Document:

Exhibit 4-6

                  PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                                       and

                 WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee

                                    INDENTURE

                           Dated as of        , 2002

                          Providing for the Issuance of
              Deferrable Interest Subordinated Debentures in Series

                                    including

       _____ Deferrable Interest Junior Subordinated Debentures, Series __
<PAGE>

             Public Service Enterprise Group Incorporated Indenture
                 Certain Sections of this Indenture relating to
                         Sections 310 through 318 of the
                           Trust Indenture Act of 1939

Trust Indenture
  Act Section                                              Indenture Section
  -----------                                              -----------------
ss.310(a)(1)                ..............................    7.10
       (a)(2)               ..............................    7.10
       (a)(3)               ..............................    Not Applicable
       (a)(4)               ..............................    Not Applicable
       (a)(5)               ..............................    Not Applicable
       (b)                  ..............................    7.08; 7.10; 11.01
       (c)                  ..............................    Not Applicable
ss.311(a)                   ..............................    7.11
       (b)                  ..............................    7.11
       (c)                  ..............................    Not Applicable
ss.312(a)                   ..............................    2.07
       (b)                  ..............................    11.03
       (c)                  ..............................    11.03
ss.313(a)                   ..............................    7.06
       (b)(1)               ..............................    Not Applicable
       (b)(2)               ..............................    7.06
       (c)                  ..............................    7.06; 11.02
       (d)                  ..............................    7.06
ss.314(a)                   ..............................    4.03; 11.02
       (b)                  ..............................    Not Applicable
       (c)(1)               ..............................    2.02; 11.04; 11.05
       (c)(2)               ..............................    2.02; 11.04; 11.05
       (c)(3)               ..............................    Not Applicable
       (d)                  ..............................    Not Applicable
       (e)                  ..............................    11.05
       (f)                  ..............................    Not Applicable
ss.315(a)                   ..............................    7.01(b)
       (b)                  ..............................    7.05, 11.02
       (c)                  ..............................    7.01(a)
       (d)                  ..............................    7.01(c)
       (e)                  ..............................    6.11
ss.316(a)(1)(A)             ..............................    6.05
       (a)(1)(B)            ..............................    6.04
       (a)(2)               ..............................    Not Applicable
       (a)(last sentence)   ..............................    2.10
       (b)                  ..............................    6.07
       (c)                  ..............................    1.05
ss.317(a)(1)                ..............................    6.08
       (a)(2)               ..............................    6.09
       (b)                  ..............................    2.06
ss.318(a)                   ..............................    11.01
       (b)                  ..............................    Not Applicable
       (c)                  ..............................    11.01

----------
Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
      be a part of the Indenture.

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                                TABLE OF CONTENTS

                                                                            Page
                                    ARTICLE 1
                   DEFINITIONS AND INCORPORATION BY REFERENCE

1.01  Definitions..............................................................1
1.02  Other Definitions........................................................6
1.03  Incorporation by Reference of Trust Indenture Act........................6
1.04  Rules of Construction....................................................6
1.05  Acts of Holders and Holders of Preferred Securities......................7

                                    ARTICLE 2
                    THE DEBENTURES; THE SERIES __ DEBENTURES

2.01  Issue of Debentures Generally............................................8
2.02  Terms and Form of the Series __ Debentures...............................9
2.03  Payment of Principal and Interest.......................................10
2.04  Execution, Authentication and Delivery..................................12
2.05  Registrar and Paying Agent..............................................13
2.06  Paying Agent to Hold Money in Trust.....................................14
2.07  Debentureholder Lists...................................................15
2.08  Transfer and Exchange...................................................15
2.09  Replacement Debentures..................................................15
2.10  Outstanding Debentures; Determinations of Holders' Action...............16
2.11  Temporary Debentures....................................................17
2.12  Book-Entry System.......................................................17
2.13  Cancellation............................................................18

                                    ARTICLE 3
                                   REDEMPTION

3.01  Redemption: Notice to Trustee...........................................19
3.02  Selection of Debentures to be Redeemed..................................19
3.03  Notice of Redemption....................................................19
3.04  Effect of Notice of Redemption..........................................20
3.05  Deposit of Redemption Price.............................................20
3.06  Debentures Redeemed in Part.............................................21

                                    ARTICLE 4
                                    COVENANTS

4.01  Payment of Debentures...................................................21
4.02  Prohibition Against Dividends. etc......................................22
4.03  SEC Reports.............................................................22
4.04  Compliance Certificates.................................................22

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4.05  Further Instruments and Acts............................................23
4.06  Payments for Consents...................................................23
4.07  Payment of Expenses of Trust I..........................................23

                               ARTICLE 5 ARTICLE 5

5.01  When the Company May Merge, Etc.........................................23

                                    ARTICLE 6
                              DEFAULTS AND REMEDIES

6.01  Events of Default.......................................................24
6.02  Acceleration............................................................25
6.03  Other Remedies..........................................................26
6.04  Waiver of Past Defaults.................................................26
6.05  Control by Majority.....................................................27
6.06  Limitation on Suits.....................................................27
6.07  Rights of Holders to Receive Payment....................................28
6.08  Collection Suit by the Trustee..........................................28
6.09  The Trustee May File Proofs of Claim....................................28
6.10  Priorities..............................................................29
6.11  Undertaking for Costs...................................................29
6.12  Waiver of Stay; Extension or Usury Laws.................................29

                                    ARTICLE 7
                                   THE TRUSTEE

7.01  Duties of the Trustee...................................................30
7.02  Rights of the Trustee...................................................31
7.03  Individual Rights of the Trustee........................................32
7.04  The Trustee's Disclaimer................................................32
7.05  Notice of Defaults......................................................32
7.06  Reports by Trustee to Holders...........................................33
7.07  Compensation and Indemnity..............................................33
7.08  Replacement of Trustee..................................................34
7.09  Successor Trustee by Merger.............................................34
7.10  Eligibility: Disqualification...........................................35
7.11  Preferential Collection of Claims Against the Company...................35

                                    ARTICLE 8
                    SATISFACTION AND DISCHARGE OF INDENTURE;
               DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS

8.01  Satisfaction and Discharge of Indenture.................................35
8.02  Application by Trustee of Funds Deposited for Payment of Debentures.....36
8.03  Repayment of Moneys Held by Paying Agent................................36

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8.04  Return of Moneys Held by the Trustee and Paying Agent Unclaimed
      for Three Years.........................................................37

                                    ARTICLE 9
                                   AMENDMENTS

9.01  Without Consent of Holders..............................................37
9.02  With Consent of Holders.................................................37
9.03  Compliance with Trust Indenture Act.....................................39
9.04  Revocation and Effect of Consents; Waivers and Actions..................39
9.05  Notation on or Exchange of Debentures...................................39
9.06  Trustee to Execute Supplemental Indentures..............................39
9.07  Effect of Supplemental Indentures.......................................40

                                   ARTICLE 10
                                  SUBORDINATION

10.01 Debentures Subordinated to Senior Indebtedness..........................40
10.02 Priority and Payment of Proceeds in Certain Events:
      Remedies Standstill.....................................................40
10.03 Payments which May Be Made Prior to Notice..............................41
10.04 Rights of Holders of Senior Indebtedness Not to Be Impaired.............41
10.05 Trustee May Take Action to Effectuate Subordination.....................42
10.06 Subrogation.............................................................42
10.07 Obligations of Company Unconditional: Reinstatement.....................42
10.08 Trustee Entitled to Assume Payments Not Prohibited in
      Absence of Notice.......................................................43
10.09 Right of Trustee to Hold Senior Indebtedness............................44

                                   ARTICLE 11
                                  MISCELLANEOUS

11.01 Trust Indenture Act Controls............................................44
11.02 Notices. 44
11.03 Communication by Holders with Other Holders.............................45
11.04 Certificate and Opinion as to Conditions Precedent......................45
11.05 Statements Required in Certificate or Opinion...........................45
11.06 Severability Clause.....................................................46
11.07 Rules by Trustee, Paying Agent and Registrar............................46
11.08 Legal Holidays..........................................................46
11.09 Governing Law...........................................................46
11.10 No Recourse Against Others..............................................46
11.11 Successors..............................................................47
11.12 Multiple Original Copies of this Indenture..............................47
11.13 No Adverse Interpretation of Other Agreements...........................47
11.14 Table of Contents: Headings. Etc........................................47
11.15 Benefits of the Indenture...............................................47

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      INDENTURE, dated as of    , 2002, by and between Public Service Enterprise
Group Incorporated, a corporation duly organized and existing under the laws of
the State of New Jersey (the "Company"), and Wachovia Bank, National
Association, a national banking association duly organized and existing under
the laws of the United States of America, as trustee (the "Trustee").

      WHEREAS, the Company may from time to time create or establish one or more
statutory business trusts for the purpose of issuing undivided beneficial
interests in the assets thereof (the "Trust Securities") and using the proceeds
thereof to acquire the Company's Deferrable Interest Junior Subordinated
Debentures.

      WHEREAS, pursuant to an Amended and Restated Trust Agreement dated as of
________________, 2002 (the "Trust I Agreement") among the Company, as
depositor, Wachovia Bank, National Association, as Property Trustee (the
"Property Trustee I"), the Delaware Trustee named therein and the Administrative
Trustee named therein, there has been declared and established PSEG Funding
Trust I, a Delaware business trust ("Trust I").

      WHEREAS, Trust I intends to issue its Trust Securities, including its
__________________________ Preferred Securities, representing undivided
beneficial interests in the assets of Trust I, having a liquidation amount of
$__ per security and having terms provided therefor in the Trust I Agreement
(the "Trust I Preferred Securities").

      WHEREAS, the Company has authorized the issuance of its ____ Deferrable
Interest Junior Subordinated Debentures, Series __ (the "Series __ Debentures")
to be purchased by Trust I with the proceeds from the issuance and sale of its
Trust Securities, and to provide therefor, the Company has duly authorized the
execution and delivery of this Indenture.

      WHEREAS, all things necessary to make the securities issued hereunder,
when duly issued and executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company, and to make this Indenture a
valid and binding agreement of the Company, enforceable in accordance with its
terms, have been done.

      NOW THEREFORE:

      Each of the Company and the Trustee, intending to be legally bound hereby,
agrees as follows for the benefit of the other party and for the equal and
ratable benefit of the Holders (as hereinafter defined) of the securities issued
hereunder, including the Series __ Debentures:

                                   ARTICLE 1
                   DEFINITIONS AND INCORPORATION BY REFERENCE

      1.01 Definitions.

      "Affiliate" of any specified Person means any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person. When used with respect to any Person,
"control" means the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership

                                       1
<PAGE>

of voting securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.

      "Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.

      "Board Resolution" means (i) a copy of a resolution certified by the
Secretary or the Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification and delivered to the Trustee or (ii) a certificate signed by the
authorized officer or officers to whom the Board of Directors has delegated its
authority, and in each case, delivered to the Trustee.

      "Business Day" means any day that is not a Saturday, a Sunday or a day on
which banking institutions in The City of New York or the State of New Jersey
are authorized or required by law or executive order to close.

      "Capital Stock" means any and all shares, interests, rights to purchase,
warrants, options, participation or other equivalents of or interests in
(however designated) corporate stock, including limited liability company
membership interests.

      "Common Securities" means the Common Trust Securities of a Trust,
representing undivided beneficial interests in the assets of such Trust.

      "Company" means Public Service Enterprise Group Incorporated, a New Jersey
corporation, or any permitted successor thereto.

      "Company Order" means a written request or order signed in the name of the
Company by an Officer of the Company and delivered to the Trustee.

      "Debentureholder" or "Holder" means a Person in whose name a Debenture is
registered on the Registrar's books.

      "Debentures" means any of the securities of any series issued,
authenticated and delivered under this Indenture.

      "Default" means any event which is, or after notice or passage of time, or
both, would be, an Event of Default pursuant to Section 6.01 hereof.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended.

      "Extension Period", with respect to any series of Debentures, means the
period during which the Company may elect to extend the interest payment period
on such series of the Debentures pursuant to Section 4.01(b) hereof; provided
that no Extension Period shall extend beyond the Stated Maturity Date or the
Redemption Date of any Debenture of such series.

      "GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified

                                       2
<PAGE>

Public Accountants and statements and pronouncements of the Financial Accounting
Standards Board.

      "Indenture" means this indenture, as amended or supplemented from time to
time in accordance with the terms hereof, including the provisions of the TIA
that are deemed to be a part hereof.

      "Interest Payment Date", when used with respect to the Debentures of any
series, means the stated maturity of any installment of interest on the
Debentures of that series.

      "Issue Date", with respect to a series of Debentures, means the date on
which the Debentures of such series are originally issued.

      "Officer" means, with respect to any corporation, the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the
Treasurer, any Assistant Treasurer, the Secretary or any Assistant Secretary of
such corporation.

      "Officer's Certificate" means a written certificate containing the
applicable information specified in Sections 11.04 and 11.05 hereof, signed in
the name of the Company by any one of its Officers, and delivered to the
Trustee.

      "Opinion of Counsel" means a written opinion containing the applicable
information specified in Sections 11.04 and 11.05 hereof, by legal counsel who
is reasonably acceptable to the Trustee.

      "Paying Agent" means any Person authorized by the Company to pay the
principal of and premium, if any, and interest on the Debentures of any series
on behalf of the Company.

      "Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision thereof or any
other entity.

      "Predecessor Debentures" of any particular Debenture means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by such
particular Debenture; and for purposes of this definition, any Debenture
authenticated and delivered under Section 2.09 hereof in exchange for or in lieu
of a mutilated, destroyed, lost or stolen Debenture shall be deemed to evidence
the same debt as the mutilated, destroyed, lost or stolen Debenture.

      "Preferred Securities" means the [Trust Preferred Securities] of a Trust,
representing undivided beneficial interests in the assets of such Trust.

      "Property Trustee I" means Wachovia Bank, National Association, (formerly
known as First Union National Bank) and its successors and assigns, as property
trustee under the Trust I Agreement.

                                       3
<PAGE>

      "Record Date", with respect to any series of the Debentures, means the
Regular Record Date, the Special Record Date or any date set to determine the
Holders of Debentures of such series entitled to vote, consent, make a request
or exercise any other right associated with such Debentures.

      "Redemption Date", with respect to the Debentures of any series to be
redeemed, means the date specified for the redemption thereof in accordance with
the terms thereof and pursuant to Article 3 of this Indenture.

      "Redemption Price", with respect to the Debentures of any series to be
redeemed, means the price at which such Debenture is to be redeemed in
accordance with the terms thereof and pursuant to Article 3 of this Indenture.

      "Regular Record Date", with respect to an interest payment on the
Debentures of a series, means the date set forth in this Indenture or the
supplemental indenture creating such series for the determination of Holders
entitled to receive payment of interest on the next succeeding Interest Payment
Date.

      "Responsible Officer", when used with respect to the Trustee, means any
Vice President, any Assistant Vice President, any Trust Officer, or Assistant
Trust Officer or any other officer of the Corporate Trust Department of the
Trustee customarily performing functions similar to those performed by any of
the above designated officers and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of that officer's knowledge of and familiarity with the particular
subject.

      "SEC" or "Commission" means the Securities and Exchange Commission.

      "Securities Act" means the Securities Act of 1933, amended.

      "Senior Indebtedness" means the principal of and premium, if any, and
unpaid interest on (i) our indebtedness (including indebtedness of others
guaranteed by us), whether outstanding on the date hereof or hereafter created,
incurred, assumed or guaranteed, for money borrowed, unless in the instrument
creating or evidencing the same or pursuant to which the same is outstanding it
is provided that such indebtedness is not senior or prior in right of payment to
the Debentures, and (ii) renewals, extensions, modifications and refundings of
any such indebtedness.

      "Series __ Debentures" means any of the Company's ____Deferrable Interest
Subordinated Debentures, Series __ issued under this Indenture.

      "Special Record Date" for the payment of any Defaulted Interest on the
Debentures of any series means the date determined pursuant to Section 2.03
hereof.

      "Stated Maturity Date", with respect to any Debenture, means the date
specified for such Debenture as the fixed date on which the principal of such
Debenture is due and payable.

                                       4
<PAGE>

      "Subsidiary" means any corporation, association, partnership, trust or
other business entity of which more than 50% of the total voting power of shares
of Capital Stock or other interests (including partnership interests) entitled
(without regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof is at the time owned or controlled,
directly or indirectly, by (i) the Company, (ii) the Company and one or more
Subsidiaries, or (iii) one or more Subsidiaries.

      "TIA" means the Trust Indenture Act of 1939, as amended and as in effect
on the date of this Indenture; provided, however, that if the TIA is amended
after such date, TIA means, to the extent required by any such amendment, the
TIA as so amended.

      "Trust" means any statutory business trust created by the Company to issue
Trust Securities and to use the proceeds from the sale thereof to purchase
Debentures.

      "Trust I" means PSEG Funding Trust I, a Delaware statutory business trust
created under the Delaware Business Trust Act, Chapter 38 of Title 12 of the
Delaware Code, 12 Del. C.ss. 3801, et seq.

      "Trust I Agreement" means the Amended and Restated Trust Agreement dated
as of ___________, 2002, among the Company, as Depositor, Wachovia Bank,
National Association (formerly known as First Union National Bank), as Property
Trustee, the Delaware Trustee named therein and the Administrative Trustee named
therein, as the same may be amended and modified from time to time.

      "Trust I Preferred Securities Guarantee Agreement" means the Guarantee
Agreement dated as of _______, 2002 from the Company, as guarantor, to Wachovia
Bank, National Association, as guarantee trustee, with respect to the Trust I
Preferred Securities.

      "Trust I Preferred Securities" means the undivided beneficial interests in
the assets of Trust I, having a liquidation amount of $__ per security and
having terms provided therefor in the Trust I Agreement.

      "Trust Securities" means the undivided beneficial interests in the assets
of a Trust and includes the Preferred Securities and the Common Securities of
such Trust.

      "Trustee" means Wachovia Bank, National Association, until a successor
replaces it pursuant to the applicable provisions of this Indenture and,
thereafter, shall mean such successor.

      "U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable at the issuer's option.

                                       5
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      "Wholly Owned Subsidiary" means a Subsidiary all the Capital Stock of
which (other than directors' qualifying shares) is owned by the Company or
another Wholly Owned Subsidiary.

      1.02 Other Definitions.

TERM                                                       DEFINED IN SECTION
----                                                       ------------------
"Act".....................................................        1.05
"Bankruptcy Law"..........................................        6.01
"Custodian"...............................................        6.01
"Defaulted Interest"......................................        2.03
"Depositary"..............................................        2.12
"Global Debenture"........................................        2.12
"Legal Holiday"...........................................        11.08
"Notice of Default".......................................        6.01
"Register"................................................        2.05
"Registrar"...............................................        2.05
"Successor"...............................................        5.01

      1.03 Incorporation by Reference of Trust Indenture Act.

      Whenever this Indenture refers to a provision of the TIA, such provision
is incorporated by reference in and made a part of this Indenture. The following
TIA terms used in this Indenture have the following meanings:

      "indenture securities" means the Debentures.

      "indenture security holder" means a Debentureholder or Holder.

      "indenture to be qualified" means this Indenture.

      "indenture trustee" or "institutional trustee" means the Trustee.

      "obligor" on the indenture securities means the Company and any other
obligor on the Debentures.

      All other TIA terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.

      1.04 Rules of Construction.

      Unless the context otherwise requires:

      (1) Each capitalized term has the meaning assigned to it;

      (2) an accounting term not otherwise defined has the meaning assigned to
it in accordance with GAAP;

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      (3) "or" is not exclusive;

      (4) "including" means including, without limitation;

      (5) words in the singular include the plural, and words in the plural
include the singular; and

      (6) "herein," "hereof" and other words of similar import refer to this
Indenture as a whole and not to any particular Article, Section or other
subdivision.

      1.05 Acts of Holders and Holders of Preferred Securities.

      (a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Indenture to be given or taken by Holders or by
holders of Preferred Securities may be embodied in and evidenced by one or more
instruments of substantially similar tenor signed by such Holders or holders of
Preferred Securities, as applicable, in person or by an agent duly appointed in
writing and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of Holders or holders of
Preferred Securities signing such instrument or instruments. Proof of execution
of any such instrument or of a writing appointing any such agent shall be
sufficient for any purpose of this Indenture and conclusive in favor of the
Trustee and the Company, if made in the manner provided in this Section.

      (b) The fact and date of the execution by any Person of any such
instrument or writing may be proved in any manner which the Trustee deems
sufficient.

      (c) The ownership of Debentures shall be proved by the Register.

      (d) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder of any Debenture shall bind every future Holder of
the same Debenture and the Holder of every Debenture issued upon the
registration transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Debenture.

      (e) If the Company solicits from the Holders any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a resolution of its Board of Directors, fix in
advance a Record Date for the determination of Holders entitled to give such
request, demand, authorization, direction, notice, consent, waiver or other Act,
but the Company shall have no obligation to do so. If such a Record Date is
fixed, such request, demand, authorization, direction, notice, consent, waiver
or other Act may be given before or after such Record Date, but only Holders of
record at the close of business on such Record Date shall be deemed to be
Holders for the purposes of determining whether Holders of the requisite
proportion of outstanding Debentures have authorized or agreed

                                       7
<PAGE>

or consented to such request, demand, authorization, direction, notice, consent,
waiver or other Act, and for that purpose the outstanding Debentures shall be
computed as of such Record Date.

                                   ARTICLE 2
                    THE DEBENTURES; THE SERIES __ DEBENTURES

      2.01 Issue of Debentures Generally.

      The aggregate principal amount of any series of Debentures which may be
authenticated and delivered under this Indenture is limited to the aggregate
liquidation amount of the Trust Securities of the Trust purchasing such
Debentures.

      The Debentures may be issued in one or more series as from time to time
shall be authorized by the Board of Directors.

      The Debentures of each series and the Trustee's Certificate of
Authentication shall be substantially in the forms to be attached as exhibits to
the Indenture or supplemental indenture creating such series, but in the case of
any series of Debentures other than the Series __ Debentures, with such
inclusions, omissions and variations as to letters, numbers or other marks of
identification or designation and such legends or endorsements printed,
lithographed or engraved thereon as the Company may deem appropriate and as are
not inconsistent with the provisions of this Indenture, or as may be required to
comply with any law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any securities exchange on which such Debentures may
be listed, or to conform to usage.

      Other series of Debentures may differ from the Series __ Debentures, and
as and between series, in respect of any or all of the following matters:

      (a) designation;

      (b) Stated Maturity Date or Dates, which may be serial and the Company's
option, if any, to change the Stated Maturity Date or Dates;

      (c) interest rate or method of determination of the interest rate;

      (d) the basis upon which interest shall be computed if other than a
360-day year composed of twelve 30-day months;

      (e) Interest Payment Dates and the Regular Record Dates therefor;

      (f) the maximum duration of the Extension Period;

      (g) Issue Date or Dates and interest accrual provisions;

      (h) authorized denominations;

      (i) the place or places for the payment of principal (and premium, if any)
and interest;

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      (j) the aggregate principal amount of Debentures of such series which may
be issued;

      (k) the optional and mandatory redemption provisions, if any;

      (l) provisions, if any, for any sinking or analogous fund; and

      (m) any other provisions expressing or referring to the terms and
conditions upon which the Debentures of such series are to be issued under this
Indenture which are not in conflict with the provisions of this Indenture;

in each case as determined by the Board of Directors and specified in the
supplemental indenture creating such series.

      2.02 Terms and Form of the Series __ Debentures.

      (a) The Series __ Debentures shall be designated "Public Service
Enterprise Group Incorporated, ____ Deferrable Interest Junior Subordinated
Debentures, Series __." The Series __ Debentures and the Trustee's Certificate
of Authentication shall be substantially in the form of Exhibit A attached
hereto. The Series __ Debentures shall initially be issued as global Debentures
in accordance with the provisions of Section 2.12 of this Indenture, with The
Depository Trust Company as Depositary. The terms and provisions contained in
the Series __ Debentures shall constitute, and are hereby expressly made, a part
of this Indenture. The Company and the Trustee, by their execution and delivery
of this Indenture, expressly agree to such terms and provisions and to be bound
thereby.

      (b) The aggregate principal amount of Series __ Debentures outstanding at
any time may not exceed $___________ except as provided in Section 2.09 hereof.
The Series __ Debentures shall be authenticated and delivered upon delivery to
the Trustee of items specified in Section 2.04(d) hereof.

      (c) The Stated Maturity Date of the Series __ Debentures is
_________________.

      (d) The interest rate of the Series __ Debentures shall be as follows:
_______ __________________________. The Interest Payment Dates for the Series __
Debentures shall be ________, _________, ___________ and ______________of each
year, commencing _________, 2002. In the event that any date on which interest
is payable on the Series __ Debentures is not a Business Day, then payment of
interest payable on such date will be made on the next day which is a Business
Day (and without any interest or other payment in respect of any such delay),
except that if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date. The Regular Record Date
for each Interest Payment Date for the Series __ Debentures shall be the __ day
(whether or not a Business Day) preceding the applicable Interest Payment Date,
provided that if Trust I is the sole Holder of the Series __ Debentures or the
Series __ Debentures are issued in book-entry-only form, the Regular Record

                                       9
<PAGE>

Date shall be the close of business on the Business Day immediately preceding
such Interest Payment Date.

      Each Series __ Debenture shall bear interest from its Issue Date or from
the most recent Interest Payment Date to which interest has been paid or duly
provided for with respect to such Series __ Debenture; except that, so long as
there is no existing Defaulted Interest (as defined in Section 2.03 hereof) or
Extension Period on the Series __ Debentures, any Series __ Debenture
authenticated by the Trustee between the Regular Record Date for any Interest
Payment Date and such Interest Payment Date shall bear interest from such
Interest Payment Date.

      Overdue principal of and interest on any Series __ Debenture and interest
which has been deferred pursuant to Section 4.01(b) hereof shall bear interest
(to the extent that the payment of such interest shall be legally enforceable)
at a rate per annum equal to the interest rate per annum payable on such Series
__ Debenture.

