of like tenor.

                                    ARTICLE 2
                        ADJUSTMENT TO THE WARRANT SHARES

     2.1 Antidilution Provisions. The intent of this Article 2 is to insure
appropriate adjustment to the Exercise Price and/or number of Warrant Shares to
be acquired in the event of the exercise of this Warrant, in the event of future
issuances of capital stock or securities into which this Warrant may ultimately
be convertible in the instances described below, to the end that the provisions
set forth herein (including adjustments to the Exercise Price) shall be made to
provide the Holder the right to receive essentially the same proportion of
shares of capital stock (in relation to all shares of capital stock outstanding)
on the date of conversion, redemption or other exchange as the Holder would have
been entitled to had it initially been issued shares of Common Stock on the date
hereof. Simultaneously with each adjustment to the Exercise Price set forth in
this Article 2, an appropriate adjustment in the number of Warrant Shares
obtainable upon the exercise of this Warrant shall be made so that the holder of
this Warrant shall receive the same number and kind of securities and other
property such holder would have been entitled to receive had this Warrant been
exercised and converted into Warrant Shares immediately prior to the event or
occurrence giving rise to the adjustment to the Exercise Price.

          2.1.1 Adjustments for Diluting Issuances.

          (a) In the event the Company shall issue additional shares of capital
     stock without consideration or for a consideration per share which is less
     than both the Exercise Price for the Warrant Shares and the fair market
     value for the Warrant Shares as determined pursuant to Section 1.4 above,
     then and in each such event, the Exercise Price shall be reduced,
     concurrently with such issue of shares, to an amount equal to the quotient
     of: (a) the sum of (i) the number of shares of Common Stock outstanding (on
     a Fully Diluted basis) immediately prior to such issuance multiplied by the
     Exercise Price plus (ii) the aggregate consideration received by the
     Company upon such issuance, divided by (b) the number of shares of Common
     Stock outstanding (on a Fully Diluted basis) immediately after such
     issuance. For purposes of this Section 2.1, the consideration received by
     the Company for the issue of any additional shares of capital stock shall
     be computed as follows: (i) insofar as such consideration consists of cash,
     such consideration shall consist of the aggregate amount of cash received
     by the Company excluding amounts paid or payable for accrued interest or
     accrued dividends, and without deduction of any expenses incurred or
     underwriting commissions or concessions paid or allowed by the Company;
     (ii) insofar as such consideration consists of property other than cash,
     such consideration shall be computed at the fair market value thereof at
     the time of such issue, as determined in good faith by the Board of
     Directors of the Company, except where such consideration consists of
     securities, in which case the amount of consideration received by the
     Company shall be the fair market value thereof (determined as provided in
     Section 1.4 hereof) as of the date of receipt, but in each such case
     without deduction therefrom of any expenses incurred or any underwriting
     commissions or concessions paid or allowed by the Company in connection
     therewith. In computing the market price of a note or other obligation that
     is not listed or admitted to trading on any securities exchange or quoted
     in the Nasdaq Stock Market or reported by the National Quotation Bureau,
     Inc., or a similar reporting organization, the total consideration to be
     received by the Company thereunder (including interest)

                                       3
<PAGE>   4

         shall be discounted to present value at the prime rate announced or
         published in The Wall Street Journal under the caption "Money Rate" in
         effect at the time the note or obligation is deemed to have been
         issued; and (iii) in the event additional Shares of capital stock are
         issued together with other securities or other assets of the Company
         for consideration which covers both, such consideration shall be the
         proportion of such consideration so received, computed as determined in
         good faith by the Board of Directors of the Company.

          (b) Treatment of Options and Convertible Securities.

               (i) In the event the Company should ever grant rights to
          subscribe for or purchase, or any options for the purchase of any
          shares of its capital stock or securities convertible into or
          exchangeable for capital stock (such rights and options herein
          referred to as "Options", and such convertible or exchangeable
          securities herein referred to as "Convertible Securities"), whether or
          not such Options or rights to convert or exchange any such Convertible
          Securities are immediately exercisable, and the price per share for
          which capital stock is issuable upon the exercise of such Option or
          upon the conversion or exchange of such Convertible Securities shall
          be less than the Exercise Price in effect immediately prior to the
          time of the granting of such Options, then the total maximum number of
          shares of capital stock issuable upon the exercise of such Options or
          upon the conversion or exchange of the total maximum amount of such
          Convertible Securities issuable upon the exercise of such Options
          shall (as of the date of granting of such Options) be deemed to be
          outstanding and to have been issued and sold for such price per share
          and the Exercise Price shall be reduced to the extent required by
          Section 2.1.1(a). For purposes of this Section 2.1.1(b)(i), the price
          per share for which such capital stock is issuable shall be determined
          by dividing (x) the total amount, if any, received or receivable by
          the Company as consideration for the granting of such Options, plus
          the minimum aggregate amount of additional consideration payable to
          the Company upon the exercise of such Options, plus, in the case of
          any such Options which relate to Convertible Securities, the minimum
          aggregate amount of additional consideration, if any, other than such
          Convertible Securities, payable to the Company upon the conversion or
          exchange of such Convertible Securities, by (y) the total maximum
          number of shares of capital stock issuable upon the exercise of such
          Options or upon the conversion or exchange of all such Convertible
          Securities issuable upon the exercise of such Options. No further
          adjustments of the Exercise Price shall be made upon the actual issue
          of such capital stock or of such Convertible Securities upon the
          exercise of such Options or upon the actual issue of such capital
          stock upon the conversion or exchange of such Convertible Securities.

