Document:

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                                                                     EXHIBIT 4.1

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                      Health Care Property Investors, Inc.

                                       and

                              The Bank of New York

                                 as Rights Agent

                                Rights Agreement

                           Dated as of July 27, 2000

================================================================================

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                                RIGHTS AGREEMENT

            Rights Agreement, dated as of July 27, 2000, between Health Care
Property Investors, Inc., a Maryland corporation (the "Company"), and The Bank
of New York, as Rights Agent (the "Rights Agent").

                                    RECITALS

            WHEREAS, on June 20, 2000, the Board of Directors of the Company
adopted this Agreement, and has authorized and declared a dividend of one
preferred share purchase right (a "Right") for each Common Share (as defined in
Section 1.6) of the Company outstanding at the close of business on July 28,
2000 (the "Record Date") and has authorized and directed the issuance of one
Right (subject to adjustment as provided herein) with respect to each Common
Share that shall become outstanding between the Record Date and the earliest of
the Distribution Date and the Expiration Date (as such terms are defined in
Sections 3.1 and 7.1), each Right initially representing the right to purchase
one one-hundredth (subject to adjustment) of a share of Series D Junior
Participating Preferred Stock (the "Preferred Shares") of the Company having the
rights, powers and preferences set forth in the form of Articles Supplementary
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth PROVIDED, HOWEVER, that Rights may be issued with respect
to Common Shares that shall become outstanding after the Distribution Date and
prior to the Expiration Date in accordance with Section 22.

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

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

            1.1 "Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and Associates
(as such terms are hereinafter defined) of such Person, shall be the Beneficial
Owner (as such term is hereinafter defined) of 15% or more of the Common Shares
of the Company then outstanding but shall not include (i) an Exempt Person (as
such term is hereinafter defined) or (ii) if, as of the date hereof, any Person
is the Beneficial Owner of 15% or more of the Common Shares outstanding (an
"Existing Holder"), such Existing Holder shall not be or become an "Acquiring
Person" unless and until such time as such Existing Holder shall become the
Beneficial Owner of one or more additional Common Shares of the Company (other
than pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of the outstanding Common Shares), unless, upon becoming the Beneficial Owner of
such additional Common Shares, such Existing Holder is not then the Beneficial
Owner of 15% or more of the Common Shares then outstanding. Notwithstanding the
foregoing, no Person shall become an "Acquiring Person" as the result of an
acquisition of Common Shares by the

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Company which, by reducing the number of shares outstanding, increases the
proportionate number of shares beneficially owned by such Person to 15% or more
of the Common Shares of the Company then outstanding; provided, however, that if
a Person shall become the Beneficial Owner of 15% or more of the Common Shares
of the Company then outstanding solely by reason of share purchases by the
Company and shall, after such share purchases by the Company, become the
Beneficial Owner of one or more additional Common Shares of the Company (other
than pursuant to a dividend or distribution paid or made by the Company on the
outstanding Common Shares in Common Shares or pursuant to a split or subdivision
of the outstanding Common Shares), then such Person shall be deemed to be an
"Acquiring Person" unless upon becoming the Beneficial Owner of such additional
shares of Common Stock such Person does not beneficially own 15% or more of the
shares of Common Stock then outstanding. Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined pursuant to the foregoing
provisions of this Section 1.1, has become such inadvertently (including,
without limitation, because (A) such Person was unaware that it beneficially
owned a percentage of Common Stock that would otherwise cause such Person to be
an "Acquiring Person" or (B) such Person was aware of the extent of its
Beneficial Ownership of Common Stock but had no actual knowledge of the
consequences of such Beneficial Ownership under this Agreement), and without any
intention of changing or influencing control of the Company, and such Person
divests as promptly as practicable a sufficient number of Common Shares so that
such Person would no longer be an Acquiring Person, as defined pursuant to the
foregoing provisions of this Section 1.1, then such Person shall not be deemed
to be or have become an "Acquiring Person" at any time for any purposes of this
Agreement. For all purposes of this Agreement, any calculation of the number of
Common Shares outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding Common Shares of which
any Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), as in effect
on the date of this Agreement.

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

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

                (i) which such Person or any of such Person's Affiliates or
Associates beneficially owns, directly or indirectly (as determined pursuant to
Rule 13d-3 of the General Rules and Regulations under the Exchange Act as in
effect on the date of this Agreement);

                (ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has (A) the right to acquire (whether such
right is exercisable immediately, or only after the passage of time, compliance
with regulatory requirements, fulfillment of a

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condition or otherwise) pursuant to any agreement, arrangement or understanding,
whether or not in writing (other than customary agreements with and between
underwriters and selling group members with respect to a bona fide public
offering of securities), or upon the exercise of conversion rights, exchange
rights, rights, warrants or options, or otherwise; PROVIDED, HOWEVER, that a
Person shall not be deemed the Beneficial Owner of, or to beneficially own, (w)
securities tendered pursuant to a tender or exchange offer made by or on behalf
of such Person or any of such Person's Affiliates or Associates until such
tendered securities are accepted for purchase or exchange, (x) securities which
such Person has a right to acquire upon the exercise of Rights at any time prior
to the time that any Person becomes an Acquiring Person, (y) securities issuable
upon the exercise of Rights from and after the time that any Person becomes an
Acquiring Person if such Rights were acquired by such Person or any of such
Person's Affiliates or Associates prior to the Distribution Date or pursuant to
Section 3.1 or Section 22 ("Original Rights") or pursuant to Section 11.9 or
Section 11.15 with respect to an adjustment to Original Rights or (z) securities
which such Person or any of such Person's Affiliates or Associates may acquire,
does or do acquire or may be deemed to acquire or may be deemed to have the
right to acquire, pursuant to any merger or other acquisition agreement between
the Company and such Person (or one or more of such Person's Affiliates or
Associates) if prior to such Person becoming an Acquiring Person the Board of
Directors of the Company has approved such agreement and determined that such
Person shall not be or be deemed to be the beneficial owner of such securities
within the meaning of this Section 1.3.; or (B) the right to vote pursuant to
any agreement, arrangement or understanding (whether or not in writing);
PROVIDED, HOWEVER, that a Person shall not be deemed the Beneficial Owner of, or
to beneficially own, any security under this clause (B) if the agreement,
arrangement or understanding to vote such security (1) arises solely from a
revocable proxy or consent given to such Person in response to a public proxy or
consent solicitation made pursuant to, and in accordance with, the applicable
rules and regulations of the Exchange Act and (2) is not also then reportable on
Schedule 13D under the Exchange Act (or any comparable or successor report); or

                (iii) which are beneficially owned, directly or indirectly, by
any other Person (or any Affiliate or Associate thereof) and with respect to
which such Person or any of such Person's Affiliates or Associates has any
agreement, arrangement or understanding (other than customary agreements with
and between underwriters and selling group members with respect to a bona fide
public offering of securities), whether or not in writing, for the purpose of
acquiring, holding, voting (except pursuant to a revocable proxy or consent as
described in the proviso to Section 1.3(ii)(B)) or disposing of any securities
of the Company; PROVIDED, HOWEVER, that no Person who is an officer, director or
employee of an Exempt Person shall be deemed, solely by reason of such Person's
status or authority as such, to be the "Beneficial Owner" of, to have
"Beneficial Ownership" of or to "beneficially own" any securities that are
"beneficially owned" (as defined in this Section 1.3), including, without
limitation, in a fiduciary capacity, by an Exempt Person or by any other such
officer, director or employee of an Exempt Person.

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

            1.5 "close of business" on any given date shall mean 5:00 p.m., New
York time, on such date; PROVIDED, HOWEVER, that if such date is not a Business
Day it shall mean 5:00 p.m., New York time, on the next succeeding Business Day.

            1.6 "Common Shares" when used with reference to the Company shall
mean the shares of common stock, par value $1.00 per share, of the Company.
"Common Shares" when used with reference to any Person other than the Company
shall mean the capital stock with the greatest voting power, or the equity
securities or other equity interest having power to control or direct the
management, of such other Person or, if such Person is a Subsidiary (as such
term is hereinafter defined) of another Person, the Person or Persons which
ultimately control such first-mentioned Person, and which has issued and
outstanding such capital stock, equity securities or equity interest.

            1.7 "Exempt Person" shall mean the Company, any Subsidiary of the
Company, in each case including, without limitation, its fiduciary capacity, or
any employee benefit plan of the Company or of any Subsidiary of the Company or
any entity or trustee holding shares of capital stock of the Company for or
pursuant to the terms of any such plan, or for the purpose of funding other
employee benefits for employees of the Company or any Subsidiary of the Company.

            1.8 "Person" shall mean any individual, partnership, joint venture,
limited liability company, firm, corporation, unincorporated association, trust
or other entity, and shall include any successor (by merger or otherwise) of
such entity.

            1.9 "Shares Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, the filing of a report pursuant to Section 13(d) of the Exchange Act
or pursuant to a comparable successor statute) by the Company or an Acquiring
Person that an Acquiring Person has become such or that discloses information
which reveals the existence of an Acquiring Person or such earlier date as a
majority of the Board of Directors shall become aware of the existence of an
Acquiring Person.

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

            1.11 A "Trigger Event" shall be deemed to have occurred upon any
Person becoming an Acquiring Person.

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            1.12 The following terms shall have the meanings defined for such
terms in the Sections set forth below:

<TABLE>
<CAPTION>
                         Term                           Section
                         ----                           -------
<S>                                                     <C>
               Adjustment Shares                        11.1.2
               common stock equivalent                  11.1.3
               Company                                  Recitals
               current per share market price           11.4
               Current Value                            11.1.3
               Distribution Date                        3.1
               equivalent preferred stock               11.2
               Exchange Act                             1.1
               Exchange Consideration                   27
               Existing Holder                          1.1
               Expiration Date                          7.1
               Final Expiration Date                    7.1
               Nasdaq                                   9
               Original Rights                          1.3
               Preferred Shares                         Recitals
               Principal Party                          13.2
               Purchase Price                           4
               Record Date                              Recitals
               Redemption Date                          7.1
               Redemption Price                         23.1
               Right                                    Recitals
               Right Certificate                        3.1
               Rights Agent                             Recitals
               Security                                 11.4
               Spread                                   11.1.3
               Substitution Period                      11.1.3
               Summary of Rights                        3.2
               Trading Day                              11.4
</TABLE>

            2 Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3, shall prior to the Distribution Date also be the
holders of the Common Shares) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such co-Rights Agents as it may deem necessary or
desirable. In the event the Company appoints one or more co-Rights Agents, the
respective duties of the Rights Agent and any co-Rights Agent shall be as the
Company shall

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determine. Contemporaneously with such appointment, if any, the Company shall
notify the Rights Agent thereof.

            3 Issuance of Right Certificates.

            3.1 Rights Evidenced by Share Certificates. Until the earlier of (i)
the tenth day after the Shares Acquisition Date or (ii) the tenth Business Day
after the date of the commencement of, or first public announcement of the
intent of any Person (other than an Exempt Person) to commence, a tender or
exchange offer the consummation of which would result in any Person (other than
an Exempt Person) becoming the Beneficial Owner of Common Shares aggregating 15%
or more of the then outstanding Common Shares of the Company (the earlier of (i)
and (ii) being herein referred to as the "Distribution Date"), (x) the Rights
(unless earlier expired, redeemed or terminated) will be evidenced (subject to
the provisions of Section 3.2) by the certificates for Common Shares registered
in the names of the holders thereof (which certificates for Common Shares shall
also be deemed to be Right Certificates) and not by separate certificates, and
(y) the Rights (and the right to receive certificates therefor) will be
transferable only in connection with the transfer of the underlying Common
Shares. The preceding sentence notwithstanding, prior to the occurrence of a
Distribution Date specified as a result of an event described in clause (ii) (or
such later Distribution Date as the Board of Directors of the Company may select
pursuant to this sentence), the Board of Directors may postpone, one or more
times, the Distribution Date which would occur as a result of an event described
in clause (ii) beyond the date set forth in such clause (ii). Nothing herein
shall permit such a postponement of a Distribution Date after a Person becomes
an Acquiring Person. As soon as practicable after the Distribution Date, the
Company will prepare and execute, the Rights Agent will countersign and the
Company (or, if requested, the Rights Agent) will send, by first-class,
postage-prepaid mail, to each record holder of Common Shares as of the close of
business on the Distribution Date (other than any Acquiring Person or any
Associate or Affiliate of an Acquiring Person), at the address of such holder
shown on the records of the Company, one or more certificates for Rights, in
substantially the form of Exhibit B hereto (a "Right Certificate"), evidencing
one Right (subject to adjustment as provided herein) for each Common Share so
held. As of the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.

            3.2 Summary of Rights. On the Record Date or as soon as practicable
thereafter, the Company will send or cause to be sent a copy of a Summary of
Rights to Purchase Preferred Shares, in substantially the form attached hereto
as Exhibit C (the "Summary of Rights"), by first-class, postage-prepaid mail, to
each record holder of Common Shares as of the close of business on the Record
Date at the address of such holder shown on the records of the Company. With
respect to certificates for Common Shares outstanding as of the close of
business on the Record Date, until the Distribution Date (or the earlier
Expiration Date), the Rights will be evidenced by such certificates for Common
Shares registered in the names of the holders thereof together with a copy of
the Summary of Rights and the registered holders of the Common Shares shall also
be registered holders of the associated Rights. Until the Distribution

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Date (or the earlier Expiration Date), the surrender for transfer of any
certificate for Common Shares outstanding at the close of business on the Record
Date, with or without a copy of the Summary of Rights, shall also constitute the
transfer of the Rights associated with the Common Shares represented thereby.

            3.3 New Certificates After Record Date. Certificates for Common
Shares which become outstanding (whether upon issuance out of authorized but
unissued Common Shares, disposition out of treasury or transfer or exchange of
outstanding Common Shares) after the Record Date but prior to the earliest of
the Distribution Date or the Expiration Date, shall have impressed, printed,
stamped, written or otherwise affixed onto them the following legend:

        This certificate also evidences and entitles the holder hereof to
        certain rights as set forth in an Agreement between Health Care Property
        Investors, Inc. (the "Company") and The Bank of New York, as Rights
        Agent, dated as of July 27, 2000, as the same may be amended from time
        to time (the "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 circumstances, as set
        forth in the Agreement, such Rights will be evidenced by separate
        certificates and will no longer be evidenced by this certificate. The
        Company will mail to the holder of this certificate a copy of the
        Agreement without charge after receipt of a written request therefor. AS
        DESCRIBED IN THE AGREEMENT, RIGHTS WHICH ARE OWNED BY, TRANSFERRED TO OR
        HAVE BEEN OWNED BY ACQUIRING PERSONS OR ASSOCIATES OR AFFILIATES THEREOF
        (AS DEFINED IN THE AGREEMENT) SHALL BECOME NULL AND VOID AND WILL NO
        LONGER BE TRANSFERABLE.

With respect to such certificates containing the foregoing legend, until the
Distribution Date (or the earlier Expiration Date), the Rights associated with
the Common Shares represented by such certificates shall be evidenced by such
certificates alone, and the surrender for transfer of any such certificates,
except as otherwise provided herein, shall also constitute the transfer of the
Rights associated with the Common Shares represented thereby. In the event that
the Company purchases or acquires any Common Shares after the Record Date but
prior to the Distribution Date, any Rights associated with such Common Shares
shall be deemed canceled and retired so that the Company shall not be entitled
to exercise any Rights associated with the Common Shares which are no longer
outstanding.

            Notwithstanding this Section 3.3, the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.

            4 Form of Right Certificates. The Right Certificates (and the forms
of election to purchase shares, certification and assignment to be printed on
the reverse thereof) shall be substantially the same as Exhibit B hereto and may
have such marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be

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required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange or trading
system on which the Rights may from time to time be listed or quoted, or to
conform to usage. Subject to the terms and conditions hereof, the Right
Certificates, whenever issued, shall be dated as of the Record Date, and shall
show the date of countersignature by the Rights Agent, and on their face shall
entitle the holders thereof to purchase such number of one one-hundredths of a
Preferred Share as shall be set forth therein at the price per one one-hundredth
of a Preferred Share set forth therein (the "Purchase Price"), but the number of
such one one-hundredths of a Preferred Share and the Purchase Price shall be
subject to adjustment as provided herein.

            5 Countersignature and Registration. The Right Certificates shall be
executed on behalf of the Company by its Chairman of the Board of Directors, the
Chief Executive Officer, President or any Vice President, either manually or by
facsimile signature, and shall have affixed thereto the Company's seal or a
facsimile thereof which shall be attested by the Secretary or any Assistant
Secretary of the Company, either manually or by facsimile signature. The Right
Certificates shall be countersigned, either manually or by facsimile signature,
by an authorized signatory of the Rights Agent, but it shall not be necessary
for the same signatory to countersign all of the Right Certificates hereunder.
No Right Certificate shall be valid for any purpose unless so countersigned. In
case any officer of the Company who shall have signed any of the Right
Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
and issued and delivered by the Company with the same force and effect as though
the person who signed such Right Certificates had not ceased to be such officer
of the Company; and any Right Certificate may be signed on behalf of the Company
by any person who, at the actual date of the execution of such Right
Certificate, shall be a proper officer of the Company to sign such Right
Certificate, although at the date of the execution of this Agreement any such
person was not such an officer.

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

            6 Transfer, Split Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificates. Subject
to the provisions of Section 11.1.2 and Section 14, at any time after the close
of business on the Distribution Date, and at or prior to the close of business
on the Expiration Date, any Right Certificate or Right Certificates (other than
Right Certificates representing Rights that have become void pursuant to Section
11.1.2 or that have been exchanged pursuant to Section 27) may be transferred,
split up or combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a Preferred Share as the Right Certificate or Right
Certificates surrendered then entitled such holder to purchase. Any

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registered holder desiring to transfer, split up or combine or exchange any
Right Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender, together with any required form of assignment and
certificate duly completed, the Right Certificate or Right Certificates to be
transferred, split up or combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Right Certificate or Right Certificates 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 or Right Certificates
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. Thereupon the Rights Agent
shall countersign and deliver to the person entitled thereto a Right Certificate
or Right Certificates, as the case may be, as so requested. The Company may
require payment from the holders of Right Certificates of a sum sufficient to
cover any tax or governmental charge that may be imposed in connection with any
transfer, split up or combination or exchange of such Right Certificates.

            Subject to the provisions of Section 11.1.2 , at any time after the
Distribution Date and prior to the Expiration Date, upon receipt by the Company
and the Rights Agent of evidence reasonably satisfactory to them of the loss,
theft, destruction or mutilation of a Right Certificate, and, in case of loss,
theft or destruction, of indemnity or security reasonably satisfactory to them,
and, at the Company's request, reimbursement to the Company and the Rights Agent
of all reasonable expenses incidental thereto, and upon surrender to the Rights
Agent and cancellation of the Right Certificate if mutilated, the Company will
make and deliver a new Right Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Right
Certificate so lost, stolen, destroyed or mutilated.

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

            7.1 Exercise of Rights. Subject to Section 11.1.2 and except as
otherwise provided herein, 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 and certification on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price for the
total number of one one-hundredths of a Preferred Share (or other securities,
cash or other assets) as to which the Rights are exercised, at or prior to the
time (the "Expiration Date") that is the earliest of (i) the close of business
on July 27, 2010 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 (the "Redemption Date"), (iii) the
closing of any merger or other acquisition transaction involving the Company
pursuant to an agreement of the type described in Section 13.3 at which time the
Rights are deemed terminated, or (iv) the time at which the Rights are exchanged
as provided in Section 27.

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            7.2 Purchase . The Purchase Price for each one one-hundredth of a
Preferred Share pursuant to the exercise of a Right shall be initially $95,
shall be subject to adjustment from time to time as provided in Sections 11, 13
and 26 and shall be payable in lawful money of the United States of America in
accordance with Section 7.3.