      (e) The Series __ Debentures shall be issuable only in registered form
without coupons and only in denominations of $__ and any integral multiple
thereof.

      (f) The maximum Extension Period for the Series __ Debentures shall be
five years consisting of __ consecutive periods.

      2.03 Payment of Principal and Interest.

      Unless otherwise specified pursuant to Section 2.01(d), interest on the
Debentures shall be computed on the basis of a 360-day year composed of twelve
30-day months, and for any period shorter than thirty days, interest will be
computed on the basis of the actual number of days elapsed in such period.

      Unless otherwise provided with respect to a series of Debentures,

            (i) the principal and Redemption Price of and interest on each
            Debenture shall be payable in such coin or currency of the United
            States of America as at the time of payment is legal tender for the
            payment of public and private debts;

            (ii) the principal and Redemption Price of any Debenture and
            interest payable on the Stated Maturity Date (if other than an
            Interest Payment Date) or Redemption Date shall be payable in
            immediately available funds upon surrender of such Debenture at the
            office or agency of any Paying Agent therefor; and

            (iii) interest on any Debenture shall be paid on each Interest
            Payment Date therefor to the Holder thereof at the close of business
            on the Record Date therefor, such interest to be payable by check
            mailed to the address of the Person entitled thereto as such address
            appears on the Register; provided however, that (1) at the written
            request of the Holder of at least

                                       10
<PAGE>

            $10,000,000 aggregate principal amount of Debentures received by the
            Registrar not later than the Regular Record Date for such Interest
            Payment Date, interest accrued on such Debenture will be payable by
            wire transfer within the continental United States in immediately
            available funds to the bank account number of such Holder specified
            in such request and entered on the Register by the Registrar and (2)
            payments made in respect of global Debentures shall be made in
            immediately available funds to the Depositary.

      Except as specified pursuant to Section 2.01 or Section 4.01(b) hereof,
interest on any Debenture which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Debenture (or one or more Predecessor Debentures) is registered at the
close of business on the Regular Record Date for such interest. Any interest on
any Debenture which is payable, but is not punctually paid or duly provided for,
on any Interest Payment Date (herein called "Defaulted Interest") shall
forthwith cease to be payable to the Holder on the relevant Regular Record Date
by virtue of having been such Holder, and such Defaulted Interest may be paid by
the Company, at its election in each case, as provided in Clause (1) and (2)
below:

            (1) The Company may elect to make payment of any Defaulted Interest
      to the Persons in whose names the Debentures (or their respective
      Predecessor Debentures) are registered at the close of business on a
      Special Record Date for the payment of such Defaulted Interest, which
      shall be fixed in the following manner. The Company shall, not less than
      15 Business Days prior to the date of the proposed payment, notify the
      Trustee and the Paying Agent in writing of the amount of Defaulted
      Interest proposed to be paid on each Debenture and the date of the
      proposed payment, and at the same time the Company shall deposit with the
      Paying Agent an amount of money equal to the aggregate amount proposed to
      be paid in respect of such Defaulted Interest or shall make arrangements
      satisfactory to the Paying Agent for such deposit prior to the date of the
      proposed payment, such money when deposited to be held in trust for the
      benefit of the Persons entitled to such Defaulted Interest as in this
      Clause provided. The Special Record Date for the payment of such Defaulted
      Interest shall be the close of business on the tenth calendar day prior to
      the date of the proposed payment. The Trustee shall, in the name and at
      the expense of the Company, cause notice of the proposed payment of such
      Defaulted Interest and the Special Record Date therefor to be given to the
      Holders thereof, not less than 7 calendar days prior to such Special
      Record Date. Notice of the proposed payment of such Defaulted Interest and
      the Special Record Date therefor having been given, such Defaulted
      Interest shall be paid to the Persons in whose names the Debentures (or
      their respective Predecessor Debentures) are registered at the close of
      business on such Special Record Date and shall no longer be payable
      pursuant to the following Clause (2).

            (2) The Company may make payment of any Defaulted Interest on the
      Debentures in any other lawful manner not inconsistent with the
      requirements of any securities exchange on which such Debentures may be
      listed, and upon such notice as may be required by such exchange, if,
      after notice given by the Company to the Trustee

                                       11
<PAGE>

      and the Paying Agent of the proposed payment pursuant to this Clause, such
      manner of payment shall be deemed practicable by the Paying Agent.

      Subject to the foregoing provisions of this Section, each Debenture
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Debenture shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Debenture.

      2.04 Execution, Authentication and Delivery.

      (a) The Debentures shall be executed on behalf of the Company by its
Chairman, its President or one of its Vice Presidents, under its corporate seal
imprinted or reproduced thereon and attested by its Secretary or one of its
Assistant Secretaries. The signature of any such Officer on the Debentures may
be manual or facsimile.

      (b) Debentures bearing the manual or facsimile signatures of individuals
who were at any time the proper Officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Debentures or did not
hold such offices at the date of such Debentures.

      (c) No Debenture shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Debenture a
Certificate of Authentication duly executed by the Trustee by manual signature
of a Responsible Officer, and such Certificate of Authentication upon any
Debenture shall be conclusive evidence, and the only evidence, that such
Debenture has been duly authenticated and made available for delivery hereunder.

      (d) The Trustee shall authenticate and deliver Debentures of a series, for
original issue, at one time or from time to time in accordance with the Company
Order referred to below, upon receipt by the Trustee of:

            (1) a Board Resolution approving the form or forms and terms of such
      Debentures;

            (2) a Company Order requesting the authentication and delivery of
      such Debentures and stating the identity of the Trust and the aggregate
      liquidation amount of the Trust Securities to be issued concurrently with
      such Debentures;

            (3) unless previously delivered, this Indenture or a supplemental
      indenture hereto setting forth the form of such Debentures and
      establishing the terms thereof;

            (4) the Debentures of such series, executed on behalf of the Company
      in accordance with Section 2.04(a) hereof;

            (5) an Opinion of Counsel to the effect that:

                                       12
<PAGE>

                  (i) the form or forms of such Debentures have been duly
            authorized by the Company and have been established in conformity
            with the provisions of this Indenture; and

                  (ii) such Debentures, when authenticated and delivered by the
            Trustee and issued and delivered by the Company in the manner and
            subject to any conditions specified in such Opinion of Counsel, will
            have been duly issued under this Indenture and will constitute valid
            and legally binding obligations of the Company, entitled to the
            benefits provided by this Indenture, and enforceable in accordance
            with their terms, subject, as to enforcement to laws relating to or
            affecting generally the enforcement of creditors' rights, including,
            without limitation, bankruptcy and insolvency laws and to general
            principles of equity (regardless of whether such enforceability is
            considered in a proceeding in equity or at law); and

                  (iii) that this Indenture or any supplemental indenture
            referred to in clause (3) above has been duly authorized, executed
            and delivered by the Company and is a valid instrument legally
            binding upon the Company, enforceable in accordance with its terms,
            subject as to enforcement to laws relating to or affecting
            creditors' rights, including, without limitation, bankruptcy and
            insolvency laws and to general principles of equity (regardless of
            whether such enforceability is considered in a proceeding in equity
            or at law); and

                  (iv) that all consents, approvals and orders of any
            commission, governmental authority or agency required in connection
            with the issuance and delivery of such Debentures have been
            obtained.

      (e) an Officer's Certificate certifying that no Default or Event of
Default has occurred and is continuing.

      (f) The Trustee shall act as the initial authenticating agent. Thereafter,
the Trustee may appoint an authenticating agent. An authenticating agent may
authenticate Debentures whenever the Trustee may do so. Each reference in this
Indenture to authentication by the Trustee includes authentication by such
agent. The Trustee shall pay any authenticating agent appointed by the Trustee
reasonable compensation for its services and the Trustee shall be reimbursed for
such payment by the Company pursuant to Section 7.07 hereof. The provisions set
forth in Section 7.02, Section 7.03, Section 7.04 and Section 7.07 hereof shall
be applicable to any authenticating agent.

      2.05 Registrar and Paying Agent.

      The Company shall maintain or cause to be maintained, within or outside
the State of New Jersey, an office or agency where the Debentures may be
presented for registration of transfer or for exchange ("Registrar"), a Paying
Agent at whose office the Debentures may be presented or surrendered for
payment, and an office or agency where notices and demands to or upon the
Company in respect of the Debentures and this Indenture may be served. The
Registrar shall keep a register (the "Register") of the Debentures and of their
transfer and exchange. The

                                       13
<PAGE>

Company may have one or more co-Registrars and one or more additional Paying
Agents. The term Registrar includes any additional registrar and the term Paying
Agent includes any additional paying agent. The corporate office of the Trustee
in Morristown, New Jersey, shall initially be the Registrar for the Series __
Debentures and agent for service of notice or demands on the Company, and the
Trustee shall initially be the Paying Agent for the Series __ Debentures.

      The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-Registrar (if not the Company or the Trustee or an
affiliate of the Trustee). The agreement shall implement the provisions of this
Indenture that relate to such agent. The Company shall give prompt written
notice to the Trustee and to the Holders of any change of location of such
office or agency. If at any time the Company shall fail to maintain or cause to
be maintained any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the address of the Trustee set forth in Section
11.02 hereof. The Company shall notify the Trustee of the name and address of
any such agent. If the Company fails to maintain a Registrar, Paying Agent or
agent for service of notices or demands, the Trustee shall act as such and shall
be entitled to appropriate compensation therefor pursuant to Section 7.07
hereof. The Company or any Affiliate of the Company may act Paying Agent,
Registrar or co-Registrar or agent for service of notices and demands.

      The Company may also from time to time designate one or more other offices
or agencies where the Debentures may be presented or surrendered for any or all
such purposes and may from time to time rescind such designations. The Company
will give prompt written notice to the Trustee and to the Holders of any such
designation or rescission and of any change in location of any such other office
or agency.

      2.06 Paying Agent to Hold Money in Trust.

      Except as otherwise provided herein, prior to 10:00 a.m. on each due date
of the principal of and premium (if any) and interest on any Debenture, the
Company shall deposit with the Paying Agent a sum of money sufficient to pay
such principal, premium (if any) and interest so becoming due. The Company shall
require each Paying Agent (other than the Trustee or the Company) to agree in
writing that such Paying Agent shall hold in trust for the benefit of Holders or
the Trustee all money held by the Paying Agent for the payment of principal of
and premium (if any) and interest on the Debentures and shall notify the Trustee
of any Default by the Company in making any such payment. At any time during the
continuance of any such Default, the Paying Agent shall, upon the request of the
Trustee, forthwith pay to the Trustee all money so held in trust and account for
any money disbursed by it. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee and to account for any money disbursed
by it. Upon doing so, the Paying Agent shall have no further liability for the
money so paid over to the Trustee. If the Company, a Subsidiary or an Affiliate
of either of them acts as Paying Agent, it shall segregate the money held by it
as Paying Agent and hold it as a separate trust fund.

                                       14
<PAGE>

      2.07 Debentureholder Lists.

      The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Debentureholders. If the Trustee is not the Registrar, the Company shall cause
to be furnished to the Trustee on or before the Record Date for each Interest
Payment Date and at such other times as the Trustee may request in writing,
within five Business Days of such request, a list, in such form as the Trustee
may reasonably require of the names and addresses of Debentureholders.

      2.08 Transfer and Exchange.

      When Debentures are presented to the Registrar or a co-Registrar with a
request to register the transfer or to exchange them for an equal principal
amount of Debentures of the same series of other authorized denominations, the
Registrar shall register the transfer or make the exchange as requested if its
reasonable requirements for such transactions are met. To permit registrations
of transfer and exchanges, the Company shall execute and the Trustee shall
authenticate Debentures, all at the Registrar's request.

      Every Debenture presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Registrar duly executed by the Holder or his attorney duly
authorized in writing.

      The Company shall not require payment of a service charge for any
registration of transfer or exchange of Debentures, but the Company may require
payment of a sum sufficient to pay all taxes, assessments or other governmental
charges that may be imposed in connection with the registration of the transfer
or exchange of Debentures from the Debentureholder requesting such transfer or
exchange (other than any exchange of a temporary Debenture for a definitive
Debenture not involving any change in ownership).

      The Company shall not be required to make, and the Registrar need not
register, transfers or exchanges of (a) any Debenture for a period beginning at
the opening of business 15 days before the mailing of a notice of redemption of
Debentures and ending at the close of business on the day of such mailing or (b)
any Debenture selected, called or being called for redemption, except, in the
case of any Debenture to be redeemed in part, the portion thereof not to be
redeemed.

      2.09 Replacement Debentures.

      If (a) any mutilated Debenture is surrendered to the Company or the
Trustee, or (b) the Company and the Trustee receive evidence to their
satisfaction of the destruction, loss or theft of any Debenture, and there is
delivered to the Company and the Trustee such security or indemnity as may be
required by them to save each of them harmless, then, in the absence of notice
to the Company or the Trustee that such Debenture has been acquired by a bona
fide purchaser, the Company shall execute in exchange for any such mutilated
Debenture or in lieu of any such destroyed, lost or stolen Debenture, a new
Debenture of the same series and of like

                                       15
<PAGE>

tenor and principal amount, bearing a number not contemporaneously outstanding,
and the Trustee shall authenticate and make such new Debenture available for
delivery.

      In case any such mutilated, destroyed, lost or stolen Debenture has become
or is about to become due and payable, or is about to be redeemed by the Company
pursuant to Article 3 hereof, the Company in its discretion may, instead of
issuing a new Debenture, pay or purchase such Debenture, as the case may be.
Upon the issuance of any new Debentures under this Section 2.09, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of the Trustee) in connection therewith.

      Every new Debenture issued pursuant to this Section 2.09 in lieu of any
mutilated, destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company (whether or not the mutilated,
destroyed, lost or stolen Debenture shall be at any time enforceable) and shall
be entitled to all benefits of this Indenture equally and ratably with any and
all other Debentures duly issued hereunder.

      The provisions of this Section 2.09 are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Debentures.

      2.10 Outstanding Debentures; Determinations of Holders' Action.

      Debentures outstanding at any time are all the Debentures authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those mutilated, destroyed, lost or stolen Debentures referred to
in Section 2.09 hereof, those redeemed by the Company pursuant to Article 3
hereof, and those described in this Section 2.10 as not outstanding. A Debenture
does not cease to be outstanding because the Company or a Subsidiary or
Affiliate thereof holds the Debenture; provided, however, that in determining
whether the Holders of the requisite principal amount of Debentures have given
or concurred in any request, demand, authorization, direction, notice, consent
or waiver hereunder, Debentures owned by the Company or a Subsidiary or
Affiliate (other than any Trust so long as any of the Preferred Securities of
such Trust are outstanding) shall be disregarded and deemed not to be
outstanding.

      Subject to the foregoing, only Debentures outstanding at the time of such
determination shall be considered in any such determination (including
determinations pursuant to Articles 3, 6 and 9).

      If a Debenture is replaced pursuant to Section 2.09 hereof, it ceases to
be outstanding unless the Trustee receives proof satisfactory to it that the
replaced Debenture is held by a bona fide purchaser.

      If the Paying Agent (other than the Company) holds, in accordance with
this Indenture, at the Stated Maturity Date or on a Redemption Date, money
sufficient to pay the Debentures payable on that date, then immediately on the
Stated Maturity Date or such

                                       16
<PAGE>

Redemption Date, as the case may be, such Debentures shall cease to be
outstanding, and interest, if any, on such Debentures shall cease to accrue.

      2.11 Temporary Debentures.

      The Company may execute temporary Debentures, and upon the Company's
Order, the Trustee shall authenticate and make such temporary Debentures
available for delivery. Temporary Debentures shall be printed, lithographed,
typewritten, mimeographed or otherwise produced, in any authorized denomination,
in the same series and principal amount and of like tenor as the definitive
Debentures in lieu of which they are issued and with such appropriate
insertions, omissions, substitutions and other variations as the Officers of the
Company executing such Debentures may determine, as conclusively evidenced by
their execution of such Debentures.

      After the preparation of definitive Debentures, the temporary Debentures
shall be exchangeable for definitive Debentures of the same series upon
surrender of the temporary Debentures at the office or agency of the Company
designated for such purpose pursuant to Section 2.05 hereof, without charge to
the Holders thereof. Upon surrender for cancellation of any one or more
temporary Debentures, the Company shall execute a like principal amount of
definitive Debentures of the same series of authorized denominations, and the
Trustee, upon receipt of a Company Order, shall authenticate and make such
Debentures available for delivery in exchange therefor. Until so exchanged, the
temporary Debentures shall in all respects be entitled to the same benefits
under this Indenture as definitive Debentures.

      2.12 Book-Entry System.

      In order to utilize a book-entry-only system for all or any portion of the
Debentures of any series, all or a portion of the Debentures of any series may
be issued in the form of one or more fully registered Debentures of the same
series for the aggregate principal amount of such Debentures of each Issue Date,
interest rate and Stated Maturity Date (a "global Debenture"), which global
Debenture shall be registered in the name of the depositary (the "Depositary")
selected by the Company or in the name of such Depositary's nominee. Each global
Debenture shall be delivered by the Trustee to the Depositary or pursuant to the
Depositary's instruction and shall bear a legend substantially to the following
effect: "Except as otherwise provided in Section 2.12 of the Indenture, this
Debenture may be transferred, in whole but not in part, only to another nominee
of the Depositary or to a successor Depositary or to a nominee of such successor
Depositary."

      Notwithstanding any other provision of this Section 2.12 or of Section
2.08 hereof, a global Debenture may be transferred in whole but not in part and
in the manner provided in Section 2.08 hereof, only by a nominee of the
Depositary for such series, or by the Depositary or any such nominee of a
successor Depositary for such series selected or approved by the Company or to a
nominee of such successor Depositary.

      If (i) at any time the Depositary for global Debentures of any series of
Debentures notifies the Company that it is unwilling or unable to continue as
Depositary for such global Debentures or if at any time the Depositary for such
global Debentures shall no longer be

                                       17
<PAGE>

registered or in good standing under the Exchange Act or other applicable
statute or regulation, and a successor Depositary for such global Debentures is
not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such condition, as the case may be, (ii) the Company
determines in its sole discretion, that the Debentures of any series shall no
longer be represented by one or more global Debentures and delivers to the
Trustee an Officer's Certificate evidencing such determination or (iii) an Event
of Default occurs and is continuing, then the provisions of this Section 2.12
shall no longer apply to the Debentures of such series. In such event, the
Company will execute and the Trustee, upon receipt of an Officer's Certificate
evidencing such determination by the Company, will authenticate and deliver
Debentures of such series and of like tenor in definitive registered form, in
authorized denominations, and in aggregate principal amount equal to the
principal amount of the global Debentures of such series in exchange for such
global Debentures. Upon the exchange of global Debentures for such Debentures in
definitive registered form without coupons, in authorized denominations, the
global Debentures shall be cancelled by the Trustee. Such Debentures in
definitive registered form issued in exchange for global Debentures pursuant to
this Section 2.12 shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its direct or
indirect participants or otherwise, shall instruct the Trustee. The Trustee
shall deliver such Debentures to the Persons in whose names such Debentures are
so registered.

      Except as provided above, owners of beneficial interests in a global
Debenture shall not be entitled to receive physical delivery of Debentures in
definitive form and will not be considered the Holders thereof for any purpose
under this Indenture.

      Members of or participants in the Depositary shall have no rights under
this Indenture with respect to any global Debenture held on their behalf by the
Depositary, and such Depositary or its nominee, as the case may be, may be
treated by the Company, the Trustee, and any agent of the Company or the Trustee
as the Holder of such global Debentures for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee, or any agent of the Company or the Trustee, from giving effect to any
written certification proxy or other authorization furnished by the Depositary
or impair, as between the Depositary and its members or participants, the
operation of customary practices governing exercise of the rights of a Holder of
any Debenture, including without limitation the granting of proxies or other
authorization of participants to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action which a Holder
is entitled to give or take under this Indenture.

      2.13 Cancellation.

      All Debentures surrendered for payment, redemption by the Company pursuant
to Article 3 hereof or registration of transfer or exchange shall, if
surrendered to any Person other than the Trustee, be delivered to the Trustee
and shall be promptly canceled by the Trustee. The Company may at any time
deliver to the Trustee for cancellation any Debentures previously authenticated
and made available for delivery hereunder which the Company may have acquired in
any manner whatsoever, and all Debentures so delivered shall be promptly
canceled by the Trustee. The Company may not reissue or issue new Debentures to
replace Debentures it has

                                       18
<PAGE>

paid or delivered to the Trustee for cancellation. No Debentures shall be
authenticated in lieu of or in exchange for any Debentures canceled as provided
in this Section 2.13, except as expressly permitted by this Indenture. All
canceled Debentures held by the Trustee shall be disposed of in accordance with
its customary procedures.

                                   ARTICLE 3
                                   REDEMPTION

      3.01 Redemption: Notice to Trustee.

      (a) The Series __ Debentures are subject to redemption prior to maturity
as provided therein.

      (b) The redemption terms for any additional series of Debentures shall be
as specified in the supplemental indenture creating such series of Debentures.

      (c) If any or all of the Debentures are to be redeemed pursuant to Section
3.01 (a) or (b) hereof, the Company shall deliver to the Trustee at least 45
days prior to the Redemption Date a Company Order specifying the series and
principal amount of Debentures to be redeemed and the Redemption Date and
Redemption Price for such Debentures. Such Company Order shall be accompanied by
a Board Resolution authorizing such redemption. If the Debentures of a series
are held by a Trust, the Company shall also deliver a copy of such Company Order
to the Property Trustee for such Trust.

      3.02 Selection of Debentures to be Redeemed.

      If less than all the outstanding Debentures of a series are to be redeemed
at any time, the Trustee shall select the Debentures of such series to be
redeemed by lot or by any other method the Trustee considers fair and
appropriate. The Trustee shall make the selection at least 30 but not more than
60 days before the Redemption Date from outstanding Debentures of such series
not previously called for redemption. Provisions of this Indenture that apply to
Debentures called for redemption also apply to portions of Debentures called for
redemption. The Trustee shall notify the Company promptly of the Debentures or
portions of Debentures to be redeemed.

      3.03 Notice of Redemption.

      At least 30 days but not more than 60 days before the Redemption Date, the
Trustee, in the Company's name and at the Company's expense, shall mail or cause
to be mailed a notice of redemption by first-class mail, postage prepaid, to
each Holder of Debentures to be redeemed at such Holder's last address as it
appears in the Register.

      The notice of redemption shall identify the Debentures to be redeemed,
including its CUSIP number, the provision of the Debentures or this Indenture
pursuant to which the Debentures called for redemption are being redeemed and
shall state:

                                       19
<PAGE>

      (1) the Redemption Date;

      (2) the Redemption Price;

      (3) the name and address of the Paying Agent;

      (4) that payment of the Redemption Price of Debentures called for
redemption will be made only upon surrender of such Debentures to the Paying
Agent;

      (5) if fewer than all the outstanding Debentures of any series are to be
redeemed, the identification and principal amounts of the particular Debentures
to be redeemed and that, on and after the Redemption Date, upon surrender of
such Debentures, a new Debenture or Debentures of the same series and of like
tenor and in a principal amount equal to the unredeemed portion thereof will be
issued; and

      (6) that, unless the Company defaults in paying the Redemption Price of
the Debentures called for redemption, plus accrued interest thereon to the
Redemption Date, interest will cease to accrue on such Debentures on and after
the Redemption Date.

      Any notice of redemption given in the manner provided herein shall be
conclusively presumed to have been given, whether or not such notice is actually
received. Failure to mail any notice or defect in the mailed notice or the
mailing thereof in respect of any Debenture shall not affect the validity of the
redemption of any other Debenture.

      3.04 Effect of Notice of Redemption.

      After notice of redemption has been given, Debentures called for
redemption shall become due and payable on the Redemption Date and at the
Redemption Price and from and after the Redemption Date (unless the Company
shall default in the payment of the Redemption Price and accrued interest), such
Debentures shall cease to bear interest. Upon the later of the Redemption Date
and the date such Debentures are surrendered to the Paying Agent, such
Debentures shall be paid at the Redemption Price, plus accrued interest to the
Redemption Date, provided that installments of interest on Debentures with an
Interest Payment Date which is on or prior to the Redemption Date shall be
payable to the Holders of such Debentures, or one or more Predecessor
Debentures, registered as such at the close of business on the Regular Record
Dates therefor according to their terms and provisions.

      3.05 Deposit of Redemption Price.

      Prior to 10:00 a.m. the Redemption Date, the Company shall deposit with
the Paying Agent (or if the Company or an Affiliate is the Paying Agent, shall
segregate and hold in trust or cause such Affiliate to segregate and hold in
trust) money sufficient to pay the Redemption Price of, and accrued interest on,
all Debentures to be redeemed on that Redemption Date. The Paying Agent shall
return to the Company any money in excess of the amount sufficient to pay the
Redemption Price of, and accrued interest on, all Debentures to be redeemed and
any interest accrued on the amount deposited pursuant to this Section 3.05.

                                       20
<PAGE>

      3.06 Debentures Redeemed in Part.

      Upon surrender of a Debenture that is redeemed in part, the Trustee shall
authenticate for the Holder a new Debenture of the same series and in a
principal amount equal to the unredeemed portion of such Debenture.

                                    ARTICLE 4
                                    COVENANTS

      4.01 Payment of Debentures.

      (a) The Company shall pay the principal of and premium, if any, and
interest (including interest accruing during an Extension Period and/or on or
after the filing of a petition in bankruptcy or reorganization relating to the
Company, whether or not a claim for post-filing interest is allowed in such
proceeding) on the Debentures on or prior to the dates and in the manner
provided in such Debentures or pursuant to this Indenture. An installment of
principal, premium, if any, or interest shall be considered paid on the
applicable due date if on such date the Trustee or the Paying Agent holds, in
accordance with this Indenture, money sufficient to pay all of such installment
then due. With respect to any Debenture, the Company shall pay interest on
overdue principal and interest on overdue installments of interest (including
interest accruing during an Extension Period and/or on or after the filing of a
petition in bankruptcy or reorganization relating to the Company, whether or not
a claim for post-filing interest is allowed in such proceeding), to the extent
lawful, at the rate per annum borne by such Debenture, compounded quarterly.
Interest on overdue interest shall accrue from the date such amounts become
overdue.