               (ii) If at any time the Company shall issue or sell Convertible
          Securities, whether or not the rights to convert or exchange such
          Convertible Securities are immediately exercisable, and the price per
          share for which capital stock is issuable upon the conversion or
          exchange of such Convertible Securities shall be less than the
          Exercise Price in effect immediately prior to the time of the issue or
          sale of such Convertible Securities, then the total maximum number of
          shares of capital stock issuable upon the conversion or exchange of
          all such Convertible Securities shall (as of the date of the issue or
          sale of such Convertible Securities) be deemed to be outstanding and
          to have been issued and sold for such price per share and the Exercise
          Price shall be reduced to the extent required by Section 2.1.1(a),
          provided that (a) except as provided in Section

                                       4
<PAGE>   5

          2.1.1(b)(vi) hereof, no further adjustments of the Exercise Price
          shall be made upon the actual issue of such capital stock upon the
          conversion or exchange of such Convertible Securities and (b) if any
          such issue or sale of such Convertible Securities is made upon
          exercise of any Options for which adjustments of the Exercise Price
          have been or are to be made pursuant to other provisions of this
          Section 2.1.1, no further adjustment of the Exercise Price shall be
          made by reason of such issue or sale. For purposes of this Section
          2.1.1(b)(ii), the price per share for which capital stock is issuable
          shall be determined by dividing (x) the total amount received or
          receivable by the Company as consideration for the issue or sale of
          such Convertible Securities, plus the minimum aggregate amount of
          additional consideration, if any, other than such Convertible
          Securities, payable to the Company upon the conversion or exchange
          thereof, by (y) the total maximum number of shares of capital stock
          issuable upon the conversion or exchange of all such Convertible
          Securities.

               (iii) If at any time the Company shall pay a dividend or make any
          other distribution upon the capital stock payable in capital stock or
          Convertible Securities, any capital stock or Convertible Securities,
          as the case may be, issuable in payment of such dividend or
          distribution shall be deemed to have been issued without
          consideration, and the Exercise Price shall be reduced as if the
          Company had subdivided the outstanding shares of capital stock into a
          greater number of shares as provided in Section 2.2 hereof.

               (iv) In case at any time the Company shall take a record of the
          holders of capital stock for the purpose of entitling them (a) to
          receive a dividend or other distribution payable in capital stock or
          Convertible Securities, or (b) to subscribe for or purchase capital
          stock or Convertible Securities, then such record date shall be deemed
          to be the date of the issue or sale of such capital stock or
          Convertible Securities.

               (v) If the purchase price provided for in any Option referred to
          in Section 2.1.1(b)(i) hereof, or the price at which any Convertible
          Securities referred to in Sections 2.1.1(b)(i) or (iii) hereof are
          convertible into or exchangeable for capital stock, shall change at
          any time (whether by reason of provisions designed to protect against
          dilution or otherwise), the Exercise Price then in effect hereunder
          shall forthwith be increased or decreased to such Exercise Price as
          would have obtained had the adjustments made upon the issuance of such
          Options or Convertible Securities been made upon the basis of (a) the
          issuance of the number of shares of capital stock theretofore actually
          delivered upon the exercise of such Options or upon the conversion or
          exchange of such Convertible Securities, and the total consideration
          received therefor, and (b) the number of shares of capital stock to be
          issued for the consideration, if any, received by the Company therefor
          and to be received on the basis of such changed price.

               (vi) If any adjustment has been made in the Exercise Price
          because of the issuance of Options or Convertible Securities and if
          any of such Options or rights to convert or exchange such Convertible
          Securities expire or otherwise terminate, then the Exercise Price
          shall be readjusted to eliminate the adjustments previously made in
          connection with the Options or rights to convert or exchange
          Convertible Securities which have expired or terminated.

                                       5
<PAGE>   6

               (vii) The number of shares of capital stock outstanding at any
          given time shall not include shares owned or held by or for the
          account of the Company, and the disposition of any such treasury
          shares shall be considered an issue or sale of capital stock.

               (viii) Anything in Section 2.1.1 hereof to the contrary
          notwithstanding, the Company shall not be required to make any
          adjustment of the Exercise Price in the case of (A) the issuance of
          the Warrants or any other warrant issued to the Holder, (B) the
          issuance of shares of Common Stock upon exercise of the Warrants or
          any other warrant issued to the Holder, (C) the granting of stock
          options by the Company or any of its subsidiaries pursuant to the
          option plans identified on Schedule 4.3 to the Purchase Agreement,
          provided that the exercise price of such stock options is at least
          equal to the fair market value of such shares of capital stock (as
          determined by the appropriate plan) on the date such stock options are
          granted, (D) the issuance of shares of capital stock upon the exercise
          of the stock options referred to in clause (C) above, and (E) the
          issuance of shares of capital stock upon the exercise, conversion, or
          exchange of the securities which are set forth on Schedule 4.3 of the
          Purchase Agreement, all of which were issued prior to or
          simultaneously with the date of the original issue of this Warrant.

     2.2. Adjustment for Subdivisions and Combinations. In the event at any time
the Company shall, by subdivision, stock split, reverse stock split, dividend,
combination or reclassification of any shares of its capital stock or otherwise
change any of the securities then issuable upon the exercise of this Warrant
into the same or a different number of securities of any class or classes, this
Warrant shall thereafter be exercisable, for the same period as the remaining
duration of the period during which this Warrant is exercisable, for the same
number and kind of securities which the holder hereof would have received had
this Warrant been exercised and converted into Warrant Shares immediately prior
to such change, whether by subdivision, stock split, reverse stock split,
dividend, combination or reclassification of any shares of its capital stock or
otherwise. In the event at any time the Company shall, by subdivision, dividend,
stock split, reclassification or otherwise, change the outstanding shares of
capital stock into a greater number of shares, the Exercise Price in effect
immediately prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of capital stock shall be combined
into a smaller number of shares, by reverse stock split, combination,
reclassification or otherwise, the Exercise Price in effect immediately prior to
such combination shall be proportionately increased. An adjustment made pursuant
to this Section 2.2 shall become effective immediately after the effective date
of such subdivision or combination.

