Document:

<PAGE>
                                EXHIBIT 10.19

                      ELEPHANT & CASTLE INTERNATIONAL, INC.
                               FRANCHISE AGREEMENT

THIS FRANCHISE AGREEMENT (this "Agreement") is made, entered into and
effective this _______ day of ____________, 19_, by and between Elephant &
Castle International, Inc., a Texas corporation, with its principal office at
7657 Anagram Drive, Eden Prairie, Minnesota 55344 (hereinafter referred to as
"Elephant & Castle"), and _________________________________,
a(n)_______________________________________ (hereinafter referred to as the
"Franchisee");

                                    RECITALS

ELEPHANT & CASTLE-Registered Trademark- RESTAURANT SYSTEM. Elephant & Castle
has developed over time at significant cost and investment a distinctive
restaurant system for operating and franchising restaurants under the name
"Elephant & Castle-Registered Trademark-" which incorporate an Anglo/British
style pub restaurant and Tudor/Victorian decor, and which serve a wide
variety of high-quality food and beverage items featuring English-style
dishes, including fish and chips, shepherds pie, "bangers and mash," and Old
Country soups and desserts (the "Restaurant System"). The Restaurant System
contains distinctive concepts including, without limitation, special
seasonings, recipes and menu items; unique cooking styles and methods; food
line management systems; distinctive building and interior design, decor and
furnishings; specific standards, specifications and procedures for
operations; quality, consistency and uniformity requirements for the foods,
beverages, products and services offered to the public; methods, procedures
and requirements for operations, quality and inventory control, and training
and assistance; and advertising and promotional programs.

ELEPHANT & CASTLE MARKS. Elephant & Castle has widely and extensively
publicized the name "Elephant & Castle-Registered Trademark-" to the public
as an organization of restaurant businesses operating under the Restaurant
System. Elephant & Castle has the right and authority to license the use of
the name "Elephant & Castle-Registered Trademark-," the Elephant & Castle
logo, and other trademarks, trade names, service marks, logos, commercial
symbols, phrases, slogans and tag lines which are now owned or which will be
developed by Elephant & Castle (hereinafter referred to as the "Marks").
Elephant & Castle will continue to develop, use, and control the use of the
Marks in order to identify for the public the source of foods, products and
services marketed under the Restaurant System, and to represent to the public
the high standards of quality, appearance, cleanliness and service of the
Restaurant System.

OPERATION OF ELEPHANT & CASTLE-Registered Trademark- RESTAURANT. The
Franchisee desires to develop, own and operate an Elephant &
Castle-Registered Trademark- restaurant (hereinafter referred to as the
"Elephant & Castle-Registered Trademark- Restaurant" or the "Restaurant") at
the location set forth in Article 2 in compliance with the Restaurant System
and with all of the quality, consistency and uniformity standards and
specifications as established and promulgated from time to time by Elephant &
Castle. The Franchisee understands and acknowledges the importance of the
high standards of quality, appearance, cleanliness and service established by
Elephant & Castle, and the necessity of operating the Franchisee's Restaurant
in strict conformity with the standards and specifications established by
Elephant & Castle.

RIGHT TO USE MARKS AND RESTAURANT SYSTEM. Elephant & Castle is willing to
provide the Franchisee with the recipes, cooking and food preparation
techniques, food line management systems, menu content and design, decor and
color schemes, intellectual property, and other operational, marketing,
advertising, promotional and business information, experience and "know how"
related to the

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-73                           426304 9

<PAGE>

Restaurant System. The Franchisee acknowledges that it would take substantial
capital and human resources to develop a restaurant business similar to the
Elephant & Castle-Registered Trademark- Restaurant and, consequently, the
Franchisee desires to acquire the right to use the Marks and the Restaurant
System and to own and operate an Elephant & Castle-Registered Trademark-
Restaurant pursuant to the terms and conditions set forth in this Agreement.
The Franchisee acknowledges that Elephant & Castle would not grant the
Elephant & Castle-Registered Trademark- Restaurant Franchise to the
Franchisee or provide the Franchisee with the business information and "know
how" about the Restaurant System unless the Franchisee agreed to comply with
all of the terms and conditions of this Agreement and agreed to pay the
Initial Fee, the Continuing Fees and all other fees specified in this
Agreement.

REVIEW OF AGREEMENT. The Franchisee has had a full and adequate opportunity to
read and review this Agreement and to be thoroughly advised of the terms and
conditions of this Agreement by an attorney or other personal representative,
and has had sufficient time to evaluate and investigate the Restaurant System,
the financial requirements and the risks associated with the Restaurant System.

Pursuant to the above Recitals and in consideration of the mutual promises and
covenants set forth in this Agreement, Elephant & Castle and the Franchisee
agree and contract as follows:

DEFINITIONS

For purposes of this Agreement, the following words will have the following
definitions:

         DESIGNATED MARKET AREA.

"Designated Market Area" will mean each television market exclusive of another
based upon a preponderance of television viewing hours as defined by the A.C.
Nielsen ratings service or such other ratings service as may be designated by
Elephant & Castle.

         DOLLARS.

"Dollars" will mean United States of America dollars.

         FRANCHISE.