            7.3 Payment Procedures. Upon receipt of a Right Certificate
representing exercisable Rights, with the form of election to purchase and
certification duly executed, accompanied by payment of the aggregate Purchase
Price for the total number of one one-hundredths of a Preferred Share to be
purchased and an amount equal to any applicable transfer tax required to be paid
by the holder of such Right Certificate in accordance with Section 9, in cash or
by certified or cashier's check or money order payable to the order of the
Company, the Rights Agent shall thereupon promptly (i)(A) requisition from any
transfer agent of the Preferred Shares (or make available, if the Rights Agent
is the transfer agent) certificates for the number of Preferred Shares to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of Preferred Shares issuable upon exercise of the
Rights hereunder with a depository agent, requisition from the depositary agent
depositary receipts representing interests in such number of one one-hundredths
of a Preferred Share as are to be purchased (in which case certificates for the
Preferred Shares represented by such receipts shall be deposited by the transfer
agent with the depositary agent) and the Company hereby directs the depositary
agent to comply with all such requests, (ii) when appropriate, requisition from
the Company the amount of cash to be paid in lieu of the issuance of fractional
shares in accordance with Section 14 or otherwise in accordance with Section
11.1.3, (iii) promptly after receipt of such certificates or depositary
receipts, cause the same to be delivered to or upon the order of the registered
holder of such Right Certificate, registered in such name or names as may be
designated by such holder and (iv) when appropriate, after receipt, promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate. In the event that the Company is obligated to issue other
securities of the Company, pay cash and/or distribute other property pursuant to
Section 11.1.3, the Company will make all arrangements necessary so that such
other securities, cash and/or other property are available for distribution by
the Rights Agent, if and when appropriate.

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

            7.5 Full Information Concerning Ownership. 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
of Rights upon the occurrence of any purported exercise as set forth in this
Section 7 unless the certificate contained in the form of election to purchase
set forth on the reverse side of the Right Certificate surrendered for such

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exercise shall have been duly completed and signed by the registered holder
thereof and the Company shall have been provided with 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.

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

            9 Reservation and Availability of Capital Stock. The Company
covenants and agrees that from and after the Distribution Date it will cause to
be reserved and kept available out of its authorized and unissued Preferred
Shares (and, following the occurrence of a Trigger Event, out of its authorized
and unissued Common Shares or other securities or out of its shares held in its
treasury) the number of Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) that will be sufficient to
permit the exercise in full of all outstanding Rights.

            So long as the Preferred Shares (and, following the occurrence of a
Trigger Event, Common Shares and/or other securities) issuable upon the exercise
of Rights may be listed on any national securities exchange or traded in the
over-the-counter market and quoted on the National Association of Securities
Dealers, Inc. Automated Quotation System ("Nasdaq") (including the National
Market or Small Cap Market), the Company shall use its best efforts to cause,
from and after such time as the Rights become exercisable, all shares reserved
for such issuance to be listed or admitted to trading on such exchange or quoted
on Nasdaq upon official notice of issuance upon such exercise.

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

            From and after such time as the Rights become exercisable, the
Company shall use its best efforts, if then necessary to permit the issuance of
Preferred Shares upon the exercise of Rights, to register and qualify such
Preferred Shares under the Securities Act and any

                                       11
<PAGE>   13

applicable state securities or "Blue Sky" laws (to the extent exemptions
therefrom are not available), cause such registration statement and
qualifications to become effective as soon as possible after such filing and
keep such registration and qualifications effective until the earlier of the
date as of which the Rights are no longer exercisable for such securities and
the Expiration Date. The Company may temporarily suspend, for a period of time
not to exceed 90 days, the exercisability of the Rights in order to prepare and
file a registration statement under the Securities Act and permit it to become
effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained and until
a registration statement under the Securities Act (if required) shall have been
declared effective.

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

            10 Preferred Shares Record Date. Each person in whose name any
certificate for Preferred Shares (or Common Shares and/or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes be
deemed to have become the holder of record of the Preferred Shares (or Common
Shares and/or other securities, as the case may be) represented thereby on, and
such certificate shall be dated, the date upon which the Right Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and any applicable transfer taxes) was made; PROVIDED, HOWEVER, that if the
date of such surrender and payment is a date upon which the Preferred Shares (or
Common Shares and/or other securities, as the case may be) transfer books of the
Company are closed, such person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Shares (or Common
Shares and/or other securities, as the case may be) transfer books of the
Company are open. Prior to the exercise of the Rights evidenced thereby, the
holder of a Right Certificate shall not be entitled to any rights of a holder of
Preferred Shares for which the Rights shall be exercisable, including, without
limitation, the right to vote or to receive dividends or other

                                       12
<PAGE>   14

distributions, and shall not be entitled to receive any notice of any
proceedings of the Company, except as provided herein.

            11 Adjustment of Purchase Price, Number of Shares or Number of
Rights. The Purchase Price, the number of Preferred Shares or other securities
or property purchasable upon exercise of each Right and the number of Rights
outstanding are subject to adjustment from time to time as provided in this
Section 11.

            11.1 Post-Execution Events.

            11.1.1 Corporate Dividends, Reclassifications, Etc. In the event the
Company shall at any time after the date of this Agreement (A) declare and pay a
dividend on the Preferred Shares payable in Preferred Shares, (B) subdivide the
outstanding Preferred Shares, (C) combine the outstanding Preferred Shares into
a smaller number of Preferred Shares or (D) issue any shares of its capital
stock in a reclassification of the Preferred Shares (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing or surviving corporation), except as otherwise
provided in this Section 11.1, the Purchase Price in effect at the time of the
record date for such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of shares of 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 Preferred
Shares transfer books of the Company were open, he would have owned upon such
exercise and been entitled to receive by virtue of such dividend, subdivision,
combination or reclassification; PROVIDED, HOWEVER, that in no event shall the
consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Company issuable upon
exercise of one Right. If an event occurs which would require an adjustment
under both Section 11.1.1 and Section 11.1.2, the adjustment provided for in
this Section 11.1.1 shall be in addition to, and shall be made prior to, the
adjustment required pursuant to, Section 11.1.2.

            11.1.2 Acquiring Person Events; Triggering Events. Subject to
Sections 23.1 and 27, in the event that a Trigger Event occurs, then, from and
after the first occurrence of such event, each holder of a Right, except as
provided below, shall thereafter have a right to receive, upon exercise thereof
at a price per Right equal to the then current Purchase Price multiplied by the
number of one one-hundredths of a Preferred Share for which a Right is then
exercisable (without giving effect to this Section 11.1.2), in accordance with
the terms of this Agreement and in lieu of Preferred Shares, such number of
Common Shares as shall equal the result obtained by (x) multiplying the then
current Purchase Price by the then number of one one-hundredths of a Preferred
Share for which a Right is then exercisable (without giving effect to this
Section 11.1.2) and (y) dividing that product by 50% of the current per share
market price of the Common Shares (determined pursuant to Section 11.4) on the
first of the date of the occurrence of, or the date of the first public
announcement of, a Trigger Event (the "Adjustment Shares");

                                       13
<PAGE>   15

PROVIDED that the Purchase Price and the number of Adjustment Shares shall
thereafter be subject to further adjustment as appropriate in accordance with
Section 11.6. Notwithstanding the foregoing, upon the occurrence of a Trigger
Event, any Rights that are or were acquired or beneficially owned by (1) any
Acquiring Person or any Associate or Affiliate thereof, (2) a transferee of any
Acquiring Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person becomes such, or (3) a transferee of any
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 the 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 this Section 11.1.2, and subsequent
transferees, shall become void without any further action, and any holder
(whether or not such holder is an Acquiring Person or an Associate or Affiliate
of an Acquiring Person) of such Rights shall thereafter have no right to
exercise such Rights under any provision of this Agreement or otherwise. From
and after the Trigger Event, no Right Certificate shall be issued pursuant to
Section 3 or Section 6 that represents Rights that are or have become void
pursuant to the provisions of this paragraph, and any Right Certificate
delivered to the Rights Agent that represents Rights that are or have become
void pursuant to the provisions of this paragraph shall be canceled.

            The Company shall use all reasonable efforts to ensure that the
provisions of this Section 11.1.2 are complied with, but shall have no liability
to any holder of Right Certificates or other Person as a result of its failure
to make any determinations with respect to any Acquiring Person or its
Affiliates, Associates or transferees hereunder.

            From and after the occurrence of an event specified in Section 13.1,
any Rights that theretofore have not been exercised pursuant to this Section
11.1.2 shall thereafter be exercisable only in accordance with Section 13 and
not pursuant to this Section 11.1.2.

            11.1.3 Insufficient Shares. The Company may at its option substitute
for a Common Share issuable upon the exercise of Rights in accordance with the
foregoing Section 11.1.2 a number of Preferred Shares or fraction thereof such
that the current per share market price of one Preferred Share multiplied by
such number or fraction is equal to the current per share market price of one
Common Share. In the event that upon the occurrence of a Trigger Event there
shall not be sufficient Common Shares authorized but unissued, or held by the
Company as treasury shares, to permit the exercise in full of the Rights in
accordance with the foregoing Section 11.1.2, the Company shall take all such
action as may be necessary to authorize additional Common Shares for issuance
upon exercise of the Rights, PROVIDED, HOWEVER, that if the Company determines
that it is unable to cause the authorization of a sufficient number of
additional Common Shares, then, in the event the Rights become exercisable, the
Company, with respect to each Right and to the extent necessary and permitted

                                       14
<PAGE>   16

by applicable law and any agreements or instruments in effect on the date hereof
to which it is a party, shall: (A) determine the excess of (1) the value of the
Adjustment Shares issuable upon the exercise of a Right (the "Current Value"),
over (2) the Purchase Price (such excess, the "Spread") and (B) with respect to
each Right (other than Rights which have become void pursuant to Section
11.1.2), make adequate provision to substitute for the Adjustment Shares, upon
payment of the applicable Purchase Price, (1) cash, (2) a reduction in the
Purchase Price, (3) Preferred Shares or other equity securities of the Company
(including, without limitation, shares, or fractions of shares, of preferred
stock which, by virtue of having dividend and liquidation rights substantially
comparable to those of the Common Shares, the Board of Directors of the Company
has deemed in good faith to have substantially the same value as Common Shares)
(each such share of preferred stock or fractions of shares of preferred stock
constituting a "common stock equivalent")), (4) debt securities of the Company,
(5) other assets or (6) any combination of the foregoing having an aggregate
value equal to the Current Value, where such aggregate value has been determined
by the Board of Directors of the Company based upon the advice of a nationally
recognized investment banking firm selected in good faith by the Board of
Directors of the Company; PROVIDED, HOWEVER, that if the Company shall not have
made adequate provision to deliver value pursuant to clause (B) above within
thirty (30) days following the occurrence of a Trigger Event, then the Company
shall be obligated to deliver, to the extent necessary and permitted by
applicable law and any agreements or instruments in effect on the date hereof to
which it is a party, upon the surrender for exercise of a Right and without
requiring payment of the Purchase Price, Common Shares (to the extent available)
and then, if necessary, such number or fractions of Preferred Shares (to the
extent available) and then, if necessary, cash, which shares and/or cash have an
aggregate value equal to the Spread. If the Board of Directors of the Company
shall determine in good faith that it is unlikely that sufficient additional
Common Shares could be authorized for issuance upon exercise in full of the
Rights, the thirty (30) day period set forth above may be extended and
re-extended to the extent necessary, but not more than ninety (90) days
following the occurrence of a Trigger Event, in order that the Company may seek
stockholder approval for the authorization of such additional shares (such
period as may be extended, the "Substitution Period"). To the extent that the
Company determines that some action need be taken pursuant to the second and/or
third sentences of this Section 11.1.3, the Company (x) shall provide that such
action shall apply uniformly to all outstanding Rights, and (y) may suspend the
exercisability of the Rights until the expiration of the Substitution Period in
order to seek any authorization of additional shares and/or to decide the
appropriate form of distribution to be made pursuant to such first sentence and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11.1.3, the
value of a Common Share shall be the current per share market price (as
determined pursuant to Section 11.4) on the date of the occurrence of a Trigger
Event and the value of any "common stock equivalent" shall be deemed to have the
same value as the Common Shares on such date. The Board of Directors of the
Company may, but shall not be required to, establish procedures to allocate the
right to receive

                                       15
<PAGE>   17

Common Shares upon the exercise of the Rights among holders of Rights pursuant
to this Section 11.1.3.

            11.2 Dilutive Rights Offering. In case the Company shall fix a
record date for the issuance of rights, options or warrants to all holders of
Preferred Shares entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase Preferred Shares (or
securities having the same rights, privileges and preferences as the Preferred
Shares ("equivalent preferred stock")) or securities convertible into Preferred
Shares or equivalent preferred stock at a price per Preferred Share or per share
of equivalent preferred stock (or having a conversion or exercise price per
share, if a security convertible into or exercisable for Preferred Shares or
equivalent preferred stock) less than the current per share market price of the
Preferred Shares (as determined pursuant to Section 11.4) on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of Preferred Shares
and shares of equivalent preferred stock outstanding on such record date plus
the number of Preferred Shares and shares of equivalent preferred stock which
the aggregate offering price of the total number of Preferred Shares and/or
shares of equivalent preferred stock to be offered (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such current per share market price and the denominator of which shall be the
number of Preferred Shares and shares of equivalent preferred stock outstanding
on such record date plus the number of additional Preferred Shares and/or shares
of equivalent preferred stock to be offered for subscription or purchase (or
into which the convertible securities so to be offered are initially
convertible); PROVIDED, HOWEVER, that in no event shall the consideration to be
paid upon the exercise of one Right be less than the aggregate par value of the
shares of capital stock of the Company issuable upon exercise of one Right. In
case such subscription price may be paid in a consideration part or all of which
shall be in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent and the holders of the Rights. Preferred
Shares and shares of equivalent preferred stock owned by or held for the account
of the Company or any Subsidiary of the Company shall not be deemed outstanding
for the purpose of any such computation. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
rights or warrants are not so issued, the Purchase Price shall be adjusted to be
the Purchase Price which would then be in effect if such record date had not
been fixed.

            11.3 Distributions. In case the Company shall fix a record date for
the making of a distribution to all holders of the Preferred Shares (including
any such distribution made in connection with a consolidation or merger in which
the Company is the continuing or surviving corporation) of evidences of
indebtedness, cash, securities or assets (other than a regular periodic cash
dividend at a rate not in excess of 125% of the rate of the last regular
periodic cash dividend theretofore paid or, in case regular periodic cash
dividends have not theretofore been paid, at a rate not in excess of 50% of the
average net income per share of the Company for the four

                                       16
<PAGE>   18

quarters ended immediately prior to the payment of such dividend, or a dividend
payable in Preferred Shares (which dividend, for purposes of this Agreement,
shall be subject to the provisions of Section 11.1.1(A))) or convertible
securities, or subscription rights or warrants (excluding those referred to in
Section 11.2), the Purchase Price to be in effect after such record date shall
be determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the current per
share market price of the Preferred Shares (as determined pursuant to Section
11.4) on such record date, less the fair market value (as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent) of the portion of the
cash, assets, securities or evidences of indebtedness so to be distributed or of
such subscription rights or warrants applicable to one Preferred Share and the
denominator of which shall be such current per share market price of the
Preferred Shares (as determined pursuant to Section 11.4); PROVIDED, HOWEVER,
that in no event shall the consideration to be paid upon the exercise of one
Right be less than the aggregate par value of the shares of capital stock of the
Company to be issued upon exercise of one Right. Such adjustments shall be made
successively whenever such a record date is fixed; and in the event that such
distribution is not so made, the 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.

            11.4 Current Per Share Market Value.

            11.4.1 General. For the purpose of any computation hereunder, the
"current per share market price" of any security (a "Security" for the purpose
of this Section 11.4.1) on any date shall be deemed to be the average of the
daily closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; PROVIDED, HOWEVER, that in the event that the current per share market
price of the Security is determined during any period following the announcement
by the issuer of such Security of (i) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (ii) any subdivision, combination or reclassification of such
Security, and prior to the expiration of thirty (30) Trading Days after the
ex-dividend date for such dividend or distribution, or the record date for such
subdivision, combination or reclassification, then, and in each such case, the
"current per share market price" shall be appropriately adjusted to reflect the
current market price per share equivalent of such Security. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the Security is not listed or
admitted to trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Security is listed or
admitted to trading or, if the Security is not listed or admitted to trading on
any national securities exchange, the last quoted price or, if not so quoted,
the average of the high bid and low asked prices in the over-the-counter market,
as reported by Nasdaq or such other system then in use, or, if on any such date
the

                                       17
<PAGE>   19

Security is not quoted by any such organization, the average of the closing bid
and asked prices as furnished by a professional market maker making a market in
the Security selected by the Board of Directors of the Company. If on any such
date no such market maker is making a market in the Security, the fair value of
the Security on such date as determined in good faith by the Board of Directors
of the Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the Security is listed or
admitted to trading is open for the transaction of business or, if the Security
is not listed or admitted to trading on any national securities exchange, a
Business Day. If the Security is not publicly held or not so listed or traded,
or if on any such date the Security is not so quoted and no such market maker is
making a market in the Security, "current per share market price" shall mean the
fair value per share as determined in good faith by the Board of Directors of
the Company or, if at the time of such determination there is an Acquiring
Person, by a nationally recognized investment banking firm selected by the Board
of Directors, which shall have the duty to make such determination in a
reasonable and objective manner, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.

            11.4.2 Preferred Shares. Notwithstanding Section 11.4.1, for the
purpose of any computation hereunder, the "current per share market price" of
the Preferred Shares shall be determined in the same manner as set forth above
in Section 11.4.1 (other than the last sentence thereof). If the current per
share market price of the Preferred Shares cannot be determined in the manner
described in Section 11.4.1, the "current per share market price" of the
Preferred Shares shall be conclusively deemed to be an amount equal to 100 (as
such number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to the Common Shares occurring
after the date of this Agreement) multiplied by the current per share market
price of the Common Shares (as determined pursuant to Section 11.4.1). If
neither the Common Shares nor the Preferred Shares are publicly held or so
listed or traded, or if on any such date neither the Common Shares nor the
Preferred Shares are so quoted and no such market maker is making a market in
either the Common Shares or the Preferred Shares, "current per share market
price" of the Preferred Shares shall mean the fair value per share as determined
in good faith by the Board of Directors of the Company, or, if at the time of
such determination there is an Acquiring Person, by a nationally recognized
investment banking firm selected by the Board of Directors of the Company, which
shall have the duty to make such determination in a reasonable and objective
manner, which determination shall be described in a statement filed with the
Rights Agent and shall be conclusive for all purposes. For purposes of this
Agreement, the "current per share market price" of one one-hundredth of a
Preferred Share shall be equal to the "current per share market price" of one
Preferred Share divided by 100.

            11.5 Insignificant Changes. No adjustment in the Purchase Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Purchase Price. Any adjustments which by reason of this
Section 11.5 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-hundred

                                       18
<PAGE>   20

thousandth of a Preferred Share or the nearest one-hundredth of a Common Share
or other share or security, as the case may be.

            11.6 Shares Other Than Preferred Shares. If as a result of an
adjustment made pursuant to Section 11.1, the holder of any Right thereafter
exercised shall become entitled to receive any shares of capital stock of the
Company other than Preferred Shares, thereafter the number of such other shares
so receivable upon exercise of any Right shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Shares contained in Sections 11.1,
11.2, 11.3, 11.5, 11.8, 11.9 and 11.13, and the provisions of Sections 7, 9, 10,
13 and 14 with respect to the Preferred Shares shall apply on like terms to any
such other shares.

            11.7 Rights Issued Prior to Adjustment. All Rights originally issued
by the Company subsequent to any adjustment made to the Purchase Price hereunder
shall evidence the right to purchase, at the adjusted Purchase Price, the number
of one one-hundredths of a Preferred Share purchasable from time to time
hereunder upon exercise of the Rights, all subject to further adjustment as
provided herein.