      (b) Notwithstanding the provisions of Section 4.01(a) hereof or any other
provision herein to the contrary, the Company shall have the right in its sole
and absolute discretion at any time and from time to time while the Debentures
of any series are outstanding, so long as no Event of Default with respect to
such series of Debentures has occurred and is continuing, to defer payments of
interest by extending the interest payment period for such series of Debentures
for the Extension Period, if any, for such series of Debentures, provided that
such Extension Period shall not extend beyond the Stated Maturity Date or
Redemption Date of any Debenture of such series, and provided further that at
the end of each Extension Period the Company shall pay all interest then accrued
and unpaid (together with interest thereon to the extent permitted by applicable
law at the rate per annum then borne by such Debentures). Prior to the
termination of an Extension Period, the Company may shorten or may further
extend the interest payment period for such series of Debentures, provided that
such Extension Period together with all such previous and further extensions may
not exceed the maximum duration of the Extension Period for such series of
Debentures or extend beyond the Stated Maturity Date or Redemption Date of any
Debenture of such series. The Company shall give the Trustee notice of the
Company's election to begin an Extension Period for any series of Debentures and
any shortening or extension thereof at least one Business Day prior to the date
the notice of the record or payment date of the related distribution on the
Preferred Securities issued by the Trust which is the Holder of the Debentures
of such series or the date payment of interest on such Debentures is required to
be given to any national securities exchange on which such Preferred Securities
or Debentures are then listed or other applicable self-regulatory organization,
but in

                                       21
<PAGE>

any event not less than two Business Days prior to the Record Date fixed by the
Company for the payment of such interest. The Company shall give or cause the
Trustee to give notice (a form of which shall be provided by the Company to the
Trustee) of the Company's election to begin an Extension Period to the Holders
by first class mail, postage prepaid.

      4.02 Prohibition Against Dividends. etc.

      The Company shall not declare or pay any dividend on, or redeem, purchase,
acquire or make a liquidation payment with respect to, any of its Capital Stock
(i) during an Extension Period, (ii) if at such time there shall have occurred
and is continuing any Default or Event of Default, or (iii) if the Company shall
be in default with respect to its payment or other obligations under any
Guarantee Agreement.

      4.03 SEC Reports.

      The Company shall file with the Trustee, within 15 days after it files
them with the SEC, copies of its annual report and of the information, documents
and other reports (or copies of such portions of any of the foregoing as the SEC
may by rules and regulations prescribe) which the Company is required to file
with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. If the Company
is not subject to the reporting requirements of Section 13 or 15(d) of the
Exchange Act, the Company shall file with the Trustee such information,
documents and other reports (or copies of such portions of any of the foregoing
as the SEC may by rules and regulations prescribe) which are specified in
Sections 13 or 15(d) of the Exchange Act. The Company shall also comply with the
provisions of Section 314(a) of the TIA. Delivery of such reports, information
and documents to the Trustee is for informational purposes only and the
Trustee's receipt of such shall not constitute constructive notice of any
information contained therein or determinable from information contained
therein, including the Company's compliance with any of its covenants hereunder
(as to which the Trustee is entitled to conclusively rely exclusively on
Officer's Certificates).

      4.04 Compliance Certificates.

      (a) The Company shall deliver to the Trustee, within 90 days after the end
of each of the Company's fiscal years, an Officer's Certificate stating whether
or not the signer knows of any Default or Event of Default. Such certificate
shall contain a certification from the principal executive officer, principal
financial officer or principal accounting officer of the Company as to his or
her knowledge of the Company's compliance with all conditions and covenants
under this Indenture. For purposes of this Section 4.04(a), such compliance
shall be determined without regard to any period of grace or requirement of
notice provided under this Indenture. If such Officer does know of such a
Default or Event of Default, the Officer's Certificate shall describe any such
Default or Event of Default, and its status. Such Officer's Certificate need not
comply with Sections 11.04 and 11.05 hereof.

      (b) The Company shall deliver to the Trustee any information reasonably
requested by the Trustee in connection with the compliance by the Trustee or the
Company with the TIA.

                                       22
<PAGE>

      4.05 Further Instruments and Acts.

      Upon request of the Trustee, the Company shall execute and deliver such
further instruments and do such further acts as may be reasonably necessary or
proper to carry out more effectively the purposes of this Indenture.

      4.06 Payments for Consents.

      Neither the Company nor any Subsidiary shall, directly or indirectly, pay
or cause to be paid any consideration, whether by way of interest, fee or
otherwise, to any Holder of any Debentures for or as an inducement to any
consent, waiver or amendment of any of the terms or provisions of this Indenture
or the Debentures unless such consideration is offered to be paid or agreed to
be paid to all Holders of the Debentures who so consent, waive or agree to amend
in the time frame set forth in the documents soliciting such consent, waiver or
agreement.

      4.07 Payment of Expenses of Trusts.

      The Company covenants for the benefit of the Holders of the Debentures to
pay all of the obligations, costs and expenses of the applicable Trust in
accordance with the applicable Trust agreement and to pay the taxes of such
Trust in accordance with such Trust agreement in order to permit such Trust to
make distributions on and redemptions of its Preferred Securities in accordance
with their terms.

                                   ARTICLE 5
                              SUCCESSOR CORPORATION

      5.01 When the Company May Merge, Etc.

      The Company may not consolidate with or merge with or into, or sell,
convey, transfer or lease its properties and assets as an entirety or
substantially as an entirety (either in one transaction or a series of
transactions) to, any Person unless:

      (1) the Person formed by or surviving such consolidation or merger or to
which such sale, conveyance, transfer or lease shall have been made (the
"Successor") if other than the Company (a) is a corporation organized and
existing under the laws of the United States of America or any State thereof or
the District of Columbia, and (b) shall expressly assume by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Debentures and the
Indenture;

      (2) immediately prior to and after giving effect to such transaction (and
treating any Indebtedness which becomes an obligation of the Successor Person or
any Subsidiary as a result of such transaction as having been incurred by such
Person or such Subsidiary at the time of such transaction), no Default or Event
of Default shall have occurred and be continuing; and

                                       23
<PAGE>

      (3) the Company delivers to the Trustee an Officer's Certificate and an
Opinion of Counsel, each stating that such consolidation, merger, sale,
conveyance, transfer or lease and such supplemental indenture comply with this
Indenture.

      The Successor will be the successor to the Company, and will be
substituted for, and may exercise every right and power and become the obligor
on the Debentures with the same effect as if the Successor had been named as the
Company herein but, in the case of a sale, conveyance, transfer or lease of all
or substantially all of the assets of the Company, the predecessor Company will
not be released from its obligation to pay the principal of and premium, if any,
and interest on the Debentures.

                                   ARTICLE 6
                              DEFAULTS AND REMEDIES

      6.01 Events of Default.

      An "Event of Default" occurs with respect to the Debentures of any series
if one of the following shall have occurred and be continuing:

      (1) The Company defaults in the payment, when due and payable, of (a)
interest on any Debenture of that series and the default continues for a period
of 30 days; provided, that during an Extension Period for the Debentures of that
series, failure to pay interest on the Debentures of that series shall not
constitute a Default or Event of Default hereunder, or (b) the principal of or
premium, if any, on any Debentures of that series when the same becomes due and
payable on the Stated Maturity Date thereof, upon acceleration, on any
Redemption Date, or otherwise;

      (2) The Company defaults in the performance of or fails to comply with any
of its other covenants or agreements in the Debentures of that series or this
Indenture or in any supplemental indenture under which the Debentures of that
series may have been issued and such failure continues for 60 days after receipt
by the Company of a "Notice of Default";

      (3) The Company, pursuant to or within the meaning of any Bankruptcy Law:

            (a)   commences a voluntary case or proceeding;

            (b)   consents to the entry of an order for relief against it in an
                  involuntary case or proceeding;

            (c)   consents to the appointment of a Custodian of it or for all or
                  substantially all of its property, and such Custodian is not
                  discharged within 60 days;

            (d)   makes a general assignment for the benefit of its creditors;
                  or

                                       24
<PAGE>

            (e)   admits in writing its inability to pay its debts generally as
                  they become due; or

      (4) A court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:

            (a)   is for relief against the Company in an involuntary case or
                  proceeding;

            (b)   appoints a Custodian of the Company for all or substantially
                  all of its properties;

            (c)   orders the liquidation of the Company;

            (d)   and in each case the order or decree remains unstayed and in
                  effect for 60 days.

      The foregoing will constitute an Event of Default whatever the reason for
any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any order, rule or regulation of any administrative or governmental
body.

      The term "Bankruptcy Law" means Title 11 of the United States Code, or any
similar federal or state law for the relief of debtors. "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator, custodian or similar
official under any Bankruptcy Law.

      A Default under clause (2) above is not an Event of Default until (i) the
Trustee provides a "Notice of Default" to the Company or the Holders of at least
25% in aggregate principal amount of the Debentures of that series at the time
outstanding or, if that series of Debentures is held by a Trust, the holders of
at least 25% in aggregate liquidation amount of the outstanding Preferred
Securities of that Trust provide a "Notice of Default" to the Company and the
Trustee and (ii) the Company does not cure such Default within the time
specified in clause (2) above after receipt of such notice. Any such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default."

      6.02 Acceleration.

      If any Event of Default with respect to the Debentures of any series other
than an Event of Default under clause (3) or (4) of Section 6.01 hereof occurs
and is continuing, the Trustee or the Holders of at least 25% in aggregate
principal amount of the Debentures of that series then outstanding may declare
the principal of all the Debentures of that series due and payable, provided
that in the case of a series of Debentures then held by a Trust, if upon an
Event of Default with respect to the Debentures of that series the Trustee has
or the Holders of at least 25% in aggregate principal amount of the Debentures
of that series have failed to declare the principal of the Debentures of that
series to be immediately due and payable, the holders of at least 25% in
aggregate liquidation amount of the outstanding Preferred Securities of that
Trust shall have such right by a notice in writing to the Company and the
Trustee. If an Event of

                                       25
<PAGE>

Default specified in clause (3) or (4) of Section 6.01 hereof occurs, the
principal of and interest on all the Debentures shall ipso facto become and be
immediately due and payable without any declaration or other act on the part of
the Trustee or any Debentureholders. Upon such an acceleration, such principal,
together with all interest accrued thereon, shall be due and payable
immediately.

      The Holders of a majority in aggregate principal amount of the Debentures
of that series at the time outstanding, in each case, by notice to the Trustee,
may rescind such an acceleration and its consequences if the rescission would
not conflict with any judgment or decree and if all existing Events of Default
with respect to such series of Debentures have been cured or waived except
nonpayment of principal or interest that has become due solely because of
acceleration, provided that if the principal of a series of Debentures has been
declared due and payable by the holders of the Preferred Series of a Trust, no
rescission of acceleration will be effective unless consented to by the holders
of a majority in aggregate liquidation amount of the Preferred Securities of
that Trust. No such rescission shall affect any subsequent Default or impair any
right consequent thereto.

      6.03 Other Remedies.

      If an Event of Default occurs and is continuing, the Trustee may, in its
own name or as trustee of an express trust, institute, pursue and prosecute any
proceeding, including, without limitation, any action at law or suit in equity
or other judicial or administrative proceeding to collect the payment of
principal of or premium, if any, or interest on the Debentures of the series
that is in default, to enforce the performance of any provision of the
Debentures of that series or this Indenture or to obtain any other available
remedy.

      The Trustee may maintain a proceeding even if it does not possess any of
the Debentures or does not produce any of the Debentures in the proceeding. A
delay or omission by the Trustee, any Debentureholder or the holders of
Preferred Securities in exercising any right or remedy accruing upon an Event of
Default shall not impair such right or remedy or constitute a waiver of, or
acquiescence in, such Event of Default. No remedy is exclusive of any other
remedy. All available remedies are cumulative.

      6.04 Waiver of Past Defaults.

      If a Default or Event of Default with respect to a series of Debentures
has occurred and is continuing, the Holders of a majority in aggregate principal
amount of the Debentures of that series at the time outstanding, or, if that
series of Debentures is held by a Trust, the holders of a majority in aggregate
liquidation amount of the Preferred Securities of that Trust, in each case by
notice to the Trustee and the Company, may waive an existing Default or Event of
Default and its consequences except a Default or Event of Default in the payment
of the principal of or premium, if any, or interest on any Debenture of that
series. When a Default or Event of Default is waived, it is deemed cured and
shall cease to exist, but no such waiver shall extend to any subsequent or other
Default or Event of Default or impair any consequent right.

                                       26
<PAGE>

      6.05 Control by Majority.

      The Holders of a majority in aggregate principal amount of the Debentures
of each series affected or, if that series of Debentures is held by a Trust, the
holders of a majority in aggregate liquidation amount of the Preferred
Securities of that Trust, may direct the time, method and place of conducting
any proceeding for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. However, the Trustee may refuse to
follow any direction that conflicts with law or this Indenture or that the
Trustee determines in good faith is unduly prejudicial to the rights of other
Debentureholders or may involve the Trustee in personal liability. The Trustee
may take any other action deemed proper by the Trustee which is not inconsistent
with such direction, including withholding notice to the Holders of the
Debentures of continuing default (except in the payment of the principal of
(other than any mandatory sinking fund payment) or premium, if any, or interest
on any Debentures) if the Trustee considers it in the interest of the Holders of
the Debentures to do so.

      6.06 Limitation on Suits.

      Except as provided in Section 6.07 hereof, no holder of Debentures or
holder of Preferred Securities of the Trust which is the Holder of that series
of Debentures may pursue any remedy with respect to this Indenture or the
Debentures unless:

      (1) the Holders of Debentures or the holders of such Preferred Securities
give to the Trustee written notice stating that an Event of Default with respect
to the corresponding Debentures is continuing;

      (2) the Holders of at least 25% in aggregate principal amount of the
Debentures of that series or the holders of at least 25% in aggregate
liquidation amount of such Preferred Securities make a written request to the
Trustee to pursue a remedy;

      (3) the Holders of Debentures or the holders of such Preferred Securities
provide to the Trustee reasonable security and indemnity against any loss,
liability or expense satisfactory to the Trustee;

      (4) the Trustee does not comply with the request within 60 days after
receipt of the notice, the request and the offer of security and indemnity; and

      (5) during such 60 day period, the Holders of a majority in aggregate
principal amount of the Debentures of that series or the holders of a majority
in aggregate liquidation amount of such Preferred Securities do not give the
Trustee a direction inconsistent with the request.

      A Holder of Debentures or a holder of Preferred Securities may not use
this Indenture to prejudice the rights of another Debentureholder or a holder of
Preferred Securities or to obtain a preference or priority over another
Debentureholder or holder of Preferred Securities.

                                       27
<PAGE>

      6.07 Rights of Holders to Receive Payment.

      Notwithstanding any other provision of this Indenture, the right of any
Holder to receive payment of the principal of and premium (if any) or interest
on the Debentures held by such Holder, on or after the respective due dates
expressed in the Debentures (in the case of interest, as the same may be
extended pursuant to Section 4.01(b) hereof) or any Redemption Date, is absolute
and unconditional and such right and the right to bring suit for the enforcement
of any such payment on or after such respective dates shall not be impaired or
affected adversely without the consent of such Holder. If the Debentures of a
series are then held by a Trust, each holder of Preferred Securities of such
Trust shall have the right to bring suit for the enforcement of any payment due
in respect of Debentures of such series based on a principal amount thereof
equal to the aggregate liquidation amount of the Preferred Securities of such
holder.

      6.08 Collection Suit by the Trustee.

      If an Event of Default described in Section 6.01(1) hereof occurs and is
continuing, the Trustee may recover judgment in its own name and as trustee of
an express trust against the Company or any obligor on the Debentures for the
whole amount owing with respect to the Debentures and the amounts provided for
in Section 7.07 hereof.

      6.09 The Trustee May File Proofs of Claim.

      In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or its properties or assets, the
Trustee shall be entitled and empowered, by intervention in such proceeding or
otherwise:

      (1) to file and prove a claim for the whole amount of the principal of and
premium, if any, and interest on the Debentures and to file such other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and of the
Holders allowed in such judicial proceeding; and

      (2) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same; and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee and, in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay the Trustee any amount
due it for the reasonable compensation, expenses, disbursements and advances of
the Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07 hereof.

      Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Holder in any such proceeding.

                                       28
<PAGE>

      6.10 Priorities.

      If the Trustee collects any money pursuant to this Article 6, it shall,
subject to Article 10 hereof, pay out the money in the following order:

First:   to the Trustee for amounts due under Section 7.07 hereof;

Second:  to Holders of Debentures of the particular series in respect of which
         or for the benefit of which such money has been collected for amounts
         due and unpaid on such Debentures for the principal amount, Redemption
         Price or interest, if any, as the case may be, ratably, without
         preference or priority of any kind, according to such amounts due and
         payable on such Debentures; and

Third:   the balance, if any, to the Company.

      Except as otherwise set forth in the Debentures, the Trustee may fix a
Record Date and payment date for any payment to Debentureholders pursuant to
this Section 6.10.

      6.11 Undertaking for Costs.

      In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant (other than the Trustee) in the suit of an undertaking to pay the costs
of the suit, and the court in its discretion may assess reasonable costs,
including reasonable attorneys' fees and expenses, against any party litigant in
the suit, having due regard to the merits and good faith of the claims or
defenses made by the party litigant. This Section 6.11 does not apply to a suit
by the Trustee, a suit by a Holder of Debentures or holder of Preferred
Securities pursuant to Section 6.07 hereof or a suit by Holders of Debentures of
more than 10% in aggregate principal amount of the Debentures of any series or,
if a series of Debentures is held by a Trust, the holders of more than 10% in
aggregate liquidation amount of the Preferred Securities of that Trust.

      6.12 Waiver of Stay; Extension or Usury Laws.

      The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury or
other law wherever enacted, now or at any time hereafter in force, that would
prohibit or forgive the Company from paying all or any portion of the principal
of or premium, if any, or interest on the Debentures as contemplated herein or
affect the covenants or the performance by the Company of its obligations under
this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.

                                       29
<PAGE>

                                    ARTICLE 7
                                   THE TRUSTEE

      7.01 Duties of the Trustee.

      (a) If an Event of Default occurs and is continuing with respect to the
Debentures of any series, the Trustee shall exercise the rights and powers
vested in it by this Indenture with respect to that series and use the same
degree of care and skill in its exercise as a prudent man would exercise or use
under the circumstances in the conduct of his own affairs.

      (b) Except during the continuance of an Event of Default with respect to
the Debentures of any series, (i) the Trustee need perform only those duties
with respect to that series that are specifically set forth in this Indenture or
the TIA and no implied covenants or obligations shall be read into the Indenture
against the Trustee; and (ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or opinions
furnished to the Trustee and conforming to the requirements of this Indenture.
However, in the case of any certificates or opinions which by any provision
hereof are specifically required to be furnished to the Trustee, the Trustee
shall examine the certificates and opinions to determine whether or not they
conform to the requirements of this Indenture.

      (c) The Trustee may not be relieved from liability for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:

            (i) this Section 7.01(c) does not limit the effect of Section
            7.01(b) hereof;

            (ii) the Trustee shall not be liable for any error of judgment made
            in good faith by a Responsible Officer unless it is proved that the
            Trustee was negligent in ascertaining the pertinent facts; and

            (iii) the Trustee shall not be liable with respect to any action it
            takes or omits to take in good faith in accordance with a direction
            received by it pursuant to Section 6.05 hereof.

      (d) Every provision of this Indenture that in any way relates to the
Trustee is subject to Section 7.01(a), (b), (c) and (e) and Section 7.02 hereof.

      (e) The Trustee may refuse to perform any duty or exercise any right or
power or extend or risk its own funds or otherwise incur any financial liability
unless it receives security and indemnity reasonably satisfactory to it against
any loss, liability or expense (including reasonable counsel fees).

      (f) Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. Except as otherwise
provided in Section 3.05 and Section 8.01 hereof, the Trustee shall not be
liable for interest on any money held by it hereunder.

                                       30
<PAGE>

      7.02 Rights of the Trustee.

      (a) The Trustee may conclusively rely on any document believed by it to be
genuine and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.

      (b) Before the Trustee acts or refrains from acting, it may require an
Officer's Certificate and, if appropriate, an Opinion of Counsel. The Trustee
shall not be liable for any action it takes or omits to take in good faith in
reliance on such Officer's Certificate and Opinion of Counsel.

      (c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.

      (d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it reasonably believes to be authorized or within its
rights or powers.

      (e) The Trustee may consult with counsel of its selection and the advice
of such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by it hereunder in good faith and in reliance thereon.

      (f) The Trustee shall be under no obligation to exercise any of the rights
or powers vested in it by this Indenture at the request or direction of any of
the Holders pursuant to this Indenture, unless such Holders shall have offered
to the Trustee reasonable security and indemnity against the costs, expenses and
liabilities (including reasonable counsel fees) which might be incurred by it in
compliance with such request or direction.

      (g) The Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the
Trustee, in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit, and, if the Trustee shall determine to
make such further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or attorney
at the sole cost of the Company and shall incur no liability or additional
liability of any kind by reason of such inquiry or investigation.

      (h) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by it
hereunder.

      (i) The Trustee shall not be deemed to have notice of any Default or Event
of Default unless a Responsible Officer of the Trustee has actual knowledge
thereof or unless written notice of any event which is in fact such a default is
received by the Trustee at the

                                       31
<PAGE>

Corporate Trust Office of the Trustee, and such notice references the Securities
and this Indenture.

      (j) The rights, privileges, protections, immunities and benefits given to
the Trustee, including, without limitation, its right to be indemnified, are
extended to, and shall be enforceable by, the Trustee in each of its capacities
hereunder, and each agent, custodian and other Person employed to act hereunder.

      (k) The Trustee may request that the Company deliver an Officers'
Certificate setting forth the names of individuals and/or titles of officers
authorized at such time to take specified actions pursuant to this Indenture,
which Officers' Certificate may be signed by any person authorized to sign an
Officers' Certificate, including any person specified as so authorized in any
such certificate previously delivered and not superseded.

      7.03 Individual Rights of the Trustee.

      The Trustee in its individual or any other capacity may become the owner
or pledgee of Debentures and may otherwise deal with the Company or its
Affiliates with the same rights it would have if it were not Trustee. Any Paying
Agent, Registrar or co-registrar may do the same with like rights. However, the
Trustee must comply with Sections 7.10 and 7.11 hereof.

      7.04 The Trustee's Disclaimer.

      The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Debentures. The Trustee shall not be accountable for the
Company's use of the proceeds from the Debentures, and the Trustee shall not be
responsible for any statement in this Indenture or the Debentures or any report
or certificate issued by the Company hereunder or any registration statement
relating to the Debentures (other than the Trustee's Certificate of
Authentication and the Trustee's Statement of Eligibility on Form T-1), or the
determination as to which beneficial owners are entitled to receive any notices
hereunder.

      7.05 Notice of Defaults.

      If a Default occurs and is continuing with respect to the Debentures of
any series and if it is known to the Trustee, the Trustee shall mail to each
Holder of a Debenture of that series notice of the Default within 90 days after
it becomes known to the Trustee unless such Default shall have been cured or
waived. Except in the case of a Default described in Section 6.01(1) hereof, the
Trustee may withhold such notice if and so long as a committee of its Trust
Officers in good faith determines that the withholding of such notice is in the
interests of the Holders of the Debentures of that series. The Trustee shall not
be charged with knowledge of any Default (except in the case of a Default under
Section 6.01(1) hereof) unless a Responsible Officer assigned to the Corporate
Trust Department of the Trustee shall have actual knowledge of the Default. The
second sentence of this Section 7.05 shall be in lieu of the proviso to TIA
Section 315(b). Said proviso is hereby expressly excluded from this Indenture,
as permitted by the TIA.

                                       32
<PAGE>

      7.06 Reports by Trustee to Holders.

      Within 60 days after each May 31, beginning with the May 31 next following
the date of this Indenture, the Trustee shall mail to each Debentureholder, and
such other holders that have submitted their names to the Trustee for such
purpose, a brief report dated as of such May 31 in accordance with and to the
extent required under TIA Section 313.

      A copy of each report at the time of its mailing to Debentureholders shall
be filed with the Company, the SEC and any securities exchange on which the
Debentures are listed. The Company agrees to promptly notify the Trustee
whenever the Debentures become listed on any securities exchange and of any
listing thereof.

      7.07 Compensation and Indemnity.

      The Company agrees:

      (1) to pay to the Trustee from time to time such compensation as shall be
agreed in writing between the Company and the Trustee for all services rendered
by it hereunder (which compensation shall not be limited by any provision of law
in regard to the compensation of a trustee of an express trust);

      (2) to reimburse the Trustee upon its request for reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any provision of this Indenture (including the reasonable compensation and the
expenses, and advances of its agents and counsel, provided that prior to any
Event of Default, the Trustee shall only have one counsel), including all
reasonable expenses and advances incurred or made by the Trustee in connection
with any Event of Default or any membership on any creditors' committee, except
any such expense or advance as may be attributable to its negligence or bad
faith; and

      (3) to indemnify the Trustee, its officers, directors and shareholders,
for, and to hold it harmless against, any and all loss, liability or expense,
including taxes (other than taxes based upon the income of the Trustee),
incurred without negligence or willful misconduct on its part, arising out of or
in connection with the acceptance or administration of this trust, including the
costs and expenses of defending itself against any claim (whether asserted by
the Company, any Holder or any other person) or liability in connection with the
exercise or performance of any of its powers or duties hereunder.

