Document:

EXHIBIT 4.1

                  U.S. ENERGY CORP.
                  Issuer and Company

                           and

                  COMPUTERSHARE TRUST COMPANY, INC
                  Rights Agent

                                RIGHTS AGREEMENT

                     Rights Record Date: September 19, 2001

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                                                 TABLE OF CONTENTS

                                                                            PAGE

Section 1.      Definitions...................................................4

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

Section 3.      Definition of Distribution Date and Offer Date;
                When Right Certificates Will Issue............................7

Section 4.      Form of Right Certificates....................................8

Section 5.      Countersignature and Registration.............................9

Section 6.      Transfer, Split Up, Combination and
                Exchange of Right Certificates;
                Mutilated, Destroyed, Lost or
                Stolen Right Certificates.....................................9

Section 7.      Exercise of Rights; Purchase Price;
                Expiration Date of Rights....................................10

Section 8.      Cancellation and Destruction of Right Certificates...........11

Section 9.      Reservation and Availability of Shares; Registration.........11

Section 10.     Record Date..................................................12

Section 11.     Adjustment of Purchase Price, Number and
                Kind of Shares or Number of Rights
                (Including Flip-In" Provision)...............................12

Section 12.     Certification of Adjusted Purchase
                Price or Number of Shares....................................17

Section 13.     Consolidation, Merger or Sale or
                Transfer of Assets or Earning Power
                (Including "Flip-Over Provision")............................18

Section 14.     Fractional Rights and Fractional Shares......................20

Section 15.     Rights of Action.............................................21

Section 16.     Agreement of Right Holders...................................21

Section 17.     Right Certificate Holder Not Deemed a Stockholder............21

Section 18.     Concerning the Rights Agent..................................21

Section 19.     Merger or Consolidation or Change of
                Name of Rights Agent.........................................22

Section 20.     Duties of Rights Agent.......................................22

Section 21.     Change of Rights Agent.......................................24

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Section 22.     Issuance of New Right Certificates...........................24

Section 23.     Redemption...................................................24

Section 24.     Notice of Proposed Actions...................................25

Section 25.     Notices in General ..........................................25

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

Section 27.     Exchange of Rights for
                Shares of Common Stock Without Cash Payment..................27

Section 28.     Successors...................................................27

Section 29.     Determinations and Actions Taken by
                the Board of Directors.......................................27

Section 30.     Benefits of this Agreement...................................27

Section 31.     Governing Law; Choice of Venue...............................27

Section 32.     Counterparts.................................................28

Section 33.     Section Headings.............................................28

Section 34.     Severability.................................................28

Signature Page  .............................................................28

Exhibit A       Form of Right Certificate....................................29

Exhibit B       Summary of Rights............................................34

Exhibit C       Certificate of Designation for
                Series P Preferred Stock.....................................37

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                                RIGHTS AGREEMENT

         This RIGHTS AGREEMENT is dated as of September 19, 2001, and is entered
into  by  U.S.  Energy  Corp.,  a  Wyoming  corporation  (the  "COMPANY"),   and
Computershare Trust Company, Inc. as the Rights Agent.

         RECITALS

         The board of directors  of the Company has  determined  that  provision
should be made to supplement  Wyoming law, in a manner consistent with that law,
to protect the  shareholders  by  facilitating  obtaining a higher value for the
Company through  negotiated  transactions,  in the event of an attempted  unfair
takeover of the Company  without the consent of the board of directors.  Subject
to the express provisions of this Rights Agreement, Exhibit C to this Agreement,
and proceedings of the board of directors of the Company, the general purpose of
this Rights Agreement is to encourage a person or company to discuss a potential
acquisition of the Company through a Qualified Offer, before acquiring more than
15% of the total voting power of the stock of the Company. Under this Agreement,
the Rights  would be  redeemed  in the event a  Qualified  Offer is made.  Under
Section  31,  if  there is  conflict  between  this  Agreement  and the  Wyoming
Management Stability Act, that law will control.

         Therefore,  the board of  directors  has  authorized  and  declared the
distribution  of one  Right  for  every  share of  Common  Stock of the  Company
outstanding  at the Close of Business on September 19, 2001 (the "RIGHTS  RECORD
DATE"), each Right representing the right to purchase one Unit, being (initially
and before any adjustments as provided for herein) one one-thousandth  (1/1,000)
of a share of Series P Preferred  Stock.  Further,  the board of  directors  has
authorized and declared this dividend to cover every  additional share of Common
Stock which may become outstanding  between the Rights Record Date and the first
to occur of the Distribution  Date, or the Expiration Date, or the date, if any,
when the  Rights  may be  redeemed,  all  upon  the  terms  and  subject  to the
conditions stated below.

         NOW, THEREFORE, the parties agree as follows:

         AGREEMENT

                  SECTION 1. DEFINITIONS.

                  (a) For purposes of this  Agreement,  the following terms have
the meanings indicated:

                  "ACQUIRING  PERSON"  means any Person  who or which,  alone or
together  with all of the  Affiliates  and  Associates  of such  Person,  is the
Beneficial  Owner of a Substantial  Block of Voting Stock,  but does not include
(I) an Exempt  Person OR (II) any  Person who or which  acquires  a  Substantial
Block of Voting Stock in connection with a transaction or series of transactions
approved prior to such  transaction or transactions by the board of directors of
the Company.  However,  no person shall become an Acquiring  Person  solely as a
result of a  reduction  in the  number of  shares of Voting  Stock  outstanding,
unless  and  until  such  Person  thereafter  becomes  the  Beneficial  Owner of
additional  shares  constituting  1% or more of the general  voting power of the
Company.

                  "AFFILIATE"  and  "ASSOCIATE"  have  the  respective  meanings
ascribed in rule 12b-2 of the General Rules and  Regulations  under the Exchange
Act.

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                  "BENEFICIAL  OWNER." A Person  is deemed to be the  Beneficial
Owner of any securities:

                           (i) which such Person or any of his or its Affiliates
or Associates beneficially owns, directly or indirectly;

                           (ii)  which  such   Person  or  any  of  his  or  its
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 any conversion, exchange or purchase rights (other than the Rights),
warrants or options, or otherwise; provided, however, that a Person shall not be
deemed the  "Beneficial  Owner" of 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 payment
or  exchange;  OR (B) the right to vote or to direct the voting of,  pursuant to
any agreement,  arrangement or understanding (whether or not in writing); OR (C)
the right to dispose or to direct the disposition of, pursuant to any agreement,
arrangement or understanding (whether or not in writing); or

                           (iii)  which  are  beneficially  owned,  directly  or
indirectly,  by any other Person with which such Person or any of such  Person's
Affiliates  or  Associates  has  any  agreement,  arrangement  or  understanding
(whether or not in writing)  for the purpose of  acquiring,  holding,  voting or
disposing of any  securities of the Company;  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 the grant of a revocable  proxy or consent given to such
Person in connection with a public proxy or consent  solicitation  made pursuant
to, and in accordance  with,  the  applicable  rules and  regulations  under the
Exchange Act, AND (2) is not also then reportable on Schedule 13(d) or successor
report under the  Exchange  Act;  provided,  further,  that a Person  engaged in
business as an  underwriter  of securities  shall not be deemed the  "Beneficial
Owner" of securities acquired through such person's  participation in good faith
in a firm  commitment  underwriting  until the  expiration  of the 40-day period
immediately following the date of such acquisition.

                  "BUSINESS DAY" means any day other than a Saturday,  Sunday or
day on which  banking  institutions  in the  State  Wyoming  are  authorized  or
obligated by law or executive order to close.

                  "CLOSE OF  BUSINESS"  means  5:00  p.m.,  Wyoming  time,  on a
Business  Day;  provided,  however,  that if such is not a Business Day it shall
mean 5:00 p.m., Wyoming time, on the next succeeding Business Day.

                  "COMMON STOCK" means the Company's  Common Stock;  and "common
stock" when used with reference to Persons other than the Company means: (I) for
Persons  organized in corporate  form, the capital stock or equity security with
the greatest  voting power of such Person or, if such Person is a Subsidiary  of
another Person,  of the Person or Persons which ultimately  control such Person;
AND (II) in the case of Persons not  organized in corporate  form,  the units of
beneficial  interest which (A) represent the right to  participate  generally in
the  profits  and  losses  of such  Person  (including  without  limitation  any
flow-through tax benefits  resulting from an ownership  interest in such Person)
AND (B) are entitled to exercise the greatest voting power of such Person or, in
the case of a limited  partnership,  shall have the power to remove the  general
partner or partners.

                  "DISTRIBUTION DATE" has the meaning assigned in Section 3(a).

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                  "EQUIVALENT STOCK" has the meaning assigned in Section 7(a).

                  "EXCHANGE ACT" means the  Securities  Exchange Act of 1934 and
its future amendments.

                  "EXEMPT  PERSON"  means the  Company,  any  Subsidiary  of the
Company and any employee  benefit plan or employee  stock plan of the Company or
of any  Subsidiary  of the  Company,  or any  trust or other  entity  organized,
established  or holding shares of Common Stock by, for or pursuant to, the terms
of any such plan.

                  "EXPIRATION DATE" has the meaning assigned in Section 7(a).

                  "OFFER DATE" has the meaning assigned in Section 3(a).

                  "PERSON" means any individual, firm, corporation, partnership,
trust or other entity and shall include any of their successors.

                  "PRINCIPAL PARTY" has the meaning assigned in Section 13(b).

                  "PURCHASE PRICE" means the price  (initially  $200.00) payable
for one Unit  (1/1,000  share of Series P Preferred  Stock)  upon  exercise of a
Right.

                  "QUALIFIED  OFFER"  means a tender or  exchange  offer for all
outstanding  Common Stock at a price and on terms  determined to be adequate and
otherwise in the best interests of the Company and its stockholders  (other than
the Person or an  Affiliate  or  Associate  thereof on whose behalf the offer is
made) by at least a majority of the Directors who are not  representatives of or
affiliated  with the Person  making such offer or any  Affiliate or Associate of
such Person.

                  "REDEMPTION  PRICE" has the meaning assigned in Section 23(a),
initially $0.01 per Right.

                  "RIGHT"  has the  meaning  assigned  in the  Recitals  to this
Agreement.

                  "RIGHTS  RECORD  DATE"  is  defined  in the  Recitals  to this
Agreement.

                  "SUBJECT  SHARES"  means the  class or  series of shares  then
issuable on exercise of the Rights.

                  "STOCK  ACQUISITION  DATE" means the date of the first  public
announcement  by the Company or an Acquiring  Person (which for purposes of this
definition shall include, without limitation, a report filed pursuant to Section
13(d) under the Exchange Act) that an Acquiring Person has become such.

                  "SUBSIDIARY"  means, with respect to any Person, a corporation
or other  entity the  securities  or other  ownership  interests of which having
ordinary  voting power  sufficient to elect a majority of the board of directors
or other  persons  performing  similar  functions  are at the time  directly  or
indirectly owned by such Person and any Affiliate of such Person.

                  "SUBSTANTIAL  BLOCK"  means a number of shares of Voting Stock
having in the aggregate 15 percent or more of the general voting power.

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                  "TRADING DAY" has the meaning assigned to it in Section 11(d).

                  "UNIT"  means the  shares or other  securities  issuable  upon
exercise  of one  Right,  initially  one  one-thousandth  of a share of Series P
Preferred  Stock of the  Company  having the rights  and  preferences  stated in
Exhibit C, before any adjustment pursuant to Section 11(a)(ii) or Section 13.

                  "VOTING STOCK" means shares of the Company's capital stock the
holders of which have general voting power.

                  SECTION 2.  APPOINTMENT  OF RIGHTS AGENT.  The Company  hereby
appoints the Rights Agent to act as agent for the Company in accordance with the
terms  and  conditions   hereof,  and  the  Rights  Agent  hereby  accepts  such
appointment.  The Company may from time to time appoint such Co-Rights  Agent or
Agents as it may deem necessary or desirable and determine the respective duties
of the Rights Agent and the Co-Rights Agent or Agents.

                  SECTION 3.  DEFINITION  OF  DISTRIBUTION  DATE AND OFFER DATE;
WHEN RIGHT CERTIFICATES WILL ISSUE.

                  (a) Until  the Close of  Business  on the  earlier  of (I) the
tenth Business Day after a Stock Acquisition Date OR (II) the tenth Business Day
(or such later date as the Company's board of directors shall  determine)  after
the date of the  commencement by any Person (other than an Exempt Person) of, or
the  date  of  the  first  public   announcement   (such  commencement  date  or
announcement  is the "OFFER  DATE") of the intent of any Person  (other  than an
Exempt  Person) to  commence  a tender or  exchange  offer  upon the  successful
consummation of which such Person,  together with its Affiliates and Associates,
would be the  Beneficial  Owner of 15  percent  or more of the then  outstanding
Voting Stock (regardless of whether any shares are actually  purchased  pursuant
to such  offer)  (the  tenth  Business  Day  after the first to occur of a Stock
Acquisition Date or an Offer Date is the "DISTRIBUTION DATE"),

                           (i) the Rights will  automatically  attach to, and be
evidenced by, the  certificates  for Common Stock registered in the names of the
holders of Common  Stock  (which  certificates  for Common Stock shall be deemed
also to be Right Certificates) and not by separate Right Certificates, and

                           (ii)  each  Right  will  be   transferable   only  in
connection with the transfer of the underlying shares of Common Stock.