            11.8 Effect of Adjustments. Unless the Company shall have exercised
its election as provided in Section 11.9, upon each adjustment of the Purchase
Price as a result of the calculations made in Sections 11.2 and 11.3, each Right
outstanding immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number of
one one-hundredths of a Preferred Share (calculated to the nearest one-hundred
thousandth of a Preferred Share) obtained by (i) multiplying (x) the number of
one one-hundredths of a Preferred Share covered by a Right immediately prior to
this adjustment by (y) the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price and (ii) dividing the product so obtained by
the Purchase Price in effect immediately after such adjustment of the Purchase
Price.

            11.9 Adjustment in Number of Rights. The Company may elect on or
after the date of any adjustment of the Purchase Price to adjust the number of
Rights, in substitution for any adjustment in the number of one one-hundredths
of a Preferred Share issuable upon the exercise of a Right. Each of the Rights
outstanding after such adjustment of the number of Rights shall be exercisable
for the number of one one-hundredths of a Preferred Share 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-hundredth) obtained by dividing the
Purchase Price in effect immediately prior to adjustment of the Purchase Price
by the Purchase Price in effect immediately after adjustment of the Purchase
Price. The Company shall make a public announcement of its election to adjust
the number of Rights, indicating the record date for the adjustment, and, if
known at the time, the amount of the adjustment to be made. This record date may
be the date on which the Purchase Price is adjusted or any day thereafter, but,
if the Right Certificates have been issued, shall be at least ten (10) days
later than the date of the public announcement. If Right Certificates have

                                       19
<PAGE>   21

been issued, upon each adjustment of the number of Rights pursuant to this
Section 11.9, the Company may, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14, the additional Rights to which
such holders shall be entitled as a result of such adjustment, or, at the option
of the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Right Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Right Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Right Certificates so to be distributed
shall be issued, executed and countersigned in the manner provided for herein
(and may bear, at the option of the Company, the adjusted Purchase Price) and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.

            11.10 Right Certificates Unchanged. Irrespective of any adjustment
or change in the Purchase Price or the number of one one-hundredths of a
Preferred Share 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 one one-hundredths of a Preferred Share which were
expressed in the initial Right Certificates issued hereunder.

            11.11 Par Value Limitations. Before taking any action that would
cause an adjustment reducing the Purchase Price below one one-hundredth of the
then par value, if any, of the Preferred Shares or other shares of capital stock
issuable upon exercise of the Rights, the Company shall take any corporate
action which may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue fully paid and nonassessable Preferred
Shares or other such shares at such adjusted Purchase Price.

            11.12 Deferred Issuance. In any case in which this Section 11 shall
require that an adjustment in the Purchase Price be made effective as of a
record date for a specified event, the Company may elect to defer until the
occurrence of such event the issuance to the holder of any Right exercised after
such record date of that number of Preferred Shares and shares of other capital
stock or securities of the Company, if any, issuable upon such exercise over and
above the Preferred Shares and shares of other capital stock or other
securities, assets or cash of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; PROVIDED,
HOWEVER, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

            11.13 Reduction in Purchase Price. Anything in this Section 11 to
the contrary notwithstanding, the Company shall be entitled to make such
reductions in the Purchase Price, in addition to those adjustments expressly
required by this Section 11, as and to the extent that it in its sole discretion
shall determine to be advisable in order that any consolidation or subdivision
of the Preferred Shares, issuance wholly for cash of any of the Preferred Shares
at less than the current market price, issuance wholly for cash of Preferred
Shares or securities which by their

                                       20
<PAGE>   22

terms are convertible into or exchangeable for Preferred Shares, dividends on
Preferred Shares payable in Preferred Shares or issuance of rights, options or
warrants referred to hereinabove in this Section 11, hereafter made by the
Company to holders of its Preferred Shares shall not be taxable to such
stockholders.

            11.14 Company Not to Diminish Benefits of Rights. The Company
covenants and agrees that after the earlier of the Shares Acquisition Date or
Distribution Date it will not, except as permitted by Section 23, Section 26 or
Section 27, take (or permit any Subsidiary to take) any action if at the time
such action is taken it is reasonably foreseeable that such action will
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights.

            11.15 Adjustment of Rights Associated with Common Shares.
Notwithstanding anything contained in this Agreement to the contrary, in the
event that the Company shall at any time after the date hereof and prior to the
Distribution Date (i) declare or pay any dividend on the outstanding Common
Shares payable in Common Shares, (ii) effect a subdivision or consolidation of
the outstanding Common Shares (by reclassification or otherwise than by the
payment of dividends payable in Common Shares), or (iii) combine the outstanding
Common Shares into a greater or lesser number of Common Shares, then in any such
case, the number of Rights associated with each Common Share then outstanding,
or issued or delivered thereafter but prior to the Distribution Date or in
accordance with Section 22 shall be proportionately adjusted so that the number
of Rights thereafter associated with each Common Share following any such event
shall equal the result obtained by multiplying the number of Rights associated
with each Common Share immediately prior to such event by a fraction, the
numerator of which shall be the total number of Common Shares outstanding
immediately prior to the occurrence of the event and the denominator of which
shall be the total number of Common Shares outstanding immediately following the
occurrence of such event. The adjustments provided for in this Section 11.15
shall be made successively whenever such a dividend is declared or paid or such
a subdivision, combination or consolidation is effected.

            12 Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Sections 11 or 13, the Company
shall (a) promptly prepare a certificate setting forth such adjustment, and a
brief statement of the facts accounting for such adjustment, (b) promptly file
with the Rights Agent and with each transfer agent for the Common Shares or the
Preferred Shares a copy of such certificate and (c) mail a brief summary thereof
to each holder of a Right Certificate in accordance with Section 25. The Rights
Agent shall be fully protected in relying on any such certificate and on any
adjustment therein contained and shall not be deemed to have knowledge of any
such adjustment unless and until it shall have received such certificate.

                                       21
<PAGE>   23

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

            13.1 Certain Transactions. In the event that, from and after the
first occurrence of a Trigger Event, directly or indirectly, (A) the Company
shall consolidate with, or merge with and into, any other Person and the Company
shall not be the continuing or surviving corporation, (B) any Person shall
consolidate with the Company, or merge with and into the Company and the Company
shall be the continuing or surviving corporation of such merger and, in
connection with such merger, all or part of the Common Shares shall be changed
into or exchanged for stock or other securities of the Company or any other
Person or cash or any other property, or (C) the Company shall sell, exchange,
mortgage or otherwise transfer (or one or more of its Subsidiaries shall sell,
exchange, mortgage or otherwise transfer), in one or more transactions, assets
or earning power aggregating 50% or more of the assets or earning power of the
Company and its Subsidiaries (taken as a whole) to any other Person or Persons
(other than the Company or one or more wholly-owned Subsidiaries of the Company
in one or more transactions each of which complies with Section 11.14), then,
and in each such case, proper provision shall be made so that (i) each holder of
a Right (other than Rights which have become void pursuant to Section 11.1.2)
shall thereafter have the right to receive, upon the exercise thereof at a price
per Right equal to the then current Purchase Price multiplied by the number of
one one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as subsequently
adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12), in
accordance with the terms of this Agreement and in lieu of Preferred Shares or
Common Shares, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable Common Shares of the Principal Party (as such
term is hereinafter defined) not subject to any liens, encumbrances, rights of
first refusal or other adverse claims, as shall be equal to the result obtained
by (x) multiplying the then current Purchase Price by the number of one
one-hundredths of a Preferred Share for which a Right was exercisable
immediately prior to the first occurrence of a Trigger Event (as subsequently
adjusted pursuant to Sections 11.1.1, 11.2, 11.3, 11.8, 11.9 and 11.12) and (y)
dividing that product by 50% of the then current per share market price of the
Common Shares of such Principal Party (determined pursuant to Section 11.4) on
the date of consummation of such consolidation, merger, sale or transfer;
PROVIDED, that the price per Right so payable and the number of Common Shares of
such Principal Party so receivable upon exercise of a Right shall thereafter be
subject to further adjustment as appropriate in accordance with Section 11.6 to
reflect any events covered thereby occurring in respect of the Common Shares of
such Principal Party after the occurrence of such consolidation, merger, sale or
transfer; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such consolidation, merger, sale or transfer, all the
obligations and duties of the Company pursuant to this Agreement; (iii) the term
"Company" shall thereafter be deemed to refer to such Principal Party; and (iv)
such Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of its Common Shares in accordance with
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 its Common Shares thereafter deliverable upon
the exercise of the Rights; PROVIDED that, upon the subsequent occurrence of any
consolidation, merger, sale or transfer of assets or other extraordinary

                                       22
<PAGE>   24

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 as provided in this Section 13.1, such cash, shares, rights,
warrants and other property which such holder would have been entitled to
receive had such holder, at the time of such transaction, owned the Common
Shares of the Principal Party receivable upon the exercise of a Right pursuant
to this Section 13.1, 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. The Company shall
not consummate any such consolidation, merger, sale or transfer unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement confirming that the requirements of
this Section 13.1 and Section 13.2 shall promptly be performed in accordance
with their terms and that such consolidation, merger, sale or transfer of assets
shall not result in a default by the Principal Party under this Agreement as the
same shall have been assumed by the Principal Party pursuant to this Section
13.1 and Section 13.2 and providing that, as soon as practicable after executing
such agreement pursuant to this Section 13, the Principal Party, at its own
expense, shall

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

            (2) use its best efforts, if the Common Shares of the Principal
Party shall be listed or admitted to trading on the New York Stock Exchange or
on another national securities exchange, to list or admit to trading (or
continue the listing of) the Rights and the securities purchasable upon exercise
of the Rights on the New York Stock Exchange or such securities exchange, or, if
the Common Shares of the Principal Party shall not be listed or admitted to
trading on the New York Stock Exchange or a national securities exchange, to
cause the Rights and the securities receivable upon exercise of the Rights to be
authorized for quotation on Nasdaq or on such other system then in use;

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

            (4) obtain waivers of any rights of first refusal or preemptive
rights in respect of the Common Shares of the Principal Party subject to
purchase upon exercise of outstanding Rights.

                                       23
<PAGE>   25

            In case the Principal Party has provision in any of its authorized
securities or in its certificate of incorporation or by-laws or other instrument
governing its corporate affairs, which provision would have the effect of (i)
causing such Principal Party to issue (other than to holders of Rights pursuant
to this Section 13), in connection with, or as a consequence of, the
consummation of a transaction referred to in this Section 13, Common Shares or
common stock equivalents of such Principal Party at less than the then current
market price per share thereof (determined pursuant to Section 11.4) or
securities exercisable for, or convertible into, Common Shares or common stock
equivalents of such Principal Party at less than such then current market price
(other than to holders of Rights pursuant to this Section 13), or (ii) providing
for any special payment, taxes or similar provision in connection with the
issuance of the Common Shares of such Principal Party pursuant to the provision
of Section 13, then, in such event, the Company hereby agrees with each holder
of Rights that it shall not consummate any such transaction unless prior thereto
the Company and such Principal Party shall have executed and delivered to the
Rights Agent a supplemental agreement providing that the provision in question
of such Principal Party shall have been canceled, waived or amended, or that the
authorized securities shall be redeemed, so that the applicable provision will
have no effect in connection with, or as a consequence of, the consummation of
the proposed transaction.

            The Company covenants and agrees that it shall not, at any time
after the Trigger Event, enter into any transaction of the type described in
clauses (A) through (C) of this Section 13.1 if (i) at the time of or
immediately after such consolidation, merger, sale, transfer or other
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, (ii)
prior to, simultaneously with or immediately after such consolidation, merger,
sale, transfer or other transaction, the stockholders of the Person who
constitutes, or would constitute, the Principal Party for purposes of Section
13.2 shall have received a distribution of Rights previously owned by such
Person or any of its Affiliates or Associates or (iii) the form or nature of
organization of the Principal Party would preclude or limit the exercisability
of the Rights. The provisions of this Section 13 shall similarly apply to
successive transactions of the type described in clauses (A) through (C) of this
Section 13.1.

            13.2 Principal Party. "Principal Party" shall mean:

                (i) in the case of any transaction described in (A) or (B) of
the first sentence of Section 13.1: (i) the Person that is the issuer of the
securities into which the Common Shares are converted in such merger or
consolidation, or, if there is more than one such issuer, the issuer the Common
Shares of which have the greatest aggregate market value of shares outstanding,
or (ii) if no securities are so issued, (x) the Person that is the other party
to the merger, if such Person survives said merger, or, if there is more than
one such Person, the Person the Common Shares of which have the greatest
aggregate market value of shares outstanding or (y) if the Person that is the
other party to the merger does not survive the merger,

                                       24
<PAGE>   26

the Person that does survive the merger (including the Company if it survives)
or (z) the Person resulting from the consolidation; and

                (ii) in the case of any transaction described in (C) of the
first sentence in Section 13.1, 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 Shares having the greatest aggregate market value of shares
outstanding; PROVIDED, HOWEVER, that in any such case described in the foregoing
clause (i) or (ii) of this Section 13.2, if the Common Shares of such Person are
not at such time or have not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, then (1) if such Person
is a direct or indirect Subsidiary of another Person the Common Shares of which
are and have been so registered, the term "Principal Party" shall refer to such
other Person, or (2) if such Person is a Subsidiary, directly or indirectly, of
more than one Person, the Common Shares of all of which are and have been so
registered, the term "Principal Party" shall refer to whichever of such Persons
is the issuer of Common Shares having the greatest aggregate market value of
shares outstanding, or (3) if such Person is owned, directly or indirectly, by a
joint venture formed by two or more Persons that are not owned, directly or
indirectly, by the same Person, the rules set forth in clauses (1) and (2) above
shall apply to each of the owners having an interest in the venture as if the
Person owned by the joint venture was a Subsidiary of both or all of such joint
venturers, and the Principal Party in each such case shall bear the obligations
set forth in this Section 13 in the same ratio as its interest in such Person
bears to the total of such interests.

            13.3 Approved Acquisitions. Notwithstanding anything contained
herein to the contrary, upon the consummation of any merger or other acquisition
transaction of the type described in clause (A), (B) or (C) of Section 13.1
involving the Company pursuant to a merger or other acquisition agreement
between the Company and any Person (or one or more of such Person's Affiliates
or Associates) which agreement has been approved by the Board of Directors of
the Company prior to any Person becoming an Acquiring Person, this Agreement and
the rights of holders of Rights hereunder shall be terminated in accordance with
Section 7.1.

            14 Fractional Rights and Fractional Shares.

            14.1 Cash in Lieu of Fractional Rights. The Company shall not be
required to issue fractions of Rights or to distribute Right Certificates which
evidence fractional Rights (except prior to the Distribution Date in accordance
with Section 11.15). 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 an amount in cash equal to the
same fraction of the current market value of a whole Right. For the purposes of
this Section 14.1, 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

                                       25
<PAGE>   27

been otherwise issuable. The closing price for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Rights are not listed or admitted to trading on the New York Stock
Exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights, the current market value of the Rights on such date shall
be the fair value of the Rights as determined in good faith by the Board of
Directors of the Company, or, if at the time of such determination there is an
Acquiring Person, by a nationally recognized investment banking firm selected by
the Board of Directors of the Company, which shall have the duty to make such
determination in a reasonable and objective manner, which determination shall be
described in a statement filed with the Rights Agent and shall be conclusive for
all purposes.

            14.2 Cash in Lieu of Fractional Preferred Shares. The Company shall
not be required to issue fractions of Preferred Shares (other than fractions
which are integral multiples of one one-hundredth of a Preferred Share) upon
exercise or exchange of the Rights or to distribute certificates which evidence
fractional Preferred Shares (other than fractions which are integral multiples
of one one-hundredth of a Preferred Share). Interests in fractions of Preferred
Shares in integral multiples of one one-hundredth of a Preferred Share may, at
the election of the Company, be evidenced by depositary receipts, pursuant to an
appropriate agreement between the Company and a depositary selected by it;
PROVIDED, that such agreement shall provide that the holders of such depositary
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the Preferred Shares represented by such
depositary receipts. In lieu of fractional Preferred Shares that are not
integral multiples of one one-hundredth of a Preferred Share, the Company shall
pay to the registered holders of Right Certificates at the time such Rights are
exercised or exchanged as herein provided an amount in cash equal to the same
fraction of the current per share market price of one Preferred Share (as
determined in accordance with Section 14.1) for the Trading Day immediately
prior to the date of such exercise or exchange.

            14.3 Cash in Lieu of Fractional Common Shares. The Company shall not
be required to issue fractions of Common Shares or to distribute certificates
which evidence fractional Common Shares upon the exercise or exchange of Rights.
In lieu of such fractional Common Shares, the Company shall pay to the
registered holders of the Right Certificates with regard to which such
fractional Common Shares would otherwise be issuable an amount in cash equal to
the same fraction of the current market value of a whole Common Share (as
determined

                                       26
<PAGE>   28

in accordance with Section 14.1) for the Trading Day immediately prior to the
date of such exercise or exchange.

            14.4 Waiver of Right to Receive Fractional Rights or Shares. The
holder of a Right by the acceptance of the Rights expressly waives his right to
receive any fractional Rights or any fractional shares upon exercise or exchange
of a Right, except as permitted by this Section 14.

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

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

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

               (b) as of and after the Distribution Date, the Right Certificates
        are transferable only on the registry books of the Rights Agent if
        surrendered at the office of the Rights Agent designated for such
        purpose, duly endorsed or accompanied by a proper instrument of transfer
        with all required certifications completed; 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 Shares certificate) is
        registered as the absolute owner thereof and of the Rights evidenced
        thereby (notwithstanding any notations of ownership or writing on the
        Right Certificates or the associated Common Shares certificate made by
        anyone other than the Company or the Rights Agent) for all purposes

                                       27
<PAGE>   29

        whatsoever, and neither the Company nor the Rights Agent shall be
        affected by any notice to the contrary.

            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 the Preferred Shares or any other
securities of the Company which may at any time be issuable on the exercise of
the Rights represented thereby, nor shall anything contained herein or in any
Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a 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 Right or Rights evidenced by such
Right Certificate shall have been exercised in accordance with the provisions
hereof.

            18 Concerning the Rights Agent. The Company agrees to pay to the
Rights Agent reasonable compensation for all services rendered by it hereunder
in accordance with a fee schedule to be mutually agreed upon and, from time to
time, 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 the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross 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 arising therefrom, directly or indirectly. The  provisions of this
Section shall survive the termination of this Agreement.

            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 the Preferred Shares or the Common Shares or for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, instruction, direction,
consent, certificate, statement, or other paper or document believed by it to be
genuine and to be signed, executed and, where necessary, verified or
acknowledged, by the proper Person or Persons.

            19 Merger or Consolidation or Change of Name of Rights Agent. Any
corporation or limited liability company into which the Rights Agent or any
successor Rights Agent may be merged or with which it may be consolidated, or
any corporation or limited liability company resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be a
party, or any corporation or limited liability company succeeding to the
corporate trust or 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 or limited liability
company would be eligible for appointment as

                                       28
<PAGE>   30

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;
and in case at that time any of the Right Certificates shall not have been
countersigned, any successor Rights Agent may countersign such Right
Certificates either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Right Certificates
shall have the full force provided in the Right Certificates and in this
Agreement.

            In case at any time the name of the Rights Agent shall be changed
and at such time any of the Right Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Right Certificates so countersigned; and in case at that time
any of the Right Certificates shall not have been countersigned, the Rights
Agent may countersign 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.

            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:

            20.1 Legal Counsel. The Rights Agent may consult with legal counsel
selected by it (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.

            20.2 Certificates as to Facts or Matters. 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
any one of the Chairman of the Board of Directors, the Chief Executive Officer,
the President, the Chief Financial Officer, any Vice President, the Treasurer,
the Secretary or any Assistant Treasurer or Assistant 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.

            20.3 Standard of Care. The Rights Agent shall be liable hereunder
only for its own gross negligence, bad faith or willful misconduct; provided,
however, that the Rights Agent shall in no event be liable or responsible for
any indirect, consequential, special or punitive damages.