      Before, after or during an Event of Default with respect to the Debentures
of a series, the Trustee shall have a claim and lien prior to the Debentures of
that series as to all property and funds held by it hereunder for any amount
owing it for its fees and expenses or any predecessor Trustee pursuant to this
Section 7.07, except with respect to funds held by the Trustee or any Paying
Agent in trust for the payment of principal of or premium, if any, or interest
on particular Debentures pursuant to Section 2.06 or Section 8.01 hereof.

      The Company's obligations pursuant to this Section 7.07 are not subject to
Article 10 of this Indenture and shall survive the discharge of this Indenture
and the removal or resignation of the Trustee. When the Trustee renders services
or incurs expenses after the

                                       33
<PAGE>

occurrence of a Default specified in Section 6.01 hereof, the compensation for
services and expenses are intended to constitute expenses of administration
under any Bankruptcy Law.

      7.08 Replacement of Trustee.

      The Trustee may resign at any time, by so notifying the Company in writing
at least 30 days prior to the date of the proposed resignation; provided,
however, no such resignation shall be effective until a successor Trustee has
accepted its appointment pursuant to this Section 7.08. The Holders of at least
a majority in aggregate principal amount of the Debentures at the time
outstanding may remove the Trustee by so notifying the Trustee in writing and
may appoint a successor Trustee, which shall be subject to the consent of the
Company unless an Event of Default has occurred and is continuing. The Trustee
shall resign if:

      (1) the Trustee fails to comply with Section 7.10 hereof;

      (2) the Trustee is adjudged bankrupt or insolvent;

      (3) a receiver or public officer takes charge of the Trustee or its
property; or

      (4) the Trustee otherwise becomes incapable of acting.

      If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Debentureholders. Subject to payment of all amounts owing to the
Trustee under Section 7.07 hereof and subject further to its lien under Section
7.07, the retiring Trustee shall promptly transfer all property held by it as
Trustee to the successor Trustee. If a successor Trustee does not take office
within 30 days after the retiring Trustee resigns or is removed, the retiring
Trustee (at the expense of the Company), the Company or the Holders of at least
a majority in aggregate principal amount of the Debentures at the time
outstanding may petition any court of competent jurisdiction for the appointment
of a successor Trustee.

      If the Trustee fails to comply with Section 7.10 hereof, any
Debentureholder may petition any court of competent jurisdiction for its removal
and the appointment of a successor Trustee.

      7.09 Successor Trustee by Merger.

      If the Trustee consolidates with, merges or converts into, or transfers
all or substantially all its corporate trust business or assets to another
corporation, the resulting, surviving or transferee corporation without any
further act shall be the successor Trustee.

                                       34
<PAGE>

      7.10 Eligibility: Disqualification.

      The Trustee shall at all times satisfy the requirements of TIA Sections
310(a)(1) and 310(a)(2). The Trustee (or any Affiliate thereof which has
unconditionally guaranteed the obligations of the Trustee hereunder) shall have
a combined capital and surplus of at least $50,000,000 as set forth in its most
recently published annual report of condition. The Trustee shall comply with TIA
Section 310(b). In determining whether the Trustee has conflicting interests as
defined in TIA Section 310(b)(1), the provisions contained in the proviso to TIA
Section 310(b)(1) and the Trustee's Statement of Eligibility on Form T-1 shall
be deemed incorporated herein.

      7.11 Preferential Collection of Claims Against the Company.

      If and when the Trustee shall be or become a creditor of the Company, the
Trustee shall be subject to the provisions of the TIA regarding the collection
of claims against the Company.

                                    ARTICLE 8
                    SATISFACTION AND DISCHARGE OF INDENTURE;
               DEFEASANCE OF CERTAIN OBLIGATIONS; UNCLAIMED MONEYS

      8.01 Satisfaction and Discharge of Indenture.

      The Company shall be deemed to have paid and discharged the entire
indebtedness on any series of the Debentures outstanding on the date the Company
has irrevocably deposited or caused to be irrevocably deposited with the Trustee
or any Paying Agent as trust funds in trust, specifically pledged as security
for, and dedicated solely to, the benefit of the Holders of the Debentures of
such series (1) cash (which may be held in an interest bearing account insured
by the Federal Deposit Insurance Corporation) in an amount, or (2) U.S.
Government Obligations, maturing as to principal and interest at such times and
in such amounts as will ensure the availability of cash, or (3) a combination
thereof, sufficient to pay the principal of and premium, if any, and interest on
all Debentures of such series then outstanding on the scheduled due dates
therefor, provided that the following conditions shall have been met:

            (A) no Default or Event of Default with respect to the Debentures of
      such series has occurred and is continuing on the date of such deposit or
      occurs as a result of such deposit;

            (B) the Company has delivered to the Trustee an Officer's
      Certificate certifying that there does not exist (i) a default in the
      payment of all or any portion of any Senior Indebtedness or (ii) any other
      default affecting Senior Indebtedness permitting its acceleration as the
      result of which the maturity of Senior Indebtedness has been accelerated;

            (C) the Company has delivered to the Trustee (i) either a private
      Internal Revenue Service ruling or an Opinion of Counsel to the effect
      that, based on a change in law occurring after the execution of this
      Indenture, the

                                       35
<PAGE>

      Holders of the Debentures of such series will not recognize income, gain
      or loss for federal income tax purposes as a result of such deposit,
      defeasance and discharge and will be subject to federal income tax on the
      same amount and in the manner and at the same times as would have been the
      case if such deposit, defeasance and discharge had not occurred, and an
      Opinion of Counsel to the effect that (A) the deposit shall not result in
      the Company, the Trustee or, if the Debentures of such series are held by
      a Trust, such Trust being deemed to be an "investment company" under the
      Investment Company Act of 1940, as amended, and (B) such deposit creates a
      valid trust in which the Holders of the Debentures of such series have the
      sole beneficial interest or that the Holders of the Debentures of such
      series have a nonavoidable first priority security interest in such trust;
      and

            (D) the Company has delivered to the Trustee an Officer's
      Certificate and an Opinion of Counsel, each stating that all conditions
      precedent relating to the defeasance contemplated by this provision have
      been complied with.

Upon such deposit, provisions of this Indenture with respect to such series of
Debentures shall no longer be in effect (except as to (1) the rights of
registration of transfer and exchange of Debentures of such series, (2) the
replacement of apparently mutilated, defaced, destroyed, lost or stolen
Debentures of such series, (3) the rights of the Holders of the Debentures of
such series to receive payments of the principal thereof and premium, if any,
and interest thereon, (4) the rights of the Holders of the Debentures of such
series as beneficiaries hereof with respect to the property so deposited with
the Trustee payable to all or any of them, (5) the obligation of the Company to
maintain an office or agency for payments on and registration of transfer of the
Debentures of such series, (6) the rights, obligations and immunities of the
Trustee hereunder, and (7) the obligations of the Company to the Trustee for
compensation and indemnity under Section 7.07 hereof), and the Trustee shall, at
the request and expense of the Company, execute proper instruments acknowledging
the same.

      8.02 Application by Trustee of Funds Deposited for Payment of Debentures.

      Subject to Section 8.04 hereof, all moneys deposited with the Trustee
pursuant to Section 8.01 hereof shall be held in trust and applied by it to the
payment, either directly or through any Paying Agent (including the Company
acting as its own Paying Agent), to the Holders of the Debentures of the series
for the payment or redemption of which such moneys have been deposited with the
Trustee, of all sums due and to become due thereon for principal and interest;
but such money need not be segregated from other funds except to the extent
required by law.

      8.03 Repayment of Moneys Held by Paying Agent.

      In connection with the satisfaction and discharge of this Indenture, all
moneys then held by any Paying Agent under this Indenture shall, upon demand of
the Company, be

                                       36
<PAGE>

repaid to it or paid to the Trustee, and thereupon such Paying Agent shall be
released from all further liability with respect to such moneys.

      8.04 Return of Moneys Held by the Trustee and Paying Agent Unclaimed for
Three Years.

      Any moneys deposited with or paid to the Trustee or any Paying Agent for
the payment of the principal of and premium, if any, or interest on the
Debentures of any series and not applied but remaining unclaimed for three years
after the date when such principal, premium, if any, or interest shall have
become due and payable shall, unless otherwise required by mandatory provisions
of applicable escheat or abandoned or unclaimed property law, be repaid to the
Company by the Trustee or such Paying Agent, and the Holders of such Debentures
shall, unless otherwise required by mandatory provisions of applicable escheat
or abandoned or unclaimed property laws, thereafter look only to the Company for
any payment which such Holder may be entitled to collect, and all liability of
the Trustee or any Paying Agent with respect to such moneys shall thereupon
cease.

                                    ARTICLE 9
                                   AMENDMENTS

      9.01 Without Consent of Holders.

      From time to time, when authorized by a resolution of the Board of
Directors, the Company and the Trustee, without notice to or the consent of any
Holders of the Debentures, may amend or supplement this Indenture:

      (1) to cure any ambiguity, defect or inconsistency;

      (2) to comply with Article 5 hereof;

      (3) to provide for uncertificated Debentures in addition to or in place of
certificated Debentures;

      (4) to make any other change that does not in the reasonable judgment of
the Company adversely affect the rights of any Debentureholder;

      (5) to comply with any requirement of the SEC in connection with the
qualification of this Indenture under the TIA;

      (6) to set forth the terms and conditions, which shall not be inconsistent
with this Indenture, of any series of Debentures (other than the Series __
Debentures) that are to be issued hereunder and the form of Debentures of such
series.

      9.02 With Consent of Holders.

      The Company and the Trustee may amend this Indenture in any manner not
permitted by Section 9.01 or may waive future compliance by the Company with any
provisions of this Indenture with the consent of the Holders of a majority in
aggregate principal amount of

                                       37
<PAGE>

the Debentures of each series affected thereby. Such an amendment or waiver may
not, without the consent of each Holder of the Debentures affected thereby:

      (1) reduce the principal amount of such Debentures;

      (2) reduce the principal amount of such Debentures the Holders of which
must consent to an amendment of this Indenture or a waiver;

      (3) change the stated maturity of the principal of or the interest on or
rate of interest on such Debentures or the manner of calculation thereof;

      (4) change adversely to the Holders the redemption provisions of Article 3
hereof;

      (5) change the currency in respect of which the payments on such
Debentures are to be made;

      (6) make any change in Article 10 hereof that adversely affects the rights
of the Holders of the Debentures or any change to any other Section hereof that
adversely affects their rights under Article 10 hereof; or

      (7) change Section 6.07 hereof;

provided that, in the case of the outstanding Debentures of a series then held
by a Trust, no such amendment shall be made that adversely affects the holders
of the Preferred Securities of that Trust, and no waiver of any Event of Default
with respect to the Debentures of that series or compliance with any covenant
under this Indenture shall be effective, without the prior consent of the
holders of a majority of the aggregate liquidation amount of the outstanding
Preferred Securities of that Trust or the holder of each such Preferred
Security, as applicable.

      A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture that has expressly been included solely for the
benefit of one or more particular series of Debentures, or which modifies the
rights of the Holders of Debentures of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Debentures of any other series.

      It shall not be necessary for the consent of the Holders of Debentures or
holders of Preferred Securities under this Section 9.02 to approve the
particular form of any proposed amendment, but it shall be sufficient if such
consent approves the substance thereof.

      If certain Holders agree to defer or waive certain obligations of the
Company hereunder with respect to Debentures held by them, such deferral or
waiver shall not affect the rights of any other Holder to receive the payment or
performance required hereunder in a timely manner.

      After an amendment or waiver under this Section 9.02 becomes effective,
the Company shall mail to each Holder a notice briefly describing the amendment
or waiver. Any

                                       38
<PAGE>

failure of the Company to mail such notices, or any defect therein, shall not,
however, in any way impair or affect the validity of such amendment or waiver.

      9.03 Compliance with Trust Indenture Act.

      Every supplemental indenture executed pursuant to this Article 9 shall
comply with the TIA.

      9.04 Revocation and Effect of Consents; Waivers and Actions.

      Until an amendment, waiver or other action by Holders becomes effective, a
consent to it or any other action by a Holder of a Debenture hereunder is a
continuing consent by the Holder and every subsequent Holder of that Debenture
or portion of the Debenture that evidences the same obligation as the consenting
Holder's Debenture, even if notation of the consent, waiver or action is not
made on such Debenture. However, any such Holder or subsequent Holder may revoke
the consent, waiver or action as to such Holder's Debenture or portion of the
Debenture if the Trustee receives the notice of revocation before the consent of
the requisite aggregate principal amount of such Debentures then outstanding has
been obtained and not revoked. After an amendment, waiver or action becomes
effective, it shall bind every Holder of the Debentures of the related series,
except as provided in Section 9.02 hereof.

      The Company may, but shall not be obligated to, fix a Record Date for the
purpose of determining the Persons entitled to consent to any amendment or
waiver. If a Record Date is fixed, then, notwithstanding the first two sentences
of the immediately preceding paragraph, only Holders of Debentures or holders of
Preferred Securities, as applicable, on such Record Date or their duly
designated proxies, and only those Persons, shall be entitled to consent to such
amendment, supplement or waiver or to revoke any consent previously given,
whether or not such Persons continue to be such after such Record Date. No such
consent shall be valid or effective for more than 90 days after such Record
Date.

      9.05 Notation on or Exchange of Debentures.

      Debentures of the related series authenticated and made available for
delivery after the execution of any supplemental indenture pursuant to this
Article 9 may, and shall, if required by the Trustee, bear a notation in form
approved by the Trustee as to any matter provided for in such supplemental
indenture. If the Company shall so determine, new Debentures so modified as to
conform, in the opinion of the Trustee and the Board of Directors, to any such
supplemental indenture may be prepared and executed by the Company and
authenticated and made available for delivery by the Trustee in exchange for
outstanding Debentures.

      9.06 Trustee to Execute Supplemental Indentures.

      The Trustee shall execute any supplemental indenture authorized pursuant
to this Article 9 if the supplemental indenture does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, execute it. In executing such supplemental indenture
the Trustee shall be entitled to receive, and shall be fully protected in

                                       39
<PAGE>

relying upon, an Officer's Certificate and Opinion of Counsel stating that such
supplemental indenture is authorized or permitted by this Indenture.

      9.07 Effect of Supplemental Indentures.

      Upon the execution of any supplemental indenture under this Article 9,
this Indenture shall be modified in accordance therewith, and such supplemental
indenture shall form a part of this Indenture for all purposes and every Holder
of Debentures of the related series theretofore or thereafter authenticated and
made available for delivery hereunder shall be bound thereby.

                                   ARTICLE 10
                                  SUBORDINATION

      10.01 Debentures Subordinated to Senior Indebtedness.

      Notwithstanding the provisions of Section 6.10 hereof or any other
provision herein or in any Debenture, the Company and the Trustee and, by their
acceptance thereof, the Holders of the Debentures (a) covenants and agrees that
all payments by the Company of the principal of and premium, if any, and
interest on the Debentures (other than Debentures which have been discharged
pursuant to Article 8) shall be subordinated in accordance with the provisions
of this Article 10 to the prior payment in full, in cash or cash equivalents, of
all amounts payable on, under or in connection with Senior Indebtedness, and (b)
acknowledges that holders of Senior Indebtedness are or shall be relying on this
Article 10.

      10.02 Priority and Payment of Proceeds in Certain Events:
            Remedies Standstill.

      (a) Upon any payment or distribution of assets or securities of the
Company, as the case may be, of any kind or character, whether in cash, property
or securities, upon any dissolution or winding up or total or partial
liquidation or reorganization of the Company, whether voluntary or involuntary,
or in bankruptcy, insolvency, receivership or other proceedings, all amounts
payable on, under or in connection with Senior Indebtedness (including any
interest accruing on such Senior Indebtedness subsequent to the commencement of
a bankruptcy, insolvency or similar proceeding) shall first be paid in full in
cash, or payment provided for in cash or cash equivalents, before the Holders or
the Trustee on behalf of the Holders or the holders of Preferred Securities
shall be entitled to receive from the Company any payment of principal of or
premium, if any, or interest on the Debentures or distribution of any assets or
securities.

      (b) No direct or indirect payment by or on behalf of the Company of
principal of or premium, if any, or interest on the Debentures (other than
Debentures which have been discharged pursuant to Article 8), whether pursuant
to the terms of the Debentures or upon acceleration or otherwise, shall be made
if, any the time of such payment, there exists (i) a default in the payment of
all or any portion of any Senior Indebtedness and the Trustee has received
written notice thereof from the Company, from holders of Senior Indebtedness or
from any trustee, representative or agent therefor, or (ii) any other default
affecting Senior

                                       40
<PAGE>

Indebtedness, as a result of which the maturity of Senior Indebtedness has been
accelerated and the Trustee has received written notice from the Company, from
holders of Senior Indebtedness or from any trustee, representative or agent
therefor, and such default shall not have been cured or waived by or on behalf
of the holders of such Senior Indebtedness.

      (c) If, notwithstanding the foregoing provisions prohibiting such payment
or distribution, the Trustee or any Holder shall have received any payment on
account of the principal of or premium, if any, or interest on the Debentures
when such payment is prohibited by this Section 10.02 and before all amounts
payable on, under or in connection with Senior Indebtedness are paid in full in
cash or cash equivalents, then and in such event (subject to the provisions of
Section 10.08 hereof) such payment or distribution shall be received and held in
trust for the holders of Senior Indebtedness and, at the written direction of
the trustee, representative or agent for the holders of the Senior Indebtedness,
shall be paid to the holders of the Senior Indebtedness remaining unpaid to the
extent necessary to pay such Senior Indebtedness in full in cash or cash
equivalents.

      Upon any payment or distribution of assets or securities referred to in
this Article 10, the Trustee and the Holders shall be entitled to rely upon any
order or decree of a court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending, and upon a
certificate of the receiver, trustee in bankruptcy, liquidating trustee, agent
or other Person making any such payment or distribution, delivered to the
Trustee for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of Senior Indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed thereon
and all other facts pertinent thereto or to this Article 10.

      10.03 Payments which May Be Made Prior to Notice.

      Nothing in this Article 10 or elsewhere in this Indenture shall prevent
(i) the Company, except under the conditions described in Section 10.02 hereof,
from making payments of principal of or premium, if any, or interest on the
Debentures or from depositing with the Trustee any monies for such payments, or
(ii) the application by the Trustee of any monies deposited with it for the
purpose of making such payments of principal of or premium, if any, or interest
on the Debentures, to the Holders entitled thereto, unless at least one Business
Day prior to the date when such payment would otherwise (except for the
prohibitions contained in Section 10.02 hereof) become due and payable the
Trustee shall have received the written notice provided for in Section
10.02(b)(i) or (ii) hereof.

      10.04 Rights of Holders of Senior Indebtedness Not to Be Impaired.

      No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time or in any way be
prejudiced or impaired by any act or failure to act in good faith by any such
holder, or by any noncompliance by the Company with the terms and provisions and
covenants herein regardless of any knowledge thereof any such holder may have or
otherwise be charged with.

      The provisions of this Article 10 are intended to be for the benefit of,
and shall be enforceable directly by, the holders of Senior Indebtedness.
Notwithstanding anything to the

                                       41
<PAGE>

contrary in this Article 10, to the extent any Holders or the Trustee have paid
over or delivered to any holder of Senior Indebtedness any payment or
distribution received on account of the principal of or premium (if any) or
interest on the Debentures to which any other holder of Senior Indebtedness
shall be entitled to share in accordance with Section 10.02 hereof, no holder of
Senior Indebtedness shall have a claim or right against any Holders or the
Trustee with respect to any such payment or distribution or as a result of the
failure to make payments or distributions to such other holder of Senior
Indebtedness.

      10.05 Trustee May Take Action to Effectuate Subordination.

      Each Holder of a Debenture, by his acceptance thereof, authorizes and
directs the Trustee on his behalf to take such action as may be required by the
trustee, representative or agent for holders of Senior Indebtedness or by the
Company to effectuate, as between the holders of Senior Indebtedness and the
Holders, the subordination as provided in this Article 10 and appoints the
Trustee his attorney-in-fact for any and all such purposes.

      10.06 Subrogation.

      Upon the payment in full, in cash or cash equivalents, of all Senior
Indebtedness, any Holder shall be subrogated to the rights of the holders of
such Senior Indebtedness to receive payments or distributions of assets of the
Company made on such Senior Indebtedness until the Debentures shall be paid in
full; and for the purposes of such subrogation, no payments or distributions to
holders of such Senior Indebtedness of any cash property or securities to which
such Holders of the Debentures would be entitled except for this Article 10, and
no payment pursuant to this Article 10 to holders of such Senior Indebtedness by
such Holders of the Debentures, shall, as between the Company, its creditors
other than holders of such Senior Indebtedness and such Holders of the
Debentures, be deemed to be a payment by the Company to or on account of such
Senior Indebtedness, it being understood that the provisions of this Article 10
are solely for the purpose of defining the relative rights of the holders of
such Senior Indebtedness, on the one hand, and such Holders of the Debentures,
on the other hand.

      If any payment or distribution to which Holders of Debentures would
otherwise have been entitled but for the provisions of this Article 10 shall
have been applied, pursuant to this Article 10, to the payment of all Senior
Indebtedness then and in such case such Holders of the Debentures shall be
entitled to receive from the holders of such Senior Indebtedness at the time
outstanding any payments or distributions received by such holders of Senior
Indebtedness in excess of the amount sufficient to pay, in cash or cash
equivalents, all such Senior Indebtedness in full.

      10.07 Obligations of Company Unconditional: Reinstatement.

      Nothing in this Article 10 or elsewhere in this Indenture or in any
Debenture is intended to or shall impair, as between the Company and Holders of
the Debentures, the obligations of the Company, which are absolute and
unconditional, to pay to such Holders the principal of and premium, if any, and
interest on the Debentures as and when the same shall become due and payable in
accordance with their terms, or is intended to or shall affect the relative
rights of such Holders of the Debentures and creditors of the Company other than
the

                                       42
<PAGE>

holders of the Senior Indebtedness, nor shall anything herein or therein prevent
the Trustee or any Holder of Debentures or holder of Preferred Securities, as
applicable, from exercising all remedies otherwise permitted by applicable law
under this Indenture, subject to the rights, if any, under this Article 10 of
the holders of such Senior Indebtedness in respect of cash, property or
securities of the Company received upon the exercise of any such remedy.

      The failure to make a scheduled payment of principal of or premium, if
any, or interest on the Debentures by reason of Section 10.02 shall not be
construed as preventing the occurrence of an Event of Default under Section 6.01
hereof; provided, however, that if (i) the conditions preventing the making of
such payment no longer exist, and (ii) such Holders of the Debentures are made
whole with respect to such omitted payments, the Event of Default relating
thereto (including any failure to pay any accelerated amounts) shall be
automatically waived, and the provisions of the Indenture shall be reinstated as
if no such Event of Default had occurred.

      10.08 Trustee Entitled to Assume Payments Not Prohibited in
            Absence of Notice.

      The Trustee or Paying Agent shall not be charged with the knowledge of the
existence of any default in the payment of all or a portion of any Senior
Indebtedness or any other default affecting Senior Indebtedness, as a result of
which the maturity of the Senior Indebtedness has been accelerated, unless and
until the Trustee or Paying Agent shall have received written notice thereof
from the Company or one or more holders of Senior Indebtedness or from any
trustee, representative or agent therefor or unless the Trustee or Paying Agent
otherwise had actual knowledge thereof; and, prior to the receipt of any such
written notice or actual knowledge of a Responsible Officer in the Corporate
Trust Department of the Trustee or Paying Agent, the Trustee or Paying Agent may
conclusively assume that no such facts exist.

      Unless at least one Business Day prior to the date when by the terms of
this Indenture any monies are to be deposited by the Company with the Trustee or
any Paying Agent for any purpose (including, without limitation, the payment of
the principal of or premium, if any, or interest on any Debenture), the Trustee
or Paying Agent shall have received with respect to such monies the notice
provided for in Section 10.02 or a Responsible Officer in the Corporate Trust
Department of the Trustee or Paying Agent shall have actual knowledge of default
in the payment of all or a portion of any Senior Indebtedness or any other
default affecting Senior Indebtedness as the result of which the maturity of the
Senior Indebtedness has been accelerated, the Trustee or Paying Agent shall have
full power and authority to receive and apply such monies to the purpose for
which they were received. Neither of them shall be affected by any notice to the
contrary, which may be received by either on or after such date. The foregoing
shall not apply to the Paying Agent if the Company is acting as Paying Agent.
Nothing in this Section 10.08 shall limit the right of the holders of Senior
Indebtedness to recover payments as contemplated by Section 10.02 hereof. The
Trustee or Paying Agent shall be entitled to conclusively rely on the delivery
to it of a written notice by a Person representing himself or itself to be a
holder of such Senior Indebtedness (or a trustee, representative or agent on
behalf of such holder) to establish that such notice has been given by a holder
of such Senior Indebtedness or a trustee, representative or agent on behalf of
any such holder. The Trustee shall not be

                                       43
<PAGE>

deemed to have any duty to the holders (and shall be fully protected in relying
upon such notice) of Senior Indebtedness.

      10.09 Right of Trustee to Hold Senior Indebtedness.

      The Trustee and any Paying Agent shall be entitled to all of the rights
set forth in this Article 10 in respect of any Senior Indebtedness at any time
held by them to the same extent as any other holder of such Senior Indebtedness,
and nothing in this Indenture shall be construed to deprive the Trustee or any
Paying Agent of any of its rights as such holder.

                                   ARTICLE 11
                                  MISCELLANEOUS

      11.01 Trust Indenture Act Controls.

      If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by operation of subsection (c) of Section 318 of the TIA, the
imposed duties shall control. The provisions of Sections 310 to 317, inclusive,
of the TIA that impose duties on any Person (including provisions automatically
deemed included in an indenture unless the indenture provides that such
provisions are excluded) are a part of and govern this Indenture, except as, and
to the extent, they are expressly excluded from this Indenture, as permitted by
the TIA.