                  (b) As soon as  practicable  after the Rights Record Date, the
Company will send by first- class mail to each record  holder of Common Stock as
of the Close of  Business  on the Rights  Record  Date a copy of the  Summary of
Rights (see Exhibit B).

                  For  certificates  for Common  Stock  issued  after the Rights
Record  Date  (including  replacement  certificates  for shares of Common  Stock
outstanding on or prior to the Rights Record Date), but prior to the earliest of
the  Distribution  Date, the Expiration  Date and the date, if any, on which the
Rights may be redeemed, the Company will have printed on or otherwise affixed to
them the following legend:

                  "This  certificate  also entitles the holder hereof to certain
Rights as set forth in the Rights  Agreement  between the Company and  Corporate
Stock  Transfer,  Inc. as Rights Agent as the same shall be amended from time to
time (the "Rights Agreement"), the terms of which are hereby incorporated herein
by reference and a copy of which is on file at the principal  executive  offices
of the Company. Under certain

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circumstances,  as set  forth  in the  Rights  Agreement,  such  Rights  will be
evidenced  by  separate  certificates  and will no longer be  evidenced  by this
Common  Stock  certificate.  The  Company  will  mail  to  the  holder  of  this
certificate  a copy of the Rights  Agreement  without  charge after receipt of a
written request  therefor.  Under certain  circumstances set forth in the Rights
Agreement,  Rights  issued  to, or held by, any Person who is, was or becomes an
Acquiring  Person or any  Affiliate  or  Associate  thereof  (as such  terms are
defined in the Rights Agreement) or certain transferees of any thereof,  whether
currently held by or on behalf of such Person or by any subsequent  holder,  may
be limited as provided in Section 7(f) of the Rights Agreement."

                  For certificates containing the legend, until the Distribution
Date, the Rights  associated with Common Stock  represented by such certificates
shall be evidenced only by such certificates;  transfer of any such certificates
also shall constitute transfer of the Rights associated with the Common Stock.

                  (c) After the Distribution  Date, the Rights will be evidenced
solely by the Right Certificates.

                  (d) As soon as practicable  after the  Distribution  Date, the
Rights  Agent will mail by first- class  insured  mail to each record  holder of
Common Stock as of the Close of Business on the  Distribution  Date, as shown by
the records of the Company at the Close of Business on the Distribution Date, at
the  address of such  holder  shown on such  records,  a Right  Certificate,  in
substantially  the form attached  hereto as Exhibit A,  evidencing one Right for
each share of Common Stock so held.

                  SECTION 4. FORM OF RIGHT CERTIFICATES.

                  (a) The Right  Certificates  (and the forms of assignment  and
certification  and of election  to purchase  shares to be printed on the reverse
thereof)  shall be in  substantially  the form of  Exhibit A hereto and may have
such marks of  identification  or  designation  and such  legends,  summaries or
endorsements as are not inconsistent with this Agreement,  or as may be required
to comply with any law or to conform to usage.

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

                  "The Rights  represented by this Right Certificate are or were
beneficially  owned by a Person  who was or  became  an  Acquiring  Person or an
Affiliate or Associate of an Acquiring  Person (as such terms are defined in the
Rights Agreement) or certain  transferees  thereof.  Accordingly,  under certain
circumstances as provided in the Rights  Agreement,  this Right  Certificate and
the Rights represented hereby may be limited as provided in Section 7(f) of such
Agreement.

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                  SECTION 5. COUNTERSIGNATURE AND REGISTRATION.

                  (a) The Right  Certificates shall be executed on behalf of the
Company  by its  Chairman  of  the  Board,  its  President  or  any of its  Vice
Presidents,  manually or by facsimile  signature,  and have affixed  thereto the
Company's seal or a facsimile  thereof attested by the Secretary or an Assistant
Secretary,  either  manually or by facsimile.  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 who shall have signed any
of the Right Certificates shall cease to be such officer before countersignature
by the  Rights  Agent and  issuance  and  delivery  by the  Company,  such Right
Certificates, nevertheless, may be countersigned by the Rights Agent, issued and
delivered  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  (as  specified  above) of the  Company to sign such Right  Certificate,
although at the date of the  execution of this Rights  Agreement any such person
was not such an officer.

                  (b) Following  the  Distribution  Date,  the Rights Agent will
keep or cause to be kept  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 Right  Certificate,  the date of each Right  Certificate and
the number of each Right Certificate.

                  SECTION 6.  TRANSFER,  SPLIT UP,  COMBINATION  AND EXCHANGE OF
RIGHT CERTIFICATES; MUTILATED, DESTROYED, LOST OR STOLEN RIGHT CERTI- FICATES.

                  (a) Subject to Sections  4(b),  7(f) and 14, at any time after
the  Close of  Business  on the  Distribution  Date,  and  prior to the Close of
Business on the  Expiration  Date or the day prior to the day, if any,  when the
Rights  are  to  be  redeemed  under  Section  23,  any  Right   Certificate  or
Certificates  may be  transferred,  split up,  combined or exchanged for another
Right  Certificate or Right  Certificates,  entitling the  registered  holder to
purchase  such  number of Units as the  Right  Certificate(s)  surrendered  then
entitled such holder to purchase.  Any registered  holder  desiring to transfer,
split up, combine or exchange any Right  Certificate  shall make such request in
writing   delivered  to  the  Rights  Agent,   and  shall  surrender  the  Right
Certificate(s) to be transferred, split up, combined or exchanged, with the form
of assignment on the reverse side(s) thereof duly completed and executed, at the
stock transfer  office of the Rights Agent.  The Rights Agent shall  countersign
and deliver to the persons entitled thereto the Right Certificate(s)  requested.
The  Company  may  require  payment  of a sum  sufficient  to  cover  any tax or
government charge that may be imposed in connection therewith.  However, neither
the Rights  Agent nor the  Company  shall be  obligated  to take any action with
respect to the transfer of any such  surrendered  Right  Certificate  unless and
until the  registered  holder shall have  completed  and signed the  certificate
contained  in the  form  of  assignment  on  the  reverse  side  of  such  Right
Certificate and shall have provided such additional  evidence of the identity of
the Beneficial  Owner (or former  Beneficial  Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.

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

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                  SECTION 7. EXERCISE OF RIGHTS; PURCHASE PRICE; EXPIRATION DATE
OF RIGHTS.

                  (a) Subject to Section 7(f),  and unless  earlier  redeemed as
provided  in Section  23, the  registered  holder of any Right  Certificate  may
exercise the Rights evidenced  thereby 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 completed and executed, to
the Rights Agent at the stock transfer office of the Rights Agent, together with
payment  of the  Purchase  Price  for  each  Unit as to  which  the  Rights  are
exercised,  at or prior to the Close of Business on the tenth anniversary of the
Rights  Record  Date or such other date to which the Rights may be  extended  as
provided in this Agreement (the latest of such dates is the "EXPIRATION  DATE").
If at any time after the Distribution  Date but prior to the Expiration Date the
Company is unable, under its articles of incorporation,  to issue the number and
class  of  shares  required  to be  issued  upon  the  exercise  of  all  of the
outstanding  Rights,  the Company  may issue upon  exercise of any of the Rights
shares of capital stock or other  securities of the Company of value  equivalent
to the shares so required to be issued  ("Equivalent  Stock"),  as determined by
the board of directors.

                  (b) The Purchase  Price for each Unit pursuant to the exercise
of a Right initially shall be US$200.00, subject to adjustment from time to time
as provided in Sections 11 and 13.

                  (c)  Upon  receipt  of a Right  Certificate,  with the form of
election to purchase duly executed, accompanied by payment of the Purchase Price
for the Units to be purchased and an amount equal to any applicable transfer tax
in cash, or by certified  check,  bank draft or money order payable to the order
of the Company,  the Rights Agent shall thereupon  promptly (i) requisition from
the Company or any transfer  agent of the Company (if different  from the Rights
Agent) a  certificate  for the number of shares to be purchased  and the Company
will comply,  and hereby  irrevocably  authorizes  its transfer agent to comply,
with all such requests;  (ii) requisition from the Company the amount of cash to
be  paid in lieu  of  issuance  of a  fractional  share,  when  appropriate,  in
accordance with Section 14; AND (iii) promptly after receipt of such certificate
from any such  transfer  agent,  cause the same to be  delivered  to or upon the
order of the  registered  holder of such Right  Certificate,  registered  in the
name(s)  designated by such holder and cash for any fractional share. These same
procedures shall be followed if Rights are exercised for Equivalent Stock.

                  (d) The Company  shall not be required to pay any transfer tax
which may be payable in respect of any  transfer  involved  in the  transfer  or
delivery of Right Certificates, or the issuance or delivery of certificates in a
name other than the registered  holder,  or to issue or deliver any certificates
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.

                  (e) If the  registered  holder  exercises  less  than  all the
Rights, a new Right  Certificate for the remaining  unexercised  Rights shall be
issued by the Rights Agent to the registered holder of such Right Certificate or
to his duly authorized assigns, subject to Section 14.

                  (f)  Notwithstanding  any  provision of this  Agreement to the
contrary,  upon the occurrence of any of the events  described in any of clauses
(A), (B), (C) or (D) of Section  11(a)(ii),  the adjustment and provision  under
Section  11(a)(ii)  SHALL NOT APPLY with  respect to any Rights  that are at the
time  Beneficially  Owned by (i) an  Acquiring  Person  or by any  Associate  or
Affiliate  of such  Acquiring  Person  (which  Acquiring  Person or Affiliate or
Associate  engages  in,  or  realizes  the  benefit  of,  one  or  more  of  the
transactions  described in clause (A) or (B) of Section 11(a)(ii),  realizes the
benefits set forth in clause (C) of Section 11(a)(ii) or,

                                       10

<PAGE>

alone or  together,  become  the  Beneficial  Owner(s)  of a number of shares of
Voting Stock which equals or exceeds the  percentage of the general voting power
as provided in clause (D) of Section  11(a)(ii),  as the case may be), OR (ii) a
transferee  of an  Acquiring  Person or of any  Associate  or  Affiliate of such
Acquiring  Person (which  engages in, or realizes the benefit of, one or more of
the  transactions  described  in  clause  (A) or (B) of  Section  11(a)(ii),  or
realizes the benefits in clause (C) of Section 11(a)(ii),  or, alone or together
with such  Acquiring  Person or Associate or  Affiliate,  become the  Beneficial
Owner(s)  of a number of shares of Voting  Stock  which  equals or  exceeds  the
percentage  of the  general  voting  power as  provided in clause (D) of Section
11(a)(ii),  as the case may be) (A) who becomes a transferee after the Acquiring
Person  becomes such, OR (B) who becomes a transferee  prior to or  concurrently
with the Acquiring Person becoming such and receives such Rights EITHER BY (1) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity  interests  in such  Acquiring  Person or to any Person with whom such
Acquiring  Person has any continuing  agreement,  arrangement  or  understanding
regarding the transferred Rights, OR (2) a transfer which the board of directors
of the Company has determined is part of a plan,  arrangement  or  understanding
which has as a primary  purpose or effect the  avoidance of this  Section  7(f).
Upon the exercise of such Rights covered by this Section 7(f), the holders shall
be entitled to receive,  upon payment of the Purchase Price, the number of Units
issuable upon exercise of such Rights  WITHOUT  GIVING EFFECT to the  adjustment
provided  for under  Section  11(a)(ii).  The Company  shall use all  reasonable
efforts to insure that the  provisions of this Section 7(f) and Section 4(b) are
complied with,  but shall have no liability to any holder of Right  Certificates
or other Person as a result of its making or failing to make any  determinations
with respect to an Acquiring Person or its Affiliates, Associates or transferees
hereunder.

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

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

                  SECTION   9.   RESERVATION   AND   AVAILABILITY   OF   SHARES;
REGISTRATION.

                  (a) The Company  covenants  and agrees that it shall (i) on or
prior to the Rights  Record Date,  take all such action as shall be necessary to
cause to be reserved  and kept  available  out of its  authorized  and  unissued
capital stock,  enough shares of Preferred  Stock to permit the exercise in full
of all Rights to be outstanding as of the Rights Record Date, (ii) no later than
promptly  following  the  Distribution  Date,  take all such  action as shall be
necessary to cause to be reserved and kept  available out of its  authorized and
unissued

                                       11

<PAGE>

capital stock,  or its  authorized  and issued shares held in its treasury,  the
number of shares of Common Stock that will,  from time to time, be sufficient to
permit the exercise in full of all Rights from time to time  outstanding;  (iii)
take all such action as may be  necessary  to insure  that all shares  delivered
upon exercise of Rights shall be duly and validly  authorized  and issued and be
fully  paid and  nonassessable;  AND (iv) pay when due any  transfer  taxes  and
charges in respect of the issuance or delivery of the Right  Certificates  or of
any shares upon the exercise of Rights (except as otherwise  provided in Section
7(d)).

                  (b) The  Company  agrees  to use its best  efforts  as soon as
practicable  following the  Distribution  Date, to file with the  Securities and
Exchange Commission a registration statement to permit the issuance of shares on
exercise of the Rights under the  Securities  Act of 1933, and to take the steps
necessary to permit such issuance  under the  securities  "blue sky" laws of the
states where registered holders reside. The Company may temporarily  suspend for
up to 90 days the exercise of the Rights to file a  registration  statement  and
other documents as needed to allow exercise of the Rights.  At the start and end
of a suspension,  the Company shall issue a public  announcement  and notify the
Rights Agent that exercise has been suspended and the end of the suspension.