            20.4 Reliance on Agreement and Right Certificates. The Rights Agent
shall not be liable for or by reason of any of the statements of fact or
recitals contained in this Agreement

                                       29
<PAGE>   31

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

            20.5 No Responsibility as to Certain Matters. 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 change in the
exercisability of the Rights (including the Rights becoming void pursuant to
Section 11.1.2) or any adjustment required under the provisions of Sections 3,
11, 13, 23 or 27 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 change or adjustment); nor
shall it by any act hereunder be deemed to make any representation or warranty
as to the authorization or reservation of any Preferred Shares or other
securities to be issued pursuant to this Agreement or any Right Certificate or
as to whether any Preferred Shares will, when so issued, be validly authorized
and issued, fully paid and nonassessable.

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

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

                                       30
<PAGE>   32

shall have received written instructions in response to such application
specifying the action to be taken or omitted.

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

            20.9 Reliance on Attorneys and Agents. 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, omission, default,
neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, omission, default, neglect or misconduct,
PROVIDED that reasonable care was exercised in the selection and continued
employment thereof.

            20.10 Incomplete Certificate. If, with respect to any Rights
Certificate surrendered to the Rights Agent for exercise or transfer, the
certificate contained in the form of assignment or the form of election to
purchase set forth on the reverse thereof, as the case may be, has not been
completed to certify the holder is not an Acquiring Person (or an Affiliate or
Associate thereof), the Rights Agent shall not take any further action with
respect to such requested exercise or transfer without first consulting with the
Company.

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

            21 Change of Rights Agent. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon
thirty (30) days' notice in writing mailed to the Company and to each transfer
agent of the Common Shares and/or Preferred Shares, as applicable, by registered
or certified mail. Following the Distribution Date, the Company shall promptly
notify the holders of the Right Certificates by first-class mail of any such
resignation. The Company may remove the Rights Agent or any successor Rights
Agent upon thirty (30) days' notice in writing, mailed to the Rights Agent or
successor Rights Agent, as the case may be, and to each transfer agent of the
Common Shares and/or Preferred Shares, as applicable, 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 resigning, removed, or incapacitated Rights Agent shall remit to the
Company, or to any successor Rights Agent designated by the Company, all books,
records,

                                       31
<PAGE>   33

funds, certificates or other documents or instruments of any kind then in its
possession which were acquired by such resigning, removed or incapacitated
Rights Agent in connection with its services as Rights Agent hereunder, and
shall thereafter be discharged from all duties and obligations hereunder.
Following notice of such removal, resignation or incapacity, the Company shall
appoint a successor to such Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by 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 or of the State of New York or the State of California (or
any other state of the United States so long as such corporation is authorized
to do business as a banking institution in the State of New York or California)
in good standing, having an office in the State of New York or the State of
California, which is authorized under such laws to exercise stock transfer or
corporate trust powers and is subject to supervision or examination by Federal
or state authority and which has at the time of its appointment as Rights Agent
a combined capital and surplus of at least $10 million. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Shares and/or Preferred Shares, as
applicable, and, following the Distribution Date, 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.

            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 Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Right Certificates made in accordance with the
provisions of this Agreement. In addition, in connection with the issuance or
sale of Common Shares following the Distribution Date and prior to the
Expiration Date, the Company shall, with respect to Common Shares so issued or
sold pursuant to the exercise of stock options or under any employee plan or
arrangement, granted or awarded, or upon exercise, conversion or exchange of
securities hereinafter issued by the Company, in each case existing prior to the
Distribution Date, issue Right Certificates representing the appropriate number
of Rights in connection with such issuance or sale; PROVIDED, HOWEVER, that (i)
no such Right Certificate shall be issued if, and to the extent that, the
Company shall be advised by counsel that

                                       32
<PAGE>   34

such issuance would create a significant risk of material adverse tax
consequences to the Company or the Person to whom such Right Certificate would
be issued and (ii) no such Right Certificate shall be issued if, and to the
extent that, appropriate adjustment shall otherwise have been made in lieu of
the issuance thereof.

            23 Redemption.

            23.1 Right to Redeem. The Board of Directors of the Company may, at
its option, at any time prior to a Trigger Event, 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,
recapitalization or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the "Redemption Price"), and
the Company may, at its option, pay the Redemption Price in Common Shares (based
on the "current per share market price," determined pursuant to Section 11.4, of
the Common Shares at the time of redemption), cash or any other form of
consideration deemed appropriate by the Board of Directors. The redemption of
the Rights by the Board of Directors may be made effective at such time, on such
basis and subject to such conditions as the Board of Directors in its sole
discretion may establish.

            23.2 Redemption Procedures. Immediately upon the action of the Board
of Directors of the Company ordering the redemption of the Rights (or at such
later time as the Board of Directors may establish for the effectiveness of such
redemption), and without any further action and without any notice, the right to
exercise the Rights will terminate and the only right thereafter of the holders
of Rights shall be to receive the Redemption Price for each Right so held. The
Company shall promptly give public notice of such redemption; PROVIDED, HOWEVER,
that the failure to give, or any defect in, any such notice shall not affect the
validity of such redemption. The Company shall promptly give, or cause the
Rights Agent to 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 or, prior
to the Distribution Date, on the registry books of the transfer agent for the
Common Shares. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption shall state the method by which the payment of the Redemption Price
will be made. Neither the Company nor any of its Affiliates or Associates may
redeem, acquire or purchase for value any Rights at any time in any manner other
than that specifically set forth in this Section 23 or in Section 27, and other
than in connection with the purchase, acquisition or redemption of Common Shares
prior to the Distribution Date.

            24 Notice of Certain Events. In case the Company shall propose at
any time after the earlier of the Shares Acquisition Date and the Distribution
Date (a) to pay any dividend payable in stock of any class to the holders of
Preferred Shares or to make any other distribution to the holders of Preferred
Shares (other than a regular periodic cash dividend at a rate not in excess of
125% of the rate of the last regular periodic cash dividend theretofore paid or,
in case

                                       33
<PAGE>   35

regular periodic cash dividends have not theretofore been paid, at a rate not in
excess of 50% of the average net income per share of the Company for the four
quarters ended immediately prior to the payment of such dividends, or a stock
dividend on, or a subdivision, combination or reclassification of the Common
Shares), or (b) to offer to the holders of Preferred Shares rights or warrants
to subscribe for or to purchase any additional Preferred Shares or shares of
stock of any class or any other securities, rights or options, or (c) to effect
any reclassification of its Preferred Shares (other than a reclassification
involving only the subdivision of outstanding Preferred Shares), or (d) to
effect any consolidation or merger into or with, or to effect any sale or other
transfer (or to permit one or more of its Subsidiaries to effect any sale or
other transfer), in one or more transactions, of 50% or more of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person (other than pursuant to a merger or other acquisition agreement of
the type described in Section 1.3(ii)(A)(z)), or (e) to effect the liquidation,
dissolution or winding up of the Company, or (f) to declare or pay any dividend
on the Common Shares payable in Common Shares or to effect a subdivision,
combination or consolidation of the Common Shares (by reclassification or
otherwise than by payment of dividends in Common Shares), then, in each such
case, the Company shall give to the Rights Agent and to each holder of a Right
Certificate, in accordance with Section 25, a notice of such proposed action,
which shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
Preferred Shares and/or Common Shares, if any such date is to be fixed, and such
notice shall be so given in the case of any action covered by clause (a) or (b)
above at least ten (10) days prior to the record date for determining holders of
the Preferred Shares for purposes of such action, and in the case of any such
other action, at least ten (10) days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of the
Preferred Shares and/or Common Shares, whichever shall be the earlier.

            In case any event set forth in Section 11.1.2 or Section 13 shall
occur, then, in any such case, (i) the Company shall as soon as practicable
thereafter give to the Rights Agent and to each holder of a Right Certificate,
in accordance with Section 25, a notice of the occurrence of such event, which
notice shall describe the event and the consequences of the event to holders of
Rights under Section 11.1.2 and Section 13, and (ii) all references in this
Section 24 to Preferred Shares shall be deemed thereafter to refer to Common
Shares and/or, if appropriate, other securities.

            Notwithstanding anything in this Agreement to the contrary, prior to
the Distribution Date a filing by the Company with the Securities and Exchange
Commission shall constitute sufficient notice to the holders of securities of
the Company, including the Rights, for purposes of this Agreement and no other
notice need be given.

            25 Notices. 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

                                       34
<PAGE>   36

be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed (until another address is filed in writing with the Rights Agent) as
follows:

                      Health Care Property Investors, Inc.
                      4675 MacArthur Court
                      9th Floor
                      Newport Beach, CA 92660
                      Attention:  Secretary

Subject to the provisions of Section 21 and Section 24, 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 first-class mail, postage prepaid, addressed (until another
address is filed in writing with the Company) as follows:

                      The Bank of New York
                      101 Barclay Street
                      New York, NY 10286
                      Attention:  Shareholder Services Division

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

            26 Supplements and Amendments. For so long as the Rights are then
redeemable, the Company may in its sole and absolute discretion, and the Rights
Agent shall, if the Company so directs, supplement or amend any provision of
this Agreement in any respect without the approval of any holders of Rights or
Common Shares. From and after the time that the Rights are no longer redeemable,
the Company may, and the Rights Agent shall, if the Company so directs, from
time to time supplement or amend this Agreement without the approval of any
holders of Rights (i) to cure any ambiguity or to correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein or (ii) to make any other changes or provisions in regard to
matters or questions arising hereunder which the Company may deem necessary or
desirable, including but not limited to extending the Final Expiration Date;
PROVIDED, HOWEVER, that no such supplement or amendment shall adversely affect
the interests of the holders of Rights as such (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person), and no such supplement or
amendment may cause the Rights again to become redeemable or cause this
Agreement again to become amendable other than in accordance with this sentence;
PROVIDED FURTHER, that the right of the Board of Directors to extend the
Distribution Date shall not require any amendment or supplement hereunder. 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

                                       35
<PAGE>   37

terms of this Section 26, the Rights Agent shall execute such supplement or
amendment. Without limiting the foregoing, at any time prior to such time as any
Person becomes an Acquiring Person, the Company and the Rights Agent may amend
this Agreement to lower the thresholds set forth in Sections 1.1 and 3.1 to not
less than the greater of (i) any percentage greater than the largest percentage
of the outstanding Common Shares then known by the Company to be beneficially
owned by any Person (other than an Exempt Person) and (ii) 10%.

            27 Exchange.

            27.1 Exchange of Common Shares for Rights. The Board of Directors of
the Company may, at its option, at any time after the occurrence of a Trigger
Event, exchange Common Shares for all or part of the then outstanding and
exercisable Rights (which shall not include Rights that have become void
pursuant to the provisions of Section 11.1.2) by exchanging at an exchange ratio
of that number of Common Shares having an aggregate value equal to the Spread
(with such value being based on the current per share market price (as
determined pursuant to Section 11.4) on the date of the occurrence of a Trigger
Event) per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such amount per
Right being hereinafter referred to as the "Exchange Consideration").
Notwithstanding the foregoing, the Board of Directors shall not be empowered to
effect such exchange at any time after any Acquiring Person shall have become
the Beneficial Owner of 50% or more of the Common Shares then outstanding. From
and after the occurrence of an event specified in Section 13.1, any Rights that
theretofore have not been exchanged pursuant to this Section 27.1 shall
thereafter be exercisable only in accordance with Section 13 and may not be
exchanged pursuant to this Section 27.1. The exchange of the Rights by the Board
of Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.

            27.2 Exchange Procedures. Immediately upon the action of the Board
of Directors of the Company ordering the exchange for any Rights pursuant to
Section 27.1 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive the Exchange Consideration. The Company shall
promptly give public notice of any such exchange; PROVIDED, HOWEVER, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of exchange shall state the method by which the
exchange of the Common Shares for Rights will be effected and, in the event of
any partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
the Rights that have become void pursuant to the provisions of Section 11.1.2)
held by each holder of Rights.

                                       36
<PAGE>   38

            27.3 Insufficient Shares. The Company may at its option substitute,
and, in the event that there shall not be sufficient Common Shares issued but
not outstanding or authorized but unissued to permit an exchange of Rights for
Common Shares as contemplated in accordance with this Section 27, the Company
shall substitute to the extent of such insufficiency, for each Common Share that
would otherwise be issuable upon exchange of a Right, a number of Preferred
Shares or fraction thereof (or equivalent preferred stock, as such term is
defined in Section 11.2) such that the current per share market price
(determined pursuant to Section 11.4) of one Preferred Share (or equivalent
preferred share) multiplied by such number or fraction is equal to the current
per share market price of one Common Share (determined pursuant to Section 11.4)
as of the date of such exchange.

                                       37
<PAGE>   39

            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.

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

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

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

            32 Governing Law; Jurisdiction; Waiver of Jury Trial. This Agreement
and each Right Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of Maryland 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; provided,
however, that the rights, duties and obligations of the Rights Agent shall be
governed and construed in accordance with the laws of the State of New York.
The parties hereto agree that all actions and proceedings arising out of this
Agreement or any of the transactions contemplated hereby shall be brought in
the United States District Court for the Southern District of New York, and
that in connection with any such action or proceeding, submit to the
jurisdiction of an venue in, such court. Each of the parties hereto also
irrevocably waives all right to trial by jury in any action, proceeding or
counter claim arising out of this Agreement or the transactions contemplated
hereby.

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

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

                                       38
<PAGE>   40

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

                                            HEALTH CARE PROPERTY INVESTORS, INC.

                                            By  /s/ EDWARD J. HENNING
                                                -----------------------------
                                                Name: Edward J. Henning
                                                Title: Vice President,
                                                       General Counsel and
                                                       Corporate Secretary

                                            THE BANK OF NEW YORK

                                            By  /s/ WILLIAM F. POWERS
                                                -----------------------------
                                                Name: William F. Powers
                                                Title: Assistant Vice President

                                      S-1
<PAGE>   41

                                                                       EXHIBIT A

                                     FORM OF

                      HEALTH CARE PROPERTY INVESTORS, INC.

                       ARTICLES SUPPLEMENTARY CLASSIFYING

                               1,000,000 SHARES OF

                  SERIES D JUNIOR PARTICIPATING PREFERRED STOCK

                         (THE "ARTICLES SUPPLEMENTARY")

        Health Care Property Investors, Inc., a Maryland corporation (the
"Corporation") certifies to the Maryland State Department of Assessments and
Taxation (the "Department") that:

            FIRST: Pursuant to the authority expressly vested in the Board of
Directors of the Corporation by Article IV of the Corporation's Articles of
Restatement filed with the Department on April 27, 1992 (as amended and
supplemented, the "Charter") and Section 2-105 of the Maryland General
Corporation Law ("MGCL"), the Board of Directors has, at a meeting duly called
and noticed on June 20, 2000, at which a quorum of directors was present and
acting throughout, adopted resolutions classifying 1,000,000 shares of
authorized but unissued Preferred Stock of the Corporation, par value $1.00 per
share (the "Preferred Stock") as a separate series of Preferred Stock to be
designated as "Series D Junior Participating Preferred Stock", setting the
preferences, conversion and other rights, voting powers, restrictions and
limitations as to dividends and other distributions, qualifications, terms and
conditions of redemption and other terms and conditions of such separate series
of Preferred Stock as hereinafter set forth, and authorizing the issuance of up
to 1,000,000 shares of such series of Preferred Stock.

            SECOND: The series of Preferred Stock of the Corporation created by
the resolutions duly adopted by the Board of Directors of the Corporation and
referred to in Article FIRST of these Articles Supplementary shall have the
following designation, number of shares, preferences, conversion and other
rights, voting powers, restrictions and limitations as to dividends and other
distributions, qualifications, terms and conditions of redemption and other
terms and conditions.

            Section 1. Designation and Amount. The shares of such series shall
be designated as "Series D Junior Participating Preferred Stock" (the "Series D
Preferred Stock") and the number of shares constituting the Series D Preferred
Stock shall be 1,000,000. Such number of shares may be increased or decreased by
resolution of the Board of Directors; PROVIDED, that no decrease shall reduce
the number of shares of Series D Preferred Stock to a number less than the
number of shares then outstanding plus the number of shares reserved for

                                      A-1
<PAGE>   42

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 D Preferred Stock.

               Section 2. Dividends and Distributions.

               (A) Subject to the prior and superior rights of the holders of
        any shares of any class or series of stock of this Corporation ranking
        prior and superior to the Series D Preferred Stock with respect to
        dividends, the holders of shares of Series D Preferred Stock, in
        preference to the holders of Common Stock, par value $1.00 per share
        (the "Common Stock"), of the Corporation, and of any other stock ranking
        junior to the Series D Preferred Stock, shall be entitled to receive,
        when, as and if declared by the Board of Directors out of funds legally
        available for the purpose, quarterly dividends payable in cash on the
        first day of March, June, September and December in each year (each such
        date being referred to herein as a "Quarterly Dividend Payment Date"),
        commencing on the first Quarterly Dividend Payment Date after the first
        issuance of a share or fraction of a share of Series D Preferred Stock,
        in an amount per share (rounded to the nearest cent) equal to the
        greater of (a) $1.00 or (b) subject to the provision for adjustment
        hereinafter set forth, 100 times the aggregate per share amount of all
        cash dividends, and 100 times the aggregate per share amount (payable in
        kind) of all non-cash dividends or other distributions, other than a
        dividend payable in shares of Common Stock or a subdivision of the
        outstanding shares of Common Stock (by reclassification or otherwise),
        declared on the Common Stock since the immediately preceding Quarterly
        Dividend Payment Date or, with respect to the first Quarterly Dividend
        Payment Date, since the first issuance of any share or fraction of a
        share of Series D Preferred Stock. In the event 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, 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 D
        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 D Preferred Stock as provided in paragraph (A) of this
        Section 2 immediately after it declares a dividend or distribution on
        the Common Stock (other than a dividend payable in shares of Common
        Stock); provided that, in the event 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 D
        Preferred Stock shall nevertheless be payable on such subsequent
        Quarterly Dividend Payment Date.

                                      A-2
<PAGE>   43

               (C) Dividends shall begin to accrue and be cumulative on
        outstanding shares of Series D 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 D 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 D 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 D 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.

            Section 3. Voting Rights. The holders of shares of Series D
Preferred Stock shall have the following voting rights:

               (A) Subject to the provision for adjustment hereinafter set
        forth, each share of Series D Preferred Stock shall entitle the holder
        thereof to 100 votes on all matters submitted to a vote of the
        stockholders of the Corporation. In the event the Corporation shall at
        any time declare or pay any dividend on the Common Stock payable in
        shares of Common Stock, or effect a subdivision, 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 number of votes per share to which holders of
        shares of Series D Preferred Stock were entitled immediately prior to
        such event shall be adjusted by multiplying such number by a fraction,
        the numerator of which is the number of shares of Common Stock
        outstanding immediately after such event and the denominator of which is
        the number of shares of Common Stock that were outstanding immediately
        prior to such event.

               (B) Except as otherwise provided herein, in any other Articles
        Supplementary creating a series of Preferred Stock or any similar stock,
        or by law, the holders of shares of Series D 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, or as otherwise provided by law,
        holders of Series D Preferred Stock shall have no special voting rights
        and their consent shall not be

                                      A-3
<PAGE>   44

        required (except to the extent they are entitled to vote with holders of
        Common Stock as set forth herein) for taking any corporate action.

               Section 4. Certain Restrictions.

               (A) Whenever quarterly dividends or other dividends or
        distributions payable on the Series D Preferred Stock as provided in
        Section 2 are in arrears, thereafter and until all accrued and unpaid
        dividends and distributions, whether or not declared, on shares of
        Series D 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 D 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 D Preferred Stock, except dividends paid ratably
               on the Series D 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 D Preferred Stock, provided that the Corporation may at
               any time redeem, purchase or otherwise acquire shares of any such
               junior stock in exchange for shares of any stock of the
               Corporation ranking junior (both as to dividends and upon
               dissolution, liquidation or winding up) to the Series D Preferred
               Stock; or

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

               (B) The Corporation shall not permit any subsidiary of the
        Corporation to purchase or otherwise acquire for consideration any
        shares of stock of the Corporation unless the Corporation could, under
        paragraph (A) of this Section 4, purchase or otherwise acquire such
        shares at such time and in such manner.