     2.3. Adjustment for Dividends and Distributions. If at any time the Company
shall pay a dividend or make a distribution to all holders of capital stock, as
such, which dividend or distribution is payable otherwise than in cash out of
earnings or earned surplus and otherwise than in capital stock, Convertible
Securities, or Options, then thereafter the Holder of this Warrant, upon the
exercise of this Warrant, shall be entitled to receive the number of shares of
Common Stock being purchased upon such exercise and, in addition thereto and
without further payment, the stock and other securities and property (including
cash) which such Holder would have received by way of dividends or distributions
(otherwise than in cash out of earnings or earned surplus or in capital stock,
Convertible Securities, or Options) as if continuously, since the date of the
original issue of this Warrant, such Holder (a) had been the record holder of
the number of shares of Common Stock then being purchased, and (b) had retained
all dividends and distributions in stock or other securities (other than capital
stock, Convertible Securities, or Options)

                                       6
<PAGE>   7

which would have been paid in respect of such Common Stock or in respect of any
stock or other securities which would have been paid as dividends or
distributions on such Common Stock.

     2.4 Repurchase on Sale, Merger, or Consolidation of the Company.

          2.4.1 Acquisition. For the purpose of this Warrant, "Acquisition"
means any sale, license, or other disposition of all or substantially all of the
assets of the Company, or any reorganization, consolidation, or merger of the
Company where the holders of the Company's securities before the transaction
beneficially own less than fifty percent (50%) of the outstanding voting
securities of the surviving entity after the transaction.

          2.4.2 Assumption of Warrant. If such Acquisition shall be effected in
such a way that the holders of Common Stock (or any other securities of the
Company then issuable upon the exercise of this Warrant) shall be entitled to
receive stock or other securities or property (including cash) with respect to
or in exchange for Common Stock (or such other securities), then lawful and
adequate provision shall be made whereby the Holder of this Warrant shall
thereafter have the right to purchase and receive upon the basis and upon the
terms and conditions specified in this Warrant, and in lieu of the shares of
Common Stock (or such other securities) immediately theretofore purchasable and
receivable upon the exercise hereof, such stock or other securities or property
(including cash) as may be issuable or payable with respect to or in exchange
for a number of outstanding shares of Common Stock (or such other securities)
equal to the number of shares of Common Stock (or such other securities)
immediately theretofore purchasable and receivable upon the exercise of this
Warrant, had such Acquisition not taken place. In any such case appropriate
provision shall be made with respect to the rights and interests of the Holder
to the end that the provisions hereof (including, without limitation, the
provisions for adjustments of the Exercise Price and of the number of Warrant
Shares purchasable upon exercise hereof) shall thereafter be applicable, as
nearly as reasonably may be, in relation to the stock or other securities or
property thereafter deliverable upon the exercise hereof. In the event of a
consolidation or merger of the Company with or into another corporation or
entity as a result of which a greater or lesser number of shares of common stock
of the surviving corporation or entity are issuable to holders of capital stock
in respect of the number of shares of capital stock outstanding immediately
prior to such consolidation or merger, then the Exercise Price in effect
immediately prior to such consolidation or merger shall be adjusted in the same
manner as though there were a subdivision or combination of the outstanding
shares of capital stock.

     2.5 Reclassification, Exchange or Substitution. Upon any reclassification,
exchange, substitution, or other event that results in a change of the number
and/or class of the securities issuable upon exercise or conversion of this
Warrant, the Holder shall be entitled to receive, upon exercise or conversion of
this Warrant, the number and kind of securities and property that the Holder
would have received for the Warrant Shares if this Warrant had been exercised
immediately before such reclassification, exchange, substitution, or other
event. Such an event shall include any automatic conversion of the outstanding
or issuable securities of the Company of the same class or series as the Warrant
Shares to Common Stock pursuant to the terms of the Company's Certificate of
Incorporation upon the closing of a new registered public offering of the
Company's Common Stock. The Company or its successor shall promptly issue to the
Holder a new Warrant for such new securities or other property. The new Warrant
shall provide for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article 2 including, without
limitation, adjustments to the Exercise

                                       7
<PAGE>   8

Price and to the number of securities or property issuable upon exercise of the
new Warrant. The provisions of this Section 2.5 shall similarly apply to
successive reclassifications, exchanges, substitutions, or other events.

     2.6 Record Date Adjustments. In any case in which this Article 2 requires
that a downward adjustment of the Exercise Price shall become effective
immediately after a record date for an event, the Company may defer until the
occurrence of such event (a) issuing to the Holder of this Warrant (exercised
after such record date and before the occurrence of such event) the additional
Warrant Shares issuable upon such exercise by reason of the adjustment required
by such event over and above the Warrant Shares issuable upon such exercise
before giving effect to such adjustment and (b) paying to such Holder any amount
in cash in lieu of a fractional share pursuant to Section 2.8 hereof.

     2.7 Minimum Adjustment of Exercise Price. No adjustment of the Exercise
Price shall be made in an amount less than $.05 per share in effect at the time
such adjustment is otherwise required to be made, but any such lesser adjustment
shall be carried forward and shall be made at the time and together with the
next subsequent adjustment which, together with any adjustments so carried
forward, shall amount to not less than $.05 per share. In case at any time the
Company shall issue capital stock by way of dividend on capital stock or
subdivide or combine the outstanding shares of capital stock, said amount of
$.05 per share (as theretofore increased or decreased, if the said amount shall
have been adjusted in accordance with the provisions of this Section 2.7) shall
forthwith be proportionately increased in the case of such a combination or
decreased in the case of such a subdivision or stock dividend so as
appropriately to reflect the same.

     2.8 Fractional Shares. No fractional Shares shall be issuable upon exercise
or conversion of the Warrant and the number of Warrant Shares to be issued shall
be rounded down to the nearest whole Share. If a fractional share interest
arises upon any exercise or conversion of the Warrant, the Company shall
eliminate such fractional share interest by paying the Holder an amount computed
by multiplying the fractional interest by the last reported sale price of the
Common Stock on the trading day immediately preceding the date of exercise.