      11.02 Notices.

      Any notice, request or other communication required or permitted to be
given hereunder shall be in writing and delivered, telecopied or mailed by
first-class mail, postage prepaid, addressed as follows:

      if to the Company:

             Public Service Enterprise Group Incorporated
             80 Park Plaza, T6B
             P.O. Box 1171
             Newark, New Jersey 07101-1171
             Facsimile No.: (973)
             Attention: Treasurer

      if to the Trustee:

             Wachovia Bank, National Association
             21 South Street
             Morristown, New Jersey  07960
             Facsimile No. (973)
             Attention: Corporate Trust Department

      The Company or the Trustee, by giving notice to the other, may designate
additional or different addresses for subsequent notices of communications. The
Company shall

                                       44
<PAGE>

notify the holder, if any, of Senior Indebtedness of any such additional or
different addresses of which the Company receives notice from the Trustee.

      Any notice or communication given to a Debentureholder shall be mailed or
delivered to the Debentureholder at the Debentureholder's address as it appears
on the Register of the Registrar and shall be sufficiently given if mailed
within the time prescribed.

      Failure to mail a notice or communication to a Debentureholder or any
defect in it shall not affect its sufficiency with respect to other
Debentureholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not received by the addressee.

      If the Company mails a notice or communication to the Debentureholders, it
shall mail a copy to the Trustee and each Registrar, Paying Agent or
co-Registrar.

      11.03 Communication by Holders with Other Holders.

      Debentureholders may communicate, pursuant to TIA Section 312(b), with
other Debentureholders with respect to their rights under this Indenture or the
Debentures. The Company, the Trustee, the Registrar, the Paying Agent and anyone
else shall have the protection of TIA Section 312(c).

      11.04 Certificate and Opinion as to Conditions Precedent.

      Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall furnish to the Trustee:

      (1) an Officer's Certificate (complying with Section 11.05 hereof) stating
that, in the opinion of such Officer, all conditions precedent to the taking of
such action have been complied with; and

      (2) if appropriate, an Opinion of Counsel (complying with Section 11.05
hereof) stating that, in the opinion of such counsel all such conditions
precedent to the taking of such action have been complied with.

      11.05 Statements Required in Certificate or Opinion.

      Each Officer's Certificate and Opinion of Counsel with respect to
compliance with a covenant or condition provided for in this Indenture shall
include:

      (1) a statement that each Person making such Officer's Certificate or
Opinion of Counsel has read such covenant or condition;

      (2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such Officer's
Certificate or Opinion of Counsel are based;

                                       45
<PAGE>

      (3) a statement that, in the opinion of each such Person, such Person has
made such examination or investigation as is necessary to enable such Person to
express an informed opinion as to whether or not such covenant or condition has
been complied with; and

      (4) a statement that, in the opinion of such Person, such covenant or
condition has been complied with; provided, however, that with respect to
matters of fact not involving any legal conclusion, an Opinion of Counsel may
rely on an Officer's Certificate or certificates of public officials.

      11.06 Severability Clause.

      If any provision in this Indenture or in the Debentures shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.

      11.07 Rules by Trustee, Paying Agent and Registrar.
---------------------------------------------

      The Trustee may make reasonable rules for action by or a meeting of
Debentureholders. The Registrar and Paying Agent may make reasonable rules for
their functions.

      11.08 Legal Holidays.

      A "Legal Holiday" is any day other than a Business Day. If any specified
date (including a date for giving notice) is a Legal Holiday, the action to be
taken on such date shall be taken on the next succeeding day that is not a Legal
Holiday, and if such action is a payment in respect of the Debentures, unless
otherwise specified pursuant to Section 2.01 hereof no principal, premium (if
any) or interest installment shall accrue for the intervening period; except
that if any interest payment is due on a Legal Holiday and the next succeeding
day is in the next succeeding calendar year, such payment shall be made on the
Business Day immediately preceding such Legal Holiday.

      11.09 Governing Law.

      This Indenture and the Debentures shall be governed by and construed in
accordance with the laws of the State of New Jersey as applied to contracts made
and performed within the State of New Jersey, without regard to its principles
of conflicts of laws.

      11.10 No Recourse Against Others.

      No director, officer, employee or stockholder, as such, of the Company
shall have any liability for any obligations of the Company under the Debentures
or this Indenture or for any claim based on, in respect of or by reason of such
obligations their creation. By accepting a Debenture, each Debentureholder shall
waive and release all such liability. The waiver and release shall be part of
the consideration for the issue of the Debentures.

                                       46
<PAGE>

      11.11 Successors.

      All agreements of the Company in this Indenture and Debentures shall bind
its successors and assigns. All agreements of the Trustee in this Indenture
shall bind its successors and assigns.

      11.12 Multiple Original Copies of this Indenture.

      The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement. Any signed copy shall be sufficient proof of this Indenture.

      11.13 No Adverse Interpretation of Other Agreements.

      This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.

      11.14 Table of Contents: Headings. Etc.

      The Table of Contents, Cross-Reference Table, and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof, and shall in no way modify or
restrict any of the terms or provisions hereof.

      11.15 Benefits of the Indenture.

      Except as otherwise expressly provided herein with respect to holders of
Senior Indebtedness and holders of Preferred Securities, nothing in this
Indenture or in the Debentures, express or implied, shall give to any person,
other than the parties hereto and their successors hereunder and the Holders of
the Debentures, any benefit or any legal or equitable right, remedy or claim
under this Indenture.

                                       47
<PAGE>

                                   SIGNATURES

      IN WITNESS WHEREOF, the undersigned, being duly authorized, have executed
this Indenture on behalf of the respective parties hereto as of the date first
above written.

                                   PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

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

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

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

                                   WACHOVIA BANK, NATIONAL ASSOCIATION,
                                   as Trustee

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

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

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

                                       48
<PAGE>

                                    Exhibit A

                  PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED
              __ Deferrable Interest Junior Subordinated Debenture,
                                    Series __

No. __

      Public Service Enterprise Group Incorporated, a New Jersey corporation
(the "Company", which term includes any successor company under the Indenture
hereinafter referred to), for value received, hereby promises to pay to
____________________ or registered assigns, the principal sum of __________
Dollars on __________, ____, and to pay interest on said principal sum from
__________, ____ or from the most recent Interest Payment Date (as defined
below) to which interest has been paid or duly provided for, ________ in arrears
on ________, ________, ________and ________, commencing         , 200_ (each, an
"Interest Payment Date") at a rate equal to ___ until the principal hereof shall
have become due and payable, and on any overdue principal and (to the extent
that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the same rate per annum. In the event that
any Interest Payment Date is not a Business Day, then interest will be payable
on the next succeeding day which is a Business Day (and without any interest or
other payment in respect of any such delay), except that, if such Business Day
is in the next succeeding calendar year, such payment shall be made on the
immediately preceding Business Day, in each case with the same force and effect
as if made on such date. The interest installment so payable, and punctually
paid or duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Debenture is registered at
the close of business on the Regular Record Date for such interest installment,
which shall be the __ day (whether or not a Business Day) preceding the
applicable Interest Payment Date, provided that if all of the Series __
Debentures (as defined below) are then held by PSEG Funding Trust I (the
"Trust") or the Series __ Debentures are held in book-entry-only form, the
Regular Record Date shall be the close of business on the Business Day next
preceding such Interest Payment Date. Any such interest installment not
punctually paid or duly provided for shall forthwith cease to be payable to the
Holder on such Regular Record Date, and may be paid to the Person in whose name
this Debenture is registered at the close of business on a Special Record Date
to be fixed by the Trustee (as defined below) for the payment of such defaulted
interest, notice whereof shall be given to the Holders of the Series __
Debentures not less than 7 days prior to such Special Record Date, as more fully
provided in the Indenture.

      Payment of the principal of, premium, if any, and interest on this
Debenture will be made in such coin or currency of the United States of America
as at the time of payment is legal tender for payment of public and private
debts. Payments of interest on an Interest Payment Date will be made by check
mailed to the Holder hereof at the address shown in the Register or, at the
option of the Holder hereof, to such other place in the United States of America
as the Holder hereof shall designate to the Trustee in writing. At the request
of a Holder of at least $10,000,000 aggregate principal amount of Series __
Debentures, interest on such Debentures will be payable by wire transfer within
the continental United States in immediately available

                                      A-1
<PAGE>

funds to the bank account number specified in writing by such Holder to the
Registrar prior to the Regular Record Date.

      The principal and any premium and interest due hereon on the Stated
Maturity Date or a Redemption Date (other than an Interest Payment Date) will be
paid in immediately available funds only upon surrender of this Debenture at the
principal corporate office of Wachovia Bank, National Association, Paying Agent,
in Morristown, New Jersey, or at such other office or agency of the Paying Agent
as the Company shall designate by written notice to the Holder of this
Debenture.

      The indebtedness evidenced by this Debenture is, to the extent provided in
the Indenture, subordinate and subject in right of payment to the prior payment
in full of all Senior Indebtedness, and this Debenture is issued subject to the
provisions of the Indenture with respect thereto. The Holder of this Debenture,
by accepting the same, (a) agrees to and shall be bound by such provisions, (b)
authorizes and directs the Trustee on his behalf to take such action as may be
necessary or appropriate to acknowledge or effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and all such
purposes. The Holder of this Debenture, by his acceptance hereof, hereby waives
all notice of the acceptance of the subordination provisions contained herein
and in the Indenture by each holder of Senior Indebtedness, whether now
outstanding or hereafter incurred, and waives reliance by each such holder upon
said provisions.

      This Debenture is one of a duly authorized series of Junior Subordinated
Debentures of the Company (herein sometimes referred to as the "Series __
Debentures"), specified in the Indenture, limited in aggregate principal amount
to $______, issued under and pursuant to an Indenture dated as of
_______________, 2002 (the "Indenture") executed and delivered between the
Company and Wachovia Bank, National Association, as trustee (the "Trustee"). The
Series __ Debentures are initially being issued to the Trust, to be held on
behalf of the Trust by its property trustee (the "Property Trustee").
Concurrently with the issuance of the Series __ Debentures, the Trust is issuing
its trust securities, representing undivided beneficial interests in the assets
of the Trust and having an aggregate liquidation amount equal to the principal
amount of the Series __ Debentures, including the Trust's ____ Trust Preferred
Securities, (the "Preferred Securities"). By the terms of the Indenture,
Debentures are issuable in series which may vary as to amount, date of maturity,
rate of interest and in other respects as in the Indenture provided. Reference
is made to the Indenture for a description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Trustee, the Company and
Holders of the Debentures. Each term used in this Debenture which is defined in
the Indenture and not defined herein shall have the meaning assigned to it in
the Indenture.

      At the option of the Company, the Series __ Debentures are redeemable
prior to maturity (i) at any time on or after __________, 200_, in whole or in
part, and (ii) if a Special Event shall occur and be continuing, in whole (but
not in part), at a price equal to __________ plus accrued interest to the
Redemption Date. A "Special Event" shall mean either a "Tax Event" or an
"Investment Company Event." "Tax Event" shall mean that the Company shall have
received an opinion of counsel (which may be regular counsel to the Company or
an Affiliate, but not an employee thereof and which must be acceptable to the
Property Trustee of

                                      A-2
<PAGE>

the Trust) experienced in such matters to the effect that, as a result of any
amendment to, or change (including any announced prospective change) in, the
laws (or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein affecting taxation, or as a
result of any official administrative pronouncement or judicial decision
interpreting or applying such laws or regulations, which amendment or change is
effective or such interpretation or pronouncement is announced on or after the
date of original issuance of Preferred Securities, there is more than an
insubstantial risk that (i) the Trust is subject to United States Federal income
tax with respect to interest received on the Debentures, (ii) interest payable
by the Company to the Trust on the Series __ Debentures will not be deductible
for United States Federal income tax purposes or (iii) the Trust is subject to
more than a de minimis amount of other taxes, duties, assessments or other
governmental charges. "Investment Company Event" shall mean the occurrence of a
change in law or regulation or a change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or regulatory
authority (a "Change in 1940 Act Law") to the effect that the Trust is or will
be considered an "investment company" that is required to be registered under
the Investment Company Act of 1940, as amended, which Change in 1940 Act Law
becomes effective on or after the date of original issuance of the Preferred
Securities.

      At least 30 days but not more than 60 days before the Redemption Date, the
Trustee shall mail or caused to be mailed a notice of redemption by first-class
mail, postage prepaid, to each Holder of Series __ Debentures to be redeemed.

      In the event of redemption of this Debenture in part only, a new Series __
Debenture or Debentures for the unredeemed portion hereof will be issued in the
name of the Holder hereof upon the cancellation hereof.

      In case an Event of Default with respect to the Series __ Debentures
occurs and is continuing, the principal of and premium, if any, and interest on
the Series __ Debentures may (and, in certain circumstances, shall) be declared,
and upon such declaration shall become, due and payable, in the manner, with the
effect and subject to the conditions provided in the Indenture.

      The Indenture contains provisions for defeasance at any time of the entire
indebtedness of this Debenture upon compliance by the Company with certain
conditions set forth therein.

      Subject to certain exceptions in the Indenture which require the consent
of every Holder, the Company and the Trustee may amend the Indenture or may
waive future compliance by the Company with any provisions of the Indenture,
with the consent of the Holders of at least a majority in aggregate principal
amount of the Debentures of each series affected thereby, provided that if the
Series __ Debentures are held by the Trust, no such amendment or waiver that
adversely affects the holders of the Preferred Securities shall be effective
without the prior consent of the holders of at least a majority in aggregate
liquidation amount of the outstanding Preferred Securities. Subject to certain
exceptions in the Indenture, without the consent of any Debentureholder, the
Company and the Trustee may amend the Indenture to cure any ambiguity, defect or
inconsistency, to bind a successor to the obligations of the Indenture, to
provide for uncertificated Debentures in addition to certificated Debentures, to
comply with any

                                      A-3
<PAGE>

requirements of the Debentures and the Securities and Exchange Commission in
connection with the qualification of the Indenture under the TIA, or to make any
change that, in the reasonable judgment of the Company, does not adversely
affect the rights of any Debentureholder. Amendments bind all Holders and
subsequent Holders.

      No reference herein to the Indenture and no provision of this Debenture or
the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this Debenture at the time and place and at the rate and in the
money herein prescribed.

      So long as no Event of Default with respect to the Series __ Debentures
has occurred and is continuing, the Company shall have the right at any time and
from time to time to extend the interest payment period of the Series __
Debentures for up to __ consecutive periods (the "Extension Period"), provided
that no Extension Period shall extend beyond the Stated Maturity Date or
Redemption Date of any Series __ Debenture. At the end of the Extension Period,
the Company shall pay all interest then accrued and unpaid (together with
interest thereon at the rate specified for the Series __ Debentures, compounded
_________, to the extent that payment of such interest is enforceable under
applicable law). Prior to the termination of any such Extension Period, the
Company may further extend such Extension Period, provided that such Extension
Period, together with all such previous and further extensions, shall not exceed
__ consecutive periods and shall not extend beyond the Stated Maturity Date or
Redemption Date of any Series __ Debenture. At the termination of any such
Extension Period and upon the payment of all amounts then due, the Company may
elect to begin a new Extension Period, subject to the foregoing restrictions.

      Series __ Debentures are issuable only in registered form without coupons
in denominations of $___ and any integral multiple thereof. As provided in the
Indenture and subject to certain limitations therein set forth, this Debenture
is exchangeable for a like aggregate principal amount of Series __ Debentures of
a different authorized denomination, as requested by the Holder surrendering the
same.

      As provided in the Indenture and subject to certain limitations therein
set forth, this Debenture is transferable by the Holder hereof upon surrender of
this Debenture for registration of transfer at the office or agency of the
Registrar accompanied by a written instrument or instruments of transfer inform
satisfactory to the Registrar duly executed by the Holder hereof or his attorney
duly authorized in writing, and thereupon one or more new Series __ Debentures
of authorized denominations and for the same aggregate principal amount will be
issued to the designated transferee or transferees. No service charge will be
made for any such transfer, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge payable in relation
thereto.

      Prior to presentment for registration of transfer of this Debenture, the
Company, the Trustee, any Paying Agent and any Registrar may deem and treat the
Holder hereof as the absolute owner hereof (whether or not this Debenture shall
be overdue and notwithstanding any notice of ownership or writing hereon made by
anyone other than the Registrar) for the purpose of receiving payment of or on
account of the principal hereof and premium, if any, and interest

                                      A-4
<PAGE>

due hereon and for all other purposes, and neither the Company nor the Trustee
nor any Paying Agent nor any Registrar shall be affected by any notice to the
contrary.

      No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder officer or director, past, present or future, as such,
of the Company or of any predecessor or successor corporation, whether by virtue
of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.

      This Debenture shall not be valid until an authorized signatory of the
Trustee manually signs and dates the Trustee's Certificate of Authentication
below.

                                      A-5
<PAGE>

      IN WITNESS WHEREOF, the Company has caused this Debenture to be signed
manually or by facsimile by its duly authorized officers and a facsimile of its
corporate seal to be affixed hereto or imprinted hereon.

                                  PUBLIC SERVICE ENTERPRISE GROUP INCORPORATED

                                  By
                                    ------------------------------------------
[SEAL]                            Name:
                                  Title:

Attest:

-------------------------------
(Assistant) Secretary

                                      A-6
<PAGE>

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

                  This is one of the Debentures, of the series
           designated, referred to in the within-mentioned Indenture.

                 WACHOVIA BANK, NATIONAL ASSOCIATION, as Trustee

                        By: ____________________________
                              Authorized Signatory

                        Dated: __________________________

                                      A-7
<PAGE>

                                 ASSIGNMENT FORM

      To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to:

--------------------------------------------------------------------------------
             (Insert assignee's social security or tax I.D. number)

--------------------------------------------------------------------------------
              (Print or type assignee's name, address and zip code)

and irrevocably appoint ____________________ agent to transfer this Debenture on
the books of the Register. The agent may substitute another to act for him.

Dated:                      Signature:
      ------------------              ------------------------------------------
                                      (Sign exactly as your name appears on the
                                      other side of this Debenture)

Signature Guaranty:
                   ------------------

Signatures must be guaranteed by an "eligible guarantor institution" meeting the
requirements of the Trustee, which requirements include membership or
participation in the Security Transfer Agent Medallion Program ("STAMP:) or such
other "signature guarantee program" as may be determined by the Trustee in
addition to, or in substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.

                                      A-8Exhibit 4.1

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

                                  LUMENIS LTD.

                                       and

                    AMERICAN STOCK TRANSFER & TRUST COMPANY,

                                  Rights Agent

                             Bonus Rights Agreement

                           Dated as of April 11, 2002

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

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                   Page
<S>                                                                                                 <C>
Section 1.    Certain Definitions................................................................    4

Section 2     Appointment of Rights Agent........................................................    9

Section 3.    Issue of Right Certificates........................................................    9

Section 4.    Form of Right certificates.........................................................   11

Section 5.    Countersignature and Registration..................................................   12

Section 6.    Transfer, Split-up, Combination and Exchange of Rights Certificates;
              Mutilated,  Destroyed, Lost or Stolen Right Certificates...........................   12

Section 7.    Exercise of Rights; Purchase Price; Expiration Date of Rights......................   13

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

Section 9.    Reservation and Availability of Ordinary Shares....................................   16

Section 10.   Ordinary Shares Record Date........................................................   17

Section 11.   Adjustment of Purchase Price, Number of Shares or Number of Rights.................   17

Section 12.   Certificate of Adjusted Purchase Price or Number of Shares.........................   28

Section 13.   Consolidation, Merger or Sale or Transfer of assets or Earning Power...............   28

Section 14.   Fractional Rights and Fractional Shares............................................   31

Section 15.   Rights of Action...................................................................   32

Section 16.   Agreement of Right Holders.........................................................   33

Section 17.   Right Certificate holder Not Deemed a Shareholder..................................   33
</TABLE>

                                      -2-
<PAGE>

<TABLE>
<S>                                                                                                 <C>
Section 18.   Concerning the Rights Agent........................................................   34

Section 19.   Merger or Consolidation or Change of Name of Rights Agent..........................   34

Section 20.   Duties of Rights Agent.............................................................   35

Section 21.   Change of Right Agent..............................................................   38

Section 22.   Issuance of New Right Certificates.................................................   39

Section 23.   Redemption and Exchange............................................................   39

Section 24.   Notice of Certain Events...........................................................   42

Section 25.   Notices............................................................................   43

Section 26.   Supplements and Amendments.........................................................   44

Section 27.   Successors.........................................................................   45

Section 28.   Benefits of this Agreement.........................................................   45

Section 29.   Severability.......................................................................   45

Section 30.   Governing Law......................................................................   45

Section 31.   Counterparts.......................................................................   46

Section 32.   Descriptive Headings...............................................................   46

Section 33.   Determination and Actions by the Board of Directors................................   46
</TABLE>

                                      -3-
<PAGE>

                             BONUS RIGHTS AGREEMENT

     Bonus  Rights  Agreement,   dated  as  of  April  11,  2002,  (the  "Rights
Agreement")  between Lumenis Ltd., an Israeli  corporation (the "Company"),  and
American Stock Transfer & Trust Company, as Rights Agent (the "Rights Agent").

     The Board of  Directors  of the  Company  (the  "Board of  Directors")  has
authorized  the  distribution  of one bonus right (a "Right") for each  Ordinary
Share (as defined in Section  1(h) hereof) of the Company  outstanding  on April
11, 2002 (the "Record  Date"),  and has authorized the issuance of one Right (as
such  number may be  hereinafter  adjusted  pursuant to the terms  hereof)  with
respect to each Ordinary Share that shall be issued (whether  originally  issued
or  delivered  from the  Company's  treasury)  between  the Record  Date and the
earliest of the Distribution  Date, the Redemption Date and the Final Expiration
Date (as such terms are  defined in  Sections  3 and 7 hereof)  and,  in certain
circumstances  provided in Section 22 hereof,  after the Distribution Date, each
Right initially representing the right to purchase one Ordinary Share.

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

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

     (a)  "Acquiring  Person" shall mean any Person (as such term is hereinafter
defined) who or which,  together with all  Affiliates  and  Associates  (as such
terms are hereinafter defined) of such Person, shall be the Beneficial Owner (as
such term is hereinafter  defined) of 15% or more of the Ordinary  Shares of the
Company then outstanding but shall not include (i) the Company,  in pursuance to
Section 308 of the Companies Law (as defined  hereunder),  (ii) any wholly-owned
Subsidiary of the Company,  in pursuance to Section 309 of the Companies Law, or
otherwise,  (iii) any employee  benefit plan of the Company or of any subsidiary
or Affiliate of the Company,  (iv) any entity holding shares of share capital of
the Company for or pursuant to the terms of any such plan, (v) Coherent, Inc., a
Delaware corporation ("Coherent"),

                                      -4-
<PAGE>

so long as Coherent  shall not purchase or otherwise  become (as a result of the
actions of Coherent or its  Affiliates or Associates)  the  Beneficial  Owner of
more than 23% of the Ordinary Shares then  outstanding  or, if applicable,  such
greater  percentage as may be contemplated by Section 5.18 of the Asset Purchase
Agreement by and among the Company,  Energy  Systems  Holdings Inc. and Coherent
dated as of February 25,  2001,  (vi) any Person who,  along with such  Person's
Affiliates  and  Associates,  becomes an  Acquiring  Person  (as  defined in the
preceding  clauses of this  Section  1(a)) as a result of a Qualified  Offer (as
defined in Section 11(a)(ii) hereof),  (vii) any Person who becomes an Acquiring
Person (as defined in the  preceding  clauses of this Section 1(a)) by virtue of
acquiring  Ordinary Shares as a result of  participation by such Person and such
Person's  Affiliates and  Associates in any dividend  reinvestment  plan,  stock
option  plan  or  other  similar  plan  or  arrangement  of the  Company  or its
Subsidiaries or Affiliates;  provided that such Person,  including such Person's
Affiliates and Associates,  does not acquire thereafter any additional  Ordinary
Shares,  exclusive  of (x)  Ordinary  Shares  acquired  by such  Person and such
Person's Affiliates and Associates as a result of stock dividends, stock splits,
recapitalizations  or similar  transaction  in which the Company did not receive
any consideration for issuing the Ordinary Shares;  (y) Ordinary Shares acquired
by such  Person  and such  Person's  Affiliates  and  Associates  as a result of
devises, bequests and intestate succession;  and (z) Ordinary Shares acquired by
such  Person  and  such  Person's  Affiliates  and  Associates  as a  result  of
participation by such Person and such Person's  Affiliates and Associates in any
dividend  reinvestment  plan,  stock  option  plan  or  other  similar  plan  or
arrangement  of the  Company or its  Subsidiaries  or  Affiliates  or (viii) any
Person who becomes an Acquiring  Person (as defined in the preceding  clauses of
this Section 1(a)) inadvertently or without knowledge of the terms of the Rights
and who or which,  together with all Affiliates and Associates,  thereafter does
not acquire additional Ordinary Shares while the Beneficial Owner of 15% or more
of the Ordinary  Shares then  outstanding;  provided that if so requested by the
Company,  (x) such Person  shall  certify  within 10  Business  Days of being so
requested,  that such Person had acquired the Ordinary Shares  inadvertently  or
without  knowledge of the terms of the Rights and (y) such Person shall promptly
sell any shares  acquired in excess of the applicable  threshold that would have
otherwise  caused such Person to be an  Acquiring  Person.  Notwithstanding  the
foregoing, no

                                      -5-
<PAGE>

Person  shall  become an  Acquiring  Person as the result of an  acquisition  of
Ordinary  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  Ordinary  Shares  of  the  Company  then
outstanding;  provided,  however,  that if a Person who becomes  the  Beneficial
Owner of 15% or more of the Ordinary  Shares of the Company then  outstanding by
reason of share  purchases by the Company shall,  after such share  purchases by
the Company,  become the Beneficial  Owner of any additional  Ordinary Shares of
the Company  constituting  1.5% or more of the Ordinary Shares then outstanding,
then such Person shall be deemed to be an Acquiring Person.