                  (c) The Rights shall not be exercisable in any jurisdiction if
not there legal.

                  (d) The Company shall use its reasonable  efforts to cause all
shares  reserved  for  issuance  upon  exercise  of  Rights  to be listed on the
Company's exchange or quotation market.

                  SECTION 10.  RECORD DATE.  Each Person in whose name any stock
certificate is issued upon exercise of Rights shall be deemed to have become the
holder of record of the shares  represented  thereby  on,  and such  certificate
shall be dated,  the date when the Right  Certificate  was  surrendered  and the
Purchase  Price paid.  Prior to  exercise  of the Rights,  the holder of a Right
Certificate  shall not be entitled to any rights of a stockholder 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 such  holder  shall not be entitled to receive any notice of
any proceedings of the Company, except as provided herein.

                  SECTION 11.  ADJUSTMENT OF PURCHASE PRICE,  NUMBER AND KIND OF
SHARES OR NUMBER OF RIGHTS (INCLUDING "FLIP-IN" PROVISION).  The Purchase Price,
number  and kind of shares or other  securities  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) If the  Company  shall at any time  after  the date of
this Agreement (A) declare and pay a dividend on the shares which are subject to
the Rights  ("Subject  Shares")  payable in shares of stock of the Company,  (B)
subdivide or split the Subject  Shares,  (C) combine or consolidate  the Subject
Shares  into a smaller  number of shares or effect a reverse  stock split of the
Subject   Shares,   OR  (D)  issue  any  shares  of  its  capital   stock  in  a
reclassification  of the Subject Shares (including any such  reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving  corporation),  THEN,  AND IN EACH SUCH EVENT,  except as otherwise
provided in this Section 11(a),  the Purchase Price in effect at the time of the
record date for dividend or  subdivision,  split,  reverse  split,  combination,
consolidation or reclassification,  and the number and kind of shares of capital
stock  issuable  on such date,  shall be  proportionately  adjusted  so that the
holder of any Right  exercised  after such time shall be entitled to receive the
aggregate  number and kind of shares of capital  stock which,  if such Right had
been  exercised  immediately  prior to such date and at a time when the transfer
books of the Company were open,  he would have  received  upon such exercise and
been  entitled to receive.  If an event occurs which would require an adjustment
under

                                       12

<PAGE>

both this Section 11(a)(i) and Section 11(a)(ii), the adjustment provided for in
this Section  11(a)(i)  shall be in addition to, and shall be made prior to, any
adjustment required pursuant to Section 11(a)(ii).

                      (ii)     If at any time after the date of this Agreement

                               (A) any  Acquiring  Person,  or any  Associate or
Affiliate of any Acquiring  Person,  directly or indirectly (1) shall merge into
the Company or any of its Subsidiaries or otherwise  combine with the Company or
any of its  Subsidiaries  and  the  Company  or  such  Subsidiary  shall  be the
continuing or surviving corporation of such merger or combination and the Common
Stock shall remain  outstanding and the outstanding  shares thereof shall not be
changed into or exchanged for stock or other securities of the Company or of any
other  Person or cash or any other  property,  OR (2)  shall  sell or  otherwise
transfer  in one or  more  transactions,  assets  to the  Company  or any of its
Subsidiaries  in  exchange  for 15 percent or more of the shares of any class of
capital  stock of the Company or any of its  Subsidiaries,  and the Common Stock
shall remain outstanding and unchanged, OR

                               (B) directly or indirectly, any Acquiring Person,
or any Associate or Affiliate of any Acquiring Person,  shall (1) in one or more
transactions,  transfer  assets to the  Company  or any of its  Subsidiaries  in
exchange  (in whole or in part) for shares of any class of capital  stock of the
Company  or  any of  its  Subsidiaries  or  for  securities  exercisable  for or
convertible  into shares of any class of capital  stock of the Company or any of
its   Subsidiaries  or  otherwise   obtain  from  the  Company  or  any  of  its
Subsidiaries, with or without consideration,  any additional shares of any class
of capital stock of the Company or any of its  Subsidiaries or other  securities
exercisable for or convertible  into shares of any class of capital stock of the
Company  or  any  of  its  Subsidiaries  (other  than  as  part  of a  pro  rata
distribution  by the Company or such Subsidiary to all holders of Common Stock),
OR (2) sell, purchase, lease, exchange,  mortgage, pledge, transfer or otherwise
dispose (in one or more transactions), to, from or with, as the case may be, the
Company  or any  of its  Subsidiaries,  assets  on  terms  and  conditions  less
favorable to the Company or such  Subsidiary than the Company or such Subsidiary
would be able to obtain in arm's-length  negotiation with an unaffiliated  third
party, OR (3) receive any compensation  from the Company or any of the Company's
Subsidiaries  other than  compensation  for  full-time  employment  as a regular
employee,  or fees for  serving as  director,  at rates in  accordance  with the
Company's (or its  Subsidiaries')  past  practices,  OR (4) receive the benefit,
directly or indirectly (except proportionately as a stockholder),  of any loans,
advances,  guarantees,  pledges or other  financial  assistance  provided by the
Company or any of its  Subsidiaries,  on terms and conditions  less favorable to
the Company or such Subsidiary than the Company or such Subsidiary would be able
to obtain in arm's-length negotiation with an unaffiliated third party, OR

                               (C) during any such time as there is an Acquiring
Person, there shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or consolidation
of the Company with any of its Subsidiaries or any other similar  transaction or
series of transactions involving the Company or any of its Subsidiaries (whether
or not with or into or otherwise  involving an Acquiring Person or any Affiliate
or  Associate  of such  Acquiring  Person)  which has the  effect,  directly  or
indirectly,  of increasing by more than one percent the  proportionate  share of
the  outstanding  shares  of any class of equity  securities,  or of  securities
exercisable for or convertible into equity securities,  of the Company or any of
its  Subsidiaries  which is directly or indirectly owned by any Acquiring Person
or any Associate or Affiliate of any Acquiring Person, OR

                               (D) any Person shall  become an Acquiring  Person
otherwise than pursuant to a Qualified Offer,

                                       13

<PAGE>

                               THEN,  AND IN EACH  SUCH  CASE,  but  subject  to
Section 27  (covering  exchange  of Rights for shares of Common  Stock,  without
requiring exercise of Rights),  proper adjustment and provision shall be made so
that each  holder of a Right  (except as  provided  below and in  Section  7(f))
shall,  on and  after the  later of (I) the date of the  occurrence  of an event
described in clause (A), (B), (C) or (D) of this Section 11(a)(ii),  OR (II) the
expiration of the period  within which the Rights may be redeemed  under Section
23 (as the same may have  been  amended  under  Section  26),  have the right to
receive, upon exercise thereof at the then current Purchase Price, the number of
shares of Common Stock equal to the result  obtained by (X) multiplying the then
current  Purchase  Price by the then  number  of Units for which a Right is then
exercisable  and dividing  that product by (Y) 50 percent of the current  market
price per share of Common Stock (determined in accordance with Section 11(d)) on
the date of the  occurrence  of the  relevant  event listed above in clause (A),
(B),  (C) or (D) of  this  subparagraph  (ii);  PROVIDED,  HOWEVER,  that if the
transaction  that would otherwise give rise to the foregoing  adjustment is also
subject to the  provisions of Section 13, then only the provisions of Section 13
("flip-over" provisions) shall apply and no adjustment shall be made pursuant to
this  Section  11(a)(ii).  The Company  shall not  consummate  any such  merger,
combination, transfer or transaction referred to in any of such clauses (A), (B)
and (C) unless prior thereto there shall be sufficient  authorized  but unissued
Common Stock to permit the exercise in full of the Rights in accordance with the
foregoing  sentence,  unless  the Board of  Directors  has  determined  to issue
Equivalent Stock in accordance with Section 7(a); PROVIDED,  HOWEVER, that in no
case may the  Company  consummate  any such  merger,  combination,  transfer  or
transaction if at the time of or immediately  after such  transaction  there are
any  rights,   warrants  or  other  instruments  or  securities  outstanding  or
agreements in effect which would  substantially  diminish or otherwise eliminate
the benefits intended to be afforded by the Rights.

         If the Company issues  Equivalent Stock upon the exercise of any Rights
pursuant to the immediately  preceding paragraph,  then, upon any such exercise,
proper provision shall be made so that the holder of a Right (except as provided
in Section 7(f)) shall have the right to receive, upon such exercise at the then
current Purchase Price, such number of shares or other units of Equivalent Stock
of the Company as shall equal the result  obtained by (X)  multiplying  the then
current  Purchase  Price  by the  number  of  Units  for  which a Right  is then
exercisable  and dividing  that product by (Y) 50 percent of the current  market
price per share or other unit of the Equivalent Stock of the Company (determined
on  substantially  the same basis as is prescribed by Section 11(d) with respect
to the  valuation  of Common  Stock) on the date of  occurrence  of the relevant
event listed above in clause (A), (B), (C) or (D) of this subparagraph  (ii). If
at any time the Company  should be  prohibited  by law, by any  provision of its
articles  of  incorporation,  or by any  instrument  or  agreement  to which the
Company is a party or by which it is bound,  from  issuing,  or should be unable
under its articles of  incorporation  to issue,  sufficient  Equivalent Stock to
permit the exercise of all  outstanding  Rights in accordance with the foregoing
sentence, then, in lieu of issuing such Equivalent Stock upon such exercise, the
Company shall pay to each holder of a Right (except as provided in Section 7(f))
upon  surrender  of the Right as  provided  herein  but  without  payment of the
Purchase Price, an amount in cash for each Right equal to the Purchase Price.

                  (b) If after the Rights  Record Date the Company sets a record
date for the  issuance of rights or  warrants to all holders of Common  Stock or
Subject  Shares  entitling them (for a period  expiring  within 45 calendar days
after such record  date) to  subscribe  for or purchase  Common Stock or Subject
Shares or securities  convertible into Common Stock or Subject Shares at a price
per share (or having a  conversion  price per share,  if a security  convertible
into Common Stock) less than the current market price per share (determined with
Section  11(d)) 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 shall be the
total number of shares of Common Stock and Subject  Shares  outstanding  on such
record  date plus the  number of shares  of  Common  Stock  which the  aggregate
offering price of the

                                       14

<PAGE>

total number of 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 shall be the total number of shares of
Common Stock and Subject Shares  outstanding on such record date plus the number
of additional  shares to be offered for  subscription or purchase (or into which
the  convertible  securities to be offered are initially  convertible).  In case
such  subscription or purchase price may be paid, in whole or in part, in a form
other than cash, the value of such consideration  shall be as determined in good
faith by the board of  directors of the Company,  whose  determination  shall be
described in a statement  filed with the Rights  Agent.  Shares owned by or held
for the account of the Company shall not be deemed  outstanding  for the purpose
of any such  computation.  Such adjustment shall be made  successively  whenever
such a record date is fixed,  and if 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 set.

                  (c) If the  Company at any time after the Rights  Record  Date
sets a record date for making a  distribution  on shares of Common  Stock or the
Subject Shares, whether by way of a dividend, distribution,  reclassification of
stock, recapitalization, reorganization or partial liquidation of the Company or
otherwise  (and  including  any  such  distribution  made in  connection  with a
consolidation or merger in which the Company is the continuing corporation),  of
subscription  rights or warrants (excluding those referred to in Section 11(b)),
evidences of indebtedness or other assets (other than (i) regular  periodic cash
dividends, (ii) a dividend payable in Common Stock OR (iii) a distribution which
is  part of or is  made  in  connection  with a  transaction  to  which  Section
11(a)(ii) or Section 13 applies),  then 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,  of which the  numerator
shall be the current  market  price per share of Common Stock  (determined  with
Section 11(d)) on such record date, less the fair market value applicable to one
share of Common Stock (as  determined in good faith by the board of directors of
the Company,  whose  determination  shall be described in a statement filed with
the  Rights  Agent)  of such  assets or  evidences  of  indebtedness  or of such
subscription  rights  or  warrants  so to  be  distributed,  and  of  which  the
denominator  shall be such current market price per share of Common Stock.  Such
adjustments shall be made successively whenever such a record date is fixed; and
if such  distribution is not so made, the Purchase Price shall again be adjusted
to be the  Purchase  Price which would then be in effect if such record date had
not been fixed.

                  (d) The  "CURRENT  MARKET  PRICE" per share of Common Stock on
any date shall be deemed to be the average of the daily closing prices per share
of such  Common  Stock  for the 30  consecutive  Trading  Days  (defined  below)
immediately prior to such date;  provided,  however,  that if the current market
price per share of Common  Stock is  determined  during a period  following  the
announcement by the issuer of such Common Stock of a dividend or distribution on
such  Common  Stock  payable  in  shares  of such  Common  Stock  or  securities
convertible  into shares of Common Stock  (other than the Rights),  and prior to
the expiration of 30 Trading Days after the  ex-dividend  date for such dividend
or distribution,  then, and in each such case, the current market price shall be
appropriately  adjusted to reflect the current  market price per share of Common
Stock in connection  with  ex-dividend  trading.  The closing price for each day
shall be the last sale price,  or, in case no such sale takes place on such day,
the average of the closing bid and asked  prices,  in either case as reported in
the principal consolidated  transaction reporting system of the principal market
where the  shares of Common  Stock are listed or  admitted  to  trading.  If the
shares of Common  Stock are not listed or  admitted  to trading on any  national
securities exchange, then closing price will be determined with reference to the
average of the high bid and low asked prices in the over-the-counter  market, as
reported by the National  Association  of Securities  Dealers,  Inc.,  Automated
Quotation System ("NASDAQ").  If on any such date the shares of Common Stock are
not quoted by any such  organization,  the fair  market  value of such shares on
such date as determined  in good faith by the board of directors  shall be used.
Any such determination of current market price shall be described in a statement
filed with the Rights Agent.