                                      A-4
<PAGE>   45

               Section 5. Restrictions on Ownership and Transfer to Preserve Tax
        Benefit.

               (A) Definitions. for the purposes of Section 5 of these Articles
        Supplementary, the following terms shall have the following meanings:

               "Beneficial Ownership" shall mean ownership of Series D Preferred
        Stock by a Person who is or would be treated as an owner of such Series
        D Preferred Stock either actually or constructively through the
        application of Section 544 of the Code, as modified by Section
        856(h)(1)(B) of the Code. The terms "Beneficial Owner," "Beneficially
        Owns" and "Beneficially Owned" shall have the correlative meanings.

               "Charitable Beneficiary" shall mean one or more beneficiaries of
        a Trust, as determined pursuant to Section 5(C)(vi) of these Articles
        Supplementary, each of which shall be an organization described in
        Sections 170(b)(1)(A), 170(c)(2) and 501(c)(3) of the Code.

               "Code" shall mean the Internal Revenue Code of 1986, as amended.
        All section references to the Code shall include any successor
        provisions thereof as may be adopted from time to time.

               "Constructive Ownership" shall mean ownership of Series D
        Preferred Stock by a Person who is or would be treated as an owner of
        such Series D Preferred Stock either actually or constructively through
        the application of Section 318 of the Code, as modified by Section
        856(d)(5) of the Code. The terms "Constructive Owner," "Constructively
        Owns" and "Constructively Owned" shall have the correlative meanings.

               "IRS" shall mean the United States Internal Revenue Service.

               "Market Price" shall mean the last reported sales price reported
        on the New York Stock Exchange of the Series D Preferred Stock on the
        trading day immediately preceding the relevant date, or if the Series D
        Preferred Stock is not then traded on the New York Stock Exchange, the
        last reported sales price of the Series D Preferred Stock on the trading
        day immediately preceding the relevant date as reported on any exchange
        or quotation system over which the Series D Preferred Stock may be
        traded, or if the Series D Preferred Stock is not then traded over any
        exchange or quotation system, then the market price of the Series D
        Preferred Stock on the relevant date as determined in good faith by the
        Board of Directors of the Corporation.

               "Ownership Limit" shall mean 9.9% (by value or by number of
        shares, whichever is more restrictive) of the outstanding Series D
        Preferred Stock of the Corporation.

               "Person" shall mean an individual, corporation, partnership,
        limited liability company, estate, trust (including a trust qualified
        under Section 401(a) or 501(c)(17) of the Code), a portion of a trust
        permanently set aside for or to be used exclusively for the

                                      A-5
<PAGE>   46

        purposes described in Section 642(c) of the Code, association, private
        foundation within the meaning of Section 509(a) of the Code, joint stock
        company or other entity; but does not include an underwriter acting in a
        capacity as such in a public offering of shares of Series D Preferred
        Stock provided that the ownership of such shares of Series D Preferred
        Stock by such underwriter would not result in the Corporation being
        "closely held" within the meaning of Section 856(h) of the Code, or
        otherwise result in the Corporation failing to qualify as a REIT.

               "Purported Beneficial Transferee" shall mean, with respect to any
        purported Transfer (or other event) which results in a transfer to a
        Trust, as provided in Section 5(B)(ii) of these Articles Supplementary,
        the Purported Record Transferee, unless the Purported Record Transferee
        would have acquired or owned shares of Series D Preferred Stock for
        another Person who is the beneficial transferee or beneficial owner of
        such shares, in which case the Purported Beneficial Transferee shall be
        such Person.

               "Purported Record Transferee" shall mean, with respect to any
        purported Transfer (or other event) which results in a transfer to a
        Trust, as provided in Section 5(B)(ii) of these Articles Supplementary,
        the record holder of the Series D Preferred Stock if such Transfer had
        been valid under Section 5(B)(i) of these Articles Supplementary.

               "REIT" shall mean a real estate investment trust under Sections
        856 through 860 of the Code and, for purposes of taxation of the
        Corporation under applicable state law, comparable provisions of the law
        of such state.

               "Restriction Termination Date" shall mean the first day after the
        date hereof on which the Board of Directors of the Corporation
        determines that it is no longer in the best interests of the Corporation
        to attempt to, or continue to, qualify as a REIT.

               "Transfer" shall mean any sale, transfer, gift, assignment,
        devise or other disposition of Series D Preferred Stock, including (i)
        the granting of any option or entering into any agreement for the sale,
        transfer or other disposition of Series D Preferred Stock or (ii) the
        sale, transfer, assignment or other disposition of any securities (or
        rights convertible into or exchangeable for Series D Preferred Stock),
        whether voluntary or involuntary, whether such transfer has occurred of
        record or of beneficial ownership or Beneficial Ownership or
        Constructive Ownership (including but not limited to transfers of
        interests in other entities which result in changes in Beneficial or
        Constructive Ownership of Series D Preferred Stock), and whether such
        transfer has occurred by operation of law or otherwise.

               "Trust" shall mean each of the trusts provided for in Section
        5(C) of these Articles Supplementary.

                                      A-6
<PAGE>   47

               "Trustee" shall mean any Person unaffiliated with the
        Corporation, or a Purported Beneficial Transferee, or a Purported Record
        Transferee, that is appointed by the Corporation to serve as trustee of
        a Trust.

               (B) Restriction on Ownership and Transfers.

                      (i)    Prior to the Restriction Termination Date:

                             (a) except as provided in Section 5(I) of these
                      Articles Supplementary, no Person shall Beneficially Own
                      Series D Preferred Stock in excess of the Ownership Limit;

                             (b) except as provided in Section 5(I) of these
                      Articles Supplementary, no Person shall Constructively Own
                      Series D Preferred Stock in excess of the Ownership Limit;

                             (c) no Person shall Beneficially or Constructively
                      Own Series D Preferred Stock which, taking into account
                      any other capital stock of the Corporation Beneficially or
                      Constructively Owned by such Person, would result in the
                      Corporation being "closely held" within the meaning of
                      Section 856(h) of the Code, or otherwise failing to
                      qualify as a REIT (including but not limited to Beneficial
                      or Constructive Ownership that would result in the
                      Corporation owning (actually or Constructively) an
                      interest in a tenant that is described in Section
                      856(d)(2)(B) of the Code if the income derived by the
                      Corporation (either directly or indirectly through one or
                      more partnerships) from such tenant would cause the
                      Corporation to fail to satisfy any of the gross income
                      requirements of Section 856(c) of the Code or comparable
                      provisions of any applicable state law).

                      (ii) If prior to the Restriction Termination Date, any
               Transfer (whether or not such Transfer is the result of a
               transaction entered into through the facilities of the New York
               Stock Exchange ("NYSE")) or other event occurs that, if
               effective, would result in any Person Beneficially or
               Constructively Owning Series D Preferred Stock in violation of
               Section 5(B)(i) of these Articles Supplementary, (1) then that
               number of shares of Series D Preferred Stock that otherwise would
               cause such Person to violate Section 5(B)(i) of these Articles
               Supplementary (rounded up to the nearest whole share) shall be
               automatically transferred to a Trust for the benefit of a
               Charitable Beneficiary, as described in Section 5(C), effective
               as of the close of business on the business day prior to the date
               of such Transfer or other event, and such Purported Beneficial
               Transferee shall thereafter have no rights in such shares or (2)
               if, for any reason, the transfer to the Trust described in clause
               (1) of this sentence is not automatically effective as provided
               therein to prevent any Person from Beneficially or Constructively
               Owning Series D Preferred Stock in violation of Section 5(B)(i)
               of these Articles

                                      A-7
<PAGE>   48

               Supplementary, then the Transfer of that number of shares of
               Series D Preferred Stock that otherwise would cause any Person to
               violate Section 5(B)(i) shall be void ab initio, and the
               Purported Beneficial Transferee shall have no rights in such
               shares.

                      (iii) Notwithstanding any other provisions contained
               herein, prior to the Restriction Termination Date, any Transfer
               of Series D Preferred Stock (whether or not such Transfer is the
               result of a transaction entered into through the facilities of
               the NYSE) that, if effective, would result in the capital stock
               of the Corporation being beneficially owned by less than 100
               Persons (determined without reference to any rules of
               attribution) shall be void ab initio, and the intended transferee
               shall acquire no rights in such Series D Preferred Stock.

               (C) Transfers of Series D Preferred Stock in Trust.

                      (i) Upon any purported Transfer or other event described
               in Section 5(B)(ii) of these Articles Supplementary, such Series
               D Preferred Stock shall be deemed to have been transferred to the
               Trustee in his capacity as trustee of a Trust for the exclusive
               benefit of one or more Charitable Beneficiaries. Such transfer to
               the Trustee shall be deemed to be effective as of the close of
               business on the business day prior to the purported Transfer or
               other event that results in a transfer to the Trust pursuant to
               Section 5(B)(ii). The Trustee shall be appointed by the
               Corporation and shall be a Person unaffiliated with the
               Corporation, any Purported Beneficial Transferee or any Purported
               Record Transferee. Each Charitable Beneficiary shall be
               designated by the Corporation as provided in Section 5(C)(vi) of
               these Articles Supplementary.

                      (ii) Series D Preferred Stock held by the Trustee shall be
               issued and outstanding Series D Preferred Stock of the
               Corporation. The Purported Beneficial Transferee or Purported
               Record Transferee shall have no rights in the shares of Series D
               Preferred Stock held by the Trustee. The Purported Beneficial
               Transferee or Purported Record Transferee shall not benefit
               economically from ownership of any shares held in trust by the
               Trustee, shall have no rights to dividends and shall not possess
               any rights to vote or other rights attributable to the shares of
               Series D Preferred Stock held in the Trust.

                      (iii) The Trustee shall have all voting rights and rights
               to dividends with respect to Series D Preferred Stock held in the
               Trust, which rights shall be exercised for the exclusive benefit
               of the Charitable Beneficiary. Any dividend or distribution paid
               to or on behalf of the Purported Record Transferee or Purported
               Beneficial Transferee prior to the discovery by the Corporation
               that shares of Series D Preferred Stock have been transferred to
               the Trustee shall be paid to the Trustee upon demand, and any
               dividend or distribution declared but unpaid shall be paid when
               due to the Trustee with respect to such Series D Preferred Stock.

                                      A-8
<PAGE>   49

               Any dividends or distributions so paid over to the Trustee shall
               be held in trust for the Charitable Beneficiary.

                      The Purported Record Transferee and Purported Beneficial
               Transferee shall have no voting rights with respect to the Series
               D Preferred Stock held in the Trust and, subject to Maryland law,
               effective as of the date the Series D Preferred Stock has been
               transferred to the Trustee, the Trustee shall have the authority
               (at the Trustee's sole discretion) (i) to rescind as void any
               vote cast by a Purported Record Transferee with respect to such
               Series D Preferred Stock prior to the discovery by the
               Corporation that the Series D Preferred Stock has been
               transferred to the Trustee and (ii) to recast such vote in
               accordance with the desires of the Trustee acting for the benefit
               of the Charitable Beneficiary; provided, however, that if the
               Corporation has already taken irreversible corporate action, then
               the Trustee shall not have the authority to rescind and recast
               such vote. Notwithstanding any other provision of these Articles
               Supplementary to the contrary, until the Corporation has received
               notification that the Series D Preferred Stock has been
               transferred into a Trust, the Corporation shall be entitled to
               rely on its share transfer and other stockholder records for
               purposes of preparing lists of stockholders entitled to vote at
               meetings, determining the validity and authority of proxies and
               otherwise conducting votes of stockholders.

                      (iv) Within 20 days of receiving notice from the
               Corporation that shares of Series D Preferred Stock have been
               transferred to the Trust, the Trustee of the Trust shall sell the
               shares of Series D Preferred Stock held in the Trust to a Person,
               designated by the Trustee, whose ownership of the shares of
               Series D Preferred Stock will not violate the ownership
               limitations set forth in Section 5(B)(i). Upon such sale, the
               interest of the Charitable Beneficiary in the shares of Series D
               Preferred Stock sold shall terminate and the Trustee shall
               distribute the net proceeds of the sale to the Purported Record
               Transferee and to the Charitable Beneficiary as provided in this
               Section 5(C)(iv). The Purported Record Transferee shall receive
               the lesser of (1) the price paid by the Purported Record
               Transferee for the shares of Series D Preferred Stock in the
               transaction that resulted in such transfer to the Trust (or, if
               the event which resulted in the transfer to the Trust did not
               involve a purchase of such shares of Series D Preferred Stock at
               Market Price, the Market Price of such shares of Series D
               Preferred Stock on the day of the event which resulted in the
               transfer of such shares of Series D Preferred Stock to the Trust)
               and (2) the price per share received by the Trustee (net of any
               commissions and other expenses of sale) from the sale or other
               disposition of the shares of Series D Preferred Stock held in the
               Trust. Any net sales proceeds in excess of the amount payable to
               the Purported Record Transferee shall be immediately paid to the
               Charitable Beneficiary together with any dividends or other
               distributions thereon. If, prior to the discovery by the
               Corporation that shares of such Series D Preferred Stock have

                                      A-9
<PAGE>   50

               been transferred to the Trustee, such shares of Series D
               Preferred Stock are sold by a Purported Record Transferee then
               (i) such shares of Series D Preferred Stock shall be deemed to
               have been sold on behalf of the Trust and (ii) to the extent that
               the Purported Record Transferee received an amount for such
               shares of Series D Preferred Stock that exceeds the amount that
               such Purported Record Transferee was entitled to receive pursuant
               to this Section 5(C)(iv), such excess shall be paid to the
               Trustee upon demand.

                      (v) Series D Preferred Stock transferred to the Trustee
               shall be deemed to have been offered for sale to the Corporation,
               or its designee, at a price per share equal to the lesser of (i)
               the price paid by the Purported Record Transferee for the shares
               of Series D Preferred Stock in the transaction that resulted in
               such transfer to the Trust (or, if the event which resulted in
               the transfer to the Trust did not involve a purchase of such
               shares of Series D Preferred Stock at Market Price, the Market
               Price of such shares of Series D Preferred Stock on the day of
               the event which resulted in the transfer of such shares of Series
               D Preferred Stock to the Trust) and (ii) the Market Price on the
               date the Corporation, or its designee, accepts such offer. The
               Corporation shall have the right to accept such offer until the
               Trustee has sold the shares of Series D Preferred Stock held in
               the Trust pursuant to Section 5(C)(iv). Upon such a sale to the
               Corporation, the interest of the Charitable Beneficiary in the
               shares of Series D Preferred Stock sold shall terminate and the
               Trustee shall distribute the net proceeds of the sale to the
               Purported Record Transferee and any dividends or other
               distributions held by the Trustee with respect to such Series D
               Preferred Stock shall thereupon be paid to the Charitable
               Beneficiary.

                      (vi) By written notice to the Trustee, the Corporation
               shall designate one or more nonprofit organizations to be the
               Charitable Beneficiary of the interest in the Trust such that (i)
               the Series D Preferred Stock held in the Trust would not violate
               the restrictions set forth in Section 5(B)(i) in the hands of
               such Charitable Beneficiary.

               (D) Remedies For Breach. If the Board of Directors or a committee
        thereof or other designees if permitted by the MGCL shall at any time
        determine in good faith that a Transfer or other event has taken place
        in violation of Section 5(B) of these Articles Supplementary or that a
        Person intends to acquire, has attempted to acquire or may acquire
        beneficial ownership (determined without reference to any rules of
        attribution), Beneficial Ownership or Constructive Ownership of any
        shares of Series D Preferred Stock of the Corporation in violation of
        Section 5(B) of these Articles Supplementary, the Board of Directors or
        a committee thereof or other designees if permitted by the MGCL shall
        take such action as it deems advisable to refuse to give effect or to
        prevent such Transfer, including, but not limited to, causing the
        Corporation to redeem shares of Series D Preferred Stock, refusing to
        give effect to such Transfer on the books of the Corporation or
        instituting proceedings to enjoin such Transfer; provided, however, that

                                      A-10
<PAGE>   51

        any Transfers (or, in the case of events other than a Transfer,
        ownership or Constructive Ownership or Beneficial Ownership) in
        violation of Section 5(B)(i) of these Articles Supplementary, shall
        automatically result in the transfer to a Trust as described in Section
        5(B)(ii) and any Transfer in violation of Section 5(B)(iii) shall
        automatically be void ab initio irrespective of any action (or
        non-action) by the Board of Directors.

               (E) Notice of Restricted Transfer. Any Person who acquires or
        attempts to acquire shares of Series D Preferred Stock in violation of
        Section 5(B) of these Articles Supplementary, or any Person who is a
        Purported Beneficial Transferee such that an automatic transfer to a
        Trust results under Section 5(B)(ii) of these Articles Supplementary,
        shall immediately give written notice to the Corporation of such event
        and shall provide to the Corporation such other information as the
        Corporation may request in order to determine the effect, if any, of
        such Transfer or attempted Transfer on the Corporation's status as a
        REIT.

               (F) Owners Required To Provide Information. Prior to the
        Restriction Termination Date each Person who is a beneficial owner or
        Beneficial Owner or Constructive Owner of Series D Preferred Stock and
        each Person (including the shareholder of record) who is holding Series
        D Preferred Stock for a beneficial owner or Beneficial Owner or
        Constructive Owner shall provide to the Corporation such information
        that the Corporation may request, in good faith, in order to determine
        the Corporation's status as a REIT.

               (G) Remedies Not Limited. Nothing contained in these Articles
        Supplementary (but subject to Section 5(M) of these Articles
        Supplementary) shall limit the authority of the Board of Directors to
        take such other action as it deems necessary or advisable to protect the
        Corporation and the interests of its shareholders by preservation of the
        Corporation's status as a REIT.

               (H) Ambiguity. In the case of an ambiguity in the application of
        any of the provisions of this Section 5 of these Articles Supplementary,
        including any definition contained in Section 5(A), the Board of
        Directors shall have the power to determine the application of the
        provisions of this Section 5 with respect to any situation based on the
        facts known to it (subject, however, to the provisions of Section 5(M)
        of these Articles Supplementary). In the event Section 5 requires an
        action by the Board of Directors and these Articles Supplementary fail
        to provide specific guidance with respect to such action, the Board of
        Directors shall have the power to determine the action to be taken so
        long as such action is not contrary to the provisions of Section 5.
        Absent a decision to the contrary by the Board of Directors (which the
        Board may make in its sole and absolute discretion), if a Person would
        have (but for the remedies set forth in Section 5(B)) acquired
        Beneficial or Constructive Ownership of Series D Preferred Stock in
        violation of Section 5(B)(i), such remedies (as applicable) shall apply
        first to the shares of Series D Preferred Stock which, but for such
        remedies, would have been actually owned by such Person, and second to
        shares of Series D Preferred Stock which, but for such remedies,

                                      A-11
<PAGE>   52

        would have been Beneficially Owned or Constructively Owned (but not
        actually owned) by such Person, pro rata among the Persons who actually
        own such shares of Series D Preferred Stock based upon the relative
        number of the shares of Series D Preferred Stock held by each such
        Person.

               (I) Exceptions.

                      (i) Subject to Section 5(B)(i)(c), the Board of Directors,
               in its sole discretion, may exempt a Person from the limitation
               on a Person Beneficially Owning shares of Series D Preferred
               Stock in violation of Section 5(B)(i)(a) if the Board of
               Directors obtains any representations and undertakings from such
               Person as are reasonably necessary to ascertain that no
               individual's Beneficial Ownership of such shares of Series D
               Preferred Stock will violate Section 5(B)(i)(a) or that any such
               violation will not cause the Corporation to fail to qualify as a
               REIT under the Code, and agrees that any violation of such
               representations or undertaking (or other action which is contrary
               to the restrictions contained in Section 5(B) of these Articles
               Supplementary) or attempted violation will result in such Series
               D Preferred Stock being transferred to a Trust in accordance with
               Section 5(B)(ii) of these Articles Supplementary.