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

     (c)  "Audit  Committee"  shall  mean the  Audit  Committee  of the Board of
Directors  or, if there is then no such Audit  Committee,  all of the  Company's
outside  directors (as such terms is used in the Companies Law), then serving on
the Board of Directors or, if there are then no outside directors serving on the
Board of Directors, the Board of Directors.

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

          (i)  which  such  Person  or  any  of  such  Person's   Affiliates  or
Associates,  directly or indirectly,  has the right to vote or dispose of or has
"Beneficial  Ownership"  of (as  determined  pursuant  to Rule  13d-3  under the
Exchange   Act),   including   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 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 regulation of the Exchange Act and (2) is not also then  reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report);

                                      -6-
<PAGE>

          (ii)  which  such  Person  or  any  of  such  Person's  Affiliates  or
Associates  has (A) the right to  acquire  (whether  such  right is  exercisable
immediately  or only  after the  passage  of time)  pursuant  to any  agreement,
arrangement or understanding  (whether or not in writing),  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
the Beneficial Owner of, or to beneficially own, 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 (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 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) for the purpose of acquiring, holding,
voting (except to the extent contemplated by the proviso to Section 1(d)(ii)(B))
or disposing of any securities of the Company;

provided,  however,  that  nothing in this  paragraph  (d) shall  cause a Person
engaged in business as an underwriter  of securities to be the Beneficial  Owner
of, or to  "beneficially  own",  any securities  acquired  through such Person's
participation  in  good  faith  in a  firm  commitment  underwriting  until  the
expiration  of forty  days  after  the date of such  acquisition;  and  provided
further,  however,  that any  shareholder  of the Company,  with  Affiliates(s),
Associate(s) or other Person(s) who may be deemed  representatives of it serving
as  director(s)  of the  Company,  shall  not be deemed  to  "beneficially  own"
securities  held by other Persons as a result of (i) Affiliates or Associates of
such  shareholder  serving  as  directors  or taking  any  action in  connection

                                      -7-
<PAGE>

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

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

     (f) "Companies Law" shall mean the Israeli  Companies Law,  5759-1999,  and
the regulations promulgated thereunder.

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

     (h) "Nasdaq Stock Market" The Nasdaq Stock Market, Inc.

     (i)  "Ordinary  Shares" when used with  reference to the Company shall mean
the Ordinary  Shares,  par value NIS 0.10 per share,  of the Company.  "Ordinary
Shares" when used with reference to any Person other than the Company shall mean
the share capital (or equity  interest)  with the greatest  voting power of such
other Person or, if such Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.

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

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

     (l)  "Shares   Acquisition   Date"  shall  mean  the  date  of  the  public
announcement  (which,  for purposes of this definition,  shall include,  without
limitation,

                                      -8-
<PAGE>

a report filed  pursuant to Section 13(d) of the Exchange Act) by the Company or
an Acquiring Person indicating that an Acquiring Person has become such.

     (m)  "Subsidiary"  of any Person shall mean any corporation or other entity
of which a majority  of the  voting  power of the voting  equity  securities  or
equity interests is owned, directly or indirectly, by such Person.

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

     Section 3. Issue of Right Certificates. (a) Until the earlier of (i)
the Close of Business  on the tenth  Business  Day after the Shares  Acquisition
Date or (ii) the Close of Business on the tenth Business Day (or such later date
as the Board of Directors,  with the concurrence of the Audit  Committee,  shall
determine)  after the date of the  commencement  of (within  the meaning of Rule
14d-2 under the Exchange  Act), a tender or exchange offer the  consummation  of
which would result in any Person's  becoming an Acquiring Person  (including any
such date  which is after  the date of this  Rights  Agreement  and prior to the
issuance of the Rights; the earlier of such dates referred to in clauses (i) and
(ii) of this Section 3(a) being herein referred to as the "Distribution  Date"),
(x) the Rights will be evidenced  (subject to the provisions of paragraph (b) of
this Section 3) by the certificates for Ordinary Shares  registered in the names
of the holders  thereof (which  certificates  for Ordinary  Shares shall also be
deemed to be Right Certificates) and not by separate Right Certificates, and (y)
the right to receive Right  Certificates will be transferable only in connection
with the transfer of Ordinary Shares.  The Board of Directors may defer the date
set forth in clause (ii) of the preceding  sentence to a specified later date or
to an  unspecified  later date,  each to be determined by action of the Board of
Directors,  with the concurrence of the Audit Committee.  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, send) by first-class,  insured, postage-prepaid
mail,

                                      -9-
<PAGE>

to each  record  holder of  Ordinary  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 Right  Certificate,  in substantially  the form of Exhibit A hereto,
evidencing  one Right for each Ordinary  Share so held.  As of the  Distribution
Date, the Rights will be evidenced solely by such Right Certificates.

     (b) At the request of any holder of Ordinary Shares,  the Company will send
or cause to be sent a copy of a Summary of Rights to Purchase  Ordinary  Shares,
in  substantially  the form  attached  hereto  as  Exhibit  B (the  "Summary  of
Rights"),  by first-class,  postage-prepaid  mail, to the address of such holder
shown on the records of the Company.  With respect to certificates  for Ordinary
Shares  outstanding  as of the Record Date,  until the  Distribution  Date,  the
Rights will be evidenced by such  certificates for Ordinary Shares registered in
the names of the holders thereof.  Until the  Distribution  Date (or the earlier
Redemption  Date or Final  Expiration  Date),  the surrender for transfer of any
certificate  for  Ordinary  Shares  outstanding  on the  Record  Date shall also
constitute  the  transfer  of the Rights  associated  with the  Ordinary  Shares
represented thereby.

     (c) Certificates issued for Ordinary Shares (including, without limitation,
certificates  issued upon  transfer or  exchange of Ordinary  Shares)  after the
Record Date but prior to the earliest of the  Distribution  Date, the Redemption
Date or the Final  Expiration  Date  shall have  impressed  on,  printed  on, or
written on or otherwise affixed to them the following legend:

          This  certificate  also  evidences  and entitles the holder  hereof to
     certain  Rights as set forth in a Bonus Rights  Agreement  between  Lumenis
     Ltd. and the Rights Agent thereunder (the "Rights Agreement"), the terms of
     which are hereby incorporated herein by reference and a copy of which is on
     file at the  principal  executive  offices of Lumenis  Ltd.  Under  certain
     circumstances,  as set forth in the Rights  Agreement,  such Rights will be
     evidenced by separate  certificates and will no longer be evidenced by this
     Certificate.  Lumenis Ltd.  will mail to the holder of this  certificate  a
     copy of the Rights  Agreement  without  charge  after  receipt of a written
     request thereof.  Under certain

                                      -10-
<PAGE>

     circumstances,  Rights  issued to  Acquiring  Persons or any  Affiliate  or
     Associate  thereof (as such terms are defined in the Rights  Agreement) may
     become null and void.

     With respect to such certificates  containing the foregoing  legend,  until
the  Distribution   Date,  the  Rights   associated  with  the  Ordinary  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 Ordinary Shares represented thereby.

     Section  4. Form of Right  Certificates.  Each Right  Certificate  (and the
forms of  election  to purchase  shares and of  assignment  to be printed on the
reverse  thereof)  shall be  substantially  the same as 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 Rights Agreement, or as may be required
to comply with any applicable  law or with any rule or regulation  made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed,  or to conform to usage. Each Right Certificate
shall entitle the holder  thereof to purchase such number of Ordinary  Shares as
shall be set forth  therein at the price per share set forth therein (such price
per whole Ordinary Share, the "Purchase Price"), but the number and kind of such
shares and the Purchase Price shall be subject to adjustment as provided herein.
In addition,  the Company  shall have the right to attach a  certificate  to any
Right  Certificate  providing for the holder  thereof to certify  whether or not
such Person is or was an Acquiring  Person or an Affiliate or Associate  thereof
or whether such Person acquired the Rights  evidenced by such Right  Certificate
from any such Person.  In the event the Company  attaches such a certificate  to
any  Right  Certificate,  proper  execution  of  such  certificate  shall  be  a
prerequisite to the exercise of the Rights  associated  therewith as set fort in
the applicable provisions of this Rights Agreement.

                                      -11-
<PAGE>

     Section 5.  Countersignature and Resignation.  The Right Certificates shall
be  executed  on behalf of the  Company  by its Chief  Executive  Officer or its
President either manually or by facsimile signature,  shall have affixed thereto
the Company's seal or a facsimile thereof and shall be attested by the Secretary
or an  Assistant  Secretary  of the  Company,  either  manually or by  facsimile
signature.  The Right Certificates shall be manually countersigned by the Rights
Agent and shall not be valid for any purpose  unless so  countersigned.  In case
any officer of the  Company who shall have signed any of the Right  Certificates
shall cease to be such  officer of the Company  before  countersignature  by the
Rights Agent and issuance and delivery by the Company,  such Right Certificates,
nevertheless, may be countersigned by the Rights Agent, and issued and delivered
by the  Company  with the same  force and effect as though the Person who signed
such Right  Certificates  had not ceased to be such officer of the Company;  and
any Right  Certificate may be signed on behalf of the Company by any Person who,
at the actual date of the execution of such Right Certificate, shall be a proper
officer of the Company to sign such Right  Certificate,  although at the date of
execution of this Rights Agreement any such Person was not such an officer.

     Following the Distribution  Date, the Rights Agent will keep or cause to be
kept, at its principal offices, books for registration and transfer of the Right
Certificates issued hereunder.  Such books shall show the names and addresses of
the respective holders of the Right Certificates, the number of Rights evidenced
on its face by each of the Right  Certificates and the date of each of the Right
Certificates.

Section 6. Transfer, Split-Up,  Combination and Exchange of Rights Certificates;
Mutilated,  Destroyed,  Lost  or  Stolen  Right  Certificates.  Subject  to  the
provisions  of Section 14 hereof,  any time after the Close of  Business  on the
Distribution  Date,  and at or prior to the Close of  Business on the earlier of
the Redemption Date or the Final Expiration Date, any Right Certificate or Right
Certificates (other than Rights  Certificates  representing Rights that may have
been exchanged  pursuant to Section 23(c) hereof) may be transferred,  split up,
combined or  exchanged  for another  Right  Certificate  or Right  Certificates,
entitling the registered  holder to purchase a like number of Ordinary Shares as
the Right  Certificate  or Right  Certificates  surrendered  then  entitled such
holder to purchase. Any registered holder desiring to transfer, split

                                      -12-
<PAGE>

up, combine or exchange any Right certificate shall make such request in writing
delivered to the Rights Agent and shall surrender the Right Certificate or Right
Certificates to be transferred, split up, combined or exchanged at the principal
office of the Rights  Agent.  Thereupon the Rights Agent shall  countersign  and
deliver  to  the  Person   entitled   thereto  a  Right   Certificate  or  Right
Certificates,  as the case may be, as so  requested.  The  Company  may  require
payment from the holder of Right  Certificates  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 such Right Certificates.

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

     Section 7. Exercise of Rights;  Purchase Price;  Expiration Date of Rights.
(a) The  registered  holder of any Right  Certificate  may  exercise  the Rights
evidenced  thereby (except as otherwise  provided herein) in whole or in part at
any time after the  Distribution  Date upon surrender of the Right  Certificate,
with the form of election to purchase on the reverse side thereof duly executed,
to the Rights Agent at the principal  office of the Rights Agent,  together with
payment of the Purchase Price for each Ordinary Share as to which the Rights are
exercised,  at or prior to the earlier of (i) the Close of Business on April 11,
2003 (the  "Final  Expiration  Date"),  or (ii) the time at which the Rights are
redeemed or exchanged as provided in Section 23 hereof (the "Redemption Date").

     (b) The  Purchase  Price  payable  pursuant to the exercise of Rights shall
initially  be  $38.00,  shall be  subject  to  adjustment  from  time to time as
provided in

                                      -13-
<PAGE>

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 Right Certificate  representing  exercisable  Rights,
with the form of election to purchase duly  executed,  accompanied by payment of
the  Purchase  Price for the shares to be  purchased  and an amount equal to any
applicable  transfer  tax  required  to be paid  by the  holder  of  such  Right
Certificate in accordance with Section 9 hereof,  in cash, or by certified check
or bank  draft  payable to the order of the  Company,  the  Rights  Agent  shall
thereupon  promptly  (i)  requisition  from any  transfer  agent of the Ordinary
Shares  (or  make  available,  if  the  Rights  Agent  is  the  transfer  agent)
certificates for the number of Ordinary Shares to be purchases,  and the Company
hereby  irrevocably  authorizes  its  transfer  agent  to  comply  with all such
requests,  (ii) when  appropriate,  requisition  from the  Company the amount of
funds to be paid in lieu of issuance of  fractional  shares in  accordance  with
Section 14 hereof, (iii) promptly after receipt of such certificates,  cause the
same to be delivered to or upon the order of the registered holder of such Right
Certificate,  registered  in such  name or  names as may be  designated  by such
holder, and (iv) when appropriate, after receipt, promptly deliver such funds to
or upon the order of the registered holder of such Right Certificate.

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

     (e) The  Company  shall  use  its  best  efforts  to (i)  file,  as soon as
practicable  following the earliest date after the first occurrence of a Section
11 Event on which the consideration to be delivered by the Company upon exercise
of the Rights has been determined  pursuant to this Rights Agreement  (including
in accordance with 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 of 1933,  as amended  (the  "Securities  Act"),  with
respect to the Ordinary Shares or other securities  purchasable upon exercise of
the Rights on an appropriate  form,  (ii) cause such

                                      -14-
<PAGE>

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  Ordinary  Shares or other  securities  and (B) the  Expiration  Date.  The
Company will also take such actions as may be  appropriate  under,  or to ensure
compliance  with,  the  securities or "blue sky" laws of the various  states and
non-U.S.  jurisdictions  in  connection  with the  exercise of the  Rights.  The
Company may temporarily  suspend, for a period of time not to exceed one hundred
twenty  (120) days after the date set forth in clause (i) of the first  sentence
of this Section 7(e), the  exercisability  of the Rights in order to prepare and
file such registration  statement and permit it to become effective or to comply
with applicable  securities law  requirements of other  jurisdictions.  Upon any
such suspension,  the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In addition,
if  the  Company  shall  determine  that a  registration  statement  or  foreign
equivalent  is  required  following  the  Distribution  Date,  the  Company  may
temporarily  suspend  the  exercisability  of the  Rights  until  such time as a
registration  statement has been declared  effective and any applicable  foreign
requirements have been satisfied.  Notwithstanding  any provision of this Rights
Agreement  to  the  contrary,  the  Rights  shall  not  be  exercisable  in  any
jurisdiction if the requisite  qualification in such jurisdiction shall not have
been obtained or the exercise  thereof shall not be permitted  under  applicable
law or a registration statement shall not have been declared effective.

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

                                      -15-
<PAGE>

cancelled Right Certificates to the Company, or shall, at the written request of
the Company,  destroy such cancelled Right Certificates,  and in such case shall
deliver a certificate of destruction thereof to the Company.

     Section 9.  Reservation and  Availability of Ordinary  Shares.  The Company
covenants  and agrees that it will use its best  efforts to cause to be reserved
and kept available out of its authorized and unissued  Ordinary  Shares,  or any
authorized  and  issued  Ordinary  Shares  held in its  treasury,  the number of
Ordinary  Shares that will be  sufficient  to permit the exercise in full of all
outstanding Rights.

     So long as the Ordinary  Shares issuable upon the exercise of Rights may be
listed on any national securities exchange or quoted on the Nasdaq Stock Market,
the Company shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange or the Nasdaq Stock Market upon  official  notice of issuance upon
such exercise.

     The Company  covenants  and agrees that it will take all such action as may
be necessary  to ensure that all  Ordinary  Shares  delivered  upon  exercise of
Rights  shall at the  time of  delivery  of the  certificates  for  such  shares
(subject to payment of the Purchase Price),  be duly and validly  authorized and
issued and fully paid and non-assessable.

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

                                      -16-
<PAGE>

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

     Section 11.  Adjustment  of Purchase  Price,  Number of Shares or Number of
Rights.  The  Purchase  Price,  the number of Ordinary  Shares or fraction of an
Ordinary  Share 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
Rights  Agreement  (A)  declare a dividend  on the  Ordinary  Shares  payable in
Ordinary Shares, (B) subdivide the outstanding  Ordinary Shares, (C) combine the
outstanding  Ordinary  Shares  into a smaller  number of shares or (D) issue any
shares  of its  share  capital  in a  reclassification  of the  Ordinary  Shares
(including  any such  reclassification  in connection  with a  consolidation  or
merger in which the Company is the continuing or surviving corporation),  except
as otherwise provided in this Section 11(a), the Purchase Price in effect at the
time of the  record  date for such  dividend  or of the  effective  date of such
subdivision, combination or reclassification,  and the number and kind of shares
of share capital  issuable on such date,  shall be  proportionately  adjusted so
that the holder of any Right  exercised  after such time  shall be  entitled  to
receive the aggregate number

                                      -17-
<PAGE>

and kind of shares of share  capital  which,  if such  Right had been  exercised
immediately  prior to such date and at a time when the Ordinary  Shares transfer
books of the Company were open,  he would have owned upon such exercise and been
entitled  to receive by virtue of such  dividend,  subdivision,  combination  or
reclassification;  provided,  however,  that if the  record  date  for any  such
dividend, subdivision,  combination or reclassification shall occur prior to the
Distribution  Date,  the Company  shall make an  appropriate  adjustment  to the
Purchase Price (taking into account any additional Rights which may be issued as
a result of such dividend,  subdivision,  combination or  reclassification),  in
lieu of adjusting (as described  above) the number of Ordinary  Shares (or other
capital stock,  as the case may be) issuable upon exercise of the Rights.  If an
event occurs which would require an adjustment  under both Section  11(a)(i) and
Section 11(a)(ii), the adjustment provided for in this Section 11(a)(i) shall be
in addition to, and shall be made prior to, any adjustment  required pursuant to
Section 11(a)(ii).

          (ii) In the event any Person, at any time after the date hereof, shall
become an Acquiring  Person,  unless the event  causing such Person to become an
Acquiring Person is an acquisition of Ordinary Shares pursuant to a tender offer
or an exchange offer for all outstanding Ordinary Shares at a price and on terms
determined  by the  Board  of  Directors,  with  the  concurrence  of the  Audit
Committee,  to be (x) at a  price  that is fair  to  shareholders  (taking  into
account all factors  which such members of the Board of Directors  deem relevant
including, without limitation,  prices which could reasonably be achieved if the
Company or its assets were sold on an orderly basis designed to realize  maximum
value) and not inadequate and (y) otherwise in the best interests of the Company
and its shareholders (a "Qualified Offer"),  then, and in each such case, proper
provision  shall be made so that  each  holder of a Right,  except  as  provided
below,  shall  thereafter  have a right to  receive,  upon  exercise  thereof in
accordance  with the terms of this  Rights  Agreement,  such  number of Ordinary
Shares as shall equal the result obtained by (x)  multiplying  the  then-current
Purchase  Price by the  number  of  Ordinary  Shares  for  which a Right is then
exercisable and (y) dividing that product by 50% of the current per share market
price of the Ordinary  Shares (such number of Ordinary  Shares is herein  called
the "Adjustment Shares");  provided, however, that if the transaction that would
otherwise  give  rise  to  the  foregoing

                                      -18-
<PAGE>

adjustment is also subject to the provisions of Section 13 hereof, then only the
provisions  of Section 13 hereof  shall  apply and no  adjustment  shall be made
pursuant  to this  Section  11(a)(ii).  (To  illustrate  the  adjustment  in the
immediately  proceeding  sentence:  If (i) the "then-current  Purchase Price" is
$38.00,  (ii)  the  "number  of  Ordinary  Shares  for  which  a  Right  is then
exercisable"  is one and  (iii)  the  "current  per  share  market  price of the
Ordinary  Shares" is $10.00,  then the  Adjustment  Shares per Right  equals 7.6
Ordinary Shares.)  Notwithstanding the foregoing,  upon the occurrence of any of
the events listed above in this  subparagraph  (ii), any Rights that are or were
on or after the  earlier of the  Distribution  Date or Shares  Acquisition  Date
beneficially  owned by the Acquiring Person or any Associate or Affiliate of the
Acquiring  Person 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 Rights Agreement or otherwise.  Any
Right  Certificate  issued pursuant to Section 3 hereof that  represents  Rights
beneficially  owned by an Acquiring Person or any Associate or Affiliate thereof
and any Right Certificate  issued at any time upon the transfer of any Rights to
an Acquiring  Person or any Associate or Affiliate  thereof or to any nominee of
such Acquiring Person,  Associate or Affiliate, and any Right Certificate issued
pursuant  to  Section  6, 7(d) or 22 hereof or this  Section  11 upon  transfer,
exchange,  replacement or adjustment of any other Right Certificate  referred to
in this sentence,  shall contain the following legend (provided,  however,  that
the Rights  Agent shall not be  responsible  for affixing  such legend  unless a
responsible officer of the Rights Agent has actual knowledge as to the foregoing
circumstances or the Company has notified the Rights Agent in writing thereof):

     The Rights  represented by this Right  Certificate  were issued to a Person
     who  was  an  Acquiring  Person  or an  Affiliate  or any  Associate  of an
     Acquiring  Person or a nominee  thereof.  This  Right  Certificate  and the
     Rights represented hereby may become void in the circumstances specified in
     Section 11(a)(ii) of the Rights Agreement.

The term  "Responsible  Officer",  when used with  respect to the  Rights  Agent
herein, shall mean the chairman of the Board of Directors,  the vice chairman of
the Board of Directors,  the president,  each vice president, the secretary, the
treasurer,  each assistant

                                      -19-
<PAGE>

vice president,  each corporate trust officer or any other officer of the Rights
Agent customarily performing functions similar to those performed by the Persons
who at the time shall be such officers,  respectively,  or to whom any corporate
trust matter is referred  because of his knowledge of and  familiarity  with the
particular subject.

          (iii) In the  event  that  the  number  of  Ordinary  Shares  which is
authorized by the  Company's  articles of  association  but not  outstanding  or
reserved for issuance for purposes other than upon exercise of the Rights is not
sufficient  to permit  the  exercise  in full of the Rights in  accordance  with
Section 11(a)(ii),  the Company shall: (A) determine the excess of (1) the value
of the  Adjustment  Shares  issuable  upon the exercise of a Right (the "Current
Value") over (2) the Purchase Price (such excess is herein called the "Spread"),
and (B) with  respect to each Right and to the extent  permitted  by  applicable
law,  make adequate  provision to substitute  for the  Adjustment  Shares,  upon
exercise of the Rights,  (1) cash,  (2) a reduction in the Purchase  Price,  (3)
Ordinary Shares or other equity  securities of the Company  (including,  without
limitation,  shares,  or units of shares,  of preferred stock which the Board of
Directors,  with the concurrence of the Audit Committee,  has deemed to have the
same value as Ordinary Shares (such shares or units of shares of preferred stock
are referred to herein as "Ordinary Share equivalents"),  (4) debt securities of
the Company,  (5) other assets, or (6) any combination of the foregoing,  having
an aggregate  value equal to the Current Value,  where such aggregate  value has
been  determined by the Board of Directors,  with the  concurrence  of the Audit
Committee;  provided,  however,  if the  Company  shall not have  made  adequate
provision to deliver value  pursuant to clause (B) above within thirty (30) days
following  the later of (x) the first  occurrence  of a Section 11 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,  to  the  extent  permitted  by
applicable  law, shall be obligated to deliver,  upon the surrender for exercise
of a Right and without requiring payment of the Purchase Price,  Ordinary Shares
(to the extent  available) and then, if necessary,  cash,  which Ordinary Shares
and/or  cash have an  aggregate  value  (to the  extent  of the  Company's  cash
resources then available)  equal to the Spread.  If the Board of Directors shall
determine in good faith that it is likely that  sufficient  additional  Ordinary
Shares could be authorized for issuance upon exercise in full of the Rights, the
thirty (30) day

                                      -20-
<PAGE>

period set forth  above may be extended  to the extent  necessary,  but not more
than one hundred twenty (120) days after the Section  11(a)(ii) Trigger Date, in
order that the Company may seek  shareholder  approval for the  authorization of
such  additional  Ordinary  Shares  (such  period,  as it may be  extended,  the
"Substitution  Period").  To the extent  that the Company  determines  that some
action  should be taken  pursuant to the first and/or  second  sentences of this
Section  11(a)(iii) the Company (x) shall provide (except as otherwise  provided
herein),  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  securities
and/or to decide the  appropriate  form of  distribution  to be made pursuant to
such first sentence and to determine the value thereof. In the event of any such
suspension,  the Company  shall  issue a public  announcement  stating  that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. For purposes
of this  Section  11(a)(iii),  the  value of the  Ordinary  Shares  shall be the
Current Market Price per share of the Ordinary  Shares on the Section  11(a)(ii)
Trigger Date and the value of any "Ordinary Share  equivalents"  shall be deemed
to have the same value as the Ordinary Shares on such date.

     (b) In case the Company  shall fix a record date for the issuance of Rights
or  warrants  to all holders of  Ordinary  Shares  entitling  them (for a period
expiring  within 45 calendar  days after such record date) to  subscribe  for or
purchase  Ordinary Shares (or securities  convertible into Ordinary Shares) at a
price per Ordinary Share (or having a conversion  price per Ordinary Share, if a
security  convertible  into  Ordinary  Shares)  less than the  current per share
market price of the Ordinary Shares (as defined in Section 11(d) hereof) on such
record date,  the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record  date by a  fraction,  the  numerator  of which  shall be the  number  of
Ordinary  Shares  outstanding  on such  record  date plus the number of Ordinary
Shares which the aggregate offering price of the total number of Ordinary Shares
so to  be  offered  (and/or  the  aggregate  initial  conversion  price  of  the
convertible  securities so to be offered)  would purchase at such current market
price  and the  denominator  of which  shall be the  number of  Ordinary  Shares
outstanding on such record date plus the number

                                      -21-
<PAGE>

of additional  Ordinary  Shares to be offered for  subscription  or purchase (or
into which the securities so to be offered are initially  convertible).  In case
such  subscription  price  may be paid in a  consideration  part or all of which
shall be in a form other than cash, the value of such consideration  shall be as
determined in good faith by the Board of Directors,  with the concurrence of the
Audit Committee, whose determination shall be described in a statement delivered
to the Rights  Agent.  Ordinary  Shares  owned by or held for the account of the
Company shall not be deemed outstanding for the purpose of any such computation.
Such  adjustments  shall be made  successively  whenever  such a record  date is
fixed; and in the event such rights or warrants are not so issued,  the Purchase
Price shall be adjusted to be the  Purchase  Price which would then be in effect
if such record date had not been fixed.