                                       15

<PAGE>

                  For the purpose of any  computation  hereunder,  the  "CURRENT
MARKET PRICE" of a Unit shall be deemed to be equal to the current  market price
per share of Common  Stock,  and the "current  market  price" of a Subject Share
shall be  deemed  to be equal to the  current  market  price per share of Common
Stock divided by the number of Subject Shares which comprise a Unit.

                  For purposes of this  Agreement,  the term "TRADING DAY" shall
mean a day on which the  principal  national  securities  exchange  on which the
shares  of Common  Stock  are  listed or  admitted  to  trading  is open for the
transaction  of  business  or, if the  shares of Common  Stock are not listed or
admitted to trading on any national securities exchange, a Business Day.

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

                  (f) If at any time, 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 capital stock of the Company other than shares
of Common Stock,  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 such shares,  contained in Sections 11(a) through (c), inclusive. The
provisions  of Sections 7, 9, 10, 13 and 14 with respect to the shares of Common
Stock shall apply on like terms to any such other shares.

                  (g) All Rights originally issued by the Company  subsequent to
any adjustment made to the Purchase Price hereunder shall represent the right to
purchase,  at the adjusted Purchase Price, the number of shares 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 under
Section 11(i),  when there is an adjustment of the Purchase Price as a result of
the  calculations  made in  Sections  11(b)  and  (c),  each  Right  outstanding
immediately prior to the making of such adjustment shall thereafter evidence the
right to  purchase,  at the  adjusted  Purchase  Price,  that  number  of shares
(calculated to the nearest  one-thousandth)  obtained by (i) multiplying (x) the
number of shares covered by a Right  immediately prior to such adjustment by (y)
the  Purchase  Price  in  effect  immediately  prior to such  adjustment  of the
Purchase  Price,  and (ii)  dividing the result by the Purchase  Price in effect
immediately after such adjustment.

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

                                       16

<PAGE>

the number of Rights,  indicating  the record date for the  adjustment,  and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter,  but,
if the Right Certificates have been issued, shall be at least 10 days later than
the date of the public  announcement.  If Right  Certificates  have been issued,
upon each  adjustment  of the number of Rights  the  Company  shall  cause to be
distributed  to holders of record of Right  Certificates  on such  record  date,
Right  Certificates  to show  (subject to Section 14) the  additional  Rights to
which the holders shall be entitled as a result of such adjustment.  However, at
its option,  the Company may shall cause to be distributed in  substitution  and
replacement for the Right  Certificates held by the holders prior to the date of
adjustment,  and upon surrender thereof,  if required by the Company,  new Right
Certificates  to evidence all the Rights to which the holders are entitled after
the adjustment.

                  (j)  Irrespective  of any adjustment or change in the Purchase
Price or the number of 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) If this  Section 11  requires  that an  adjustment  in the
Purchase  Price be made  effective as of the record date for a specified  event,
the Company may elect to defer until the  occurrence  of such event the issuance
to the holder of any Right  exercised  after  such  record  date the  additional
shares or securities of the Company,  if any,  issuable as a consequence of 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 or securities upon the occurrence of such event.

                  (l)  Notwithstanding  the other provisions of this Section 11,
the Company shall be entitled to make such  adjustments  in the number of shares
which may be acquired upon exercise of the Rights,  and such  adjustments in the
Purchase Price, in addition to those adjustments expressly required by the other
subsections  of this Section 11, as and to the extent that the  Company,  in its
sole discretion,  shall determine to be advisable, in order that (x) the holders
of the Rights shall be treated  equitably and in accordance with the purpose and
intent of this Agreement,  AND (y) to the extent reasonably possible, such event
shall not, in the opinion of counsel for the Company, result in the stockholders
of the Company being subject to any United States  federal  income tax liability
by such  adjustments.  The events  which  would  enable the Company to make such
further   adjustments  include  (i)  any   reclassification,   consolidation  or
subdivision of the Common Stock; (ii) any reorganization or partial  liquidation
of the Company or similar transaction; (iii) any issuance wholly for cash of any
Common Stock at less than the current market price; (iv) any issuance wholly for
cash of Common Stock or securities  which by their terms are convertible into or
exchangeable for Common Stock; (v) any stock dividends;  OR (vi) any issuance of
rights, options or warrants to holders of Common Stock.

                  SECTION 12. CERTIFICATION OF ADJUSTED PURCHASE PRICE OR NUMBER
OF SHARES.  If an  adjustment  is made under Section 11 or 13, the Company shall
(i) promptly prepare a certificate  setting forth such  adjustment,  and a brief
statement of the facts accounting for such  adjustment;  (ii) promptly file with
the Rights Agent and any different transfer agent for the Common Stock a copy of
such  certificate;  AND (iii)  mail a brief  summary  to each  holder of a Right
Certificate  in  accordance  with  Section  25.  Notwithstanding  the  foregoing
sentence,  the failure of the  Company to give such notice  shall not affect the
validity of, or the force or effect of, the requirement for such adjustment.

                                       17

<PAGE>

                  SECTION  13.  CONSOLIDATION,  MERGER  OR SALE OR  TRANSFER  OF
ASSETS OR EARNING POWER (INCLUDING "FLIP-OVER PROVISION).

                  (a) If, at any time after an Acquiring Person has become such,

                           (i) the Company shall consolidate with, or merge with
and into,  any other  Person  and the  Company  shall not be the  continuing  or
surviving corporation of such consolidation or merger, OR

                           (ii) any other Person(s)  shall  consolidate or merge
with and into the  Company,  the Company  shall be the  continuing  or surviving
corporation of such merger, and in connection with such consolidation or merger,
all or part of the Common Stock shall be changed into or exchanged  for stock or
other  securities  of the  Company  or of any other  Person 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 percent of
the assets or earning  power of the  Company  and its  Subsidiaries  (taken as a
whole) to any other Person,  (other than a pro rata  distribution by the Company
of assets  (including  securities) of the Company or any of its  Subsidiaries to
all holders of the Company's Common Stock),  THEN, on and after the later of (I)
the date of the occurrence of an event described in clause (i), (ii) or (iii) of
this Section  13(a),  OR (II) the date of the  expiration  of the period  within
which the Rights may be  redeemed  pursuant  to Section 23 (as the same may have
been amended as provided in Section 26):

                                (A) proper  provision shall be made so that each
holder of a Right shall thereafter have the right to receive,  upon the exercise
thereof at the then  current  Purchase  Price,  such  number of shares of common
stock of the  Principal  Party as shall be equal to the result  obtained  by (x)
multiplying  the then current  Purchase Price by the number of Units for which a
Right is then  exercisable  and  dividing  that product by (y) 50 percent of the
current  market  price  per share of the  common  stock of the  Principal  Party
(determined  in the same manner as the current  market  price of Common Stock is
determined   under  Section  11(d))  on  the  date  of   consummation   of  such
consolidation, merger, sale or transfer;

                                (B) the  Principal  Party  shall  thereafter  be
liable for, and shall assume, by virtue of such  consolidation,  merger, sale or
transfer,  all the  obligations  and  duties  of the  Company  pursuant  to this
Agreement,  provided  that  the  Principal  Party  shall,  prior  to  the  first
occurrence  of an event  described in clause (i),  (ii) or (iii) of this Section
13(a),  have caused to be reserved out of its authorized and unissued  shares of
common stock (or its  authorized  and issued  shares of common stock held in its
treasury),  for  issuance  pursuant to this  Agreement,  the number of shares of
common  stock  that will be  sufficient  to permit the  exercise  in full of the
Rights after the occurrence of such event;

                                (C) the  term  "Company"  wherever  used in this
Agreement shall thereafter be deemed to refer to such Principal Party; AND

                                (D) the  Principal  Party shall,  in addition to
the  reservation  of shares of its common  stock as  provided  in the proviso to
clause (B) above, take such steps (including without limitation  compliance with
the Company's  other  obligations as set forth in Section 9) 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 the
shares of its common  stock  thereafter  deliverable  upon the  exercise  of the
Rights;  provided,  however, that, upon the subsequent occurrence of any merger,
consolidation,  sale  of  all or  substantially  all  assets,  recapitalization,
reclassification of shares, reorganization or other extraordinary

                                       18

<PAGE>

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

                  (b) For purposes of this  Agreement,  "Principal  Party" shall
mean

                           (i)  in the  case  of any  transaction  described  in
clause (i) or (ii) of Section  13(a),  (A) the Person  that is the issuer of the
securities  into which  shares of Common  Stock are  converted in such merger or
consolidation,  or, if there is more than one such issuer, the issuer the common
stock of which has the greatest  market value,  OR (B) if no  securities  are so
issued,  (X) the Person that is the other  party to the merger or  consolidation
and that  survives said merger or  consolidation,  or, if there is more than one
such Person,  the Person the common stock of which has the greatest market value
OR (Y) if the Person that is the other party to the merger or consolidation does
not  survive  the  merger or  consolidation,  the  Person  that does so  survive
(including the Company if it survives); and

                           (ii) in the  case  of any  transaction  described  in
clause  (iii) of Section  13(a),  the  Person  that is the party  receiving  the
greatest  portion of the assets or earning  power  transferred  pursuant to such
transaction  or  transactions,  or,  if each  Person  that  is a  party  to such
transaction or  transactions  receives the same portion of the assets or earning
power so  transferred  or if the Person  receiving  the greatest  portion of the
assets or earning power cannot be  determined,  whichever of such Persons is the
issuer of common stock having the greatest  market value of shares  outstanding;
PROVIDED, HOWEVER, that in any such case, (1) if the common stock of such Person
is not at such time and has not been  continuously  over the preceding 12- month
period  registered  under  Section 12 of the Exchange  Act, and such Person is a
direct or indirect  Subsidiary of another  corporation the common stock of which
is and has been so  registered,  "Principal  Party"  shall  refer to such  other
corporation;  (2) if the common  stock of such Person is not and has not been so
registered  and such  Person is not a direct or indirect  Subsidiary  of another
corporation the common stock of which is and has been so registered,  "Principal
Party" shall refer to the corporation which ultimately controls such Person; (3)
in case such Person is a Subsidiary,  directly or  indirectly,  of more than one
corporation,  the common stocks of all of which are and have been so registered,
"Principal Party" shall refer to whichever of such corporations is the issuer of
common stock having the greatest market value of shares held by the public;  and
(4) if the common stock of such Person is not and has not been so registered and
such Person is owned,  directly or indirectly,  by a joint venture formed by two
or more Persons that are not owned, directly or indirectly,  by the same Person,
the rules set forth in clauses (1), (2) and (3) above shall apply to each of the
chains of ownership  having an interest in such joint  venture as if such Person
were a  "Subsidiary"  of both or all of such joint  venturers  and the Principal
Party in each such chain shall bear the obligations set forth in this Section 13
in the same ratio as its direct or indirect interests in such Person bear to the
total of such interests.

                  (c) The Company shall not consummate  any such  consolidation,
merger,  sale or transfer  unless  prior  thereto the Company and the  Principal
Party shall have  executed  and  delivered  to the Rights  Agent a  supplemental
agreement  making  valid  provision  for the results  described in clause (A) of
Section  13(a)  and  confirming  that  the  Principal  Party  will  perform  its
obligations under this Section 13(a); provided, however, that in no case may the
Company consummate any such  consolidation,  merger,  sale or transfer if (I) at
the time of or immediately after such transaction there are any rights, warrants
or other  instruments  or securities  outstanding  or agreements in effect which
would substantially diminish or otherwise eliminate the benefits

                                       19

<PAGE>

intended to be afforded by the Rights OR (II) prior to,  simultaneously  with or
immediately  after  such  transaction,  the  stockholders  of the  Person  which
constitutes,  or would  constitute,  the  Principal  Party for  purposes of this
Section 13 shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates and Associates.

                  (d) The provisions of this Section 13 shall similarly apply to
successive  mergers or consolidations or sales or other transfers.  This Section
13 shall not be applicable to a transaction described in Subparagraphs (i), (ii)
or  (iii)  of  Subsection  (a) of  this  Section  if  (I)  such  transaction  is
consummated  with a Person or Persons who acquired  Common  Stock  pursuant to a
Qualified  Offer (or a wholly owned  subsidiary  of any such Person or Persons);
(II) the  price  per  share of  Common  Stock  offered  in such  transaction  or
distributable  to stockholders  upon conclusion of such  transaction is not less
than the price per share of Common  Stock paid to all  holders  of Common  Stock
whose shares were purchased pursuant to such Qualified Offer; AND (III) the form
of consideration being offered to the remaining holders of Common Stock pursuant
to such  transaction or  distributable  to stockholders  upon conclusion of such
transaction  is the  same as the form of  consideration  paid  pursuant  to such
Qualified Offer.  Upon conclusion of any transaction  described in the foregoing
sentence, all Rights shall expire.