                      (ii) Subject to Section 5(B)(i)(c), the Board of
               Directors, in its sole discretion, may exempt a Person from the
               limitation on a Person Constructively Owning Series D Preferred
               Stock in violation of Section 5(B)(i)(b), if the Corporation
               obtains any representations and undertakings from such Person as
               are reasonably necessary to ascertain that such Person does not
               and will not own, actually or Constructively, an interest in a
               tenant of the Corporation (or a tenant of any entity owned in
               whole or in part by the Corporation) that would cause the
               Corporation to own, actually or Constructively more than a 9.9%
               interest (as set forth in Section 856(d)(2)(B) of the Code) in
               such tenant and that any violation or attempted violation will
               result in such Series D Preferred Stock being transferred to a
               Trust in accordance with Section 5(B)(ii) of these Articles
               Supplementary. Notwithstanding the foregoing, the inability of a
               Person to make the certification described in this Section
               5(I)(ii) shall not prevent the Board of Directors, in its sole
               discretion, from exempting such Person from the limitation on a
               Person Constructively Owning Series D Preferred Stock in
               violation of Section 5(B)(i)(b) if the Board of Directors
               determines that the resulting application of Section 856(d)(2)(B)
               of the Code would affect the characterization of less than 0.5%
               of the gross income (as such term is used in Section 856(c)(2) of
               the Code) of the Corporation in any taxable year, after taking
               into account the effect of this sentence with respect to all
               other Series D Preferred Stock to which this sentence applies.

                      (iii) Prior to granting any exception pursuant to Section
               5(I)(i) or (ii) of these Articles Supplementary, the Board of
               Directors may require a ruling from

                                      A-12
<PAGE>   53
               the Internal Revenue Service, or an opinion of counsel, in either
               case in form and substance satisfactory to the Board of Directors
               in its sole discretion, as it may deem necessary or advisable in
               order to determine or ensure the Corporation's status as a REIT.

               (J) Preemptive Rights. No holder of shares of Series D Preferred
        Stock shall have any preemptive or preferential right to subscribe for
        or to purchase any additional shares of any series, or any bonds or
        convertible securities of any nature.

               (K) Legends. Each certificate for Series D Preferred Stock shall
        bear the following legends:

                                CLASSES OF STOCK

        "THE COMPANY IS AUTHORIZED TO ISSUE MORE THAN ONE CLASS OF CAPITAL STOCK
        CONSISTING OF COMMON STOCK AND ONE OR MORE SERIES OF PREFERRED STOCK.
        THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE PREFERENCES,
        LIMITATIONS AND RELATIVE RIGHTS OF EACH SERIES OF PREFERRED STOCK BEFORE
        THE ISSUANCE OF ANY SUCH SERIES OF PREFERRED STOCK. THE COMPANY WILL
        FURNISH, WITHOUT CHARGE, TO ANY SHAREHOLDER MAKING A REQUEST THEREFOR, A
        COPY OF THE COMPANY'S CHARTER AND A FULL STATEMENT WITH RESPECT TO
        DESIGNATIONS AND ANY PREFERENCES, CONVERSION OR OTHER RIGHTS, VOTING
        POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS AND OTHER
        DISTRIBUTIONS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF
        THE STOCK OF EACH CLASS WHICH THE COMPANY HAS THE AUTHORITY TO ISSUE
        AND, SINCE THE COMPANY IS AUTHORIZED TO ISSUE PREFERRED STOCK IN SERIES,
        (i) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE
        SHARES OF EACH SERIES TO THE EXTENT SET, AND (ii) THE AUTHORITY OF THE
        BOARD OF DIRECTORS TO SET SUCH RIGHTS AND PREFERENCES OF SUBSEQUENT
        SERIES. REQUEST FOR SUCH WRITTEN STATEMENT MAY BE DIRECTED TO THE
        SECRETARY OF THE COMPANY AT ITS PRINCIPAL OFFICE."

                      RESTRICTION ON OWNERSHIP AND TRANSFER

        "THE SHARES OF SERIES D PREFERRED STOCK REPRESENTED BY THIS CERTIFICATE
        ARE SUBJECT TO RESTRICTIONS ON BENEFICIAL AND CONSTRUCTIVE OWNERSHIP AND
        TRANSFER FOR THE PURPOSE OF THE COMPANY'S MAINTENANCE OF ITS STATUS AS A
        REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS
        AMENDED (THE "CODE"). SUBJECT TO CERTAIN

                                      A-13
<PAGE>   54

        FURTHER RESTRICTIONS AND EXCEPT AS EXPRESSLY PROVIDED IN THE ARTICLES
        SUPPLEMENTARY FOR THE SERIES D PREFERRED STOCK, (i) NO PERSON MAY
        BENEFICIALLY OWN SHARES OF THE COMPANY'S SERIES D PREFERRED STOCK IN
        EXCESS OF 9.9% (BY VALUE OR BY NUMBER OF SHARES, WHICHEVER IS MORE
        RESTRICTIVE) OF THE OUTSTANDING SERIES D PREFERRED STOCK OF THE COMPANY;
        (ii) NO PERSON MAY CONSTRUCTIVELY OWN SHARES OF THE COMPANY'S SERIES D
        PREFERRED STOCK IN EXCESS OF 9.9% (BY VALUE OR BY NUMBER OF SHARES,
        WHICHEVER IS MORE RESTRICTIVE) OF THE OUTSTANDING SERIES D PREFERRED
        STOCK OF THE COMPANY; (iii) NO PERSON MAY BENEFICIALLY OR CONSTRUCTIVELY
        OWN SERIES D PREFERRED STOCK THAT, TAKING INTO ACCOUNT ANY OTHER CAPITAL
        STOCK OF THE COMPANY BENEFICIALLY OR CONSTRUCTIVELY OWNED BY SUCH
        PERSON, WOULD RESULT IN THE COMPANY BEING "CLOSELY HELD" UNDER SECTION
        856(h) OF THE CODE OR OTHERWISE CAUSE THE COMPANY TO FAIL TO QUALIFY AS
        A REIT; AND (iv) NO PERSON MAY TRANSFER SERIES D PREFERRED STOCK IF SUCH
        TRANSFER WOULD RESULT IN THE CAPITAL STOCK OF THE COMPANY BEING OWNED BY
        FEWER THAN 100 PERSONS. ANY PERSON WHO BENEFICIALLY OR CONSTRUCTIVELY
        OWNS OR ATTEMPTS TO BENEFICIALLY OR CONSTRUCTIVELY OWN SERIES D
        PREFERRED STOCK WHICH CAUSES OR WILL CAUSE A PERSON TO BENEFICIALLY OR
        CONSTRUCTIVELY OWN SERIES D PREFERRED STOCK IN EXCESS OF THE ABOVE
        LIMITATIONS MUST IMMEDIATELY NOTIFY THE COMPANY. IF ANY OF THE
        RESTRICTIONS ON TRANSFER OR OWNERSHIP ARE VIOLATED, THE SERIES D
        PREFERRED STOCK REPRESENTED HEREBY IN EXCESS OF SUCH RESTRICTIONS WILL
        BE AUTOMATICALLY TRANSFERRED TO THE TRUSTEE OF A TRUST FOR THE BENEFIT
        OF ONE OR MORE CHARITABLE BENEFICIARIES. IN ADDITION, THE COMPANY MAY
        REDEEM SHARES UPON THE TERMS AND CONDITIONS SPECIFIED BY THE BOARD OF
        DIRECTORS IN ITS SOLE DISCRETION IF THE BOARD OF DIRECTORS DETERMINES
        THAT OWNERSHIP OR A TRANSFER OR OTHER EVENT MAY VIOLATE THE RESTRICTIONS
        DESCRIBED ABOVE. FURTHERMORE, UPON THE OCCURRENCE OF CERTAIN EVENTS,
        ATTEMPTED TRANSFERS IN VIOLATION OF THE RESTRICTIONS DESCRIBED ABOVE MAY
        BE VOID AB INITIO. ALL TERMS IN THIS LEGEND WHICH ARE DEFINED IN THE
        ARTICLES SUPPLEMENTARY FOR THE SERIES D PREFERRED STOCK SHALL HAVE THE
        MEANINGS ASCRIBED TO THEM IN SUCH ARTICLES SUPPLEMENTARY, AS THE SAME
        MAY BE AMENDED FROM TIME TO TIME, A COPY OF WHICH, INCLUDING THE
        RESTRICTIONS ON TRANSFER AND OWNERSHIP, WILL BE FURNISHED TO EACH

                                      A-14
<PAGE>   55

        HOLDER OF SERIES D PREFERRED STOCK ON REQUEST AND WITHOUT CHARGE.
        REQUESTS FOR SUCH A COPY MAY BE DIRECTED TO THE SECRETARY OF THE COMPANY
        AT ITS PRINCIPAL OFFICE."

               (L) Severability. If any provision of this Section 5 or any
        application of any such provision is determined to be invalid by any
        federal or state court having jurisdiction over the issues, the validity
        of the remaining provisions shall not be affected and other applications
        of such provision shall be affected only to the extent necessary to
        comply with the determination of such court.

               (M) NYSE. Nothing in this Section 5 shall preclude the settlement
        of any transaction entered into through the facilities of the NYSE. The
        shares of Series D Preferred Stock that are the subject of such
        transaction shall continue to be subject to the provisions of this
        Section 5 after such settlement.

               (N) Applicability of Section 5. The provisions set forth in this
        Section 5 shall apply to the Series D Preferred Stock notwithstanding
        any contrary provisions of the Series D Preferred Stock provided for
        elsewhere in these Articles Supplementary.

            Section 6. Reacquired Shares. Any shares of Series D Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled 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
Certificate of Incorporation, or in any other Articles Supplementary creating a
series of Preferred Stock or any similar stock or as otherwise required by law.

            Section 7. Liquidation, Dissolution or Winding Up. (A) Upon any
liquidation, dissolution or winding up of the Corporation, voluntary or
otherwise 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 D Preferred Stock unless, prior thereto, the holders
of shares of Series D Preferred Stock shall have received an amount per share
(the "Series D Liquidation Preference") equal to $100 per share, plus an amount
equal to accrued and unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment, provided that the holders of shares of
Series D Preferred Stock shall be entitled to receive an aggregate amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
100 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 D Preferred Stock, except distributions made ratably on the Series D
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. In the event 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, combination or consolidation of the outstanding
shares of Common Stock (by reclassification or otherwise than

                                      A-15
<PAGE>   56

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 D 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
are outstanding immediately prior to such event.

               (B) In the event, however, that there are not sufficient assets
        available to permit payment in full of the Series D Liquidation
        Preference and the liquidation preferences of all other classes and
        series of stock of the Corporation, if any, that rank on a parity with
        the Series D Preferred Stock in respect thereof, then the assets
        available for such distribution shall be distributed ratably to the
        holders of the Series D Preferred Stock and the holders of such parity
        shares in proportion to their respective liquidation preferences.

               (C) Neither the merger or consolidation of the Corporation into
        or with another corporation nor the merger or consolidation of any other
        corporation into or with the Corporation shall be deemed to be a
        liquidation, dissolution or winding up of the Corporation within the
        meaning of this Section 7.

            Section 8. 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 D Preferred Stock shall at the same time be similarly exchanged or
changed into an amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 100 times the aggregate amount of 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.
In the event 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,
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 D Preferred Stock shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

            Section 9. No Redemption. The shares of Series D Preferred Stock
shall not be redeemable by the Company.

            Section 10. Rank. The Series D Preferred Stock shall rank, with
respect to the payment of dividends and the distribution of assets upon
liquidation, dissolution or winding up, junior to all series of any other class
of the Corporation's Preferred Stock, except to the extent

                                      A-16
<PAGE>   57

that any such other series specifically provides that it shall rank on a parity
with or junior to the Series D Preferred Stock.

            Section 11. Amendment. At any time any shares of Series D Preferred
Stock are outstanding, neither the Articles of Restatement nor the Articles
Supplementary of the Corporation shall be amended in any manner which would
materially alter or change the powers, privileges, preferences or special rights
of the Series D Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding shares
of Series D Preferred Stock, voting separately as a single class.

            Section 12. Fractional Shares. Series D Preferred Stock may be
issued in fractions of a share that shall entitle the holder, in proportion to
such holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other rights of
holders of Series D Preferred Stock.

                           [signature page to follow]

                                      A-17
<PAGE>   58

            IN WITNESS WHEREOF, these Articles Supplementary are executed on
behalf of the Corporation by the undersigned this ___ day of July, 2000.

                                            By  ________________________________
                                                Name:
                                                Title:

                                            By  ________________________________
                                                Name:
                                                Title:

                                      A-18
<PAGE>   59

                                                                       EXHIBIT B

                           [Form of Right Certificate]

Certificate No. R-                                                _______ Rights

        NOT EXERCISABLE AFTER ________, ____ OR EARLIER IF NOTICE OF REDEMPTION
        OR EXCHANGE IS GIVEN OR IF THE COMPANY IS MERGED OR ACQUIRED PURSUANT TO
        AN AGREEMENT OF THE TYPE DESCRIBED IN SECTION 1.3(ii)(A)(z) OF THE
        AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION AT $.01 PER RIGHT, AND
        TO EXCHANGE ON THE TERMS SET FORTH IN THE AGREEMENT. UNDER CERTAIN
        CIRCUMSTANCES (SPECIFIED IN SECTION 11.1.2 OF THE AGREEMENT), RIGHTS
        BENEFICIALLY OWNED BY OR TRANSFERRED TO AN ACQUIRING PERSON (AS DEFINED
        IN THE AGREEMENT), OR ANY SUBSEQUENT HOLDER OF SUCH RIGHTS WILL BECOME
        NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

                                Right Certificate

                      HEALTH CARE PROPERTY INVESTORS, INC.

            This certifies that            , or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement, dated as of July 27, 2000, as the same may be amended from time to
time (the "Agreement"), between Health Care Property Investors, Inc., a Maryland
corporation (the "Company"), and The Bank of New York, as Rights Agent (the
"Rights Agent"), to purchase from the Company at any time after the Distribution
Date and prior to 5:00 P.M. (New York City time) on July 27, 2010, at the
offices of the Rights Agent, or its successors as Rights Agent, designated for
such purpose, one one-hundredth of a fully paid, nonassessable share of Series D
Junior Participating Preferred Stock, par value $1.00 per share (the "Preferred
Shares") of the Company, at a purchase price of $95 per one one-hundredth of a
Preferred Share, subject to adjustment (the "Purchase Price"), upon presentation
and surrender of this Right Certificate with the Form of Election to Purchase
and certification duly executed. The number of Rights evidenced by this Right
Certificate (and the number of one one-hundredths of a Preferred Share which may
be purchased upon exercise thereof) set forth above, and the Purchase Price set
forth above, are the number and Purchase Price as of ________, ____ based on the
Preferred Shares as constituted at such date. Capitalized terms used in this
Right Certificate without definition shall have the meanings ascribed to them in
the Agreement. As provided in the Agreement, the Purchase Price and the number
of Preferred 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 Agreement, which terms, provisions and conditions are
hereby incorporated herein by

                                      B-1
<PAGE>   60

reference and made a part hereof and to which Agreement reference is hereby made
for a full description of the rights, limitations of rights, obligations, duties
and immunities hereunder of the Rights Agent, the Company and the holders of the
Right Certificates. Copies of the Agreement are on file at the principal offices
of the Company and the Rights Agent.

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

            Subject to the provisions of the Agreement, the Board of Directors
may, at its option, (i) redeem the Rights evidenced by this Right Certificate at
a redemption price of $.01 per Right or (ii) exchange Common Shares for the
Rights evidenced by this Certificate, in whole or in part.

            No fractional Preferred Shares will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions of Preferred Shares
which are integral multiples of one one-hundredth of a Preferred Share, which
may, at the election of the Company, be evidenced by depository receipts), but
in lieu thereof a cash payment will be made, as provided in the Agreement.

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

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

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

                                      B-2
<PAGE>   61

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

Attest:                                     HEALTH CARE PROPERTY INVESTORS, INC.

By ______________________                   By _________________________________
    Title:                                     Title:

Countersigned:

The Bank of New York, as Rights Agent

By_____________________________
    Authorized Signature

                                      B-3
<PAGE>   62

                   [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)

Rights evidenced by 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 Company, with full power of substitution.

Dated: ___________

                                    ____________________________________________
                                    Signature

Signature Guaranteed:
_____________________

            Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.

                                      B-4
<PAGE>   63
-------------------------------------------------------------------------------

The undersigned hereby certifies that:

            (1) the Rights evidenced by this Right Certificate are not
beneficially owned by and are not being assigned to an Acquiring Person or an
Affiliate or an Associate thereof; and

            (2) after due inquiry and to the best knowledge of the undersigned,
the undersigned 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 thereof.

Dated: ________________

                                    ____________________________________________
                                    Signature

                                      B-5
<PAGE>   64

                          FORM OF ELECTION TO PURCHASE

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

To: Health Care Property Investors, Inc.

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

________________________________________________________________________________
(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 Guaranteed:

_________________________________

            Signatures must be guaranteed by an "eligible guarantor institution"
as defined in Rule 17Ad-15 promulgated under the Securities Exchange Act of
1934, as amended.

                                      B-6
<PAGE>   65

The undersigned hereby certifies that:

            (1) the Rights evidenced by this Right Certificate are not
beneficially owned by and are not being assigned to an Acquiring Person or an
Affiliate or an Associate thereof; and

            (2) after due inquiry and to the best knowledge of the undersigned,
the undersigned 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 thereof.

Dated: __________________

                                    ____________________________________________
                                    Signature

________________________________________________________________________________

                                     NOTICE

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

            In the event the certification set forth above in the Form of
Assignment or Form of Election to Purchase is not completed, the Company will
deem the beneficial owner of the Rights evidenced by this Right Certificate to
be an Acquiring Person or an Affiliate or Associate hereof and such Assignment
or Election to Purchase will not be honored.

                                      B-7
<PAGE>   66

                                                                       EXHIBIT C

                      HEALTH CARE PROPERTY INVESTORS, INC.

                                SUMMARY OF RIGHTS

FORM OF SECURITY                    The Board of Directors has declared a
                                    dividend of one preferred share purchase
                                    right for each outstanding share of Health
                                    Care Property Investors, Inc.'s Common
                                    Stock, payable to holders of record as of
                                    the close of business on July 28, 2000 (each
                                    a "RIGHT" and collectively, the "RIGHTS").

CERTIFICATES AND
TRANSFER                            No separate certificates will be issued for
                                    the Rights at this time. Prior to the
                                    Distribution Date(1), the Rights will be
                                    evidenced by certificates for and will be
                                    transferred with the Common Stock, and the
                                    registered holders of the Common Stock will
                                    be deemed to be the registered holders of
                                    the Rights.

                                    After the Distribution Date, the Rights
                                    Agent will mail separate certificates
                                    evidencing the Rights to each record holder
                                    of the Common Stock as of the close of
                                    business on the Distribution Date, and
                                    thereafter the Rights will be transferable
                                    separately from the Common Stock.

EXERCISE                            Prior to the Distribution Date, the Rights
                                    will not be exercisable.

                                    After the Distribution Date, prior to the
                                    occurrence of an event described below under
                                    "Flip-In" and "Flip-Over",

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

(1) Distribution Date generally means the earlier of:

(1)  the 10th day after public announcement that any person or group has become
     an Acquiring Person (which, as described under "Flip-In" below, generally
     means the beneficial owner of 15% or more of the Company's Common Stock),
     and

(2)  the 10th business day after the date of the commencement or announcement of
     an intention to make a tender or exchange offer by any person which would,
     if consummated, result in such person becoming an Acquiring Person.

                                      C-1
<PAGE>   67

                                    each Right will be exercisable to purchase,
                                    for $95.00 (the "PURCHASE PRICE"), one
                                    one-hundredth of a share of Health Care
                                    Property Investors, Inc.'s Series D Junior
                                    Participating Preferred Stock, par value
                                    $1.00 per share.