     (c) In case the  Company  shall  fix a  record  date  for the  making  of a
distribution  to  all  holders  of  the  Ordinary  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 out of the earnings or
retained earnings of the Company) or subscription  rights or warrants (excluding
those referred to in Section 11(b)  hereof),  the Purchase Price to be in effect
after such record date shall be determined by multiplying  the Purchase Price in
effect  immediately  prior to such record date by a fraction,  the  numerator of
which shall be the current per share  market  price of the  Ordinary  Shares (as
defined in Section 11(d) hereof) on such record date, less the fair market value
(as determined in good faith by the Board of Directors,  with the concurrence of
the Audit Committee, whose determination shall be described in a statement filed
with the Rights Agent) of the portion of the assets or evidences of indebtedness
so to be distributed or of such  subscription  rights or warrants  applicable to
one Ordinary Share and the  denominator of which shall be such current per share
market price of the Ordinary Shares. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.

                                      -22-
<PAGE>

     (d) For the purpose of any computation  hereunder,  other than computations
made pursuant to Section  11(a)(iii)  hereof,  the "Current Market Price" of the
Ordinary  Shares  on any date  shall be deemed  to be the  average  of the daily
closing prices per share of such Ordinary Shares for the thirty (30) consecutive
Trading Days (as such term is  hereinafter  defined)  immediately  prior to such
date,  and for  purposes of  computations  made  pursuant to Section  11(a)(iii)
hereof,  the Current  Market Price per share of the Ordinary  Shares on any date
shall be deemed to be the average of the daily closing  prices per share of such
Ordinary Shares for the ten (10) consecutive Trading Days immediately  following
such date;  provided,  however,  that in the event that the Current Market Price
per share of the Ordinary  Shares is  determined  during a period  following the
announcement  by the  issuer  of the  Ordinary  Shares  of (i) any  dividend  or
distribution on such Ordinary Shares,  payable in shares of such Ordinary Shares
or securities  convertible  into shares of such Ordinary  Shares (other than the
Rights),  or (ii)  any  subdivision,  combination  or  reclassification  of such
Ordinary Shares, and the ex-dividend date for such dividend or distribution,  or
the record date for such subdivision,  combination or reclassification shall not
have occurred prior to the  expiration of the requisite  thirty (30) Trading Day
period or ten (10)  Trading Day period,  as set forth above,  then,  and in each
such case,  the Current  Market  Price  shall be properly  adjusted to take into
account  ex-dividend  trading.  The closing price for each day shall be the last
sale price,  regular  way, or, in case no such sale takes place on such day, the
average of the  closing  bid and asked  prices,  regular  way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities  listed or admitted to trading on the New York Stock  Exchange or,
if the  Ordinary  Shares are not listed or  admitted  to trading on the New York
Stock Exchange, as reported in the principal consolidated  transaction reporting
system with respect to securities  listed on the principal  national  securities
exchange on which the  Ordinary  Shares are listed or admitted to trading or, if
the  Ordinary  Shares are not  listed or  admitted  to  trading on any  national
securities exchange,  the last quoted price or, if not so quoted, the average of
the high bid and low asked prices in the over-the-counter market, as reported on
the  Nasdaq  Stock  Market or, if on any such date the  Ordinary  Shares are not
quoted on the Nasdaq  Stock  Market,  the  average of the  closing bid and asked
prices  as  furnished  by a  professional  market  maker  making a market in the
Ordinary  Shares  selected by the

                                      -23-
<PAGE>

Board.  If on any such date no market  maker is making a market in the  Ordinary
Shares,  the fair value of such  Ordinary  Shares on such date as  determined in
good faith by the Board of Directors shall be used. The term "Trading Day" shall
mean a day on which the principal  stock market on which the Ordinary Shares are
listed or admitted to trading is open for the transaction of business or, if the
Ordinary  Shares are not listed or  admitted to trading on any stock  market,  a
Business  Day. If the Ordinary  Shares are not publicly held or not so listed or
traded,  "Current Market Price" per share shall mean the fair value per share as
determined in good faith by the Board, whose determination shall be described in
a  statement  filed  with the  Rights  Agent  and  shall be  conclusive  for all
purposes.

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

     (f) If as a result of an  adjustment  made pursuant to Section  11(a),  the
holder of any Right  thereafter  exercised  shall become entitled to receive any
shares of share capital of the Company other than  Ordinary  Shares,  thereafter
the number of such other shares so  receivable  upon exercise of any Right shall
be  subject to  adjustment  from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions  with respect to the Ordinary Shares
contained  in Section  11(a)  through  (c),  inclusive,  and the  provisions  of
Sections 7, 9, 10 and 13 hereof with respect to the Ordinary  Shares shall apply
on like terms to any such other shares.

     (g)  All  Rights  originally  issued  by  the  Company  subsequent  to  any
adjustment  made to the Purchase  Price  hereunder  shall  evidence the right to
purchase,  at the  adjusted  Purchase  Price,  the number of Ordinary  Shares or
fraction of an  Ordinary

                                      -24-
<PAGE>

Share  purchasable from time to time hereunder upon exercise of the Rights,  all
subject to further adjustment as provided herein.

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

     (i) The  Company  may elect on or after the date of any  adjustment  of the
Purchase  Price  to  adjust  the  number  of  Rights,  in  substitution  for any
adjustment  in the number of Ordinary  Shares or  fraction of an Ordinary  Share
issuable 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
Ordinary  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 Purchase  Price in effect  immediately
prior to  adjustment  of the  Purchase  Price by the  Purchase  Price in  effect
immediately  after  adjustment of the Purchase  Price.  The Company shall make a
public  announcement of its election to adjust the number of Rights,  indicating
the record date for the adjustment, and, if known at the time, the amount of the
adjustment  to be made.  This record date may be the date on which the  Purchase
Price is adjusted or any day  thereafter,  but, if the Right  Certificates  have
been  issued,  shall  be at  least 10 days  later  than  the date of the  public
announcement.  If Right  Certificates have been issued,  upon each adjustment of
that number of Rights  pursuant to this Section  11(i),  the Company  shall,  as
promptly as  practicable,  cause to be distributed to holders of record of Right
Certificates  on such  record  date Right  Certificates  evidencing,  subject to
Section 14 hereof, the additional Rights to which such holders shall be entitled
as a result of such

                                      -25-
<PAGE>

adjustment,  or, at the option of the Company,  shall cause to be distributed to
such  holders  of  record  in   substitution   and  replacement  for  the  Right
Certificates  held by such  holders  prior to the date of  adjustment,  and upon
surrender thereof, if required by the company, new Right Certificates evidencing
all the Rights to which such holders  shall be entitled  after such  adjustment.
Right  Certificates  so  to  be  distributed  shall  be  issued,   executed  and
countersigned  in the manner provided for herein (and may bear, at the option of
the Company,  the adjusted  Purchase Price) and shall be registered in the names
of the holders of record of Right  Certificates  on the record date specified in
the public announcement.

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

     (k) Before  taking any action that would cause an  adjustment  reducing the
Purchase Price below the then par value, if any, of the Ordinary 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 fully paid and  nonassessable  Ordinary Shares at such
adjusted Purchase Price.

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

                                      -26-
<PAGE>

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

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

     (o) The Company covenants and agrees that, after the Distribution  Date, it
will not,  except as  permitted  by Section  23 or  Section 26 hereof,  take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is  reasonably

                                      -27-
<PAGE>

foreseeable that such action will diminish  substantially or otherwise eliminate
the benefits intended to be afforded by the Rights.

     Section 12.  Certificate  of Adjusted  Purchase  Price or Number of Shares.
Whenever an  adjustment  is made as  provided in Sections 11 and 13 hereof,  the
Company shall (a) promptly prepare a certificate  setting forth such adjustment,
and a brief statement of the facts accounting for such adjustment,  (b) promptly
file with the Rights Agent and with each transfer agent for the Ordinary  Shares
a copy of such certificate and (c) if after the Distribution  Date, mail a brief
summary thereof to each holder of a Right Certificate in accordance with Section
25 hereof.

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

     (a) In the event that,  following the Shares Acquisition Date,  directly or
indirectly,  (i) the Company shall consolidate with, or merge with and into, any
other Person,  (ii) any Person shall consolidate with the Company, or merge with
and into the  Company  and the  Company  shall be the  continuing  or  surviving
corporation of such merger and, in connection  with such merger,  all or part of
the Ordinary  Shares of the Company shall be changed into or exchanged for stock
or other  securities  of any other  Person (or the Company) or cash or any other
property,  or (iii) the Company shall sell or otherwise transfer (or one or more
of  its  Subsidiaries  shall  sell  or  otherwise  transfer),  in  one  or  more
transactions, assets or earning power aggregating more than 50% of the assets or
earning  power of the  Company  and its  Subsidiaries  (taken as a whole) to any
other Person, then, and in each such case, and except as contemplated by Section
13(d), proper provision shall be made so that (A) each holder of a Right (except
as otherwise  provided herein) shall thereafter have the right to receive,  upon
the exercise thereof in accordance with the terms of this Rights Agreement, such
number of validly authorized and fully paid,  non-assessable and freely tradable
Ordinary Shares of the Principal Party (as such term is hereinafter  defined) as
shall  be equal to the  result  obtained  by (x)  multiplying  the  then-current
Purchase  Price by the  number  of  Ordinary  Shares  for  which a Right is then
exercisable (without taking into account any adjustment previously made pursuant
to Section  11(a)(ii))  and (y) dividing  that product by 50% of the current per
share market price of the Ordinary  Shares of such Principal  Party

                                      -28-
<PAGE>

(determined  pursuant to Section  11(d) hereof) on the date of  consummation  of
such  consolidation,  merger,  sale or transfer;  (B) such Principal Party shall
thereafter  be liable for, and shall  assume,  by virtue of such  consolidation,
merger, sale or transfer, all the obligations and duties of the Company pursuant
to this Rights  Agreement;  (C) the term "Company" shall thereafter be deemed to
refer to such  Principal  Party;  and (D) such  Principal  Party shall take such
steps (including,  but not limited to, the reservation of a sufficient number of
its Ordinary Shares in accordance with Section 9 hereof) in connection with such
consummation  as may be  necessary  to assure that the  provisions  hereof shall
thereafter be  applicable,  as nearly as  reasonably  may be, in relation to its
Ordinary Shares thereafter deliverable upon the exercise of the Rights.

     (b)  "Principal  Party"  shall  mean  (i) in the  case  of any  transaction
described  in Section  13(a)(i)  or (ii),  the Person  that is the issuer of any
securities   into  which  Ordinary  Shares  are  converted  in  such  merger  or
consolidation,  and if no securities are so issued, the Person that is the other
party to such merger or  consolidation,  and (ii) in the case of any transaction
described  in Section  13(a)(iii)  the Person  that is the party  receiving  the
greatest  portion of the assets or earning  power  transferred  pursuant to such
transaction or transactions;  provided,  however,  that in any such case, (A) if
the  Ordinary  Shares  of such  Person  are not at such  time  and have not been
continuously  over the preceding  12-month period registered under Section 12 of
the Exchange Act and such Person is a direct or indirect  Subsidiary  of another
Person the Ordinary Shares of which are and have been so registered,  "Principal
Party"  shall  refer to such  other  Person  and (B) in case  such  Person  is a
Subsidiary, directly or indirectly, of more than one Person, the Ordinary Shares
of two or more of which are and have been so registered, "Principal Party" shall
refer to whichever of such Persons is the issuer of the Ordinary  Shares  having
the greatest aggregate market value.

     (c)(i) The Company shall not  consummate  any such  consolidation,  merger,
sale or transfer  unless the Principal  Party shall have a sufficient  number of
authorized  Ordinary  Shares which have not been issued or reserved for issuance
to permit the exercise in full of the Rights in accordance  with this Section 13
and unless  prior  thereto  the  Company  and such  Principal  Party  shall have
executed and delivered to the Rights Agent a  supplemental  agreement  providing
for the terms set forth in Section 13(a) and

                                      -29-
<PAGE>

(b) and further  providing  that, as soon as  practicable  after the date of any
consolidation,  merger,  sale or transfer of assets  mentioned in Section 13(a),
such Principal  Party will (A) 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,  and will use its best
efforts to cause such registration  statement to (1) become effective as soon as
practicable after such filing and (2) remain effective (with a prospectus at all
times meeting the  requirements  of the Securities Act) until the earlier of the
Expiration  Date or the Redemption  Date, and (B) will deliver to holders of the
Rights historical  financial  statements for the Principal Party and each of its
Affiliates that comply in all respects with the requirements for registration on
Form 10 under the Exchange Act. The Company shall not enter into any transaction
of the kind  referred to in this  Section 13 if at the time of such  transaction
there are any rights,  warrants,  instruments  or securities  outstanding or any
agreements  or  arrangements  which,  as a result  of the  consummation  of such
transaction,  would  substantially  diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.

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

     (c)  Notwithstanding  anything in this Rights  Agreement  to the  contrary,
Section  13 shall  not be  applicable  to a  transaction  described  in  Section
13(a)(i) or (ii) if (i) such transaction is consummated with a Person or Persons
(or a Subsidiary  of any such Person or Persons) who  acquired  Ordinary  Shares
pursuant to a tender offer or exchange offer for all outstanding Ordinary Shares
which complies with the provisions of Section 11(a)(ii)  hereof,  (ii) the price
per Ordinary  Share offered in such  transaction  is not less that the price per
Ordinary  Share  paid to all  holders  of  Ordinary  Shares  whose  shares  were
purchased pursuant to such tender

                                      -30-
<PAGE>

offer or exchange offer,  and (iii) the form of  consideration  being offered to
the remaining  holders of Ordinary  Shares  pursuant to such  transaction is the
same as the form of consideration paid pursuant to such tender offer or exchange
offer.  Upon  consummation of any such transaction  contemplated by this Section
13(d), all Rights hereunder shall expire.

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

     (b) The Company shall not be required to issue fractions of Ordinary Shares
upon exercise or redemption  of the Rights or to distribute  certificates  which
evidence  fractional  Ordinary Shares. In lieu of fractional Ordinary Shares, to
the extent  permitted by applicable law, the Company may, at its option,  pay to
the  registered  holders  of

                                      -31-
<PAGE>

Right  Certificates  at the time such Rights are exercised as herein provided an
amount in cash equal to the same  fraction  of the current  market  value of one
Ordinary Share. Prior to the Shares Acquisition Date, a number of Rights must be
exercised  so that only whole  Ordinary  Shares will be issued.  For purposes of
this Section  14(b),  the current market value of an Ordinary Share shall be the
closing  price of an  Ordinary  Share  (as  determined  pursuant  to the  second
sentence of Section 11(d) hereof) for the Trading Day  immediately  prior to the
date of such exercise.

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

     Section  15.  Rights of  Action.  All  rights of action in  respect of this
Rights  Agreement,  except the rights of action  given to the Rights Agent under
Section 18 hereof, are vested in the respective  registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Ordinary Shares);  and any registered holder of any Right Certificate (or, prior
to the Distribution  Date, of any Ordinary  Shares),  without the consent of the
Rights Agent or of the holder of any other Right  Certificate  (or, prior to the
Distribution  Date, of any Ordinary Shares),  may, in his own behalf and for his
own benefit,  enforce this Rights Agreement,  and may institute and maintain any
suit, action or proceeding against the Company to enforce this Rights Agreement,
or  otherwise  enforce  or act in respect  of his right to  exercise  the Rights
evidenced  by such  Right  Certificate  in the  manner  provided  in such  Right
Certificate and in this Rights 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 Rights 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 (including, without limitation, the
Company) subject to this Rights Agreement.

                                      -32-
<PAGE>

     Section  16.  Agreement  of  Right  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 Ordinary Shares;

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

     (c) the Company may, and, upon appropriate  instruction by the Company, the
Rights  Agent  shall,  deem  and  treat  the  Person  in whose  name  the  Right
Certificate (or, prior to the Distribution Date, the associated  Ordinary Shares
certificate)  is  registered  as the  absolute  owner  thereof and of the Rights
evidenced thereby  (notwithstanding any notations of ownership or writing on the
Right Certificates or the associated  Ordinary 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 Shareholder.  No holder,
as such, of any Right Certificate  shall be entitled to vote,  receive dividends
or be deemed  for any  purpose  the holder of the  Ordinary  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
Right  Certificate  be  construed  to  confer  upon  the  holder  of  any  Right
Certificate,  as such,  any of the rights of a shareholder of the Company or any
right to vote for the  election of  directors  or upon any matter  submitted  to
shareholders  at any  meeting  thereof,  or to give or  withhold  consent to any
corporate  action,  or to receive notice of meetings or other actions  affecting
shareholders  (except as provided in Section 24 hereof), or to receive dividends
or subscription  rights,  or otherwise,  until the Right or Rights  evidenced by
such  Right  Certificate  shall  have  been  exercised  in  accordance  with the
provisions hereof.

                                      -33-
<PAGE>

     Section 18.  Concerning the Rights Agent.  The Company agrees to pay to the
Rights Agent reasonable  compensation for all services  rendered by it hereunder
in accordance  with a fee schedule to be mutually  agreed upon and, from time to
time, its reasonable  expenses and reasonable  counsel fees and other reasonable
and customary disbursements incurred in the administration and execution of this
Rights  Agreement  and the exercise  and  performance  of its duties  hereunder,
provided that the  incurrence of any such expenses shall be subject to the prior
written  approval  of the  Company,  which  approval  shall not be  unreasonably
withheld. The Company also agrees to indemnify the Rights Agent for, and to hold
it  harmless  against,  any  loss,  liability,  or  expense,   incurred  without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection  with the  acceptance
and  administration of this Rights  Agreement,  including the costs and expenses
(including  reasonable  attorney's  fees)  of  defending  against  any  claim of
liability  in the  premises,  provided  that the  Company  shall be  entitled to
control the defense of any such claim and shall not be liable for any settlement
entered into without its prior written consent.

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

     Section 19. Merger or  Consolidation or Change of Name of Rights Agent. Any
corporation  into which the Rights  Agent or any  successor  Rights Agent may be
merged or with which it may be consolidated,  or any corporation  resulting from
any merger or  consolidation  to which the Rights Agent or any successor  Rights
Agent shall be a party,  or any  corporation  succeeding to the corporate  trust
business  of the  Rights  Agent  or any  successor  Rights  Agent,  shall be the
successor to the Rights Agent under this Rights Agreement  without the execution
or  filing  of any paper or any  further  act on the part of any of the  parties
hereto,  provided that such  corporation  would be eligible for

                                      -34-
<PAGE>

appointment  as a  successor  Rights  Agent under the  provisions  of Section 21
hereof.  In case at the time such  successor  Rights Agent shall  succeed to the
agency created by this Rights  Agreement,  any of the Right  Certificates  shall
have been  countersigned but not delivered,  any such successor Rights Agent may
adopt the  countersignature  of the  predecessor  Rights  Agent and deliver such
Rights Certificates so countersigned;  and in case at that time any of the Right
Certificates shall not have been  countersigned,  any successor Rights Agent may
countersign such Right Certificates either in the name of the predecessor Rights
Agent or in the name of the successor  Rights Agent;  and in all such cases such
Right  Certificates shall have the full force provided in the Right Certificates
and in this Rights Agreement.

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

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

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

     (b) Whenever in the  performance of its duties under this Rights  Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter be
proved or  established  by the Company  prior to taking or suffering  any action
hereunder,  such fact

                                      -35-
<PAGE>

or matter  (unless  other  evidence  in respect  thereof be herein  specifically
prescribed)  shall be deemed to be  conclusively  proved  and  established  by a
certificate  signed by any one of the chief executive  officer,  chief operating
officer or chief  financial  officer of the Company and  delivered to the Rights
Agent; and such certificate shall be full  authorization to the Rights Agent for
any  action  taken or  suffered  in good  faith by it in  conformity  with  such
certificate under the provisions of this Rights Agreement.

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

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

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

     (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 Right

                                      -36-
<PAGE>

Agent for the carrying out or performing  by the Rights Agent of the  provisions
of this Rights 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 Chief Executive Officer or the President of the Company, and to apply
to any such officers for advice or  instructions  in connection  with its duties
under this Rights Agreement,  and it shall not be liable for any action taken or
suffered to be taken by it in good faith in accordance with  instructions of any
such officer.

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

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

     (j) At any time and from time to time after the Distribution Date, upon the
request of the Company, the Rights Agent shall promptly deliver to the Company a
list, as of the most recent  practicable date (or as of such earlier date as may
be specified by the Company), of the holders of record of Rights.

     (k) Except as  otherwise  provided  herein,  the Rights  Agent shall not be
required to expend or risk its own funds in the  performance of its duties or in
the exercise of its rights hereunder.

                                      -37-
<PAGE>

     Section 21. Change of Rights Agent The Rights Agent or any successor Rights
Agent may resign and be discharged  from its duties under this Rights  Agreement
upon 30 days' notice in writing mailed to the Company and to each transfer agent
of the Ordinary  Shares by  registered  or  certified  mail.  The Company  shall
promptly notify the holders of the Right Certificates by first class mail of any
such  resignation.  The  Company  may remove the Rights  Agent or any  successor
Rights  Agent upon 30 days'  notice in writing to the Rights  Agent or successor
Rights  Agent,  as the case may be, and to each  transfer  agent of the Ordinary
Shares and to the holders of the Right  Certificates.  If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting,  the Company
shall  appoint a successor to such Rights  Agent.  If the Company  shall fail to
make such  appointment  within a period of 30 days after  giving  notice of such
removal  or  after  it has been  notified  in  writing  of such  resignation  or
incapacity by the resigning or incapacitated  Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Company),  then the Rights Agent or the  registered  holder of
any Right  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 a  corporation  organized and doing
business  under the laws of the United States or of the State of New York (or of
any other state of the United States so long as such  corporation  is authorized
to do business in the State of New York), in good standing,  which is authorized
under  applicable  laws to  exercise  corporate  trust  powers and is subject to
supervision or examination by federal or state authority. After appointment, the
successor Rights Agent shall be vested with the same powers,  rights, duties and
responsibilities  as if it had been  originally  named as Rights  Agent  without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the  purpose.  Not later than the  effective  date of any such  appointment  the
Company shall file notice thereof in writing with the  predecessor  Rights Agent
and each transfer  agent of the Ordinary  Shares,  and mail a notice  thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice  provided for in this Section 21, however,  or any defect

                                      -38-
<PAGE>

therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the  appointment  of the successor  Rights Agent,  as the
case may be.

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

     Section 23. Redemption and Exchange.  (a) The Board of Directors,  with the
concurrence of the Audit Committee, may, at its option, at any time prior to the
Close of Business on the earlier of (x) the tenth  Business  Day  following  the
Shares Acquisition Date (or such later date as the Board of Directors,  with the
concurrence of the Audit Committee,  shall determine,  which determination to be
made prior to the Close of  Business on the tenth  Business  Day  following  the
Shares  Acquisition  Date) and (y) the Final Expiration Date, redeem all but not
less than all the then  outstanding  Rights at a  redemption  price of $.001 per
Right,  appropriately  adjusted to reflect any stock  split,  stock  dividend or
similar  transaction  occurring after the date hereof (such redemption

                                      -39-
<PAGE>

price  per Right  being  hereinafter  referred  to as the  "Redemption  Price").
Notwithstanding anything contained in this Rights Agreement to the contrary, the
Rights shall not be exercisable after the first occurrence of an event described
in  Section  11(a)(ii)  until  such time as the  Company's  right of  redemption
hereunder has expired.  The Company may, at its option, pay the Redemption Price
in cash, Ordinary Shares of the Company (based on the current share market price
of such Ordinary  Shares at the time of  redemption,  provided,  however,  that,
unless  permitted by applicable  law, the effective  consideration  per Ordinary
Share paid to the Company  shall not be less than the par value  thereof) or any
other form of consideration deemed appropriate by the Board of Directors.

     (b)  Immediately  upon the action of the Board of  Directors  ordering  the
redemption of the Rights, and without any further action and without any notice,
the right to exercise the Rights will  terminate and the holders of Rights shall
have not further  rights other than the right to receive the  Redemption  Price.
Promptly  after the action of the Board of Directors  ordering the redemption of
the Rights, the Company shall give notice of such redemption to the Rights Agent
and the  holders of the then  outstanding  Rights by mailing  such notice to all
such holders at 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 Ordinary  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.

     (c) The Board of Directors may, at its option, at any time after any Person
becomes an Acquiring  Person,  exchange all or part of the then  outstanding and
exercisable  Rights  (which  shall not  include  Rights  that have  become  void
pursuant to the provisions of Section  11(a)(ii)  hereof) for Ordinary Shares at
an exchange  ratio of one Ordinary  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,  the Board of Directors shall
not be  empowered  to effect such  exchange at any time after any Person  (other
than the Company,  any Subsidiary,  any employee  benefit plan of the

                                      -40-
<PAGE>

Company or any such  Subsidiary,  or any entity holding  Ordinary  Shares 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
Ordinary Shares then outstanding.