                  SECTION 14. FRACTIONAL RIGHTS AND FRACTIONAL SHARES.

                  (a) The Company  shall not be required to issue  fractions  of
Rights or distribute Right Certificates which evidence fractional Rights. If the
Company  shall  elect  not to  issue  such  fractional  Rights,  in lieu of such
fractional  Rights,  there shall be paid to the registered  holders of the Right
Certificates  with regard to which such  Fractional  Rights  would  otherwise be
issuable, 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 average of the high
bid and low asked prices in the over-the-counter  market, as reported by NASDAQ.
If on any such date the Rights are not quoted by any such organization, the fair
value of the  Rights on such date as  determined  in good  faith by the board of
directors of the Company shall be used. Any such determination of current market
value shall be described in a statement filed with the Rights Agent.

                  (b) The Company  shall not be required to issue  fractions  of
shares upon exercise of a Right or to  distribute  certificates  which  evidence
fractional  shares. In lieu of fractional  shares,  the Company shall pay to the
registered holders of Right Certificates at the time such Right Certificates are
exercised,  cash equal to the same  fraction  of the current  market  value of a
share of Common Stock. For purposes of this Section 14, the current market value
of a share of Common Stock shall be the closing price of a share of Common Stock
for the Trading Day immediately prior to the date of such exercise.

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

                                       20

<PAGE>

                  SECTION 15. RIGHTS OF ACTION.  All rights of action in respect
of this Agreement are vested in the registered holders of the Right Certificates
(and  prior to the  Distribution  Date,  the  registered  holders  of the Common
Stock).  Any  registered  holder  of any  Right  Certificate  (or,  prior to the
Distribution  Date,  any  registered  holder of the Common  Stock),  without the
consent of the Rights  Agent or the holder of any other Right  Certificate  (or,
prior to the  Distribution  Date,  any other  registered  holder  of the  Common
Stock),  may,  on his own  behalf  and for his  own  benefit,  enforce,  and may
institute and maintain,  any suit,  action or proceeding  against the Company to
enforce,  or  otherwise  act in  respect  of, his right to  exercise  the Rights
evidenced  by such  Right  Certificate  in the  manner  provided  in such  Right
Certificate  and in  this  Agreement.  Without  limiting  the  foregoing  or any
remedies  available to the holders of Rights,  it is  specifically  acknowledged
that the  holders  of Rights  would not have an  adequate  remedy at law for any
breach of this  Agreement  and will be entitled to specific  performance  of the
obligations under, and injunctive relief against actual or threatened violations
of the obligations of any Person subject to, this Agreement.

                  SECTION 16.  AGREEMENT  OF RIGHT  HOLDERS.  Every  holder of a
Right 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 Common Stock;

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

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

                  SECTION 17. RIGHT CERTIFICATE HOLDER NOT DEEMED A STOCKHOLDER.
No holder, as such, of any Right Certificate shall be entitled to vote,  receive
dividends  or be deemed for any purpose the holder of Common  Stock or any other
securities  of the Company  which may at any time be issuable on the exercise of
the Rights represented  thereby.  No provision of this Agreement or of any Right
Certificate  shall  be  construed  to  confer  upon  the  holder  of  any  Right
Certificate,  as such,  any of the rights of a stockholder of the Company or any
right to vote for the  election of  directors  or upon any matter  submitted  to
stockholders  at any  meeting  thereof,  or to give or  withhold  consent to any
corporate  action,  or to receive notice of meetings or other actions  affecting
stockholders  (except as provided in Section  24),  or to receive  dividends  or
subscription  rights,  or  otherwise,  until the Rights  evidenced by such Right
Certificate have been exercised.

                  SECTION 18. CONCERNING THE RIGHTS AGENT.

                  (a) The Company  agrees to pay to the Rights Agent  reasonable
compensation  for all services  rendered by it hereunder and, from time to time,
on demand of the Rights  Agent,  its  reasonable  expenses  and counsel fees and
other  disbursements  incurred  in the  administration  and  execution  of  this
Agreement and the exercise and performance of its duties hereunder.  The Company
also agrees to indemnify

                                       21

<PAGE>

the Rights  Agent for,  and hold it  harmless  against any loss,  liability,  or
expense incurred,  without  negligence,  bad faith or willful  misconduct on the
part of the Rights  Agent,  for anything  done or omitted by the Rights Agent in
connection with the acceptance and  administration of this Agreement,  including
the costs and expenses of defending against any claim of liability.

                  (b) The Rights  Agent  shall be  protected  and shall incur no
liability  for or in respect of any action  taken,  suffered or omitted by it in
connection with its  administration of this Agreement in reliance upon any Right
Certificate  or  certificate  for Common  Stock or for other  securities  of the
Company,  instrument of assignment or transfer, power of attorney,  endorsement,
affidavit, letter, notice, direction, consent, certificate,  statement, or other
paper or document believed by it, acting with reasonable care, 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.

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

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

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

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

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

                                       22

<PAGE>

the Chairman of the Board, the President,  any Vice President,  or the Secretary
of the Company and delivered to the Rights Agent, and such certificate  shall be
full  authorization to the Rights Agent for any action taken or suffered in good
faith by it under  the  provisions  of this  Agreement  in  reliance  upon  such
certificate.

                  (c) The Rights  Agent shall be liable  hereunder  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 Agreement or in the
Right  Certificates  (except  its  countersignature  thereof)  or be required to
verify the same, but all such statements and recitals are and shall be deemed to
have been made by the Company only.

                  (e) The Rights Agent shall not be under any  responsibility in
respect of the validity of this  Agreement or the execution and delivery  hereof
(except  the due  execution  hereof by the  Rights  Agent) or in  respect of the
validity or  execution  of any Right  Certificate  (except its  countersignature
thereof),  nor shall it be  responsible  for any  breach by the  Company  of any
covenant or condition  contained in this Agreement or in any Right  Certificate,
nor shall it be responsible for any adjustment  required under the provisions of
Section 11 or 13 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 shares of stock to be issued  pursuant to
this  Agreement  or any Right  Certificate  or as to whether any shares of stock
will,  when  issued,   be  validly   authorized  and  issued,   fully  paid  and
nonassessable.

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

                  (g) The Rights  Agent is hereby  authorized  and  directed  to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President or the Secretary of the Company, and to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer.

                  (h) Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.

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

                  (j) If, with respect to any Right  Certificate  surrendered to
the Rights Agent for exercise or transfer,  the certificate attached to the form
of  assignment  or form of election to purchase,  as the case may be, has either
not been  completed or indicates  an  affirmative  response to clause 1 and/or 2
thereof, the Rights

                                       23

<PAGE>

Agent shall not take any further action with respect to such requested  exercise
or transfer without first obtaining the Company's approval.

                  SECTION 21. CHANGE OF RIGHTS AGENT. Unless the Company and the
Rights Agent agree to a shorter time period,  the Rights Agent or any  successor
Rights Agent may resign and be discharged  from its duties under this  Agreement
upon 15 days' notice in writing  mailed to the Company (and,  if  different,  to
each transfer agent of Common Stock) by registered or certified mail, and to the
holders of the Right  Certificates by first-class  mail.  Unless the Company and
the Rights  Agent  agree to a shorter  time  period,  the Company may remove the
Rights  Agent or any  successor  Rights  Agent upon 15 days'  notice in writing,
mailed to the Rights Agent or successor Rights Agent, as the case may be, and to
each transfer agent of Common Stock by registered or certified  mail, and to the
holders of the Right Certificates by first-class mail. If the Rights Agent shall
resign or be removed or shall otherwise become incapable of acting,  the Company
shall appoint a successor to the Rights Agent. If the Company shall fail to make
such  appointment  within a period of 15 days after such removal or after it has
been notified in writing of such  resignation  or incapacity by the resigning or
incapacitated  Rights Agent or by the holder of a Right  Certificate (who shall,
with such notice,  submit his Right  Certificate for inspection by the Company),
then the registered  holder of any Right  Certificate  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
having a stock  transfer  office in the State of  Colorado  which is  subject to
supervision  or  examination  by  federal  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 if  different,  each  transfer  agent of  Common  Stock)  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
therein, shall not affect the legality or validity of the resignation or removal
of the Rights Agent or the  appointment  of the successor  Rights Agent,  as the
case may be.

                  SECTION   22.    ISSUANCE    OF   NEW   RIGHT    CERTIFICATES.
Notwithstanding  any of the provisions of this Agreement or of the Rights to the
contrary,  the  Company  may,  at  its  option,  issue  new  Right  Certificates
evidencing  Rights in such form as may be approved by its board of  directors to
reflect any adjustment or change in the Expiration  Date, the Purchase Price per
share or the number or kind or class of shares of stock or other  securities  or
property  purchasable  under the Right  Certificates made in accordance with the
provisions of this Agreement.

                  SECTION 23. REDEMPTION.

                  (a) At its complete option and as provided below, the board of
directors of the Company may, if the triggering  events set forth in Sections 11
and 13 should  occur,  and  notwithstanding  the  operative  provisions of those
Sections,  instead  elect  to  redeem  all but not  less  than  all of the  then
outstanding  Rights  at a  redemption  price  of $.01 per  Right,  appropriately
adjusted to reflect any stock split, stock dividend, reclassification or similar
transaction  occurring after the date hereof,  at any time up to (but not after)
the Close of Business  on a Stock  Acquisition  Date.  PROVIDED,  HOWEVER,  that
redemption  of the  Rights  only may be made in  conjunction  with the  board of
directors'  determination  that a tender or exchange offer is a Qualified Offer,
and provided further that in its discretion,  the board of directors may provide
that the Rights

                                       24

<PAGE>

shall be reinstated and the redemption  price refunded if the Qualified Offer is
materially  and  adversely  changed  to the  detriment  of the  Company  and its
shareholders,  as  determined  by the  board  of  directors  in  its  reasonable
discretion.

                  (b)  Immediately  upon the  action of the  board of  directors
electing to redeem the  Rights,  the  Company  shall make a public  announcement
thereof,  and from and after the date of such announcement,  without any further
action and  without any further  notice,  the right to exercise  the Rights will
terminate  and the only right  thereafter  of the holders of Rights  shall be to
receive the Redemption  Price. As soon as practicable after the determination of
the board of  directors to redeem the Rights,  the Company  shall give notice of
such  redemption to 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.  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.

                  SECTION 24. NOTICE OF PROPOSED  ACTIONS.  In case the Company,
after the Rights  become  exercisable,  shall  propose  (I) to pay any  dividend
payable in stock of any class to the holders of its Common  Stock or the Subject
Shares or to make any other  distribution  to the holders of its Common Stock or
Subject Shares (other than a regular  periodic cash dividend),  OR (II) to offer
to the  holders of its Common  Stock or Subject  Shares  rights or  warrants  to
subscribe for or to purchase any additional  shares of Common Stock or shares of
stock of any  class or any other  securities,  rights  or  options,  OR (III) to
effect any  reclassification of its Common Stock or Subject Shares (other than a
reclassification  involving only the subdivision of outstanding shares of Common
Stock) or any  recapitalization  or  reorganization  of the Company,  OR (IV) 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 percent of the
assets or earning power of the Company and its  Subsidiaries  (taken as a whole)
to, any other Person,  OR (V) to effect the liquidation,  dissolution or winding
up of the  Company,  THEN,  in each such case,  the  Company  shall give to each
holder of a Right, in accordance  with Section 25, a notice.  The notice of such
proposed  action  shall  specify  the  record  date or the  date on  which  such
reclassification, recapitalization, reorganization, consolidation, merger, sale,
transfer,  liquidation,  dissolution or winding up is to take place and the date
of  participation  therein by the holders of Common Stock and/or Subject Shares,
if any such date is to be fixed. The notice shall be given in case of any action
covered by clause  (i) or (ii)  above at least 20 days prior to the record  date
for  determining  holders of the Common Stock and/or Subject Shares for purposes
of such action;  in the case of any other action,  at least 20 days prior to the
date of the taking of such proposed action or the date of participation  therein
by the holders of Common Stock and/or  Subject  Shares,  whichever  shall be the
earlier.  The failure to give notice  required by this  Section 24 or any defect
thereon  shall not affect the  legality or  validity of the action  taken by the
Company or the vote upon any such action.