     2.9 Certificate as to Adjustments. Upon each adjustment of the Exercise
Price, the Company, at its expense, shall promptly compute such adjustment, and
furnish the Holder with a certificate of its Chief Financial Officer setting
forth such adjustment, and the corresponding adjustment in the number of Warrant
shares obtainable upon the exercise of this Warrant, and the facts upon which
such adjustments are based. The Company shall, upon written request, furnish the
Holder a certificate setting forth the Exercise Price in effect upon the date
thereof and the series of adjustments leading to such Exercise Price.

     2.10 Certain Events. If any event occurs of the type contemplated by the
provisions of this Article 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features), then the Company's
Board of Directors shall make an appropriate adjustment in the number of Warrant
Shares obtainable upon exercise of this Warrant and in the Exercise Price so as
to protect the rights of the Holder of this Warrant; provided that no such
adjustment shall decrease the number of Warrant Shares obtainable as otherwise
determined pursuant to this Article 2.

     2.11 Purchase Rights. If at any time the Company grants, issues or sells
any rights to purchase stock, warrants, securities or other property pro rata to
the record holders of any class of stock (the

                                       8
<PAGE>   9

"Purchase Rights") then the Holder of this Warrant shall be entitled to obtain,
upon the same terms on which the holders of Common Stock are to receive such
Purchase Rights, the aggregate Purchase Rights which such Holder could have
acquired if such Holder had held the number of Warrant Shares acquirable upon
complete exercise of this Warrant immediately before the date on which a record
is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common Stock are to
be determined for the grant, issue or sale of such Purchase Rights.

                                    ARTICLE 3
                  REPRESENTATIONS AND COVENANTS OF THE COMPANY

     The Company hereby represents and warrants to the Holder as follows:

     3.1 Title to Warrant Shares. All Warrant Shares which may be issued upon
the exercise of the rights represented by this Warrant, and all securities, if
any, issuable upon conversion of the Warrant Shares, shall, upon issuance be
duly authorized, validly issued, fully paid and nonassessable, and free of any
liens and encumbrances.

     3.2 Reservation of Shares. During the period which this Warrant may be
exercised, the Company will at all times have authorized and reserved for
issuance a sufficient number of shares of Common Stock to cover such exercise.

     3.3 No Impairment. The Company shall not, by amendment of its Certificate
of Incorporation or through a reorganization, transfer of assets, consolidation,
merger, dissolution, issue, or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under this Warrant by the Company, but shall at all times
in good faith assist in carrying out all the provisions of this Warrant and in
taking all such action as may be necessary or appropriate to protect the
Holder's rights under this Warrant against impairment. If the Company takes any
action affecting the Shares or its Common Stock other than as provided for above
that adversely affects the Holder's rights under this Warrant, then the Company
shall make appropriate adjustment to the Exercise Price and/or the number of
Warrant Shares to carry out the intent of Article 2 as set forth in Section 2.1.

     3.4 Notice of Certain Events. If the Company proposes at any time to (a)
declare any dividend or distribution upon its Common Stock, whether in cash,
property, stock or other securities and whether or not a regular cash dividend;
(b) offer for subscription pro rata to the holders of any class or series of
stock any additional shares of stock of any class or series or other rights; (c)
effect any reclassification or recapitalization of Common Stock; or (d) merge or
consolidate with or into any other corporation, or sell, lease, license, or
convey all or substantially all of its assets, or to liquidate, dissolve or wind
up, then, in connection with each such event, the Company shall give the Holder:
(1) at least twenty (20) days prior written notice of the date on which a record
will be taken for such dividend, distribution, or subscription rights (and
specifying the date on which the holders of Common Stock will be entitled
thereto) or for determining rights to vote, if any, in respect of the matters
referred to in (c) and (d) above; and (2) in the case of the matters referred to
in (c) and (d) above at least twenty (20) days prior written notice of the date
when the same will take place (and specifying the date on which the holders of
Common Stock will be entitled to exchange their Common Stock for securities or
other property deliverable upon the occurrence of such event).

                                       9
<PAGE>   10

     3.5 Registration under the Securities Act of 1933.

          3.5.1 Piggyback Rights. In the event that the Company files a
     registration statement under the Securities Act of 1933, as amended (the
     "Act") which relates to an offering of securities of the Company by the
     Company or any holder of securities (except in connection with an offering
     to or by employees), such registration statement and the prospectus
     included therein shall also, at the written request to the Company by the
     Holder, include and relate to, and meet the requirements of the Act with
     respect to, the public offering of such Warrant Shares as the Holder
     indicates it intends to exercise and offer under the registration statement
     for sale and sell, so as to permit the public sale thereof in compliance
     with the Act, and any related qualifications under blue sky laws or other
     compliance or any underwriting involved therein shall also relate thereto.
     The Company shall use its best efforts to effect such registration, any
     such qualification, any such compliance and any such underwriting as soon
     as practicable. The Company shall give prompt written notice to the Holder
     of its intention to file a registration statement under the Act relating to
     an offering of the aforesaid securities of the Company, but in no event
     less than twenty-five (25) days prior to the filing of such registration
     statement, and the written request provided for in the first sentence of
     this Section shall be made by the Holder ten (10) or more days prior to the
     date specified in the notice as the date on which it is intended to file
     such registration statement. Neither the delivery of such notice by the
     Company nor of such request pursuant to this Section 3.5.1 by the Holder
     shall in any way obligate the Company to file any such registration
     statement and, notwithstanding the filing of such registration statement,
     the Company may, at any time prior to the effective date thereof, determine
     not to offer the securities to which such registration statement relates,
     without liability to the Holder, except that the Company shall pay such
     expenses as are contemplated to be paid by it under Section 3.5.3 and by
     the Holder pursuant to Section 3.5.3(d). Provided, that, anything above in
     this Section 3.5.1 to the contrary notwithstanding, the inclusion of
     Warrant Shares in any such registration will require the approval of the
     underwriters, if any, but which approval shall not be unreasonably
     withheld, and such inclusion shall be conditioned upon the provision by the
     Holder to the Company of all information regarding the Holder reasonably
     required to be included in the registration statement under applicable law
     and the rules and regulations promulgated by the Securities and Exchange
     Commission (the "SEC") pursuant to the Act. The "piggy-back" registration
     rights granted hereunder shall terminate five (5) years from the date
     hereof.