"Franchise" will mean the right granted by Elephant & Castle to the
Franchisee authorizing the Franchisee to operate an Elephant &
Castle-Registered Trademark- Restaurant at the Franchised Location in
conformity with the Restaurant System using the name "Elephant &
Castle-Registered Trademark-" and the other Marks.

         GENERAL MANAGER.

"General Manager" will mean the individual responsible for the overall
management and operation of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant including, but not limited to, administration, basic
operations, marketing, customer and community relations, record keeping,
employee staffing and training, inventory control, hiring and firing, food
preparation and maintenance of the Franchised Location.

         GROSS SALES.

"Gross Sales" will mean the total dollar sales from all customers of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant, and will
include all cash and credit sales made by the Franchisee of every kind and
nature made at, from, by or in connection with the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant business including, but not limited
to, all dollars and income received from the sale of: (a) foods, food
products and food items; (b) alcoholic and non-alcoholic beverages and
drinks; (c) admission or cover charges; (d) telephones, vending machines,
pool tables, dart board machines, video games and all other amusement games;
(e) slot machines and gaming machines; (f) net fees received from automated
teller machines; (g) lotteries, lottery tickets and pull tabs; (h) hats,
shirts, T-shirts,

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-74                           426304 9

<PAGE>

sweatshirts and other clothing; (i) cigars, cigarettes, tobacco products,
candies and gum; (j) catering; (k) room service; (l) banquets; (m) carry-out
items; (n) any and all other foods, products, products and services; (o) all
off-premises sales of foods, food products and all other products and
services offered in connection with the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant; and (p) all sales, use or gross
receipts tax rebates. "Gross Sales" will not include any sales, use or gross
receipts tax imposed by any federal, state, municipal or governmental
authority directly upon sales, if the amount of the tax is added to the
selling price and is charged to the customer, a specific record is made at
the time of each sale of the amount of such tax, and the amount of such tax
is paid to the appropriate taxing authority by the Franchisee; the amount of
all discounts and coupons issued to the public by the Franchisee and which
are taken or redeemed at the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant provided that a specific record is made each time a
customer takes a discount or redeems a coupon of the amount of the reduction
in the menu price as a result of such discount taken or coupon redeemed; and,
the amount of all employee meal discounts (E.G., manager meals) taken by
employees of the Franchisee at the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant provided that a specific record is made each time an
employee takes an employee meal discount of the amount of the reduction in
menu price as a result of such discount.

         MARKS.

"Marks" will include the name "Elephant & Castle-Registered Trademark-", the
Elephant & Castle logo, "Pub Grub-TM-" and such other trademarks, trade
names, service marks, logos, commercial symbols, phrases, slogans, and tag
lines as Elephant & Castle has or may develop for use in connection with
Elephant & Castle-Registered Trademark- Restaurants.

         OWNERSHIP INTEREST.

"Ownership Interest" will mean the share(s) of capital stock if the Franchisee
is a corporation, a membership interest if the Franchisee is a limited liability
company, a partnership interest if the Franchisee is a partnership, limited or
general partnership interests if the Franchisee is a limited partnership and
will include all other types and means of ownership of the Franchisee.

         OWNER.

"Owner" will mean any person or entity that owns shares of capital stock in the
Franchisee if the Franchisee is a corporation, a membership interest in the
Franchisee if the Franchisee is a limited liability company, a partnership
interest in the Franchisee if the Franchisee is a partnership, a limited or
general partnership interest if the Franchisee is a limited partnership and will
include all other persons or entities owning any other type or means of
Ownership Interest.

         RESTAURANT SYSTEM.

"Restaurant System" will mean the distinctive foods, beverages, food products,
and other products and services which are associated with the trademarks, trade
names, service marks, copyrights, distinctive interior and exterior building
designs, decor, furnishings, menus, uniforms, slogans, signs, logos, commercial
symbols and color combinations of Elephant & Castle. "Restaurant System" will
include all of the quality, consistency and uniformity requirements; the
standards, specifications and procedures for product and services, operations,
cleanliness, sanitation, control, training, advertising and promotion, service,
appearance; and, all instructions, procedures, methods and specifications
promulgated by Elephant & Castle.

         WEEK.

"Week" or "weekly" will mean a period of seven (7) consecutive days from Monday
through Sunday.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-75                           426304 9

<PAGE>

GRANT OF FRANCHISE

         FRANCHISED LOCATION.

Elephant & Castle hereby grants the Franchisee the personal right to operate
one Elephant & Castle-Registered Trademark- Restaurant in conformity with the
Restaurant System using the name "Elephant & Castle-Registered Trademark-"
and other specified Marks at the following single location__________________
____________________________________________________________________________,
which is referred to as the "Franchised Location."

         EXCLUSIVE AREA.