                  SECTION 25. NOTICES IN GENERAL.  Notices or demands authorized
by this  Agreement  to be given or made by the Rights  Agent or by the holder of
any Right  Certificate  to or on the Company  shall be given if sent by courier,
facsimile, or first-class mail, postage prepaid, addressed to:

                  U.S. Energy Corp.
                  877 N. 8th W.
                  Riverton, Wyoming 82501
                  Fax 307.857.3050

                                       25

<PAGE>

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

                  Computershare Trust Company, Inc.
                  12039 West Alameda Parkway, Suite Z 2
                  Lakewood, Colorado [Fax 303.986.2444]

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

                  SECTION  26.   SUPPLEMENTS  AND   AMENDMENTS.   Prior  to  the
Distribution Date and subject to the penultimate  sentence of this Section,  the
Company and the Rights Agent  shall,  if the Company so directs,  supplement  or
amend any  provision  of this  Agreement  without the approval of any holders of
certificates   representing   shares  of  Common  Stock.   From  and  after  the
Distribution Date and subject to the penultimate  sentence of this Section,  the
Company and the Rights Agent  shall,  if the Company so directs,  supplement  or
amend this Agreement  without the approval of any holders of Right  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,  or (IV) to
change or supplement the  provisions  hereof in any manner which the Company may
deem  necessary or desirable and which shall not adversely  affect the interests
of the holders of Right Certificates;  PROVIDED, HOWEVER, this Agreement may not
be  supplemented  or amended to lengthen (A) a time period  relating to when the
Rights may be  redeemed at such time as the Rights are not then  redeemable,  OR
(B) any other  time  period,  unless  such  lengthening  is for the  purpose  of
protecting,  enhancing or clarifying  the rights of, and/or the benefits to, the
holders  of Rights.  Upon the  delivery  of a  certificate  from an  appropriate
officer of the Company which states that the proposed supplement or amendment is
in  compliance  with the terms of this  Section,  the Rights Agent shall execute
such  supplement  or  amendment.  Notwithstanding  anything  contained  in  this
Agreement to the contrary:  (1) no  supplement or amendment  shall be made which
changes the  Redemption  Price,  the  Purchase  Price or the number of shares or
Units for which a Right is  exercisable;  and (2) the duration of the Rights may
not be shortened  without the written consent of the registered  holders thereof
(other than by a redemption of the Rights).  Prior to the Distribution Date, the
interests of the holders of Rights shall be deemed coincident with the interests
of the holders of Common Stock.

                  SECTION  27.  EXCHANGE  OF RIGHTS FOR  SHARES OF COMMON  STOCK
WITHOUT CASH PAYMENT.

                  (a) The board of  directors of the Company may, at its option,
at any time after any Person becomes an Acquiring  Person,  exchange all or part
of the then  outstanding and exercisable  Rights (which shall not include Rights
that have become  subject to Section 7(f)) for Common Stock at an exchange ratio
of one share of Common  Stock per Right,  appropriately  adjusted to reflect any
stock split,  stock  dividend or similar  transaction  occurring  after the date
hereof  (such  exchange  ratio being  hereinafter  referred to as the  "Exchange
Ratio").

                  (b)  Immediately  upon the action of the board of directors of
the Company  ordering the exchange of any Rights  pursuant to subsection  (a) of
this Section 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

                                       26

<PAGE>

Rights  shall be to receive  that number of shares of Common  Stock equal to the
number of such Rights held by such holder  multiplied by the Exchange Ratio. The
Company  shall  promptly  give  public  notice of any such  exchange;  provided,
however,  that the  failure to give,  or any defect in,  such  notice  shall not
affect the validity of such exchange.  The Company  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  notice of  exchange  will state the
method by which the  exchange  of the Common  Stock for Rights  will be effected
and, in the event of any partial  exchange,  the number of Rights  which will be
exchanged.  Any partial  exchange shall be effected pro rata based on the number
of Rights  (other than Rights  which have become  subject to the  provisions  of
Section 7(f)) held by each holder of Rights.

                  (c) If there is not enough  authorized  Common Stock to permit
an exchange of Rights as  contemplated  in  accordance  with this  Section,  the
Company  shall take all such action as may be necessary to authorize  additional
Common Stock or Equivalent Stock for issuance upon exchange of the Rights.

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

                  SECTION 29.  DETERMINATION  AND ACTIONS  TAKEN BY THE BOARD OF
DIRECTORS.  For all purposes of this Agreement, any calculation of the number of
shares of Common Stock (or other applicable securities hereunder) outstanding at
any  particular  time,  including  for purposes of  determining  the  particular
percentage of such outstanding  shares of Common Stock (or other  securities) of
which any Person is the Beneficial  Owner,  shall be made in accordance with the
last  sentence  of  rule  13d-  3(d)(1)(i)  (as in  effect  on the  date of this
Agreement)  of the General  Rules and  Regulations  under the Exchange  Act. The
board of directors of the Company shall have the  exclusive  power and authority
to administer this Agreement and to exercise all rights and powers  specifically
granted to such board or to the Company,  or as may be necessary or advisable in
the administration of this Agreement, including without limitation the right and
power to (I)  interpret  the  provisions  of this  Agreement,  AND (II) make all
Determinations  deemed  necessary or advisable  for the  administration  of this
Agreement  (including a  determination  to redeem or not redeem the Rights or to
amend  the  Agreement).  All such  actions,  calculations,  interpretations  and
Determinations  (including, for purposes of clause (B) below, all omissions with
respect  to the  foregoing)  which are done or made by the Board in good  faith,
shall (A) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other  parties,  AND (B) not  subject the board to
any liability to the holders of the Rights.

                  SECTION  30.  BENEFITS  OF  THIS  AGREEMENT.  Nothing  in this
Agreement  shall be construed to give to any Person other than the Company,  the
Rights Agent and the registered holders of the Right Certificates (and, prior to
the  Distribution  Date,  the  holders of Common  Stock) any legal or  equitable
right,  remedy or claim under this  Agreement.  This Agreement  shall be for the
sole and exclusive  benefit of the Company,  the Rights Agent and the registered
holders of the Right  Certificates  (and,  prior to the  Distribution  Date, the
holders of Common Stock).

                  SECTION 31. GOVERNING LAW; CHOICE OF VENUE. This Agreement and
each Right  Certificate  issued  hereunder shall be deemed to be a contract made
under the laws of the State of Wyoming and for all purposes shall be governed by
and construed in accordance with the laws of such State  applicable to contracts
to be made and performed  entirely within such State. The rights and obligations
of the Rights Agent under this  Agreement  shall be governed by and construed in
accordance with the laws in effect

                                       27

<PAGE>

in the State of Colorado. The parties to this Agreement,  and all of the holders
of record of the Rights,  irrevocably  agree and  acknowledge  that all disputes
involving  the  subject  matter  of this  Agreement  are to be  resolved  in the
District Courts, Fremont County, Wyoming.

         Notwithstanding  any provision of this  Agreement,  in the event of any
conflict  between any  provision  of this  Agreement,  on the one hand,  and the
express  provisions of the Wyoming  Management  Stability Act (the "WMSA," secs.
17-18-101 et seq., as now in effect and hereafter  amended),  on the other hand,
then  the  express  provisions  of the WMSA  shall  control,  and the  necessary
provisions of this Agreement  shall be deemed modified and changed to the extent
necessary so that this  Agreement  shall not conflict with the WMSA, and all the
other provisions of this Agreement shall remain intact and unchanged.

                  SECTION 32.  COUNTERPARTS.  This  Agreement may be executed in
any number of counterparts and each of such counterparts  shall for all purposes
be deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.

                  SECTION  33.  SECTION  HEADINGS.  Descriptive  headings of the
Sections of this  Agreement  are  inserted  only for  convenience  and shall not
control or affect its meaning or construction.

                  SECTION 34. SEVERABILITY.  If any term, provision, covenant or
restriction  of this Agreement is held by a court of competent  jurisdiction  or
other  authority to be invalid,  illegal,  or  unenforceable,  (I) such invalid,
illegal  or  unenforceable  term,  provision,   covenant  or  restriction  shall
nevertheless be valid,  legal and enforceable to the extent, if any, provided by
such  court or  authority,  AND (II) the  remainder  of the  terms,  provisions,
covenants  and  restrictions  of this  Agreement  shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.

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

                  U.S. ENERGY CORP.

                  -------------------------------
                  By: Keith G. Larsen, President

                  COMPUTERSHARE TRUST COMPANY, INC.

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

                  Title:

                                       28

<PAGE>

                                    EXHIBIT A

                           [Form of Right Certificate]

Certificate No. R-                  Rights
                  ------------------

         THESE  RIGHTS  ARE  NOT  EXERCISABLE   AFTER  PUBLIC   ANNOUNCEMENT  OF
REDEMPTION IS MADE. THE RIGHTS ARE SUBJECT TO  REDEMPTION,  AT THE OPTION OF THE
COMPANY,  AT $.01 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS  AGREEMENT.  IF
THE  RIGHTS  REPRESENTED  BY THIS  CERTIFICATE  ARE ISSUED TO A PERSON WHO IS AN
ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE THEREOF (AS SUCH TERMS ARE DEFINED
IN THE RIGHTS AGREEMENT) OR CERTAIN TRANSFEREES THEREOF,  THIS RIGHT CERTIFICATE
AND THE RIGHTS REPRESENTED  HEREBY MAY BE SUBJECT TO CERTAIN  LIMITATIONS IN THE
CIRCUMSTANCES SPECIFIED IN SECTION 7 OF THE RIGHTS AGREEMENT.

                                RIGHT CERTIFICATE

         This certifies that or registered  assigns,  is the registered owner of
the number of Rights set forth above,  each of which entitles the owner thereof,
subject to the terms,  provisions and conditions of the Rights Agreement,  dated
as of September 19, 2001 (the "Rights  Agreement")  between U.S.  Energy Corp. a
Wyoming corporation (the "Company"),  and Computershare Trust Company, Inc. (the
"Rights  Agent"),  to  purchase  from the  Company,  unless the Rights have been
previously  redeemed,  at any time after the  Distribution  Date (defined in the
Rights  Agreement)  and prior to the  Expiration  Date  (defined  in the  Rights
Agreement),  or the  date,  if  any,  on  which  the  Rights  evidenced  by this
Certificate  may be redeemed,  at the stock transfer office of the Rights Agent,
or its successors as Rights Agent,  ONE ONE-  THOUSANDTH  (1/1,000TH) OF ONE (1)
FULLY PAID AND  NONASSESSABLE  SHARE OF SERIES P PREFERRED  STOCK, AT A PURCHASE
PRICE OF $200.00 (THE "PURCHASE PRICE"), upon presentation and surrender of this
Right  Certificate  with the Form of  Election to Purchase  duly  completed  and
executed.  The number of Rights evidenced by this Right Certificate as set forth
above (and the number of shares which may be purchased  upon exercise  thereof),
and the Purchase Price set forth above,  are the number and Purchase Price as of
the date of the  Rights  Agreement  based on the  shares of Common  Stock of the
Company as constituted at such date.

         Upon the  occurrence  of an event  described in clause (A), (B), (C) or
(D) of Section 11(a)(ii) of the Rights Agreement,  the holder of any Rights that
are, or were,  beneficially  owned by an  Acquiring  Person or an  Associate  or
Affiliate thereof (as such terms are defined in the Rights Agreement) or certain
transferees  thereof  which  engaged in, or realized the benefit of, an event or
transaction  or  transactions  described in clause (A),  (B), (C) or (D) of such
Section  11(a)(ii),  shall not be  entitled  to the  benefit  of the  adjustment
described in such Section 11(a)(ii).

         As provided in the Rights Agreement,  the Purchase Price and the number
and class of 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.

         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.  Reference is
made to the Rights Agreement 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

                                       29

<PAGE>

Certificates,  which  limitations of rights include the temporary  suspension of
the exercisability of such Rights under specific  circumstances set forth in the
Rights  Agreement.  Copies of the Rights  Agreement are on file at the office of
the Rights Agent and at the principal office of the Company.

         This Right Certificate, with or without other Right Certificates,  upon
surrender at the stock transfer office of the Rights Agent set forth above,  may
be exchanged for another Right  Certificate or Right  Certificates of like tenor
and date  evidencing  Rights  entitling  the holder to  purchase  such number of
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  Rights  Agreement,   the  Rights  evidenced  by  this
Certificate  may be redeemed by the Company at its option at a redemption  price
of $.01 per Right.

         No  fractional  shares will be issued  upon the  exercise of any Rights
evidenced hereby, but in lieu thereof a cash payment may be made, as provided in
the Rights Agreement.

         No  holder  of this  Right  Certificate  shall be  entitled  to vote or
receive  dividends  or be deemed for any  purpose the holder of shares or of any
other  securities  of the  Company  which  may at any  time be  issuable  on the
exercise hereof.  Nothing in this Right Certificate and nothing contained in the
Rights  Agreement shall be construed to confer upon the holder hereof,  as such,
any of the rights of a  stockholder  of the Company or any right to vote for the
election  of  directors  or upon any matter  submitted  to  stockholders  at any
meeting thereof,  or to give or withhold consent to any corporate  action, or to
receive notice of meetings or other actions  affecting  stockholders  (except as
provided  in the Rights  Agreement),  or to receive  dividends  or  subscription
rights,  or  otherwise,  until  the  Right or  Rights  evidenced  by this  Right
Certificate shall have been exercised as provided in the Rights Agreement.

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

         WITNESS the facsimile signatures of the proper officers of the Company.

Dated as of September 19, 2001

Attest:

                                            By
---------------------------------------         --------------------------------
           Secretary                            Keith G. Larsen, President

           Countersigned:

By:
    -----------------------------------
           Authorized Signature

                                       30

<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 Certificate.)

         FOR VALUE RECEIVED                                       hereby sells,
                            -------------------------------------
assigns and transfers unto
                          ------------------------------------------------------
                              (Please print name and address of transferee)

this Right Certificate, 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 Corporation,  with full power of substitution.