FLIP-IN                             If any person or group (other than as set
                                    forth in the following sentence) becomes the
                                    beneficial owner of 15% or more of Health
                                    Care Property Investors, Inc.'s Common Stock
                                    (such person or group, an "ACQUIRING
                                    PERSON"), then each Right (other than Rights
                                    beneficially owned by the Acquiring Person
                                    and certain affiliated persons) will entitle
                                    the holder to purchase, for the Purchase
                                    Price, a number of shares of Health Care
                                    Property Investors, Inc.'s Common Stock
                                    having a market value of twice the Purchase
                                    Price.

                                    Any person who was, as of the close of
                                    business on July 27, 2000, the beneficial
                                    owner of 15% or more of Health Care Property
                                    Investors, Inc.'s Common Stock outstanding
                                    on such date shall not be deemed to be an
                                    "ACQUIRING PERSON" for purposes of the
                                    Rights Agreement so long as neither such
                                    person nor any of its affiliates or
                                    associates becomes the beneficial owner of
                                    any additional shares of Common Stock.

FLIP-OVER                           If, after any person has become an Acquiring
                                    Person, (1) Health Care Property Investors,
                                    Inc. is involved in a merger or other
                                    business combination in which Health Care
                                    Property Investors, Inc. is not the
                                    surviving corporation or its Common Stock is
                                    exchanged for other securities or assets or
                                    (2) Health Care Property Investors, Inc.
                                    and/or one or more of its subsidiaries sell
                                    or otherwise transfer assets or earning
                                    power aggregating more than 50% of the
                                    assets or earning power of Health Care
                                    Property Investors, Inc. and its
                                    subsidiaries, taken as a whole, then each
                                    Right will entitle the holder to purchase,
                                    for the Purchase Price, a number of shares
                                    of common stock of the other party to such
                                    business combination or sale (or in certain
                                    circumstances, an affiliate) having a market
                                    value of twice the Purchase Price.

EXCHANGE                            At any time after any person becomes an
                                    Acquiring Person but before any person
                                    becomes the beneficial owner of 50% or more
                                    of Health Care Property Investors, Inc.'s
                                    Common Stock, Health Care Property
                                    Investors, Inc. may exchange all or part of
                                    the Rights (other than the Rights
                                    beneficially

                                      C-2
<PAGE>   68

                                    owned by the Acquiring Person and certain
                                    affiliated persons) for shares of Common
                                    Stock at an exchange ratio of one share of
                                    Common Stock per Right.

REDEMPTION                          The Board of Directors may redeem all of the
                                    Rights at a price of $0.01 per Right at any
                                    time prior to the time that any person
                                    becomes an Acquiring Person.

EXPIRATION                          The Rights will expire on July 27, 2010,
                                    unless earlier exchanged or redeemed.

AMENDMENTS                          For so long as the Rights are redeemable,
                                    the Rights Agreement may be amended in any
                                    respect by Health Care Property Investors,
                                    Inc.'s Board of Directors.

                                    At any time after the Rights are no longer
                                    redeemable, the Rights Agreement may be
                                    amended by the Board of Directors in any
                                    respect that does not (i) adversely affect
                                    the Rights holders (other than any Acquiring
                                    Person and certain affiliated persons), (ii)
                                    cause the Rights Agreement again to become
                                    amendable other than in accordance with this
                                    paragraph or (iii) cause the Rights again to
                                    become redeemable.

VOTING RIGHTS                       Rights holders have no rights as a Health
                                    Care Property Investors, Inc. stockholder
                                    separate from those as a stockholder,
                                    including the right to vote and to receive
                                    dividends.

ANTIDILUTION PROVISIONS             The Rights Agreement includes antidilution
                                    provisions designed to prevent efforts to
                                    diminish the efficacy of the Rights.

TAXES                               While the dividend of the Rights will not be
                                    taxable to stockholders or to Health Care
                                    Property Investors, Inc., stockholders or
                                    Health Care Property Investors, Inc. may,
                                    depending upon the circumstances, recognize
                                    taxable income in the event that the Rights
                                    become exercisable.

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

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, a copy of
which may be found on the SEC's EDGAR database at www.sec.gov. A copy of the
Rights Agreement is also available free of charge to Health Care Property
Investors, Inc.'s stockholders by writing to Investor Relations,

                                      C-3
<PAGE>   69

Health Care Property Investors, Inc., 4675 MacArthur Court, 9th Floor, Newport
Beach, CA 92660. This summary description of the Rights is not complete and is
qualified by reference to the Rights Agreement, as may be amended from time to
time, the terms of which are incorporated by reference.

                                      C-4<PAGE>   1
                                                                    EXHIBIT 10.1

                             NOVATEL WIRELESS, INC.
                        1997 EMPLOYEE STOCK OPTION PLAN
                          (ADOPTED AS OF JUNE 2, 1997)

                                    ARTICLE I

                                  GENERAL TERMS

        1.1 PURPOSE OF PLAN; TERM

               (a) ADOPTION. On June 2, 1997, the Board of Directors (the
"Board") of Novatel Wireless, Inc., a Delaware corporation (the "Company"),
adopted this stock option plan to be known as the Novatel 1997 Employee Stock
Option Plan (the "Plan").

               (b) DEFINED TERMS. All initially capitalized terms used in the
Plan shall have the meanings set forth in Article IV hereto.

               (c) GENERAL PROPOSE. The purpose of the Grant Program is to
further the interests of the Company and its stockholders by attracting and
retaining employees of the Company (or Parent or Subsidiary Corporations) and
encouraging employees to acquire shares of the Company's Stock, thereby
acquiring a proprietary interest is its business and an increased personal
interest in its continued success and progress. Such purpose shall be,
accomplished by providing for the granting of options ("Options") to acquire the
Company's Stock.

               (d) CHARACTER OF OPTIONS. Options granted under this Plan to
employees of the Company (or Parent or Subsidiary Corporations) that are
intended to qualify as "incentive stock options" as defined in Code Section 422
("Incentive Stock Options") will be specified in the applicable stock option
agreement. All other Options granted under this Plan will be nonqualified
options.

               (e) RULE 16b-3 PLAN. With respect to persons subject to Section
16 of the Securities Exchange Act of 1934, as amended ("1934 Act"), the Plan is
intended to comply with all applicable conditions of Rule 16b-3 (and all
subsequent revisions thereof) ("Rule 16b-3") promulgated under the 1934 Act. In
such instance, to the extent any provision of the Plan or action by a Plan
Administrator fails to so comply, it shall be deemed null and void, to the
extent permitted by law and deemed advisable by such Plan Administrator. In
addition, the Board may amend the Plan from time to time as it deems necessary
in order to meet the requirements of any amendments to Rule 16b-3 without the
consent of the stockholders of the Company.

               (f) DURATION OF PLAN. The term of the Plan shall be 10 years
commencing on the date of adoption of the Plan by the Board as specified in
Section 1.l(a) hereof. No Option shall be granted under the Plan unless granted
within 10 years of the adoption of the Plan by the Board, but Options
outstanding on that date shall not be terminated or otherwise affected by virtue
of the Plan's expiration.

<PAGE>   2

        1.2 STOCK AND MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN

               (a) DESCRIPTION OF STOCK AND MAXIMUM SHARES ALLOCATED. The stock
subject to the provisions of the Plan and issuable upon exercise of Options
granted under the Plan is shares of the Company's Common Stock, $.001 par value
pet share (the "Stock"), which may be either unissued or treasury shares, as the
Board may from time to time determine. Subject to adjustment as provided in
Section 3.1 hereof, the aggregate number of shares of Stock covered by the Plan
and issuable hereunder shall be 600,000 shares of Stock.

               (b) CALCULATION OF AVAILABLE SHARES. For purposes of calculating
the maximum number of shares of Stock which may be issued under the Plan, the
shares issued (including the shares, if any, withheld for tax withholding
requirements) upon exercise of an Option shall be counted.

               (c) RESTORATION OF UNPURCHASED SHARES. If an Option expires or
terminates for any reason prior to its exercise in full and before the term of
the Plan expires, the shares of Stock subject to, but not issued wader, such
Option shall, without further action by or on behalf of the Company, again be
available under the Plan.

        1.3 APPROVAL; AMENDMENTS

               (a) APPROVAL BY STOCKHOLDERS. The Plan shall be submitted to the
stockholders of the Company for their approval at a regular or special meeting
to be held within 12 months after the adoption of the Plan by the Board.
Stockholder approval shall be evidenced by the affirmative vote at the holders
of a majority of the shares of the Company's Stock present in person or by proxy
and voting at the meeting. The date such stockholder approval has been obtained
shaft be referred to herein as the "Effective Date."

               (b) COMMENCEMENT OF PROGRAMS. The Grant Program Shall commence
immediately.

               (c) AMENDMENTS TO PLAN. The Board may, without action on the part
of the Company's stockholders, make such amendments to, changes in and additions
to the Plan as it may, from time to time, deem necessary or appropriate and in
the best interests of the Company; provided, however, that the Board may not,
without the consent of the applicable Optionholder, take any action which
disqualifies any Option previously granted under the Plan for treatment as an
Incentive Stock Option or which adversely affects or impairs the rights of the
Optionholder of any Option outstanding under the Plan, and further provided
that, except as provided in Article III hereof, the Board may not, without the
approval of the Company's stockholders, (i) increase the aggregate number of
shares of Stock subject to the Plan, (ii) reduce the Exercise Price at which
Options may be granted or the Exercise Price at which any outstanding Option may
be exercised, (iii) extend the term of the Plan, (iv) change the class of
persons eligible to receive Options under the Plan, or (v) materially increase
the benefits accruing to participants under the Plan. Notwithstanding the
foregoing, Options may be granted under this Plan to purchase shares of Stock in
excess of the number of shares then available for issuance under the Plan if (A)
an amendment to increase the maximum number of shares issuable under the Plan is
adopted by the Board prior to a initial grant of any such Option and within one
year thereafter

                                      -2-
<PAGE>   3

such amendment is approved by the Company's stockholders, and (B) each such
Option granted is not to become exercisable or vested, in whole or in part, at
any time prior to the obtaining of such stockholder approval.

                                   ARTICLE II

                                  GRANT PROGRAM

        2.1 PARTICIPANTS; ADMINISTRATION

               (a) ELIGIBILITY AND PARTICIPATION. Options may be granted only to
persons ("Eligible Persons") who, at the time of grant, are employees of the
Company (or Parent or Subsidiary Corporations); provided, however, the maximum
number of shares of Stock with respect to which Options may be granted to any
employee during the term of the Plan shall not exceed 50 percent of the shares
of Stock covered by and is issuable under the Plan as specified in Section
1.2(a) hereof. A Plan Administrator shall have full authority to determine which
Eligible Persons in its administered group are to receive Option grants under
the Plan, the number of shares to be covered by each such grant, whether or not
the granted Option is to be an Incentive Stock Option, the time or times at
which each such Option is to become exercisable, and the maximum term for which
the Option is to be outstanding.

               (b) GENERAL ADMINISTRATION. The power to administer the Grant
Program shall be vested with the Board or a committee designated by the Board.
The Board may appoint a Senior Committee ("Senior Committee"), which may, at the
discretion of the Board, be constituted so as to comply wish the applicable
requirements of Rule 16b-3 and Code Section 162(m), and the Board may delegate
to such Senior Committee the power to administer the Grant Program with respect
to Eligible Persons who are Affiliates and/or non-Affiliates. The Board may also
appoint an Employee Committee ("Employee Committee") of two or more persons who
are members of the Board and delegate to such Employee Committee the power to
administer the Grant Program with respect to Eligible Persons that are not
Affiliates for purposes of this Plan, the term "Affiliates" shall mean all
"officers" (as that term is defined in Rule 16a-1(f) promulgated under the 1934
Act), all "covered persons" (as that term is defined in Code Section 162(m)),
directors of the Company, and all persons who own 10 percent or more of the
Company's issued and outstanding equity securities.

               (c) PLAN ADMINISTRATORS. The Board, the Senior Committee, the
Employee Committee, and/or any other committee allowed hereunder, whichever is
applicable, shall be each referred to herein as a "Plan Administrator." Each
Plan Administrator shall have the authority and discretion, with respect to its
administered group, to select which Eligible Persons shall participate in the
Grant Program, to grant Options under the Grant Program, to establish such rules
and regulations as they may deem appropriate with respect to the proper
administration of the Grant Program and to make such determinations under, and
issue such interpretations of, the Grant Program and any outstanding Option as
they may deem necessary or advisable. Unless otherwise required by law or
specified by the Board with respect to any committee, decisions among the
members of a Plan Administrator shall be by majority vote. Decisions of a Plan
Administrator shall be final and binding on all parties who have an interest in
the Grant Program or any outstanding Option. The Senior Committee, the Employee
committee,

                                      -3-
<PAGE>   4

and/or any other committee allowed hereunder, in their respective sole
discretion, may make specific grants of Options conditioned on approval of a
Board.

               The Board may establish an additional committee or committees of
persons who are members of the Board and delegate to such other committee or
committees the power to administer all or a portion of the Grant program with
respect to all or a portion of the Eligible Persons. Members of the Senior
Committee, Employee Committee, or any other committee allowed hereunder shall
serve for such period of time as the Board may determine and shall be subject to
removal by the Board at any time. The Board may, at any time, terminate all or a
portion of the functions of the Senior Committee, the Employee Committee, or any
other committee allowed hereunder and reassume all or a portion of powers and
authority previously delegated to such committee.

               (d) GUIDELINES FOR PARTICIPATION. In designating and selecting
Eligible Persons for participation in the Grant Program, a Plan Administrator
shall consult with and give consideration to the recommendations and criticisms
submitted by appropriate managerial and executive officers of the Company. A
Plan Administrator also shall take into account the duties and responsibilities
of the Eligible Persons, their past, present and potential contributions to the
success of the Company and such other factors as a Plan Administrator shall deem
relevant in connection with accomplishing the purpose of the Plan.

        2.2 TERMS AND CONDITIONS OF OPTIONS

               (a) ALLOTMENT OF SHARES. A Plan Administrator shall determine the
number of shares of Stock to be optioned from time to time and the number of
shares to be optioned to any Eligible Person (the "Optioned Shares"). The grant
of a Option to a person shall neither entitle such person to, nor disqualify
such person from, participation in any other grant of Options under this Plan or
any other stock option plan of the Company.

               (b) EXERCISE PRICE. Upon the grant of my Option, a Plan
Administrator shall specify the price ("Exercise Price") to be paid for each
share of Stock upon the exercise of such Option. The Exercise Price may not be
less than 100 percent of the fair market value per share of the Stock on the
date the Option is granted if the Option (i) is intended to qualify as an
Incentive Stock Option, and/or (ii) is intended to qualify for the
"performance-based compensation" exception to the tax deduction limits of Code
Section 162(m). If the Option is intended to qualify as an Incentive Stock
Option and is granted to a stockholder, who at the time the Option is granted,
owns or is deemed to own stock possessing more than 10 percent of the total
combined voting power of all classes of stock of the Company) (or of any Parent
or Subsidiary Corporation), the Exercise Price shall not be less than 110
percent of the fair market value per share of Stock on the date chat the Option
is granted. The determination of the fair market value of the Stock shall be
made in accordance with the valuation provisions of Section 3.5 hereof.

               (c) INDIVIDUAL STOCK OPTION AGREEMENTS. Options granted under the
Plan shall be evidenced by option agreements in such form and content as a Plan
Administrator from time to time approves, which agreements shall substantially
comply with and be subject to the terms of the Plan, including the terms and
conditions of this Section 2.2. As determined by a Plan Administrator, each
option agreement shall state (i) the total number of shares to which it

                                      -4-
<PAGE>   5

pertains, (ii) the Exercise Price for the shares covered by the Option, (iii)
the time at which the Options vest and become exercisable, and (iv) the Option's
scheduled expiration date. The option agreements may contain such other
provisions or conditions as a Plan Administrator deems necessary or appropriate
to effectuate the sense and purpose of the Plan, including without limitation,
covenants by the Optionholder not to compete and remedies for the Company in the
event of the breach of any such covenant, and a requirement that any partial
exercise of an Option be for no Less than 20% of the total number of shares
originally subject to such Option.

               (d) OPTION PERIOD. No Option granted wader the Plan that is
intended to be an Incentive Stock Option shall be exercisable for a period in
excess of 10 years from the date of its grant (five years if the Option is
granted to a stockholder who at the time the Option is granted owns or is deemed
to own stuck possessing more than 10 percent of the total combined voting power
of all classes of stock of the Company or of any Parent or Subsidiary
Corporation), subject to earlier termination in the event of termination of
employment, retirement or death of the Optionholder. A Option may be exercised
in full or is part at any time or from time to time during the term of the
Option or provide for its exercise in stated installments at stated times during
the Option's term.

               (e) VESTING; LIMITATIONS. The tame at which the Optioned Shares
vest with respect to an Optionholder shall be in the discretion of that
Optionholder's Plan Administrator. Notwithstanding the foregoing, to the extent
a Option is intended to qualify as an Incentive Stock Option, the aggregate fair
market value (determined as of the respective date or dates of grant) of the
Stock for which one or more Options granted to any person under this Plan (or
any other option plan of the Company or any Parent or Subsidiary Corporation)
may for the first time become exercisable as Incentive Stock Options during any
one calendar year shall not exceed the sum of $100,000 (referred to herein as
the "$100,000 Limitation"). To the extent that any person holds two or more
Options which become exercisable for the first time in the same calendar year,
the foregoing limitation on the exercisability as an Incentive Stock Option
shall be applied on the basis of the order in which such Options are granted.

               (f) NO FRACTIONAL SHARES. Options shall be exercisable only for
whole shares: no fractional shares will be issuable upon exercise of any Option
granted under the Plan.

               (g) METHOD OF EXERCISE. In order to exercise a Option with
respect to any vested Optioned Shares, an Optionholder (or in the case of an
exercise after an Optionholder's death, such Optionholder's executor,
administrator, heir or legatee, as the case may be) must take the following
action:

                      (i) execute and deliver to the Company a written notice of
exercise signed in writing by the person exercising the Option specifying the
number of shares of Stock with respect to which the Option is being exercised;

                      (ii) pay the aggregate Exercise Price in one of the
alternate forms as set forth in Section 2.2(h) below; and

                      (iii) furnish appropriate documentation that the person or
persons exercising the Option (if other than the Optionholder) has the right to
exercise such Option.

                                      -5-
<PAGE>   6

As soon as practicable after the Exercise Date, the Company shall mail or
deliver to or on behalf of the Optionholder (or any other person or persons
exercising this Option in accordance herewith) a certificate or certificates
representing the Stock for which the Option has been exercised in accordance
with the provisions of this Plan. In no event may any Option be exercised for
any fractional shares.

               (h) PAYMENT OF EXERCISE PRICE. The aggregate Exercise Price shall
be payable in one of the alternative forms specified below:

                      (i) Full payment in cash or check made payable to the
Company's order; or

                      (ii) To the extent permitted by the Plant Administrator,
in its sole and unrestricted discretion, full payment in shares of Stock held
for the requisite period necessary to avoid a charge to the Company's reported
earnings and valued at fair market value on the Exercise Date (as determined in
accordance with Section 3.5 hereof); or

                      (iii) If a cashless exercise program has been implemented
by the Board and to the extent permitted by the Plan Administrator, in its sole
and unrestricted discretion, full payment through a sale and remittance
procedure pursuant to which the Optionholder (A) shall provide irrevocable
written instructions to a designated brokerage firm to effect the immediate sale
of a Optioned Shares to be purchased and remitted to the Company, out of the
sale proceeds available on the settlement date, sufficient funds to cover the
aggregate Exercise Price payable for the Optioned Shares to be purchased, and
(B) shall concurrently provide written directives to the Company to deliver the
certificates for the Optioned Shares to be purchased directly to such brokerage
firm in order to complete a sale transaction.