Except as provided to the contrary in this Article, the Franchisee will
receive an "Exclusive Area" consisting of the area within a three (3) mile
radius of the Franchised Location; provided, however, that if the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant is located in
any of the top forty (40) Metropolitan Statistical Areas in the United States
as determined by the United States Department of Commerce, then the
Franchisee will receive an Exclusive Area consisting of the area within a
one-half (1/2) mile radius of the Franchised Location. The Franchisee's
Exclusive Area is exclusive to the extent that Elephant & Castle will not
franchise, license, develop, own or operate ("develop") an Elephant &
Castle-Registered Trademark- Restaurant in the Exclusive Area.
Notwithstanding the foregoing, Elephant & Castle will have the absolute right
to:

         (a)      Develop other restaurant business concepts under other brand
                  names even if the locations for the concepts are within the
                  Exclusive Area;

         (b)      Develop Elephant & Castle-Registered Trademark- Restaurants
                  in the Exclusive Area if they are located at or within an
                  airport terminal, a stadium or arena or other venue for
                  semi-professional or professional sports, or a college or
                  university campus;

         (c)      Market, distribute and sell, on a wholesale or retail basis,
                  clothing, goods, foods, products or any other items sold under
                  any of the Marks, by direct sale, mail order, infomercials,
                  telemarketing or by any other marketing or distribution
                  method, even if such sales take place in, or are to
                  distributors, retailers, or consumers who are located in the
                  Exclusive Area; and,

         (d)      Advertise, promote and participate in special events and
                  promotional activities which take place in the Exclusive Area
                  including, without limitation, parades, holiday celebrations,
                  cooking, recipe or restaurant competitions, sporting events,
                  and fund-raising and charitable events, and sell any product
                  or service, including any product or service sold under any of
                  the Marks, in connection with such participation.

         UNDETERMINED FRANCHISED LOCATION.

If the Franchised Location has not yet been determined as of the date of this
Agreement, then the geographic area in which the Franchisee's Restaurant is
to be located will be described or otherwise defined in an exhibit signed by
the parties and attached to this Agreement. When the address of the
Franchised Location is determined, it will be inserted into this Agreement
and initialed by the parties.

         LEASE OR PURCHASE OF FRANCHISED LOCATION.

The Franchisee will not sign any lease, purchase agreement or obtain any
related rights to possession, occupancy or ownership of the Franchised
Location prior to the date set forth on Page F-1 of this Agreement. If the
Franchisee leases the Franchised Location, then the Franchisee will use its
best efforts to negotiate a lease term that coincides with the term of this
Agreement.

         RELOCATION.

The Franchisee may, with the prior written approval of Elephant & Castle,
relocate the Franchised Location if (a) the proposed new location does not
compete with any Elephant & Castle-Registered Trademark- Restaurant

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-76                           426304 9

<PAGE>

operated by Elephant & Castle or any other franchisee, (b) the proposed new
location is within the Franchisee's Exclusive Area, and (c) the proposed new
location does not infringe upon and is not located within the exclusive area
of another Elephant & Castle franchisee, area franchisee, master franchisee
or subfranchisee. The new location of the Restaurant, including the real
estate and the building, must comply with all applicable provisions of this
Agreement and with the then-current image, decor and specifications of
Elephant & Castle. Within ten (10) days after receipt by the Franchisee of
Elephant & Castle's written approval of the relocation of the Franchised
Location, the Franchisee will pay to Elephant & Castle a relocation fee of
five thousand dollars ($5,000).

         CONDITIONS.

The Franchisee hereby undertakes the obligation to operate the Elephant &
Castle-Registered Trademark- Restaurant using the Restaurant System at the
Franchised Location in strict compliance with the terms and conditions of
this Agreement for the entire term of this Agreement. The rights and
privileges granted to the Franchisee by Elephant & Castle under this
Agreement are applicable only to the single location designated as the
Franchised Location, are personal in nature, and may not be used elsewhere or
at any other location by the Franchisee.

         PERSONAL LICENSE.

The Franchisee will not have the right to franchise, subfranchise, license or
sublicense its rights under this Agreement. The Franchisee will not have the
right to pledge, assign or transfer this Agreement or its rights under this
Agreement, except as specifically provided for in this Agreement.

TERM OF AGREEMENT

         TERM.

The term of this Agreement will be for twenty (20) years, commencing on the date
set forth on Page F-1 of this Agreement. This Agreement will not be enforceable
until it has been signed by both the Franchisee and Elephant & Castle.

         TERM OF LEASE.

If the term of the lease for the Franchised Location (excluding any renewal
terms) is for a term that is longer than the term of this Agreement, then the
term of this Agreement will be automatically extended to coincide with the
initial term of the Franchisee's lease for the Franchised Location; provided,
however, that if the Franchisee, or any of the Franchisee's Owners, owns, either
directly or indirectly, the Franchised Location, including the business
premises, the real estate or the building, then the term of this Agreement will
be for twenty (20) years.

         REACQUISITION OPTION.