Dated:
       -----------------------          ----------------------------------------
                                        Signature

Signature Guaranteed:

                                   CERTIFICATE

         The  undersigned  hereby  certifies  (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:

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

                  (2) the  undersigned  [ ] did [ ] did not  acquire  the Rights
evidenced by this Right  Certificate from any Person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Dated:
       ---------------     -----------------------------------------------------
                           Signature

Dated:
       ---------------     -----------------------------------------------------
                           Signature

Dated:
       ---------------     -----------------------------------------------------
                           Signature

Signature Guaranteed:

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

                                       31

<PAGE>

                          FORM OF ELECTION TO PURCHASE

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

To the Company and the Rights Agent:

         The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Right  Certificate  and to purchase the 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 be registered in the name of and delivered to:

Please insert social security or other identifying number:
                                                           ---------------------

--------------------------------------------------------------------------------
                         (Please print name and address)

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

Dated:
       ----------------    -----------------------------------------------------
                           Signature

                           (Signature must conform in all respects to name of
                           holder as specified on the face of this Right
                           Certificate)

Signature Guaranteed:

                                       32

<PAGE>

                                   CERTIFICATE

         The  undersigned  hereby  certifies  (after due inquiry and to the best
knowledge of the undersigned) by checking the appropriate boxes that:

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

                  (2) the  undersigned  [ ] did [ ] did not  acquire  the Rights
evidenced by this Right  Certificate from any person who is, was or subsequently
became an Acquiring Person or an Affiliate or Associate of an Acquiring Person.

Dated:
       ---------------     -----------------------------------------------------
                           Signature

Signature Guaranteed:

                                     NOTICE

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

                                       33

<PAGE>

                                    EXHIBIT B

                                SUMMARY OF RIGHTS

         This summary is qualified  by reference to the detailed  provisions  of
the Rights  Agreement,  a copy of which is filed herewith.  A copy of the Rights
Agreement is available free of charge from the Company.

         As of September 19, 2001,  the board of directors of U.S.  Energy Corp.
(the "COMPANY")  declared a distribution  of one Right for each  outstanding one
share of common stock (the "COMMON SHARES") of the Company.  The distribution is
to be  made  as of  September  19,  2001  (the  "RIGHTS  RECORD  DATE")  to  the
stockholders  of record on that date.  All Common Shares issued after the Rights
Record Date also will carry one Right for each share. The Rights are designed to
discourage unfair takeovers of the Company,  by encouraging a potential acquiror
of the  Company to  negotiate  with the board of  directors a fair price for the
Company.  The Rights defined as part of the Rights Agreement between the Company
and Computershare Trust Company, Inc. as the Rights Agent.  Arrangements adopted
by United  States  corporations  which are similar to the Rights  Agreement  are
often called "poison  pills." As summarized  below, if a Qualified Offer is made
to acquire  all the stock of the  Company,  the Rights  would be redeemed by the
board of directors, thus causing the poison pill to disappear.

         Each Right entitles the registered holder to purchase from the Company,
initially, one one-thousandth (1/1,000th) of one (1) share of Series P Preferred
Stock ("PREFERRED SHARES") at a price of $200.00 (the "PURCHASE PRICE") for each
1/1,000th  of 1 share,  subject  to  adjustment.  Fractional  shares  may not be
issued,  at the  discretion of the Company,  in which event  fractions  would be
cashed out. The terms and  conditions  of the Rights are set forth in the Rights
Agreement between the Company and the Rights Agent.

         A  Preferred  Share  purchasable  upon  exercise  of the Rights will be
entitled to dividends equal to 1,000 times the dividends, per share, declared on
the  Common  Shares.  In the event of  liquidation,  a  Preferred  Share will be
entitled to a minimum preferential  liquidating distribution of $1,000 per share
and an aggregate liquidating  distribution,  per share, equal to 1,000 times the
distribution made per Common Share. The Preferred Shares will vote together with
the  Common  Shares  and in the  event  of any  merger,  consolidation  or other
transaction in which Common Shares are exchanged,  each Preferred  Share will be
entitled to receive 1,000 times the amount received per Common Share.

         Because of the Preferred Shares' dividend and liquidation  rights,  the
value  when  issued of the  1/1,000th  of a  Preferred  Share  purchasable  upon
exercise  of each  Right  should  approximate  the  underlying  value  (but  not
necessarily the market value) of one Common Share.

         Until the earlier to occur of (i) 10 business  days  following a public
announcement  that a person or group of  affiliated  or  associated  persons (an
"ACQUIRING  PERSON")  has  acquired  beneficial  ownership of 15% or more of the
Company's  general  voting  power other than  pursuant to a Qualified  Offer (as
defined  below),  the date of such public  announcement  being called the "STOCK
ACQUISITION  DATE,"  or (ii) 10  business  days  (or such  later  date as may be
determined by action of the board of directors)  following the  commencement of,
or  announcement  of an intention to make, a tender offer or exchange  offer the
consummation  of which would result in the  beneficial  ownership by a person or
group of 15% or more of the  Company's  general  voting  power (the date of such
earlier  occurrence being called the  "DISTRIBUTION  DATE"),  the Rights will be
evidenced  by the  certificates  representing  the  Common  Shares  and  will be
transferred with and only with the Common Shares.  New Common Share certificates
issued  after the Rights  Record Date upon  transfer  or new  issuance of Common
Shares will contain a notation  incorporating the Rights Agreement by reference,
and the surrender

                                       34

<PAGE>

for transfer of any certificate for Common Shares, even without such notation or
a copy of this Summary of Rights being attached  thereto,  will also  constitute
the transfer of the Rights associated with the Common Shares represented by such
certificate.

         If there ever is a Distribution Date, then immediately the Company will
mail to holders of record of the Common  Shares (as of the close of  business on
the  Distribution  Date)  separate  certificates  evidencing  the Rights ("RIGHT
CERTIFICATES"),  and such separate  Right  Certificates  alone will evidence the
Rights.

         The Rights are not exercisable until the Distribution  Date. The Rights
will  expire on the tenth  anniversary  of the Rights  Record  Date (the  "FINAL
EXPIRATION  DATE"),  unless the Final  Expiration Date is extended or unless the
Rights are earlier redeemed or exchanged by the Company, as described below.

         The Purchase Price payable, the number of shares or other securities or
property  issuable  upon exercise of the Rights,  and the number of  outstanding
Rights, are subject to adjustment from time to time to prevent dilution.

         A  QUALIFIED  OFFER  is a  tender  offer  or  exchange  offer  for  all
outstanding  Common Shares which is  determined by the directors not  affiliated
with an Acquiring  Person to be fair to and  otherwise in the best  interests of
the Company and its shareholders.

         If any person  becomes  an  Acquiring  Person  other than by a purchase
pursuant  to a  Qualified  Offer,  proper  provision  shall be made so that each
holder of a Right, other than Rights  beneficially owned by the Acquiring Person
(which will not be entitled to the benefit of such  adjustment)  will thereafter
have the right to receive upon  exercise  that number of Common Shares or Common
Share  equivalents  having a market value of two times the exercise price of the
Right (i.e.,  Common Shares will be issued at one-half or 50% of market value at
the time).

         If, at any time after an Acquiring  Person has become such, the Company
is acquired in a merger or other business combination  transaction (other than a
merger which follows a Qualified  Offer at the same or a higher price) or 50% or
more of its consolidated assets or earning power are sold, proper provision will
be made so that  each  holder  of a Right  will  thereafter  have  the  right to
receive,  upon the exercise  thereof at the then current  exercise  price of the
Right,  that number of shares of common stock of the acquiring  company which at
the time of such  transaction will have a market value of two times the exercise
price of the Right.

         At any time after an  Acquiring  Person has become  such,  the board of
directors  of the Company may  exchange  the Rights  (other than Rights owned by
such person or group),  in whole or in part, at an exchange  ratio of one Common
Share per one Right  (subject  to  adjustment),  termed  an  "EXCHANGE."  Unlike
exercise of a Right with cash (see the  preceding  paragraph),  such an Exchange
would not require  payment of cash or other  consideration  by the holder of the
Right.

         At any time up to close of business on a Stock  Acquisition  Date,  the
board of  directors  of the Company  may redeem the Rights in whole,  but not in
part, at a price of $.01 per Right (the  "REDEMPTION  PRICE").  Immediately upon
any redemption of the Rights,  the right to exercise them will terminate and the
only right of the holders will be to receive the Redemption Price. However, such
redemption  only  can be  made in  conjunction  with  the  board  of  directors'
determination that there is a Qualified Offer.

         The  terms of the  Rights  may be  amended  by the  board of  directors
without  the  consent  of the  holders  of the  Rights at any time  prior to the
Distribution Date. Thereafter the Rights may be amended to make

                                       35

<PAGE>

changes  which do not  adversely  affect  the  interests  of the  holders of the
Rights,  or  which  shorten  or  lengthen  time  periods,   subject  to  certain
limitations set forth in the Rights Agreement.

         Holders of Rights will have no rights as  stockholders  of the Company,
until Preferred  Shares or Common Shares are acquired on exercise or exchange of
the Rights.

         A copy of the Rights  Agreement has been filed with the  Securities and
Exchange Commission as an Exhibit to a registration statement on Form 8-A.

                                       36

<PAGE>

                                    EXHIBIT C

                      ARTICLES OF AMENDMENT TO THE RESTATED
                 ARTICLES OF INCORPORATION OF U.S. ENERGY CORP.
                      TO ESTABLISH SERIES P PREFERRED STOCK

         By  authority  of  Article  IV of the  existing  Restated  Articles  of
Incorporation of U.S. Energy Corp. (the "Corporation"), and section 17-16-602(a)
of the Wyoming Business  Corporation Act (the "WBCA"), the board of directors of
the Corporation has established a new series of shares of the Preferred Stock.

         These  Articles of  Amendment  are filed with the Wyoming  Secretary of
State by the Corporaiton under section 17-16-1006 of the WBCA.

         A.       The name of the Corporation is U.S. Energy Corp.

         B.       The text of the amendment is:

         "There is  established  the  series P  Preferred  Stock.  The number of
shares in the series,  its  designation  thereof,  and the rights,  preferences,
privileges  and  restrictions  of the shares of such  series,  all are fixed and
established as follow:

                  I.       DESIGNATION AND AMOUNT

                  The series is designated  the "Series P Preferred  Stock." The
number of shares  constituting  the Series P Preferred  Stock is fifty  thousand
(50,000).  Such number of shares may be increased or decreased by  resolution of
the board of  directors,  but no decrease  shall  reduce the number of shares of
Series P  Preferred  Stock to a number  less  than the  number  of  shares  then
outstanding plus the number of shares reserved for issuance upon the exercise of
outstanding  options,   rights  or  warrants  or  upon  the  conversion  of  any
outstanding  securities  issued by the  Corporation  convertible  into  Series P
Preferred Stock.

                  II.      DIVIDENDS AND DISTRIBUTIONS

                  (A)  Subject to the rights of the holders of any shares of any
series of Preferred  Stock (or any similar  stock) ranking prior and superior to
the Series P Preferred Stock with respect to dividends, the holders of shares of
Series P Preferred  Stock,  in  preference to the holders of Common Stock of the
Corporation, shall be entitled to receive, when, as and if declared by the board
of directors out of funds legally available for the purpose, quarterly dividends
payable in cash on the first day of March, June,  September and December in each
year (a "Quarterly  Dividend  Payment  Date"),  starting on the first  Quarterly
Dividend  Payment Date after the first issuance of a share of Series P Preferred
Stock, in an amount per share (rounded to the nearest cent) equal to the greater
of (a) $1.00 or (b) subject to the  provision  for  adjustment  hereinafter  set
forth,  1,000 times the  aggregate per share amount of all cash  dividends,  and
1,000 times the  aggregate  per share  amount  (payable in kind) of all non-cash
dividends  or other  distributions,  other than a dividend  payable in shares of
Common  Stock or a  subdivision  of the  outstanding  shares of Common Stock (by
reclassification  or  otherwise),   declared  on  the  Common  Stock  since  the
immediately  preceding  Quarterly  Dividend Payment Date or, with respect to the
first Quarterly  Dividend Payment Date, since the first issuance of any share of
Series P Preferred  Stock. If the  Corporation  shall at any time declare or pay
any dividend on the Common

                                       37

<PAGE>

Stock payable in shares of Common Stock,  or effect a subdivision or combination
or consolidation of the outstanding shares of Common Stock (by  reclassification
or  otherwise  than by payment of a dividend  in shares of Common  Stock) into a
greater or lesser number of shares of Common  Stock,  then in each such case the
amount to which  holders of shares of Series P  Preferred  Stock  were  entitled
immediately prior to such event under clause (b) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction,  the numerator of which is
the number of shares of Common Stock  outstanding  immediately  after such event
and the  denominator  of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

                  (B) The  Corporation  shall declare a dividend or distribution
on the Series P Preferred  Stock as provided in  paragraph  (A) of this  Section
immediately  after it declares a dividend or  distribution  on the Common  Stock
(other than a dividend payable in shares of Common Stock);  PROVIDED that, if no
dividend or distribution shall have been declared on the Common Stock during the
period  between any  Quarterly  Dividend  Payment  Date and the next  subsequent
Quarterly  Dividend  Payment Date, a dividend of $1.00 per share on the Series P
Preferred  Stock  shall  nevertheless  be payable on such  subsequent  Quarterly
Dividend Payment Date.