               (i) REPURCHASE RIGHT. The Plan Administrator may, in its sole
discretion, set forth other terms and conditions upon which the Company (or its
assigns) shall have the right to repurchase shares of Stock acquired by as
Optionholder pursuant to an Option. Any repurchase right of the Company shall be
exercisable by the Company (or its assignees) upon such terms and conditions as
the Plan Administrator may specify in the Stock Repurchase Agreement evidencing
such right. The Plan Administrator may, in its discretion, also establish as a
term and condition of one or more Options granted under the Plan that the
Company shall have a right of first refusal with respect to any proposed sale or
other disposition by the Optionholder of any shares of Stock issued upon the
exercise of such Options. Any such right of first refusal shall be exercisable
by the Company (or its assigns) in accordance with the terms and conditions set
forth in the Stock Repurchase Agreement.

               (j) TERMINATION OF INCENTIVE STOCK OPTIONS

                      (i) TERMINATION OF SERVICE. If any Optionholder teas to be
in Service to the Company for a reason other than death, the Optionholder's
vested Incentive Stock Options on the date of termination of such Service shall
remain exercisable for no more than 90 days after the date of termination of
such Service or unfit the stated expiration date of the Optionholder's Option,
whichever occurs first; provided, that (i) if Optionholder is discharged for
Cause, or (ii) if after the Service of the Optionholder is terminated, the
Optionholder commits

                                      -6-
<PAGE>   7

acts detrimental to the Company's interests, then the Incentive Stock Option
shall thereafter be void for all purposes. The Company shall have "Cause" to
discharge the Optionholder for (A) commission of a crime by the Optionholder or
for reasons involving moral turpitude; (B) an act by the Optionholder which
tends to bring the Company into disrepute; or (C) negligent, fraudulent or
willful misconduct by the Optionholder. Notwithstanding the foregoing, if any
Optionholder ceases to be in Service to the Company by reason of permanent
disability within the meaning of Code Section 22(e)(3) (as determined by the
applicable Plan Administrator), the Optionholder shall have up to 180 days after
the dace of termination of Service, but in no event after a stated expiration
date of the Optionholder's Incentive Stock Options, to exercise Incentive Stock
Options that the Optionholder was entitled to exercise on the date the
Optionholder's Service terminal as a result of such disability.

                      (ii) DEATH OF OPTIONHOLDER. If an Optionholder dies while
in the Company's Service, the Optionholder's vested Incentive Stock Options as
of the date of death shall remain exercisable up to one year after the date of
death or until the stated expiration date of the Optionholder's Option,
whichever occurs first, and may be exercised only by the person or persons
("Successors") to whom the Optionholder's rights pass under a will or by the
laws of descent and distribution. The Option may be exercised and payment of the
Exercise Price made in full by the Successors only after written notice to the
Company specifying the number of shares to be purchased. Such notice shall state
that the Exercise Plan is being paid in full in the manner specified in Section
2.2 hereof. As soon as practicable after receipt by the Company of such notice
and payment in full of the Exercise Price, a certificate or certificates
representing the Optioned Shares shall be registered in the name or names
specified by the Successors in the written notice of exercise and shall be
delivered to the Successors.

               (k) TERMINATION OF NONQUALIFIED OPTIONS. Any Options, which are
not Incentive Stock Options and are outstanding at the time an Optionholder dies
while in Service to the Company or otherwise ceases to be in Service to the
Company, shall remain exercisable for such period of time thereafter as
determined by the Plan Administrator at the time of grant and set forth in the
documents evidencing such Options; provided, however, that no Option shall be
exercisable after the Option's stated expiration date, and provided further,
that if the Optionholder is discharged for Cause or, if after the Optionholder's
Service to the Company is terminated, the Optionholder commits acts detrimental
to the Company's interests, then the Option will thereafter be void for all
purposes.

               (l) OTHER PLAN PROVISIONS STILL APPLICABLE. If an Option is
exercised upon the termination of Service or death of an Optionholder under this
Section 2.2, the other provisions of the Plan shall still be applicable to such
exercise, including the requirement that the Optionholder or his or her
Successor may be required to enter into a Stock Repurchase Agreement.

               (m) DEFINITION OF "SERVICE." For purposes of this Plan, unless
otherwise provided in the option agreement with the Optionholder, the
Optionholder shall be deemed to be in "Service" to the Company so long as such
individual renders continuous services on a periodic basis to the Company (or to
any Parent or Subsidiary Corporation) in the capacity of an employee, director,
or an independent consultant or advisor. In the discretion of a Plan
Administrator, an Optionholder shall be considered to be rendering continuous
services to the

                                      -7-
<PAGE>   8

Company even if the type of services change, e.g., from employee to independent
consultant. The Optionholder shall be considered to be an employee for so long
as such individual remains in the employ of the Company or one or more of its
Parent or Subsidiary Corporations.

               (n) TAX REIMBURSEMENT BONUS. The Plan Administrator may, with the
consent of the Board, cause the Company to pay a cash bonus to an Optionholder
for the purpose of paying ail or a portion of any federal, state or local tax
due with respect to the grant, exercises or disposition of an Option, the
disposition of shares of Stock acquired upon the exercise of as Option, and/or
any payment made under this Section 2.2(n).

                                   ARTICLE III

                                  MISCELLANEOUS

        3.1 CAPITAL ADJUSTMENTS. The aggregate number of shares of Stock subject
to the Plan, the number of shares covered by outstanding Options, and the
Exercise Price stated in such Options shall be proportionately adjusted for any
increase or decrease in the number of outstanding shares of Stock of the Company
resulting from a subdivision or consolidation of shares or any other capital
adjustment or the payment of a stock dividend or any other increase or decrease
in the number of such shares effected without the Company's receipt of
consideration therefor in money, services or property.

        3.2 MERGERS, ETC. If the Company is the surviving corporation in any
merger or consolidation (not including a Corporate Transaction), any Option
granted under the Plan shall pertain to and apply to the securities to which a
holder of the number of shares of Stock subject to the Option would have been
entitled prior to the merger or consolidation. Except as provided in Section 3.3
hereof, a dissolution or liquidation of the Company shall cause every Option
outstanding hereunder to terminate.

        3.3 CORPORATE TRANSACTION. In the event of stockholder approval of a
Corporate Transaction, the Plan Administrator shall have the discretion and
authority, exercisable at any time, to provide for the automatic acceleration of
one or more of the outstanding Options granted by it under the Plan. Upon the
consummation of the Corporate Transaction, all Options shall, to the extent not
previously exercised, terminate and cease to be outstanding.

        3.4 CHANGE IN CONTROL

               (a) GRANT PROGRAM. A Plan Administrator shall have the discretion
and authority, exercisable at any time, whether before or after a Change in
Control, to provide for the automatic acceleration of one or more outstanding
Options granted by it under the Plan in the vent of a Change in Control. A Plan
Administrator may also impose limitations upon the automatic acceleration of
such Options to the extent it deems appropriate. Any Options accelerated upon a
Change in Control shall remain fully exercisable until the expiration or sooner
termination of the Option term.

               (b) INCENTIVE STOCK OPTION LIMITS. The exercisability of any
Options which are intended to qualify as Incentive Stock Options and which are
accelerated by the Plan Administrator in connection with a pending Corporation
Transaction or Change in Control shall,

                                      -8-
<PAGE>   9

except as otherwise provided in the discretion of the Plan Administrator, remain
subject to the $100,000 Limitation and vest as quickly as possible without
violating the $100,000 Limitation.

        3.5 CALCULATION OF FAIR MARKET VALUE OF STOCK. The fair market value of
a share of Stock on any relevant date shall be determined in accordance with the
following provisions:

               (a) If the Stock is not at the time listed or admitted to trading
on any stock exchange but is traded in the over-the-counter market, the fair
market value shall be the mean between the highest bid and lowest asked prices
(or, if such information is available, the closing selling price) per share of
Stock on the date in question in the over-the-counter market, as such prices are
report d by the National Association of Securities Dealers through its Nasdaq
system or any successor system. If there are no reported bid and asked prices
(or closing selling price) for the Stock on the date in question, then the mean
between the highest bid price and lowest asked price (or the closing selling
price) on the last preceding date for which such quotations exist shall be
determinative of fair market value.

               (b) If the Stock is at the time listed or admitted to trading on
any stock exchange, then the fair market value shall be the closing selling
price per share of Stock on the date in question on the stock exchange
determined by the Board to be the primary market for the Stock, as such price is
officially quoted in the composite tape of transactions on such exchange. If
there is no reported sale of Stock on such exchange on the date in question,
then the fair market value shall be the closing selling price on the exchange on
the last preceding date for which such quotation exists.

               (c) If the Stock at the time is neither listed nor admitted to
trading on any stock exchange nor traded in the over-the-counter market, then
the fair market value shall be determined by the Board after taking into account
such factors as the Board shall deem appropriate.

        3.6 USE OF PROCEED. The proceeds received by the Company from the sale
of Stock pursuant to the exercise of Options hereunder, if any, shall be used
for general corporate purposes.

        3.7 CANCELLATION OF OPTIONS. Each Plan Administrator shall have the
authority to effect, at any time and from time to time, with the consent of the
affected Optionholder, the cancellation of any or all outstanding Options
granted under the Plan and to grant in substitution therefore new Options under
the Plan covering the same or different numbers of shares of Stock as long as
such new Options have an Exercise Price that is no less than the minimum
Exercise Price as set forth in Section 2.2(b) hereof on the new grant date.

        3.8 REGULATORY APPROVALS. The implementation of the Plan, the granting
of any Option hereunder, and the issuance of Stock upon the exercise of any such
Option shall be subject to the procurement by the Company of all requisite
approvals and permits.

        3.9 INDEMNIFICATION. Each and every member of a Plan Administrator, in
addition to such other available rights of indemnification, shall be indemnified
and held harmless by the Company, to the extent permitted under applicable law,
for, from and against all costs and expenses reasonably incurred in connection
with any action, suit, or other legal proceeding to

                                      -9-
<PAGE>   10

which any member thereof may be a party by reason of any action taken, failure
to act under or in connection with the Plan or any rights granted thereunder and
against all amounts paid by them in settlement thereof or paid by them in
satisfaction of a judgment of any such action, suit or proceeding, except a
judgment based upon a finding of bad faith.

        3.10 PLAN NOT EXCLUSIVE. This Plan is not intended to be the exclusive
means by which the Company may issue options to acquire its Stock. To the extent
permitted by applicable law, other options or awards may be issued by the
Company other than pursuant to this Plan without stockholder approval.

        3.11 COMPANY RIGHTS. The grants of Options shall in no way affect the
right of the Company to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

        3.12 PRIVILEGE OF STOCK OWNERSHIP. An Optionholder shall not have any of
the rights of a stockholder with respect to Optioned Shares until such
individual shall have exercised the Option and paid the Exercise Price for the
Optioned Shares. No adjustment will be made for dividends or other rights for
which the record date is prior to the date of such exercise and full payment for
such Optioned Shares.

        3.13 ASSIGNMENT. Except as may be specifically allowed by the Plan
Administrator and set forth in the documents evidencing an Option. no Option
granted under the Plan or any of the rights and privileges conferred thereby
shall be assignable or transferable by an Optionholder or grantee other than by
will or the laws of descent and distribution. and such Option shall be
exercisable during the Optionholder's or grantee's lifetime only by the
Optionholder or grantee. Notwithstanding the foregoing, no Incentive Stock
Option granted under the Plan or any of the rights and privileges conferred
thereby shall be assignable or transferable by an Optionholder or grantee other
than by will or the laws of descent and distribution, and such Incentive Stock
Option shall be exercisable during the Optionholder's or grantee's lifetime only
by the Optionholder or grantee. The provisions of the Plan shall inure to the
benefit of, and be binding upon, the Company and its successors or assigns, and
the Optionholders, the legal representatives of their respective estates, their
respective heirs or legatees and their permitted assignees.

        3.14 SECURITIES RESTRICTIONS

               (a) LEGEND ON CERTIFICATES. All certificates representing shares
of Stock issued upon exercise of Options granted under the Plan shall be
endorsed with a legend reading as follows:

               THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE
               BEEN ISSUED TO THE REGISTERED OWNER IN RELIANCE UPON WRITTEN
               REPRESENTATIONS THAT THESE SHARES HAVE BEEN PURCHASED SOLELY FOR
               INVESTMENT. THESE SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED
               UNLESS IN THE OPINION OF THE COMPANY AND ITS LEGAL COUNSEL SUCH
               SALE, TRANSFER

                                      -10-
<PAGE>   11

               OR ASSIGNMENT WILL NOT BE IN VIOLATION OF THE SECURITIES ACT OF
               1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER.

               (b) PRIVATE OFFERING FOR INVESTMENT ONLY. The Options are and
shall be made available only to a limited number of present and future employees
who have knowledge of the Company's financial condition, management and its
affairs. The Plan is not intended to provide additional capital for the Company,
but to encourage ownership of Stock among the Company's employees. By the act of
accepting an Option, each grantee agrees (i) that any shares of Stock acquired
pursuant to any Option will be solely acquired for investment and not with any
intention to resell or redistribute those shares, and (ii) such intention will
be confirmed by an appropriate certificate at the time the Stock is acquired if
requested by the Company. The neglect or failure to execute such a certificate,
however, shall not limit or negate the foregoing agreement.

               (c) REGISTRATION STATEMENT. If a Registration Statement covering
a shares of Stock issuable upon exercise of Options granted under the Plan is
filed under the Securities Act of 1933, as amended, and is declared effective by
the U.S. Securities Exchange Commission, the provisions of Sections 3.14(a) and
(b) shall terminate during the period of time that such Registration Statement,
as periodically amended, remains effective.

        3.15 TAX WITHHOLDING

               (a) GENERAL. The Company's obligation to deliver Stock upon the
exercise of Options under the Plan shall be subject to the satisfaction of all
applicable United States, Canadian, state, provincial, and local income tax
withholding requirements.

               (b) SHARES TO PAY FOR WITHHOLDING. The Plan Administrator may, in
its discretion and in accordance with the provisions of this Section 3.15(b) and
such supplemental rules as it may from time to time adopt, provide any or all
Optionholders with the right to use shares of Stock in satisfaction of all or
part of the United States, Canadian, state, provincial, and local income tax
liabilities ("Taxes") incurred by such Optionholders in connection with the
exercise of their Options. Such right may be provided to Optionholders in either
or both of the following formats:

                      (i) STOCK WITHHOLDING. The Plan Administrator may, in its
discretion, provide the Optionholder with the election to have the Company
withhold, from the Stock otherwise issuable upon the exercise of an Option, a
portion of those shares of Stock with an aggregate fair market value equal to
the percentage (not to exceed 100 percent) of the applicable Taxes designated by
the Optionholder.

                      (ii) STOCK DELIVERY. The Plan Administrator may, in its
discretion, provide the Optionholder with the election to deliver to the
Company, at the time the Option is exercised, one or more shares of Stock
previously acquired by such individual (other than pursuant to the transaction
triggering Taxes) with an aggregate fair market value equal to the percentage
(not to exceed 100 percent) of the Taxes incurred in connection with such Option
exercise as designated by the Optionholder.

                                      -11-
<PAGE>   12

        3.16 GOVERNING LAW. The Plan shall be governed by and all questions
thereunder shall be determined in accordance with the laws of the State of
Delaware, without regard to its conflicts of laws principles.

                                   ARTICLE IV

                                   DEFINITIONS

               The following capitalized terms used in this Plan shall have the
meaning described below:

               "AFFILIATES" shall have the meaning set forth in Section 2.1(b)
hereof.

               "BOARD" shall mean the Board of Directors of the Company.

               "CAUSE" shall have the meaning set forth in Section 2.2(j)(i)
hereof.

               "CHANGE IN CONTROL" shall mean and include the following
transactions or situations (i) a person or related group of persons, other than
the Company or a person that directly or indirectly controls, is controlled by,
or under common control with the Company, acquires ownership of 40 percent or
more of the Company's outstanding common stock pursuant to a tender or exchange
offer which the Board of Directors recommends that the Company's stockholders
not accept, or (ii) the change in the composition of the Board occurs such that
those individuals who were elected to the Board at the last stockholders'
meeting at which there was not a contested election for Board membership
subsequently ceased to comprise a majority of the Board by reason of a contested
election.

               "CODE" shall mean the United States Internal Revenue Code of
1986, as amended.

               "COMPANY" shall mean Novatel Wireless, Inc. a Delaware
corporation.

               "CORPORATE TRANSACTION" shall mean (a) a merger or consolidation
in which the Company is not the surviving entity, except for a transaction the
principal purposes of which is to change the state in which the Company is
incorporated; (b) the sale, transfer of or other disposition of, all or
substantially all of the assets of the Company and complete liquidation or
dissolution of the Company, or (c) any reverse merger in which the Company is
the surviving entity but in which the securities possessing snore than 50
percent of the total combined voting power of the Company's outstanding
securities are transferred to a person or persons different from those who held
such securities immediately prior to such merger.

               "EFFECTIVE DATE" shall mean the date that the Plan has been
approved by the stockholders as set forth in Section 1.3(a) hereof.

               "ELIGIBLE PERSONS" shall have the meaning set forth in Section
2.1(a) hereof.

               "EMPLOYEE COMMITTEE" shall mean that committee appointed by the
Board to administer the Plan with respect to the Non-Affiliates and comprised of
two or more persons who are members of the Board.

                                      -12-
<PAGE>   13

               "EXERCISE DATE" shall be the date on which written notice of the
exercise of an Option is delivered to the Company in accordance with the
requirements of the Plan.

               "EXERCISE PRICE" shall mean the Exercise Price per share as
specified by the Plan Administrator pursuant to Section 2.2(b) hereof.

               "GRANT PROGRAM" shall mean the program described in this Plan
pursuant to which Eligible Persons are granted Options in the discretion of the
Plan Administrator.

               "INCENTIVE STOCK OPTION" shall mean an Option that is intended to
qualify as an "incentive stock option" under Code Section 422.

               "$100,000 LIMITATION" shall mean the limitation pursuant to which
the aggregate fair market value (determined as of the respective date or dates
of grant) of the Stock for which one or more Options granted to any persons
under this Plan (or any other option plan of the Company or any Parent or
Subsidiary Corporation) may for the first time be exercisable as Incentive Stock
Options during any one calendar year shall not exceed the sum of $100,000.

               "OPTIONED SHARES" shall have the meaning set forth in Section
2.2(a) hereof.

               "OPTIONHOLDER" shall mean an Eligible Person to whom Options have
been granted.

               "OPTIONS" shall mean options to acquire Stock granted under the
Plan.

               "PARENT CORPORATION" shall mean any corporation in the unbroken
chain of corporations ending with the employer corporation, where, at each link
of the chain, the corporation and the link above owns at least 50 percent of the
combined total voting power of all classes of the stock in the corporation in
the link below.

               "PLAN" shall mean this stock option plan for Novatel Wireless,
Inc.

               "PLAN ADMINISTRATOR" shall mean (a) either the Board, the Senior
Committee, or any other committee, whichever is applicable, with respect to the
administration of the Grant Program as it relates to Affiliates, and (b) either
the Board, the Senior Committee, the Employee Committee, or any other committee,
whichever is applicable, with respect to the administration of the Grant Program
as it relates to Non-Affiliates.

               "RULE 16b-3" shall have the meaning set forth in Section 1.1(e)
hereof.

               "SENIOR COMMITTEE" shall have the meaning set forth in Section
2.1(b) hereof.

               "SERVICE" shall have the meaning set forth in Section 2.2(m)
hereof.

               "STOCK" shall mean shares of the Company's common stock, $.001
par value per share, which may be unissued or treasury shares, as the Board may
from time to time determine.

                                      -13-
<PAGE>   14

               "SUBSIDIARY CORPORATION" shall mean any corporation in the
unbroken chain of corporations starting with the employer corporation, where, at
each link of the chain, the corporation and the link above owns at least 50
percent of the combined voting power of all classes of stock in the corporation
below.

               "SUCCESSORS" shall have the meaning set forth in Section
2.21(j)(ii) hereof.

               "TAXES" shall have the meaning set forth in Section 3.15(b)
hereof.

               EXECUTED as of the 2nd day of June, 1997.

                                   NOVATEL WIRELESS, INC.

                                   By: /s/
                                      ------------------------------------------
                                   Its: President

ATTESTED BY:

/s/
------------------------------
Its: Secretary

                                      -14-

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