At the end of the term of this Agreement, the Franchisee will have the right
and option to reacquire the Franchise for the Franchised Location for one
additional ten (10) year term, provided that the Franchisee has complied with
all material terms and conditions of this Agreement and has agreed to and has
complied in all respects with the following conditions: (a) the Franchisee
has given Elephant & Castle written notice at least one (1) year prior to the
end of the term of this Agreement of its intention to reacquire the Franchise
for the Franchised Location; (b) all monetary obligations owed by the
Franchisee to Elephant & Castle have been paid or satisfied prior to the end
of the term of this Agreement, and have been timely met throughout the term
of this Agreement; (c) the Franchisee has agreed, in writing, to remodel,
modernize and redecorate the Franchised Location, and to replace and
modernize the signs, furniture, fixtures, supplies and equipment used in the
Franchisee's Restaurant so that the Franchisee's Restaurant will reflect the
image portrayed by the then-current image, decor and specifications of
Elephant & Castle (the "Modernization") and has agreed to make such capital
expenditures as are necessary to complete the required Modernization; (d) as
of the date the

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-77                           426304 9

<PAGE>

Franchisee exercises its option to reacquire the Franchise for the Franchised
Location, the Franchisee either owns the Franchised Location, or the
Franchisee has the right to lease the Franchised Location for a term that
coincides with the term of the then-current standard Elephant & Castle
franchise agreement; (e) the Franchisee (or the Franchisee's Operating
Partner), the Franchisee's General Manager and the Franchisee's Chef have
completed the required training designated by Elephant & Castle for new
franchisees to ensure that the Franchisee is in conformity with the
then-current qualifications and operational requirements established by
Elephant & Castle; and (f) the Franchisee agrees to execute and comply with
the then-current standard franchise agreement being offered to new
franchisees by Elephant & Castle, subject further to the provisions of
Article 3.4 of this Agreement.

         TERMS OF OPTION.

The Franchisee will have the option to reacquire the Franchise for the
Franchised Location under the same terms and conditions as are then being
offered to other franchisees under the then-current standard Elephant &
Castle franchise agreement; provided, however, that the term of the franchise
agreement executed by the Franchisee to reacquire the Franchise will be for
ten (10) years, as specified in Article 3.3 of this Agreement. The Franchisee
will be required to pay Elephant & Castle a reacquisition fee equal to
twenty-five percent (25%) of the Initial Fee specified in the then-current
standard Elephant & Castle franchise agreement, which will be payable in full
on the date the Franchisee signs the then-current standard franchise
agreement executed pursuant to this option. The reacquisition fee is payment,
in part, to Elephant & Castle for: (a) training at the time of the
reacquisition for the Franchisee (or the Franchisee's Operating Partner), the
Franchisee's General Manager and the Franchisee's Chef (but not payment for
the travel, lodging, and living expenses, salaries, and all other expenses of
any persons attending such training, which will be paid by the Franchisee);
(b) providing the Franchisee with the then-current standards relating to the
image of Elephant & Castle-Registered Trademark-Restaurants, including decor,
fixtures, furniture and sign specifications; (c) providing the Franchisee
with the then-current specifications for the supplies and equipment to be
used in the operation of the Restaurant; and (d) administrative and
out-of-pocket expenses incurred by Elephant & Castle in connection with the
reacquisition, including employee salaries, attorneys' fees and long-distance
telephone calls. The Franchisee will be required to pay the Continuing Fee
and all other fees at the rates specified in the then-current standard
franchise agreement. The Franchisee will also pay any additional fees
specified or provided for by the terms of the then-current standard franchise
agreement. The Franchisee acknowledges that the terms, conditions and
economics of future franchise agreements of Elephant & Castle may, at that
time, vary in substance and form from the terms, conditions and economics of
this Agreement.

INITIAL FEE; APPROVAL OF FRANCHISEE

         INITIAL FEE.

The Franchisee will pay Elephant & Castle an Initial Fee of thirty-five
thousand dollars ($35,000), which will be payable in full on the date the
Franchisee signs this Agreement. The Initial Fee payable by the Franchisee is
payment, in part, to Elephant & Castle for the costs incurred by Elephant &
Castle to operate its business, including costs for general sales and
administrative expenses, travel, long distance telephone calls, training,
opening costs, marketing costs, legal and accounting fees, compliance with
franchising and other laws, and the initial services rendered to the
Franchisee as described in this Agreement.

         TERMINATION OF FRANCHISE.

Elephant & Castle will have the right to terminate this Agreement at any time
within one hundred twenty (120) days after the date of this Agreement if: (a)
any required or other financial, personal or other information provided by
the Franchisee to Elephant & Castle is materially false, misleading,

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-78                           426304 9

<PAGE>

incomplete or inaccurate; (b) the Franchisee has not purchased or leased a
site for the Franchised Location or has done so in a manner not in compliance
with Article 2.4 and Article 11 of this Agreement; (c) the Franchisee fails
to apply for and obtain a valid license for the service of food for its
Elephant & Castle-Registered Trademark-Restaurant from the appropriate
governmental agencies; (d) the Franchisee fails to apply for and obtain a
valid liquor license for its Elephant & Castle-Registered
Trademark-Restaurant from the appropriate governmental authorities; or (e)
the Franchisee (or its Operating Partner), the Franchisee's General Manager
and the Franchisee's Chef fail to complete the Elephant & Castle training
program described in Article 16.1 of this Agreement.

         REFUND OF INITIAL FEE.

If this Agreement is terminated by Elephant & Castle pursuant to Article 4.2,
then Elephant & Castle will retain fifty percent (50%) of the Initial Fee paid
by the Franchisee as payment for the administrative and out-of-pocket expenses
incurred by Elephant & Castle including, but not limited to, executives' and
employees' salaries, salespersons' commissions, attorneys' fees, accountants'
fees, travel expenses, training costs, legal compliance, marketing costs and
long distance telephone calls.