                  (C)  Dividends  shall  begin to accrue  and be  cumulative  on
outstanding  shares of Series P  Preferred  Stock  from the  Quarterly  Dividend
Payment Date next preceding the date of issue of such shares, unless the date of
issue of such  shares  is  prior to the  record  date  for the  first  Quarterly
Dividend  Payment  Date,  in which case  dividends on such shares shall begin to
accrue from the date of issue of such  shares,  or unless the date of issue is a
Quarterly  Dividend  Payment  Date or is a date  after the  record  date for the
determination  of  holders of shares of Series P  Preferred  Stock  entitled  to
receive a quarterly dividend and before such Quarterly Dividend Payment Date, in
either of which events such  dividends  shall begin to accrue and be  cumulative
from such Quarterly  Dividend  Payment Date.  Accrued but unpaid dividends shall
not bear interest.  Dividends paid on the shares of Series P Preferred  Stock in
an amount less than the total  amount of such  dividends at the time accrued and
payable on such shares shall be  allocated  pro rata on a  share-by-share  basis
among all such shares at the time outstanding.  The board of directors may fix a
record  date for the  determination  of holders of shares of Series P  Preferred
Stock  entitled  to  receive  payment  of a dividend  or  distribution  declared
thereon,  which  record  date  shall be not more than 60 days  prior to the date
fixed for the payment thereof.

                  III.     VOTING RIGHTS

                  The holders of shares of Series P  Preferred  Stock shall have
the following voting rights:

                  (A) Subject to the provision for  adjustment  hereinafter  set
forth,  each share of Series P Preferred  Stock shall entitle the holder thereof
to 1,000 votes on all matters  submitted  to a vote of the  stockholders  of the
Corporation.

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

                  (C) Except as set forth herein, in the Corporation's  articles
of incorporation or as otherwise  provided by law, holders of Series P Preferred
Stock shall have no voting rights.

                                       38

<PAGE>

                  IV.      CERTAIN RESTRICTIONS

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

                           (i)  declare  or pay  dividends,  or make  any  other
distributions,  on any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series P Preferred Stock;

                           (ii)  declare  or pay  dividends,  or make any  other
distributions,  on any  shares  of  stock  ranking  on a  parity  (either  as to
dividends  or upon  liquidation,  dissolution  or winding  up) with the Series P
Preferred  Stock,  except dividends paid ratably on the Series P Preferred Stock
and all such  parity  stock on which  dividends  are  payable  or in  arrears in
proportion to the total amounts to which the holders of all such shares are then
entitled;

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

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

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

                  V.       REACQUIRED SHARES

                  Any shares of Series P Stock  purchased or otherwise  acquired
by the  Corporation  in any manner  whatsoever  shall be retired  and  cancelled
promptly  after the  acquisition  thereof.  All such  shares  shall  upon  their
cancellation become authorized but unissued shares of Preferred Stock and may be
reissued as part of a new series of Preferred  Stock  subject to the  conditions
and restrictions on issuance set forth herein, in the articles of incorporation,
any other  Certificate of  Designations  creating a series of Preferred Stock or
any similar stock or as otherwise required by law.

                  VI.      LIQUIDATION, DISSOLUTION, OR WINDING UP

                  Upon  any  liquidation,  dissolution  or  winding  up  of  the
Corporation, no distribution shall be made (1) to the holders of shares of stock
ranking  junior  (either as to dividends  or upon  liquidation,  dissolution  or
winding up) to the Series P Preferred Stock unless,  prior thereto,  the holders
of shares of Series

                                       39

<PAGE>

P Preferred Stock shall have received $1,000 per share,  plus an amount equal to
accrued and unpaid dividends and distributions thereon, whether or not declared,
to the date of such  payment,  provided  that the  holders of shares of Series P
Preferred  Stock  shall be entitled  to receive an  aggregate  amount per share,
subject to the provision for adjustment  hereinafter  set forth,  equal to 1,000
times the aggregate  amount to be distributed  per share to holders of shares of
Common  Stock,  or (2) to the  holders  of shares of stock  ranking  on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series P Preferred  Stock,  except distri-  butions made ratably on the Series P
Preferred  Stock and all such parity stock in proportion to the total amounts to
which the  holders  of all such  shares  are  entitled  upon  such  liquidation,
dissolution or winding up. If the  Corporation  shall at any time declare or pay
any dividend on the Common Stock payable in shares of Common Stock,  or effect a
subdivision or combination or consolidation of the outstanding  shares of Common
Stock (by  reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common Stock, then
in each such case the  aggregate  amount to which  holders of shares of Series P
Preferred Stock were entitled  immediately prior to such event under the proviso
in clause (1) of the preceding  sentence shall be adjusted by  multiplying  such
amount by a fraction  the  numerator  of which is the number of shares of Common
Stock  outstanding  immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding  immediately prior to
such event.

                  VII.     CONSOLIDATION, MERGER, ETC.

                  In case the  Corporation  shall enter into any  consolidation,
merger, combination or other transaction in which the shares of Common Stock are
exchanged for or changed into other stock or  securities,  cash and/or any other
property,  then in any such case each share of Series P Preferred Stock shall at
the same time be  similarly  exchanged  or  changed  into an amount  per  share,
subject to the provision for adjustment  hereinafter  set forth,  equal to 1,000
times the aggregate amount of stock, securities,  cash and/or any other property
(payable  in kind),  as the case may be,  into  which or for which each share of
Common  Stock is  changed or  exchanged.  If the  Corporation  shall at any time
declare  or pay any  dividend  on the Common  Stock  payable in shares of Common
Stock,  or  effect  a  subdivision  or  combination  or   consolidation  of  the
outstanding  shares of Common Stock (by  reclassification  or otherwise  than by
payment of a dividend in shares of Common Stock) into a greater or lesser number
of shares of Common  Stock,  then in each such case the  amount set forth in the
preceding  sentence with respect to the exchange or change of shares of Series P
Preferred Stock shall be adjusted by multiplying such amount by a fraction,  the
numerator  of  which  is the  number  of  shares  of  Common  Stock  outstanding
immediately  after  such  event and the  denominator  of which is the  number of
shares of Common Stock that were outstanding immediately prior to such event.

                  VIII.    REDEMPTION

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

                  IX.      RANK

                  The Series P Preferred  Stock shall rank,  with respect to the
payment of dividends and the distribution of assets, junior to all series of any
other class of the Corporation's Preferred Stock.

                  X.       AMENDMENT

                  The articles of incorporation of the Corporation  shall not be
amended in any manner  which would alter or change the  powers,  preferences  or
special rights of the Series P Preferred Stock so as to affect

                                       40

<PAGE>

them  adversely  without  the  affirmative  vote  of  the  holders  of at  least
two-thirds  of the  outstanding  shares  of  Series P  Preferred  Stock,  voting
together as a single class."

         C.       This amendment was duly adopted and authorized by the board of
directors of U.S. Energy Corp. on September 10, 2001.

         U.S. Energy Corp.

                                                          September ___, 2001
         ----------------------------------------
         By:  Keith G. Larsen, President

         Attest:

                                                          September ___, 2001
         ----------------------------------------
         Daniel P. Svilar, Ass't Secretary

                                                          September ___, 2001
         ----------------------------------------
         By:      Max Evans, Secretary

Fremont                    )
State of Wyoming           )

         On September __, 2001  personally  appeared before me, a Notary Public,
Keith G. Larsen and Max Evans,  who  acknowledged  that they  executed the above
instrument.

                                            -----------------------------
                                            Notary Public
         SEAL
                                            My Commission Expires: _________

                                       41

<PAGE>AGREEMENT REGARDING COMPENSATION FOR SERVICES

         THIS AGREEMENT (the "Agreement") is made this 4th day of September,
2001, by and between Richard D. Surber, ("Surber"), an individual whose office
is located at 268 West 400 South, Suite 300, Salt Lake City, Utah 84101 and
Learner's World, Inc., a Florida corporation whose address is 369 Avenue U,
Brooklyn, New York 11223 (the "Company").

         WHEREAS, Surber has performed valuable legal and non-legal services
("services") for and on behalf of the Company, which services were not be in
connection with the offer or sale of securities in a capital-raising
transaction, nor were they for services which directly or indirectly promoted or
maintained a market for the Company's securities; and

         WHEREAS, the aforesaid services to Company were provided with respect
to projects related to ongoing corporate business filings with the United States
Securities and Exchange Commission ("SEC") and other day-to-day corporate
activities; and

         WHEREAS, Surber and his agents have also expended time and effort to
assist the Company in keeping its SEC filings current; and

         WHEREAS, the Company has paid for certain of the services previously
rendered by issuing shares of stock of the Company to Surber, coupled with
assurances to Surber that he would be able to sell the shares and recoup the
fees owed for services; and

         WHEREAS, the market price of the Company's shares has declined
substantially over the past year, precluding Surber from realizing payment of
the fees owed for services rendered to the Company; and

         WHEREAS, Surber has been unable to recoup sufficient funds upon sale of
shares to realize the payment of fees for which the shares were issued; and

         WHEREAS, Surber has rendered additional services for which he has not
yet been paid; and

         WHEREAS, negotiations have been ongoing between Surber and the Company
regarding the payment to Surber of the amounts which he claims are owed to him
by the Company; and

         WHEREAS, Surber claims entitlement to compensation in an amount in
excess of $50,000; and

         WHEREAS, the Company desires to fairly compensate Surber for his
services which were of great value to the Company; and

         WHEREAS, the Company desires to enter into an agreement to comprise and
settle the amounts owed to Surber by the Company.

         NOW THEREFORE, in consideration of the mutual promises of the parties
hereto and other

<PAGE>

goods and valuable consideration, the adequacy and sufficiency of which is
hereby admitted, the parties hereto agree as follows:

1.       Fees

         The Company agrees that the shares of stock previously issued to Surber
         are inadequate to compensate him for the work for which the shares were
         originally issued. The Company further agrees that it has not paid
         Surber for his time expended subsequent to the issuance of such shares
         and for work not covered by the issuance of the said shares. Therefore
         the Company has agreed to pay fees to Surber pursuant to the terms of
         this agreement, which fees are based upon the reasonable value of
         Surber's services as determined by negotiation and agreement between
         the parties. The parties specifically represent that the services
         rendered by Surber, for which payment is being made under this
         Agreement, were not rendered in connection with the odder or sale of
         securities in a capital-raising transaction or to directly or
         indirectly promote or maintain a market for the Company's securities.

         Surber's rate is normally Three Hundred Dollars ($300) per hour.
         However, Company and Surber have agreed on a fixed flat fee to be paid
         by the Company as a compromise of Surber's claims for all work
         performed by Surber through August 31, 2001.

         The flat fee to be paid by the Company to Surber for his past services
         shall be a cash payment of Fifty Thousand Dollars ($50,000).

2.       Payment

         Company agrees to make the $50,000 cash payment within thirty days, or
         immediately upon closing of any reverse merger or transfer of control
         of the Company to any person(s).

         The parties agree that in lieu of a cash payment, the Company may issue
         to Surber sufficient free-trading shares of the Company's common stock,
         registered under an S-8 Registration Statement to allow Surber, upon
         immediate sale of the shares, to realize payment of the $50,000 payable
         to him under the terms of this agreement.

         The Company agrees that any shares issued to Surber pursuant to this
         Agreement will be registered with the Securities and Exchange
         Commission under a Form S-8 or other applicable registration statement,
         and it shall cause such registration statement to remain effective at
         all time while Attorney holds such shares.

3.       Miscellaneous

         This Agreement has been entered into in and shall be governed by and
         construed in accordance with the laws of the State of Utah, and sets
         forth the entire agreement between the parties for the resolution of
         claims relating to services performed by Surber for the Company through
         August 31, 2001. All prior agreements or understandings of the parties
         have been and are merged herein. This Agreement can be amended or
         modified only in

<PAGE>

         writing. Each party signing below is jointly and severally responsible
         for all obligations due to Surber and represents that each has full
         authority to execute this Agreement so that it is binding. This
         Agreement may be signed in one or more counterparts and binds each
         party signing it whether or not any other proposed signatory ever
         executes it. If any provision of this Agreement or the application
         thereof is held invalid or enforceable, the invalidity or unenforceable
         shall not effect other provisions or applications, and to this end the
         provisions of this Agreement are declared to be serverable. The failure
         to insist upon strict compliance with any of the terms, covenants or
         conditions of the Agreement shall not be deemed a waiver or
         relinquishment of such right or power at any other time or times.

4.       Enforcement of Agreement

         The parties agree that any suit to enforce the provisions of this
         Agreement shall be brought in the Third Judicial District Court of Salt
         Lake City, State of Utah, and the parties consent to personal
         jurisdiction in said court and agree that venue for any suit to enforce
         the provisions of this Agreement shall be in Salt Lake County, State of
         Utah. The prevailing party in any such suit shall be entitled to
         recover all costs of suit, including attorney's fees and expert witness
         fees.

5.       Counterparts

         The Agreement may be executed in duplicate facsimile counterparts, each
         of which shall be deemed an original and together shall constitute one
         and the same binding Agreement, with one counterpart being delivered to
         each party hereto.

         IN WITNESS WHEREOF, the parties hereto have set their hands and seals
as of the day and date first above written.

                                               Learner's World, Inc.

Dated this 6 day of September, 2001            By: /s/ Sal Casaccio
                                               -------------------------------
                                                       Sal Casaccio, President

Dated this 6th day of September, 2001              /s/ Richard Surber
                                               -------------------------------
                                                       Richard D. Surber

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