     (d)  Immediately  upon the action of the Board of  Directors  ordering  the
exchange of any Rights pursuant to subsection (c) of this Section 23 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 Ordinary  Shares equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
give public notice of any such exchange;  provided, however, that the failure to
give,  or any defect in,  such  notice  shall not  affect the  validity  of such
exchange.  The Company  promptly shall mail a notice of any such exchange to all
of the  holders of such Rights at their last  addresses  as they appear upon the
registry  books of the Rights  Agent.  Any notice  which is mailed in the manner
herein  provided shall be deemed given,  whether or not the holder  receives the
notice. Each such notice of exchange will state the method by which the exchange
of the  Ordinary  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  11(a)(ii)
hereof) held by each holder of Rights.

     (e) In the event  that there  shall not be  sufficient  shares of  Ordinary
Shares  issued but not  outstanding  or  authorized  but  unissued to permit any
exchange  of Rights as  contemplated  in  accordance  with this  Section 23, the
Company  shall take all such action as may be necessary to authorize  additional
shares of Ordinary Shares for issuance upon exchange of the Rights.

     (f) The Company shall not be required to issue fractions of Ordinary Shares
or to distribute  certificates  which evidence  fractions of Ordinary Shares. In
lieu of such fractions  Ordinary  Shares,  there shall be paid to the registered
holders of the Right Certificates with regard to which such fractional shares of
Ordinary Shares would otherwise be issuable, an amount in cash equal to the same
fraction of the current

                                      -41-
<PAGE>

market value of an Ordinary Share.  For the purposes of this subsection (f), the
current  market  value of an Ordinary  Share  shall be the  closing  price of an
Ordinary Share (as determined  pursuant to the second  sentence of Section 11(d)
hereof) for the Trading Day immediately  prior to the date of exchange  pursuant
to this Section 23.

     Section 24. Notice of Certain Events.  In case the Company shall propose at
any time after the  Distribution  Date (a) to pay any dividend  payable in share
capital  of any class to the  holders  of  Ordinary  Shares or to make any other
distribution to the holders of Ordinary Shares (other than a regularly quarterly
cash dividend out of the earnings or retained  earnings of the Company),  or (b)
to offer to the holders of Ordinary  Shares  rights or warrants to subscribe for
or to purchase any additional  Ordinary Shares or shares of share capital of any
class  or any  other  securities,  rights  or  options,  or (c)  to  effect  any
reclassification of its Ordinary Shares other than a reclassification  involving
only the  subdivision  of  outstanding  Ordinary  Shares,  or (d) to effect  any
consolidation  or merger into or with,  or to effect any sale or other  transfer
(or to  permit  one or more of its  Subsidiaries  to  effect  any  sale or other
transfer),  in one or more  transactions,  of more  than  50% of the  assets  or
earning  power of the  Company and its  Subsidiaries  (taken as a whole) to, any
other Person, or (e) to effect the liquidation, dissolution or winding up of the
Company, then, in each such case, the Company shall give to the Rights Agent and
to each holder of a Right  Certificate,  in accordance with Section 25 hereof, a
notice of such  proposed  action,  which  shall  specify the record date for the
purposes of such stock dividend, distribution of rights or warrants, or the date
on  which  such   reclassification,   consolidation,   merger,  sale,  transfer,
liquidation,  dissolution,  or  winding  up is to take  place  and  the  date of
participation therein by the holders of the Ordinary Shares, if any such date is
to be fixed, and such notice shall be so given in the case of any action covered
by  clause  (a) or (b)  above  at least 10 days  prior  to the  record  date for
determining  holders of the Ordinary Shares for purposes of such action,  and in
the case of any such  other  action,  at least 10 days  prior to the date of the
taking of such  proposed  action  or the date of  participation  therein  by the
holders of the Ordinary Shares whichever shall be the earlier.

     In case any of the  events set forth in Section  11(a)(ii)  of this  Rights
Agreement  shall occur,  then,  in any such case,  the Company  shall as soon as
practicable  thereafter

                                      -42-
<PAGE>

give  to the  Rights  Agent  and to  each  holder  of a  Right  Certificate,  in
accordance  with Section 25 hereof,  a notice of the  occurrence  of such event,
which shall  specify the event and the  consequences  of the event to holders of
Rights under Section 11(a)(ii) hereof.

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

                           Lumenis Ltd.
                           Industrial Park, Yokneam
                           P.O. Box 240
                           Yokneam, 20692
                           Israel
                           Attention: President
                           Fax no.: +972-4-959-9000

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

                           American Stock Transfer & Trust Company
                           5 Maiden Lane
                           New York, New York 10038
                           Attention: Corporate Trust Department
                           Fax no.: +1-718-331-1852

     Notices or demands  authorized by this Rights Agreement to be given or made
by the Company or the Rights Agent to the holder of any Right  Certificate  (or,
prior  to the  Distribution  Date,  to  holders  of  Ordinary  Shares)  shall be
sufficiently  given  or  made  if

                                      -43-
<PAGE>

sent by  first-class  mail,  postage  prepaid,  addressed  to such holder at the
address of such holder as shown on the registry books of the Company.

     Section 26. Supplements and Amendments.  (a) Prior to the Distribution Date
subject to the  provisions  of Section  26(b),  the Company and the Rights Agent
shall,  if the Company  (upon  approval of the Board of Directors  and the Audit
Committee)  so  directs,  supplement  or  amend  any  provision  of this  Rights
Agreement  in any manner  without the  approval  of any holders of  certificates
representing  Ordinary  Shares and the Rights;  provided,  however,  that if the
effect of such supplement or amendment  would be to alter,  amend or enlarge the
scope or extent of the Rights Agent's duties,  liabilities or obligations  under
Section  18,  19, 20, 21 or this  provision  of this  Section  26  hereof,  such
supplement  or  amendment  shall only become  effective  with the prior  written
consent of the Rights Agent. From and after the Distribution Date and subject to
the provisions of Section 26(b),  the Company and the Rights Agent shall, if the
Company  (upon  approval of the Board of Directors  and the Audit  Committee) so
directs,  supplement or amend this Rights Agreement  without the approval of any
holders  of  Rights  Certificates  in order (i) to cure any  ambiguity,  (ii) to
correct or supplement any provision  contained  herein which may be defective or
inconsistent with any other provisions herein,  (iii) to shorten or lengthen any
time period hereunder,  or (iv) to change or supplement the provisions hereunder
in any manner which the Company may deem  desirable but which does not adversely
affect the interests of holders of Rights (other than an Acquiring Person). Upon
the delivery of a  certificate  from an officer of the Company which states that
the proposed  supplement  or amendment is in  compliance  with the terms of this
Section 26, the Rights Agent shall execute such  supplement or amendment.  Prior
to the Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Ordinary Shares,

     (b)  Notwithstanding  anything  herein to the  contrary,  no  supplement or
amendment  shall be made to this Rights  Agreement at a time when the Rights are
not  redeemable,  except as  contemplated  by clause  (i) or (ii) of the  second
sentence of Section 26(a) hereof.

                                      -44-
<PAGE>

     Section 27.  Successors.  All the covenants  and  provisions of this Rights
Agreement  by or for the benefit of the  Company or the Rights  Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

     Section  28.  Benefits  of this  Rights  Agreement.  Nothing in this Rights
Agreement  shall be construed to give to any Person other than the Company,  the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the Distribution Date, the Ordinary Shares) any legal or equitable right, remedy
or claim under this Rights Agreement; but this Rights Agreement shall be for the
sole and exclusive  benefit of the Company,  the Rights Agent and the registered
holders of the Right  Certificates  (and,  prior to the  Distribution  Date, the
Ordinary Shares).

     Section 29. Severability.  If any term, provision,  covenant or restriction
of this Rights  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 Rights Agreement shall remain in
full force and effect and shall in no way be affected,  impaired or  invalidate;
provided, however, that notwithstanding anything in this Rights Agreement to the
contrary, if any such term,  provision,  covenant or restriction is held by such
court  or  authority  to be  invalid,  void or  unenforceable  and the  Board of
Directors  determines  in its good faith  judgment  that  severing  the  invalid
language from this Rights Agreement would adversely affect the purpose or effect
of this Rights Agreement, the right of redemption set forth in Section 23 hereof
shall be  reinstated  and shall not expire  until the Close of  Business  on the
tenth  Business Day  following  the date of such  determination  by the Board of
Directors.

     Section 30. Governing Law. This Rights Agreement and each Right Certificate
issued  hereunder  shall be deemed to be a  contract  made under the laws of the
State  of  Israel  and for all  purposes  shall  be  governed  by and  construed
exclusively in accordance  with the laws of such State.  The courts of Tel Aviv,
Israel shall have exclusive  jurisdiction  for any disputes arising out of or in
connection with this Rights Agreement.

                                      -45-
<PAGE>

     Section  31.  Counterparts.  This Rights  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  32.  Descriptive  Headings.  Descriptive  headings  of the several
Sections of this Rights  Agreement are inserted for  convenience  only and shall
not  control or affect  the  meaning or  construction  of any of the  provisions
hereof.

     Section 33. Determination and Actions by the Board of Directors.  The Board
of Directors (where  specifically  provided herein,  with the concurrence of the
Audit Committee) shall have the exclusive power and authority to administer this
Rights Agreement and to exercise all rights and powers  specifically  granted to
the Board of Directors or to the Company, or as may be necessary or advisable in
the administration of this Rights Agreement,  including, without limitation, the
right and power to (a) interpret the  provisions of this Rights  Agreement,  and
(b) make all calculations and  determinations  deemed necessary or advisable for
the administration of this Rights Agreement (including a determination to redeem
or not redeem the Rights or to amend the Rights  Agreement).  All such  actions,
calculations,  interpretations  and determinations  (including,  for purposes of
clause (ii) below,  all omissions with respect to the foregoing) which are done,
taken or made by the Board of Directors (where specifically provided for herein,
with the concurrence of the Audit Committee) in good faith,  shall (i) be final,
conclusive  and binding on the  Company,  the Rights  Agent,  the holders of the
Rights and all other  parties,  and (ii) not subject the members of the Board of
Directors or Audit Committee to any liability to the holders of the Rights.

                                      -46-
<PAGE>

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

                                        LUMENIS LTD.

                                        By: /s/ Kevin R. Morano
                                            ----------------------------
                                            Name: Kevin R. Morano
                                            Title: Executive Vice President and
                                                   Chief Financial Officer

                                        AMERICAN STOCK TRANSFER & TRUST COMPANY

                                        By: /s/ Herbert J. Lemmer
                                            ----------------------------
                                            Name: Herbert J. Lemmer
                                            Title: Vice President

                                      -47-
<PAGE>

                                                                       Exhibit A

                        [Form of Bonus Right Certificate]

         Certificate No. R-                        ______  Bonus Rights

     NOT EXERCISABLE  AFTER April 11, 2003 OR EARLIER IF NOTICE OF REDEMPTION OR
     EXCHANGE IS GIVEN.  THE RIGHTS ARE SUBJECT TO REDEMPTION,  AT THE OPTION OF
     THE COMPANY, AT $.001 PER RIGHT, ON THE TERMS SET FORTH IN THE BONUS RIGHTS
     AGREEMENT.  [THE RIGHTS  REPRESENTED BY THIS  CERTIFICATE  WERE ISSUED TO A
     PERSON WHO WAS AN  "ACQUIRING  PERSON" OR AN  ASSOCIATE  OR AFFILIATE OF AN
     "ACQUIRING  PERSON" OR A NOMINEE  THEREOF.  THIS RIGHT  CERTIFICATE AND THE
     RIGHTS REPRESENTED HEREBY MAY BECOME VOID IN THE CIRCUMSTANCES SPECIFIED IN
     SECTION 11(a)(ii) OF THE RIGHTS AGREEMENT.]

                             Bonus Right Certificate

                                  LUMENIS LTD.

          This certifies that, or registered assigns, is the registered owner of
the  number  of bonus  rights  (the  "Rights")  set forth  above,  each of which
entities the owner thereof,  subject to the terms,  provisions and conditions of
the Bonus Rights  Agreement dated as of April 11, 2002 (the "Rights  Agreement")
between Lumenis Ltd., an Israeli corporation (the "Company"), and American Stock
Transfer & Trust Company, as Rights Agent (the "Rights Agent"), to purchase from
the Company at any time after the Distribution  Date (as such term is defined in
the Rights  Agreement)  and prior to 5:00 P.M.  (New York City  time)  April 11,
2003, at the principal  office of the Rights Agent,  or its successors as Rights
Agent,  one fully paid,  non-assessable  Ordinary Share,  par value NIS 0.10 per
share (the "Ordinary Shares"), of the Company, at a purchase price of $38.00 per
share (the  "Purchase  Price"),  upon  presentation  and surrender of this Right
Certificate  with the Form of Election to Purchase duly executed.  The number of

                                      -48-
<PAGE>

Rights evidenced by this Right Certificate (and the number of shares which maybe
purchased  upon exercise  thereof) set forth above,  and the Purchase  Price set
forth above,  are the number and Purchase  Price as of April 11, 2002,  based on
the Ordinary Shares as constituted at such date.

     As provided in the Rights  Agreement,  the Purchase Price and the number of
Ordinary Shares which may be purchased upon the exercise of the Rights evidenced
by this Right  Certificate are subject to  modification  and adjustment upon the
happening of certain events.

----------
     * The  portion  of the  legend  in  brackets  shall  be  inserted  only  if
applicable as provided under the Rights Agreement.

          This Right Certificate is subject to all of the terms,  provisions and
conditions of the Rights Agreement,  which terms,  provisions and conditions are
hereby  incorporated  herein by  reference  and made a part  hereof and to which
Rights Agreement  reference is hereby made for a full description of the rights,
limitations  of rights,  obligations,  duties and  immunities  hereunder  of the
Rights Agent, the Company and the holders of the Right  Certificates.  Copies of
the Rights Agreement are on file at the principal  offices of the Company and of
the Rights Agent.

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

          Subject  to  the  provisions  of  the  Rights  Agreement,  the  Rights
evidenced by this  Certificate may be redeemed by the Company at its option at a
redemption price of $.001 per Right. In addition, under certain circumstances at
any time  after any

                                      -49-
<PAGE>

Person becomes an Acquiring Person, the Rights may be exchanged,  in whole or in
part, for Ordinary  Shares having  essentially the same value or economic rights
as such  shares.  Immediately  upon the action of the Board of  Directors of the
Company  authorizing  any such  exchange,  and without any further action or any
notice,  the Rights  (other than Rights which are not subject to such  exchange)
will  terminate and the Rights will only enable  holders to receive the Ordinary
Shares issuable upon such exchange.

          The Company shall not be required to issue fractional  Ordinary Shares
upon the exercise of any Right or Rights evidenced hereby.

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

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

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

Dated as of _____________

         ATTEST:                        LUMENIS LTD.

                                        By: ____________________________
                                            Name:
                                            Title:

    Countersigned:

                                      -50-
<PAGE>

         AMERICAN STOCK TRANSFER
         & TRUST COMPANY

         By:      _____________________
                  Authorized Signature

         Date: ______________________

                                      -51-
<PAGE>

                   [Form of Reverse Side of Right Certificate]

                               FORM OF ASSIGNMENT

             [To be executed by the registered holder if such holder
                  desires to transfer the Right Certificates.]

     FOR VALUE RECEIVED  ________________________________  hereby sells, assigns
and transfers unto _____________________________________________________________

________________________________________________________________________________

________________________________________________________________________________

                  [Please print name and address of transferee]

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

     Dated: _____________________

                                         __________________________________
                                           Signature

Signature Guaranteed:
__________________________________

                                      -52-
<PAGE>

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1) the  Rights  evidenced  by this Right  Certificate  [ ] are [ ] are not
beneficially  owned by an  "Acquiring  Person" or an  Affiliate  or an Associate
thereof (as defined in the Rights Agreement); and

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

     Dated: _____________________

                                         __________________________________
                                           Signature

                                      -53-
<PAGE>

                          FORM OF ELECTION TO PURCHASE

                      (To be executed if holder desires to
                        exercise the Right Certificate.)

     To: LUMENIS LTD.

          The undersigned hereby  irrevocably elects to exercise  ______________
Rights  represented by this Right  Certificate  to purchase the Ordinary  Shares
issuable  upon the exercise of such Rights and requests  that  certificates  for
such shares be issued in the name of:

Please insert social security or other identifying number

_____________________________________________________________
                           (Please print name and address)

_____________________________________________________________

If such  number of Rights  shall not be all the Rights  evidenced  by this Right
Certificate, a new

Right  Certificate for the balance remaining of such Rights shall he registered.
in the name of and delivered to:

Please insert social security
or other identifying number

_____________________________________________________________

                      (Please print name and address)
_____________________________________________________________

     Dated: _____________________

                                         __________________________________
                                           Signature

                                      -54-
<PAGE>

Signature Guaranteed:

          Signatures  must  be  guaranteed  by a  member  firm  of a  registered
national securities exchange, a member of the National Association of Securities
Dealers,  Inc.,  or a  commercial  bank or trust  company  having  an  office or
correspondent in the United States.

The undersigned hereby certifies by checking the appropriate boxes that:

          (1) the Rights evidenced by this Right Certificate [ ] are [ ] are not
beneficially  owned by an  "Acquiring  Person" or an  Affiliate  or an Associate
thereof (as defined in the Rights Agreement); and

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

     Dated: _____________________

                                         __________________________________
                                           Signature

__________________________________

                                      -55-
<PAGE>

                                     NOTICE

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

          In the  event  the  certification  set  forth  above  in the  Forms of
Assignment and Election is not completed,  the Company will deem the "Beneficial
Owner" of the Rights  evidenced  by this Right  Certificate  to bean  "Acquiring
Person"  or an  Affiliate  or  Associate  thereof  (as  defined  in  the  Rights
Agreement) and, in the case of an Assignment, will affix a legend to that effect
on any Right Certificates issued in exchange for this Right Certificate.

                                      -56-
<PAGE>

                                                                       Exhibit B

                             SUMMARY OF BONUS RIGHTS
                   TO PURCHASE ORDINARY SHARES OF LUMENIS LTD.

     On April 4, 2002,  the Board of Directors of Lumenis Ltd.  (the  "Company")
declared a  distribution  of one bonus  right (a "Right")  for each  outstanding
Ordinary  Share,  par value NIS 0.10 per share (the "Ordinary  Shares"),  of the
Company.  The  distribution  is payable on April 11, 2002 (the "Record Date") to
shareholders of record on that date.  Each Right entitles the registered  holder
to purchase from the Company one Ordinary Share at a price of $38 per share (the
"Purchase  Price"),  subject to  adjustment.  The  description  and terms of the
Rights are set forth in a Bonus  Rights  Agreement,  dated as of April 11,  2002
(the  "Rights  Agreement"),  between the Company and American  Stock  Transfer &
Trust Company, as Rights Agent (the "Rights Agent").

     Until the  earlier to occur of (i) ten  business  days  following  a public
announcement  that a  person  or  group  of  affiliated  or  associated  persons
acquired,  or obtained the right to acquire,  "Beneficial  Ownership"  of 15% or
more of the  Ordinary  Shares (an  "Acquiring  Person";  the date of such public
announcement  being called the "Shares  Acquisition  Date") or (ii) ten business
days  following  the  commencement  of a tender  offer  or  exchange  offer  the
consummation of which would result in any person's  becoming an Acquiring Person
(the earlier of such days being called the "Distribution Date"), the Rights will
be evidenced, with respect to any of the Ordinary Share certificates outstanding
as of the Record Date, by such Ordinary Share  certificate.  Among certain other
exemptions,  a person who  becomes  the  Beneficial  Owner of 15% or more of the
Ordinary  Shares as a result of  repurchases  of Ordinary  Shares by the Company
will not become an  Acquiring  Person  unless and until such  person  thereafter
acquires  additional  Ordinary Shares  representing 1.5% or more of the Ordinary
Shares  of  the  Company  then   outstanding.   Additionally,   Coherent,   Inc.
("Coherent"),  a shareholder of the Company,  is exempted from the definition of
an Acquiring  Person so long as Coherent shall not purchase or otherwise  become
(as a result of the actions of Coherent or its  affiliates  or  associates)  the
Beneficial Owner of more than 23% of the Ordinary Shares then outstanding or, if
applicable,  such greater  percentage as may be  contemplated by Section 5.18 of
the Asset Purchase Agreement by and among the

                                      -57-
<PAGE>

Company,  Energy Systems  Holdings Inc. (now known as Lumenis Holdings Inc.) and
Coherent, dated as of February 25, 2001.

     The Rights Agreement provides that, until the Distribution Date, the Rights
will  be  transferred  with  and  only  with  the  Ordinary  Shares.  Until  the
Distribution Date (or earlier redemption, exchange or expiration of the Rights),
new Ordinary  Share  certificates  issued after the Record Date upon transfer or
new issuance of the Ordinary  Shares will contain a notation  incorporating  the
Rights  Agreement  by  reference.   Until  the  Distribution  Date  (or  earlier
redemption, exchange or expiration of the Rights), the surrender for transfer of
any  certificates  for Ordinary  Shares will also constitute the transfer of the
Rights associated with the Ordinary Shares  represented by such certificate.  As
soon as  practicable  following the  Distribution  Date,  separate  certificates
evidencing the Rights ("Right Certificates") will be mailed to holders of record
of the Ordinary Shares as of the Close of Business on the Distribution  Date and
such separate Right Certificates alone will evidence the Rights.

     The Rights are not exercisable until the Distribution Date. The Rights will
expire on April 11, 2003, unless earlier redeemed or exchanged by the Company as
described below.

     The  Purchase  Price  payable,  and the number of Ordinary  Shares or other
securities  or  property  issuable,  upon  exercise of the Rights are subject to
adjustment  from time to time to  prevent  dilution  (i) in the event of a stock
dividend on, or a subdivision,  combination or  reclassification of the Ordinary
Shares,  (ii) upon the grant to all  holders of the  Ordinary  Shares of certain
rights or warrants to subscribe for Ordinary Shares or convertible securities at
less than the  current  market  price of the  Ordinary  Shares or (iii) upon the
distribution  to holders of the Ordinary  Shares of evidences of indebtedness or
assets  (excluding  regular quarterly cash dividends out of earnings or retained
earnings or dividends  payable in Ordinary Shares) or of subscription  rights or
warrants (other than those referred to above).

     In the event that a Person becomes an Acquiring Person,  except pursuant to
an offer for all outstanding Ordinary Shares which the Board of Directors,  with
the concurrence of the Audit Committee, determines to be fair and not inadequate
and to otherwise be in the best interests of the Company and its shareholders (a
"Qualified

                                      -58-
<PAGE>

Offer"),  proper  provision shall be made so that each holder of a Right,  other
than  Rights  that  were  beneficially  owned by the  Acquiring  Person  (or any
Associate or Affiliate  thereof) on the earlier of the Distribution  Date or the
Shares Acquisition Date (which Rights will thereafter be void), shall thereafter
have the  right  to  receive,  upon the  exercise  thereof  at the then  current
Purchase  Price,  that number of Ordinary  Shares  having a market  value of two
times the  Purchase  Price.  If the Company  does not have  sufficient  Ordinary
Shares for this purpose,  the Company may, to the extent permitted by applicable
law, substitute cash, a reduction in the exercise price, other equity securities
of the Company, debt securities of the Company, other assets, or any combination
of the foregoing,  having an aggregate value equal to the value which would have
been realized if the Company had sufficient Ordinary Shares. In addition, in the
event that, at any time following the Shares  Acquisition  Date, (i) the Company
engages  in a merger  or other  business  combination  transaction  in which the
Company  is not the  surviving  corporation  (other  than with an  entity  which
acquired the shares pursuant to a Qualified Offer),  (ii) the Company engages in
a merger or other business  combination  transaction in which the Company is the
surviving corporation and the Ordinary Shares are changed or exchanged, or (iii)
50% or more of the  Company's  assets or earning  power is sold or  transferred,
proper  provision  shall be made so that each holder of a Right  (except  Rights
which have previously been voided as set forth above) shall  thereafter have the
right to receive,  upon the exercise thereof at the then current Purchase Price,
that  number  of  shares  of the  acquiring  company  which  at the time of such
transaction  would  have a market  value of two times the  Purchase  Price.  For
example,  at a  Purchase  Price of $38 per  Right,  each  Right  not owned by an
Acquiring Person (or by certain related parties) following an event set forth in
this  paragraph  would  entitle  its  holder to  purchase  $76 worth of  shares.
Assuming  that the  shares  had a per share  value of $10.00 at such  time,  the
holder of each valid Right would be entitled to purchase 7.6 shares for $38.

     At any time until ten business days following the Shares  Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of $.001
per  Right.  Immediately  upon the  action  of the Board of  Directors  ordering
redemption  of the Rights,  the Rights will  terminate and the only right of the
holders of Rights will be to receive the $.001 redemption price. In addition, at
any time after a person

                                      -59-
<PAGE>

becomes an Acquiring Person and prior to the acquisition by such person or group
of fifty percent (50%) or more of the outstanding Ordinary Shares, the Board may
exchange the Rights  (other than Rights owned by such person or group which have
become void),  in whole or in part, at an exchange  ratio of one Ordinary  Share
per Right (subject to adjustment).

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

     Any of the  provisions of the Rights  Agreement may be amended by the Board
of  Directors  of  the  Company  prior  to  the  Distribution  Date.  After  the
Distribution  Date, the provisions of the Rights Agreement may be amended by the
Board in order to cure any  ambiguity,  to correct or  supplement  any provision
which may be defective or  inconsistent  with any other  provision  therein,  to
shorten or lengthen any time period thereunder,  or to make changes which do not
adversely  affect the  interests  of holders of Rights  (other than an Acquiring
Person). The foregoing  notwithstanding,  no amendment may be made to the Rights
Agreement  when the Rights are not  redeemable,  except to cure any ambiguity or
correct or supplement any provision  contained in the Rights  Agreement that may
be defective or inconsistent with any other provision therein.

     A copy of the  Rights  Agreement  is being  filed with the  Securities  and
Exchange Commission.  A copy of the Rights Agreement is available free of charge
from the Rights Agent.  This summary  description of the Rights does not purport
to be complete  and is  qualified  in its  entirety by  reference  to the Rights
Agreement, which is incorporated herein by reference.

                                      -60-

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