CONTINUING FEE

         AMOUNT OF CONTINUING FEE; DATE PAYABLE.

In addition to the Initial Fee payable by the Franchisee, the Franchisee will
pay Elephant & Castle a weekly Continuing Fee equal to the greater of: (a)
five percent (5%) of the Franchisee's weekly Gross Sales for the preceding
week; or (b) one thousand two hundred and fifty dollars ($1,250). The weekly
Continuing Fee will be paid to Elephant & Castle by the Franchisee by
Wednesday of each week for the preceding week. The minimum weekly Continuing
Fee of one thousand two hundred and fifty dollars ($1,250) will not be
applicable until the first full week of the seventh month after the date of
this Agreement, and beginning on Wednesday of that week, the Franchisee will
pay the greater of the amounts set forth above.

         INTEREST ON UNPAID CONTINUING FEES.

If the Franchisee fails to remit the Continuing Fee due to Elephant & Castle as
provided for in Article 5.1, then the amount of the unpaid and past due
Continuing Fee will bear simple interest at the lesser of the maximum legal rate
allowable by applicable law or eighteen percent (18%) simple interest per annum.
The Franchisee will pay Elephant & Castle an administrative fee of seventy-five
dollars ($75) for each delinquent Continuing Fee payment within ten (10) days
after the delinquent Continuing Fee was due. The Franchisee will also reimburse
Elephant & Castle for any and all costs incurred by Elephant & Castle in the
collection of unpaid and past due Continuing Fee payments including, but not
limited to, attorneys' fees, deposition costs, expert witness fees,
investigation costs, accounting fees, filing fees and travel expenses.

         REPORTS.

The Franchisee will maintain an accurate written record of the weekly Gross
Sales for the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
and other information specified by Elephant & Castle, and will submit weekly
reports for the Franchisee's Restaurant using the forms and formats that
Elephant & Castle prescribes in writing. The weekly reports will be e-mailed
or faxed to Elephant & Castle by Wednesday of each week for the preceding
week. The weekly reports will be signed by the Franchisee and will include
the Franchisee's weekly Gross Sales, the weekly Continuing Fee payment as
calculated by the Franchisee, and such other information as may be required
by Elephant & Castle.

         FRANCHISEE'S OBLIGATION TO PAY.

The Continuing Fee payable to Elephant & Castle under this Article will be
calculated and paid to Elephant & Castle by the Franchisee each week during
the entire term of this Agreement, and the

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-79                           426304 9

<PAGE>

Franchisee's failure to pay the weekly Continuing Fee to Elephant & Castle
will be deemed to be a material breach of this Agreement. The Franchisee's
obligation to pay Elephant & Castle the Continuing Fee pursuant to the terms
of this Agreement will be absolute and unconditional, and will remain in full
force and effect until the term of this Agreement has expired or until this
Agreement has been terminated in accordance with the terms and conditions set
forth in this Agreement and applicable law. The Franchisee will not have the
"right of offset" and, as a consequence, the Franchisee will timely pay all
Continuing Fees due to Elephant & Castle under this Agreement regardless of
any claims or allegations the Franchisee may allege against Elephant & Castle.

         PRE-AUTHORIZED BANK DEBITS.

The Franchisee will, from time to time during the term of this Agreement,
execute such documents as Elephant & Castle may request to provide the
Franchisee's unconditional and irrevocable authority and direction to its
bank authorizing and directing the Franchisee's bank to pay and deposit
directly to the account of Elephant & Castle, and to charge to the account of
the Franchisee, the amount of the weekly Continuing Fee payable by the
Franchisee pursuant to this Agreement on Wednesday of each week for the
Continuing Fee due for the preceding week. The authorizations will be in the
form prescribed by a bank specified by Elephant & Castle and will permit
Elephant & Castle to designate the amount to be debited or drafted from the
Franchisee's account and to adjust such amount from time to time to the
amount of the weekly Continuing Fee payable to Elephant & Castle by the
Franchisee, as calculated by the Franchisee in the report of weekly Gross
Sales submitted by the Franchisee pursuant to Article 5.3 of this Agreement.
If the Franchisee fails at any time to provide the weekly reports required
under Article 5.3, then Elephant & Castle will have the absolute right to
debit the Franchisee's bank account for the same amount as the most recent
debit to the Franchisee's bank account that was based on actual Gross Sales
provided by the Franchisee. The Franchisee will, at all times during the term
of this Agreement, maintain a balance in its account at its bank sufficient
to allow the appropriate amount to be debited from the Franchisee's account
for payment of the Continuing Fee payable by the Franchisee for deposit in
the account of Elephant & Castle.

LOCAL ADVERTISING

         LOCAL ADVERTISING EXPENDITURE.

Each quarter for the entire term of this Agreement, the Franchisee will spend
at a minimum for approved local advertising for its Elephant &
Castle-Registered Trademark- Restaurant an amount equal to two percent (2%)
of the quarterly Gross Sales of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant (the "Local Advertising Expenditure"). For the purposes
of this Article, local advertising will include television, radio, newspaper,
billboards, magazine, direct mail and other print advertising, which has been
approved by Elephant & Castle prior to broadcast, publication or distribution.

         REPORTS OF LOCAL ADVERTISING EXPENDITURES.