          3.5.2 Demand Registration Rights.

               (a) In addition, upon written notice at any time after the second
          anniversary of the date of this Warrant, and on or before the
          Expiration Date, upon written request from a holder or holders of
          fifty percent (50%) or more of the securities issued or issuable upon
          exercise of this Warrant, the Company, as promptly as possible after
          the receipt of such notice, shall file a new registration statement
          under the Act with respect to the Warrant Shares covered by such
          notice and use its best efforts to effect such registration, all
          qualifications under blue sky laws and all other compliance as soon as
          practicable. Within ten (10) days after receiving any such notice, the
          Company shall give notice to any other Holders of

                                       10
<PAGE>   11

          the Warrant Shares issued or issuable pursuant to this Warrant,
          advising that the Company is proceeding with such registration
          statement to include therein Warrant Shares of such Holders. The
          Company shall not be obligated to any such other Holder unless such
          other Holder shall accept such offer by notice in writing to the
          Company within ten (10) days thereafter. The Company shall be required
          to effect two (2) registrations of Warrant Shares pursuant to this
          Section 3.5.2. The Holder agrees to become subject to a customary
          lock-up agreement, for a reasonable period of time, if required by the
          underwriter of a public offering by the Company during the period in
          which the Holder is entitled to registration of the Warrant Shares
          under this Section 3.5.2; provided, however, that the Expiration Date
          shall be extended by the effective period of any such lock-up
          agreement. The Company may postpone, one time, for up to ninety (90)
          days the registration of Warrant Shares pursuant to this Section 3.5.2
          if its Board of Directors determines in good faith that such
          registration would have a material adverse effect on a significant
          transaction proposed by the Company; provided, however, that the
          Expiration Date shall be extended by the period of any such
          postponement. The distribution of Warrant Shares covered by the
          request of a Holder pursuant to this Section 3.5.2 shall be effected
          by means of the method of distribution selected by such Holder. If
          such distribution is effected by means of an underwriting, the Company
          shall enter into an underwriting agreement in customary form with a
          managing underwriter of nationally recognized standing selected for
          such underwriting by the Holder and approved by the Company, which
          approval shall not be unreasonably withheld. Notwithstanding any other
          provision of this Section 3.5.2, if the managing underwriter advises
          the Holder in writing that marketing factors require limitation of the
          number of shares to be underwritten, then the underwriters may exclude
          shares requested to be included in such registration. The number of
          shares to be included in the registration and underwriting shall be
          allocated first among the Holders who requested registration pursuant
          to this Section 3.5.2 and then among other Holders who have requested
          registration of securities in such registration and underwriting in
          proportion as nearly as practicable to the respective amounts of
          securities of the Company held by such Holders at the time of filing
          the registration statement. No securities excluded from the
          underwriting by reason of the managing underwriter's marketing
          limitation shall be included in such registration. If any Holder
          disapproves of the terms of the underwriting, such Holder may elect to
          withdraw therefrom by written notice to the Company, the managing
          underwriter and the Holder requesting such registration pursuant to
          this Section 3.5.2 and the securities so withdrawn shall also be
          withdrawn from registration. If the distribution of the Warrant Shares
          is being effected by means of an underwriting and if the managing
          underwriter has not limited the number of securities to be
          underwritten, the Company may include securities for its own account
          in such registration if the managing underwriter so agrees and may
          include securities for the account of holders of securities other than
          Holders of the Warrant Shares issued or issuable upon exercise of this
          Warrant. The inclusion of such securities by the Company or such other
          holders shall be on the same terms as the registration of Warrant
          Shares held by the Holders requesting registration pursuant to this
          Section 3.5.2. In the event that the underwriters exclude some of the

                                       11
<PAGE>   12

          securities to be registered, the securities to be sold for the account
          of the Company and any other holders shall be excluded in their
          entirety prior to the exclusion of any Warrant Shares issued or
          issuable pursuant to this Warrant.

               (b) If the Company is a registrant for purposes of the Act which
          is entitled to use Form S-3 (or any successor form to Form S-3) to
          register securities for any registration requested pursuant to Section
          3.5.2, at the request of a holder pursuant to Section 3.5.2, the
          Company shall use its best efforts to cause the shares to be
          registered on Form S-3.

               (c) A holder requesting registration pursuant to Section 3.5.2
          shall have the right to cancel a proposed registration pursuant to
          Section 3.5.2 when, in its discretion, market conditions are so
          unfavorable as to be seriously detrimental to an offering pursuant to
          such registration. For the avoidance of doubt, such cancellation of a
          registration shall not be counted as one of the two (2) registrations
          pursuant to Section 3.5.2, subject to the condition that the canceling
          Holder shall promptly reimburse the Company for its expenses
          reasonably incurred in connection with the cancelled registration,
          unless such registration was cancelled after having been deferred,
          postponed or interrupted by the Company pursuant to Section 3.5.2, in
          which case, such expense reimbursement shall not be required.

          3.5.3 Agreements Related to Registrations. In each instance in which
     pursuant to Sections 3.5.1 and 3.5.2 of this Section, the Company shall
     take any action to permit a public offering or sale or other distribution
     of the Warrant Shares, the Company shall:

               (a) Supply to the Holders of Warrant Shares intending to make a
          public distribution of their Warrant Shares a reasonable number of
          copies of the preliminary, final and other prospectus in conformity
          with requirements of the Act and the rules and regulations promulgated
          thereunder and such other documents as the Holders shall reasonably
          request.

               (b) In regard to a registration under Section 3.5.2 only,
          cooperate in taking such action as may be necessary to register or
          qualify the Warrant Shares under such other securities acts or blue
          sky laws of such jurisdictions as the Holders shall reasonably request
          and to do any and all other acts and things which may be necessary or
          advisable to enable the Holders of such Warrant Shares to consummate
          such proposed sale or other disposition of the Warrant Shares in any
          such jurisdiction.