Within 10 (ten) days after the end of each quarter, the Franchisee will, in a
form prescribed by Elephant & Castle, furnish Elephant & Castle with an
accurate accounting of the Franchisee's Local Advertising Expenditure during
the quarter just ended. If the Franchisee has failed to spend the required
amount for the Local Advertising Expenditure, then the Franchisee will
deposit with Elephant & Castle the difference between the amount that should
have been spent by the Franchisee for the Local Advertising Expenditure and
the amount actually spent, and this amount will be spent by Elephant & Castle
for advertising and promotion in the Franchisee's Designated Market Area in a
manner deemed appropriate by Elephant & Castle in its sole discretion.

         TELEPHONE DIRECTORY LISTINGS.

The Franchisee will continually list and advertise in the "Yellow Pages" in the
Franchisee's market area under the heading "Restaurant" and/or other listings
designated by Elephant & Castle in writing. The

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-80                           426304 9

<PAGE>

format, size and content of the listings and advertising will conform in all
respects to the standards established by Elephant & Castle and specified in
the Standard Operations Manual. The Franchisee will also take all steps
necessary to be listed in the "White Pages" for the Franchisee's market area.
Expenditures made by the Franchisee for Yellow Pages or White Pages
advertising may be applied to the Local Advertising Expenditure set forth in
Article 6.1 of this Agreement.

         GRAND OPENING ADVERTISING.

The Franchisee will spend, within the period of time from ninety (90) days
prior to the day of the grand opening to 11:00 p.m. on the day of the grand
opening, a minimum of fifteen thousand dollars ($15,000) for grand opening
advertising of the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant. Payments, rebates, or allowances received by the Franchisee from
vendors and used by the Franchisee in connection with advertising and
promoting the grand opening of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant may be applied to the minimum grand opening expenditure
requirement set forth in this Article. The Franchisee's expenditures for
grand opening advertising will not be applied to the Local Advertising
Expenditure requirement set forth in Article 6.1 of this Agreement.

FINANCIAL STATEMENTS

         MONTHLY REPORTS AND FINANCIAL STATEMENTS.

The Franchisee will, at its expense, prepare a monthly and year-to-date
balance sheet and profit and loss statement for the Franchisee's Restaurant
("the Monthly Report"). The Franchisee will also prepare, at its expense,
annual financial statements, consisting of a balance sheet, profit and loss
statement, statement of cash flows and explanatory footnotes, for the
Franchisee's Restaurant (the "Financial Statements"). All Monthly Reports and
Financial Statements provided to Elephant & Castle pursuant to this Article
will be in substantially the form prescribed by Elephant & Castle in writing,
will conform to the standard chart of accounts prescribed by Elephant &
Castle and will be prepared in accordance with generally accepted accounting
principles applied on a consistent basis.

         DUE DATE; VERIFICATION OF MONTHLY REPORTS AND FINANCIAL STATEMENTS.

The Monthly Report for the Franchisee's Restaurant will be delivered to Elephant
& Castle within twenty (20) days after the end of the month. The Franchisee's
Financial Statements will be delivered to Elephant & Castle within ninety (90)
days after the Franchisee's fiscal year end. The Franchisee's Monthly Reports
and Financial Statements must be verified by the Franchisee's Chief Financial
Officer.

         SUBSTANTIATION OF MONTHLY REPORTS AND FINANCIAL STATEMENTS.

Within three (3) business days after receiving a written request from Elephant &
Castle, the Franchisee will provide Elephant & Castle with originals or exact
copies of all documents, records and other materials including, but not limited
to, cash register tapes, customer checks, point-of-sale system records, payroll
records and purchasing and expense records, requested by Elephant & Castle to
substantiate the Monthly Reports and Financial Statements submitted by the
Franchisee pursuant to this Article. Elephant & Castle will maintain the
confidentiality of all information, documents, records and other materials
submitted by the Franchisee to Elephant & Castle pursuant to this Article.
However, if the information, documents, records or other materials are relevant
to any issue in any mediation, arbitration or court proceeding between Elephant
& Castle and the Franchisee, then Elephant & Castle may disclose the
information, documents, records or other materials in such proceeding.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-81                           426304 9

<PAGE>

         SALES AND INCOME TAX RETURNS.

Within fifteen (15) days after receipt of a written request from Elephant &
Castle, the Franchisee will furnish Elephant & Castle with exact copies of all
state sales tax returns and all state and federal income tax returns filed by
the Franchisee relating to the operation of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant.

         AUDIT RIGHTS.

Within three (3) business days after receiving written notice from Elephant &
Castle, the Franchisee and the Franchisee's accountants will make all of their
computer and hand prepared records and ledgers, the sales ledger, work papers,
books, bank statements, federal and state income tax returns, federal and state
sales tax returns, daily cash register tapes, accounts, and other financial
information relating to Gross Sales, food and liquor costs, and labor costs (the
"Financial Records") available to Elephant & Castle during business hours for
review and audit by Elephant & Castle or its designee. If the Financial Records
are computerized, then the Franchisee will grant Elephant & Castle or its
designees the absolute right to access the Franchisee's computer and software
programs containing the Financial Records and the absolute right to copy the
Financial Records to a computer disk or to any portable or other computer owned
or controlled by Elephant & Castle. The Financial Records for each fiscal year
will be kept in a secure place by the Franchisee and will be available for audit
by Elephant & Castle for at least five (5) years. The Franchisee will provide
Elephant & Castle with adequate facilities to conduct the audit. Elephant &
Castle will maintain the confidentiality of all information, documents, records
and other materials reviewed or copied by Elephant & Castle during an audit
conducted by Elephant & Castle pursuant to this Article. However, if the
information, documents, records or other materials are relevant to any issue in
any mediation, arbitration or court proceeding between Elephant & Castle and the
Franchisee, then Elephant & Castle may disclose the information, documents,
records or other materials in such proceeding.

         PAYMENT OF AUDIT COSTS.

If an audit of the Franchisee's Financial Records reveals any deficiencies in
the Continuing Fees payable to Elephant & Castle, then the Franchisee will,
within five (5) days after receipt of an invoice from Elephant & Castle
indicating the amounts owed, pay to Elephant & Castle any deficiency owed to
Elephant & Castle, together with interest as provided for herein. If an audit by
Elephant & Castle results in a determination that the Franchisee's Gross Sales
were understated by more than one percent (1%) in any year or in any month, then
the Franchisee will, within fifteen (15) days after receipt of an invoice from
Elephant & Castle, pay Elephant & Castle all costs and expenses (including
employee salaries, travel costs, room and board, and audit fees) that Elephant &
Castle incurred for the audit of the Franchisee's Financial Records.

         REFUSAL TO SUBMIT RECORDS OR PERMIT AUDIT.

The Franchisee's failure or refusal to provide the documents, records or other
materials requested by Elephant & Castle to substantiate the Monthly Reports or
Financial Statements in accordance with Article 7.3 or to produce the Financial
Records in accordance with Article 7.5 will be grounds for the immediate
termination of this Agreement by Elephant & Castle.

QUALITY CONTROL, UNIFORMITY AND STANDARDS

         QUALITY AND SERVICE STANDARDS.

Elephant & Castle will develop, from time to time, uniform standards of
quality, cleanliness and service regarding the business operations of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant to protect
and maintain (for the benefit of Elephant & Castle and all of its
franchisees) the distinction, valuable goodwill and uniformity represented
and symbolized by the Marks and the Restaurant System. Accordingly, to ensure
that all Elephant & Castle franchisees will maintain and adhere to the
uniformity

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-82                           426304 9

<PAGE>

requirements and quality standards for the foods, products and services
associated with the Marks and the Restaurant System, the Franchisee agrees to
maintain the uniformity and quality standards required by Elephant & Castle
for all foods, products and services associated with the Marks and the
Restaurant System and agrees to the terms and conditions contained in this
Article to assure the public that all Elephant & Castle-Registered
Trademark- Restaurants will be uniform in nature and will sell and dispense
quality foods, products and services.

         IDENTIFICATION OF RESTAURANT.

The Franchisee will operate the Restaurant so that it is clearly identified
and advertised as an Elephant & Castle-Registered Trademark- Restaurant. The
style and form of the words "Elephant & Castle-Registered Trademark-" and the
other Marks used in any advertising, marketing, public relations or
promotional program must have the prior written approval of Elephant &
Castle. The Franchisee will use the name "Elephant & Castle-Registered
Trademark-," the approved logos and all graphics commonly associated with the
Restaurant System and the Marks which now or hereafter may form a part of the
Restaurant System, on all paper supplies, furnishings, advertising, public
relations and promotional materials, signs, stationery, business cards,
linens, towels, napkins, aprons, menus, food and beverage containers,
placemats, uniforms, clothing and other materials in the identical
combination and manner as may be prescribed by Elephant & Castle in writing.
The Franchisee will, at its expense, comply with all legal notices of
registration required by Elephant & Castle or its attorneys and will, at its
expense, comply with all trademark, trade name, service mark, copyright,
patent or other notice markings that are required by Elephant & Castle or by
applicable law.

         COMPLIANCE WITH STANDARDS.

The Franchisee will use the Marks and the Restaurant System in strict compliance
with the moral and ethical standards, quality standards, health standards,
operating procedures, specifications, requirements and instructions required by
Elephant & Castle, which may be amended and supplemented by Elephant & Castle
from time to time.

         ALTERATIONS TO RESTAURANT.

The Franchisee will not install or permit to be installed in, on or above the
Restaurant, without the prior written consent of Elephant & Castle, any
fixtures, furnishings, equipment, decor, signs or other items not previously
approved by Elephant & Castle.

         PROHIBITED SALES.

The Franchisee will offer for sale at the Franchised Location only those menu
items, food products and other products approved in writing by Elephant &
Castle. Elephant & Castle will provide the Franchisee with a sample of the
standard Elephant & Castle menu and all subsequent modifications to the menu.

         OTHER BUSINESS.

The Franchisee will use the Franchised Location solely for the operation of
an Elephant & Castle-Registered Trademark- Restaurant and will not directly
or indirectly operate or engage in any other business or activity from the
Franchised Location without the prior written consent of Elephant & Castle.
The Franchisee will not participate in any dual branding program, or in any
other program, promotion or business pursuant to which a trademark, service
mark, trade name, logo, slogan, or commercial symbol owned by any person or
entity other than Elephant & Castle is displayed, featured or used in
connection with the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant without the prior written consent of Elephant & Castle.