               (c) Keep effective all such registrations under the Act and
          cooperate in taking such action as may be necessary to facilitate a
          public sale or other disposition of such Warrant Shares by such
          Holders.

               (d) Pay all expenses of any registration under Section 3.5.2.
          Each registration under Section 3.5.1 shall be at the Company's
          expense, except for the direct, incremental costs attributable to the
          "piggy-backed" Warrant Shares, which

                                       12
<PAGE>   13

          shall be paid by the Holders thereof. The Company shall not be
          required to pay any underwriting discount or commission or applicable
          transfer taxes relating to the disposition of the Warrant Shares.

               (e) Indemnify and hold harmless each Holder with respect to which
          registration, qualification or compliance has been effected pursuant
          to this Agreement and any underwriter, within the meaning of the Act
          who may purchase from or sell for any Holder any Warrant Shares, and
          each of their respective officers, directors, partners and such
          Holder's legal counsel and independent accountants, if any, and such
          person controlling such persons, within the meaning of the Act, from
          and against any and all losses, claims, damages, expenses and
          liabilities (including, but not limited to, legal fees and expenses
          and any and all expenses whatsoever reasonably incurred in
          investigating, preparing, defending or settling any claim (including,
          but not limited to, legal fees and expenses)) arising from or based on
          (i) any untrue statement (or alleged untrue statement) of a material
          fact contained in any registration statement furnished pursuant to
          clause (a) of this Section, or any prospectus included therein or any
          amendment or supplement thereto, (ii) any omission (or alleged
          omission) to state therein a material fact required to be stated
          therein or necessary to make the statements therein not misleading
          (unless such untrue statement (or alleged untrue statement) or
          omission (or alleged omission) was based upon and in conformity with
          information furnished in writing, or required to be furnished, to the
          Company by the Holder or underwriter expressly for use therein), or
          (iii) any violation by the Company of any rule or regulation
          promulgated under the Act or any state securities law applicable to
          the Company and relating to action or inaction by the Company in
          connection with any such registration, qualification or compliance.

               (f) Each Holder which has securities included in any registration
          pursuant to this Agreement shall indemnify and hold harmless the
          Company and any underwriter, within the meaning of the Act, and each
          of their respective officers, directors, partners, legal counsel and
          independent accountants, and each person controlling such persons
          within the meaning of the Act, from and against any and all losses,
          claims, damages, expenses and liabilities (including, but not limited
          to, legal fees and expenses and any and all expenses whatsoever
          reasonably incurred in investigating, preparing, defending or settling
          any claim (including, but not limited to, legal fees and expenses))
          arising from or based on (i) any untrue statement (or alleged untrue
          statement) of a material fact contained in any registration statement
          furnished pursuant to clause (a) of this Section or any prospectus
          included therein or any amendment or supplement thereto, or (ii) any
          omission (or alleged omission) to state therein a material fact
          required to be stated therein or necessary to make the statements
          therein not misleading, provided, that the indemnity by such Holder
          shall be limited to liability based upon information furnished in
          writing, or required to be furnished, to the Company by such Holder
          expressly for use therein. The indemnity agreement of the Company
          herein shall not inure to the benefit of any such underwriter (or to
          the benefit of any person who controls such underwriter) on account of
          any losses, claims, damages, liabilities (or actions or proceedings in
          respect thereof) arising from the sale of any

                                       13
<PAGE>   14

          of such Warrant Shares by such underwriter to any person if such
          underwriter failed to send or give a copy of the prospectus furnished
          pursuant to clause (a) of this Section, to such person with or prior
          to the written confirmation of the sale involved. The obligation of
          any Holder pursuant to this Section 3.5.3(f) shall be limited to an
          amount equal to the net proceeds to such Holder from securities sold
          in such registration pursuant to this Agreement.

               (g) Each party entitled to indemnification hereunder (the
          "Indemnifying Party") shall give notice to the party required to
          provide indemnification (the "Indemnifying Party") promptly after such
          Indemnified Party has actual knowledge of any claim as to which
          indemnity may be sought, and shall permit the Indemnifying Party to
          assume the defense of any such claim or any litigation resulting
          therefrom, provided that counsel for the Indemnifying Party, who shall
          conduct the defense of such claim or litigation, shall be approved by
          the Indemnified Party (whose approval shall not be unreasonably
          withheld). The Indemnified Party may participate in such defense at
          such party's expense; provided, however, that the Indemnifying Party
          shall bear the expense of such defense of the Indemnified Party if
          representation of both parties by the same counsel would be
          inappropriate due to actual or potential conflicts of interest. The
          failure of any Indemnified Party to give notice as provided herein
          shall not relieve the Indemnifying Party of its obligations under this
          Agreement, unless and to the extent such failure is prejudicial to the
          ability of the Indemnifying Party to defend the action. No
          Indemnifying Party, in the defense of any such claim or litigation
          shall, except with the consent of each Indemnified Party, consent to
          entry of any judgment or enter into any settlement which does not
          include as an unconditional term thereof the giving by the claimant or
          plaintiff to such Indemnified Party of a release from all liability in
          respect of such claim or litigation.

               (h) If the indemnification provided for in paragraphs (e) and (f)
          above is unavailable or insufficient to hold harmless an Indemnified
          Party, then each Indemnifying Party shall contribute to the amount
          paid or payable by such Indemnified Party as a result of the expenses,
          claims, losses, damages or liabilities (or actions or proceedings in
          respect thereof) referred to in such paragraphs in such proportion as
          is appropriate to reflect the relative fault of the Company, on the
          one hand, and the holders of securities registered pursuant hereto, on
          the other hand, in connection with the statement or omissions which
          resulted in such losses, claims, damages, expenses and liabilities, as
          well as any other relevant equitable considerations. The relative
          fault shall be determined by reference to, among other things, whether
          the untrue or alleged untrue statement of a material fact or the
          omission or alleged omission to state a material fact relates to
          information supplied by the Company or any such holder and the
          parties' relative intent, knowledge, access to information and
          opportunity to correct or prevent such untrue statement or omission.
          The Company and the Holder agree that it would not be just and
          equitable if contributions pursuant to this paragraph (h) were to be
          determined by pro rata allocation or by any other method of allocation
          which does not take account of the equitable consideration referred to
          in this paragraph. No person guilty of fraudulent misrepresentation
          (within the meaning of Section 11(f)

                                       14
<PAGE>   15

          of the Act) shall be entitled to contribution from any person who was
          not guilty of such fraudulent misrepresentation.

               (i) In addition, in connection with any registration requested
          pursuant hereto, the Company shall:

                    (1) prepare and file with the SEC pursuant to the Act such
               amendments and supplements to such registration statement and
               prospectus included therein as may be necessary to effect and
               maintain the effectiveness of such registration statement for a
               period of 180 days or such longer period as may be required in
               order to complete the distribution of the securities covered
               thereby and furnish to the Holders of such securities copies of
               any such supplement or amendment prior to it being used and/or
               filed with the SEC and comply with the provisions of the Act with
               respect to the disposition of all securities to be included in
               such registration statement.

                    (2) provide the Holders, any underwriters in connection
               therewith, one counsel for such underwriters and one counsel for
               the Holders the opportunity to participate in the preparation of
               such registration statement and each amendment and supplement
               thereto.

                    (3) for a reasonable period prior to the filing of the
               registration statement and throughout the period specified in
               paragraph (1) above, make available for inspection by the parties
               specified in paragraph (2) above such financial and other
               information and books and records of the Company, and cause the
               officers, directors, employees and representatives of the Company
               to respond to such inquiries as shall be reasonably necessary to
               conduct a reasonable investigation of the Company within the
               meaning of the Act.

                    (4) promptly notify the holders of securities included in
               such registration statement and the managing underwriter in
               connection therewith (and confirm such advice in writing) (A)
               when such registration statement or the prospectus included
               therein or any prospectus amendment or supplement or post-
               effective amendment has been filed, and, with respect to such
               registration statement or any post-effective amendment, when the
               same has become effective, (B) of any comments by the SEC and by
               the blue sky or securities commissioner or regulator of any state
               with respect thereto or any request by the SEC for amendments or
               supplements to such registration statement or the prospectus or
               for additional information, (C) of the issuance by the SEC of any
               stop order suspending the effectiveness of such registration
               statement or the initiation of any proceedings for that purpose,
               (D) 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 of any proceeding
               for such purpose, or (E) if it shall be the case, at any time
               when a prospectus is required to be delivered under the Act, that
               such registration statement, prospectus, or any document
               incorporated by reference, in any of the foregoing contains an
               untrue statement of a material fact or omits to state a material
               fact required to be stated therein or

                                       15
<PAGE>   16

               necessary to make the statements therein not misleading in light
               of the circumstances then existing, in which case such Holders of
               securities covered by such registration statement shall suspend
               sales of such securities until they have been advised by the
               Company that an appropriate prospectus amendment or supplement or
               post-effective amendment has been filed; provided, however, that
               in such instance the Company shall use its best efforts to
               promptly file such prospectus amendment or supplement or
               post-effective amendment and the period during which such holders
               shall be so required to suspend sales hereunder shall not exceed
               30 days.

                    (5) use its best efforts to obtain the withdrawal of any
               order suspending the effectiveness of such registration statement
               or any post-effective amendment thereto at the earliest
               practicable date.

                    (6) enter into one or more underwriting agreements,
               engagement letters, agency agreements, "best efforts"
               underwriting agreements, lock-up agreements or similar
               agreements, as appropriate, and take such other actions in
               connection therewith as the Holders of securities registered
               pursuant hereto shall reasonably request in order to expedite or
               facilitate the disposition of such securities.

                    (7) whether or not an agreement of the type referred to in
               the preceding paragraph is entered into and whether or not any
               portion of the offering contemplated by such registration
               statement is an underwritten offering, (A) make such
               representations and warranties to the Holders of securities
               registered pursuant hereto and any underwriters thereof, in form,
               substance and scope as are customarily made in connection with
               any offering of equity securities pursuant to any appropriate
               agreement and/or to a registration statement filed on the form
               applicable to such registration statement, (B) obtain an opinion
               of counsel to the Company in customary form and covering such
               matters of the type customarily covered by such an opinion as the
               managing underwriters and Holders of securities registered
               pursuant hereto may reasonably request, (C) obtain a "cold"
               comfort letter or letters from the independent certified public
               accountants of the Company addressed to the Holders and the
               underwriters, if any, dated the effective date of such
               registration statement , the effective date of any prospectus
               supplement to the prospectus included in such registration
               statement or post- effective amendment to such registration
               statement and the date of any consummation of the sale of
               securities pursuant hereto, such letter or letters to be in
               customary form and covering such matters of the type customarily
               covered by letters of such type, (D) deliver such documents and
               certificates as may reasonably be requested by the holders of
               securities covered by such registration statement and the
               managing underwriter, if any, and (E) undertake such obligations
               relating to expense reimbursement, indemnification and
               contribution as are provided herein.

                                       16
<PAGE>   17

                    (8) otherwise use its best efforts to comply with all
               applicable rules and regulations of the SEC and otherwise take
               all actions as may reasonably be necessary to accomplish the
               intentions and purposes of this Section 3.5.

     3.6 Additional Covenants. The Company and Holder understand that the
possibility exists that in connection with the exercise (including certain
partial exercises) of this Warrant, each of the Company and Holder may be
required to make certain filings under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR"). The Company covenants that it shall file with
the Federal Trade Commission and the Department of Justice the notification
form, together with all necessary materials and information, to attempt to
secure the expiration or termination of all applicable waiting period(s)
relating to any or all exercises of the Warrant hereunder as required on its
part under HSR (each an "HSR Warrant Consent"), in the event the Company is
notified by the Holder that the Holder has been advised by its counsel of the
necessity of making such filings. This covenant is in addition to any covenants
to obtain the HSR Consent under the Purchase Agreement. The Company agrees and
covenants that it shall use good faith commercially reasonable efforts to obtain
the HSR Warrant Consent to allow the Holder to exercise the Warrant, and shall
inform the Holder of all material developments in the Company's efforts to
obtain the HSR Warrant Consent, and that simultaneously with the transmittal to
third parties or to governmental agencies, it shall provide the Holder with
copies of all correspondence, filings or other written documentation related to
efforts to obtain the HSR Warrant Consent. If, notwithstanding the Company's
satisfaction of its obligations above, the Company fails to obtain the HSR
Warrant Consent, then the Company shall issue Warrant Shares in the maximum
number of shares permissible without obtaining HSR consent and in lieu of
issuing the remaining Warrant Shares in Common Stock (meaning those that cannot
be issued without HSR Consent), the Company shall issue an equivalent number of
shares of a new class of non-voting common stock of the Company ("Non-Voting
Stock") which shall be identical in all respects to the Common Stock, except
that shares of Non-Voting Stock shall not have the right to vote on any matters
presented to the Company's stockholders, unless otherwise required by law; and
by their terms the Non-Voting Stock shall automatically, without notice or any
other further action on the part of either the Company or the Holder, be
converted into shares of Common Stock if they are transferred by the Holder.
Thus, if HSR Warrant Consent shall not have been obtained, the Holder shall
continue to have the right to exercise this Warrant, as otherwise allowed in
accordance with the terms hereof; provided, that upon such exercise, in lieu of
receiving Warrant Shares, the Holder shall receive an equal number of shares of
Non-Voting Stock, to the extent of the affected Warrant Shares (i.e., if a
portion of the Warrant Shares can then be issued without HSR Warrant Consent,
the Non-Voting Stock shall be issued only with respect to the remainder of the
Warrant Shares then exercised as evidenced by this Warrant). The Amendment of
the Restated Certificate of Incorporation of the Company adopted pursuant to
Section 3.4 of the Purchase Agreement and which is attached thereto as Exhibit
B-1 authorized a number of shares of Non-Voting Stock equal to or greater than
the number of Warrant Shares.

     The intent of this Section 3.6 is to place the Holder in the position most
nearly identical to the position that the Holder would have been in upon such
exercise if either the HSR Warrant Consent was not necessary or had been
obtained. The Company covenants that, at the cost and expense of the Holder, it
will use commercially reasonable efforts and continue to take all reasonable
steps to attempt to secure for the Holder the Warrant Shares or equivalents
which deliver to the Holder the voting rights and economic benefits bargained
for under the Purchase Agreement, which efforts shall include, but not be
limited to, appealing any decision of the Federal Trade Commission and/or
Justice Department which denies consent to the exercise in question if, in the
opinion of counsel to the Holder, there is a reasonable basis for such appeal.
In the event the Company is unable to issue the Non-Voting Stock as contemplated

                                       17
<PAGE>   18

herein, the Company covenants that it will use commercially reasonable efforts
to secure for the Holder the benefits set forth herein.

                                    ARTICLE 4
                                  MISCELLANEOUS

     4.1 Term. This Warrant is exercisable, in whole or in part, at any time and
from time to time on or before the Expiration Date set forth above.

     4.2 Legends. This Warrant shall be imprinted with a legend in substantially
the following form:

NEITHER THIS SECURITY NOR THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT
REQUIRED.

     4.3 Compliance with Securities Laws on Transfer. This Warrant may not be
transferred or assigned by the Company. This Warrant may not be transferred or
assigned by the Holder in whole or in part without compliance with applicable
federal and state securities laws by the transferor and the transferee
(including, without limitation, the delivery of investment representation
letters and legal opinions reasonably satisfactory to the Company, as reasonably
requested by the Company). The Company shall not require the Holder to provide
an opinion of counsel if the transfer is to (a) an Affiliate of the Holder; (b)
the respective successors of the Holder in a merger or consolidation; (c) the
purchaser of all or substantially all of the assets of Holder; (d) the
shareholders of the Holder in the event the Holder is liquidated or dissolved;
or (e) any other person or entity with respect to whom such transfer has been
approved by the Company. If requested by the Company, and if the transfer is
other than a circumstance described above, the Holder shall provide a reasonable
opinion of counsel in connection with the transfer of the Warrant Shares
pursuant to Rule 144.

     4.4 Transfer Procedure. Subject to the provisions of Section 4.3, the
Holder may transfer all or part of this Warrant or the Warrant Shares issuable
upon exercise of this Warrant (or the securities issuable, directly or
indirectly, upon conversion of the Warrant Shares, if any).

     4.5 Notices. All notices and other communications from the Company to the
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address set forth in the Purchase Agreement or as may have been
thereafter furnished to the Company or the Holder, as the case may be, in
writing by the Company or such the Holder from time to time.

     4.6 Waiver. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.

                                       18
<PAGE>   19

     4.7 Attorneys Fees. In the event of any dispute between the parties
concerning the terms and provisions of this Warrant, the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorney's fees.

     4.8 Governing Law; Jurisdiction and Venue. This Warrant shall be governed
by, construed and enforced in accordance with the internal laws of the State of
Delaware, excluding the conflict of laws provisions thereof that would otherwise
require the application of the law of any other jurisdiction. The Company
acknowledges and agrees that the state and federal courts sitting in the State
of Delaware shall have jurisdiction in any matter arising out of this Warrant,
and the Company hereby consents to such jurisdiction and agrees that the venue
of any such matter shall also be proper in such state and federal courts sitting
in the State of Delaware.

     Dated November 17, 1999.

                                  SOURCE MEDIA, INC.

                                  By:  /s/ Stephen W. Palley
                                     -------------------------------------------
                                           Stephen W. Palley
                                           President and Chief Executive Officer

                                       19

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