         FRANCHISEE'S NAME.

The Franchisee will not use the name "Elephant & Castle-Registered
Trademark-" or any derivative thereof in its corporate, partnership or sole
proprietorship name. The Franchisee will hold itself out to the public as an
independent contractor operating its Elephant & Castle-Registered Trademark-
Restaurant pursuant to a Franchise from Elephant & Castle. The Franchisee
will file for a certificate of assumed name in the manner required

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-83                           426304 9

<PAGE>

by applicable state law to notify the public that the Franchisee is operating
its Elephant & Castle-Registered Trademark- Restaurant as an independent
contractor pursuant to this Agreement.

         OPERATION OF ELEPHANT & CASTLE-Registered Trademark- RESTAURANT.

The Franchisee will be totally and solely responsible for the operation of
its Elephant & Castle-Registered Trademark- Restaurant, and will control,
supervise and manage all the employees, agents and independent contractors
who work for or with the Franchisee. The Franchisee will be responsible for
the acts of its employees, agents, and independent contractors and will take
all reasonable business actions necessary to ensure that its employees,
agents and independent contractors comply with all applicable federal, state,
city, local and municipal laws, statutes, ordinances, rules and regulations.
Elephant & Castle will not have any right, obligation or responsibility to
control, supervise or manage the Franchisee's employees, agents or
independent contractors.

         BUSINESS HOURS.

The Franchisee's Elephant & Castle-Registered Trademark- Restaurant will be
open from 11:00 a.m. to 11:00 p.m. every day of the week, or during such
other normal business hours as otherwise may be specified by Elephant &
Castle in the Standard Operations Manual.

         PERSONNEL.

The Franchisee will at all times during business hours have management personnel
on duty who are responsible for supervising the employees and the business
operations of the Franchisee's Restaurant. The Franchisee will maintain a
competent, conscientious and adequately trained staff with enough personnel to
operate the Restaurant in a professional and competent manner and to guarantee
efficient service to the Franchisee's customers. The Franchisee will take such
steps as are necessary to ensure that its employees develop and preserve good
customer relations, render competent, prompt, courteous and knowledgeable
service and meet the quality and service standards established by Elephant &
Castle.

         STANDARDS OF SERVICE.

The Franchisee will at all times give prompt, courteous and efficient service to
its customers. The Franchisee will, in all dealings with its customers,
suppliers and the public, adhere to the highest standards of honesty, integrity,
fair dealing and ethical conduct.

         ALCOHOLIC BEVERAGES.

The Franchisee will serve beer, wine and alcoholic beverages at its Elephant
& Castle-Registered Trademark- Restaurant. The Franchisee will comply with
all federal, state, city, local and municipal licensing, insurance and other
laws, regulations and requirements applicable to the sale of alcoholic
beverages by the Franchisee. The Franchisee will comply with the liquor
liability insurance requirements set forth in Article 14 of this Agreement.

         VENDING MACHINES AND ENTERTAINMENT DEVICES.

Other than those items which the Franchisee must procure and place in the
premises of the Franchised Location as specified in the Standard Operations
Manual, the Franchisee will not permit any jukebox, video and electronic games,
vending machines (including cigarette, gum and candy machines), newspaper racks,
rides or other mechanical or electronic entertainment devices or coin or token
operated machines (including pinball) to be used on the premises of the
Franchised Location without the prior written approval of Elephant & Castle.

         GAMBLING MACHINES; TICKETS.

The Franchisee will not permit any gambling machines or other gambling devices
to be used on the premises of the Franchised Location, except with the prior
written approval of Elephant & Castle. The Franchisee will not keep or offer for
sale or allow employees to offer for sale at or near the Franchised

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-84                           426304 9

<PAGE>

Location any tickets, subscriptions, pools, chances, raffles, lottery tickets
or pull tabs, except with the prior written approval of Elephant & Castle.

         STANDARD ATTIRE OR UNIFORMS.

The Franchisee will require its employees to wear the standard attire or
uniforms described in the Standard Operations Manual. All employees of the
Franchisee will wear clean and neat attire or uniforms and will practice good
personal hygiene.

         CREDIT CARDS.

The Franchisee will honor all credit, charge, courtesy or cash cards or other
credit devices required or approved by Elephant & Castle in writing. The
Franchisee must obtain the written approval of Elephant & Castle prior to
honoring any unapproved credit, charge, courtesy or cash cards or other credit
devices.

         GIFT CERTIFICATES AND COUPONS.

The Franchisee will offer the gift certificates issued by Elephant & Castle
for use by its franchisees. The Franchisee will not have the right to sell or
issue gift certificates except those that have been obtained from Elephant &
Castle. The Franchisee will not issue coupons or discounts of any type,
except as may be approved in advance in writing by Elephant & Castle. Such
coupons will clearly state that they are redeemable only at the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant, and not at any other
Elephant & Castle-Registered Trademark- Restaurant.

         MUSIC AND MUSIC SELECTION.

In order to maintain the image and ambiance associated with the Restaurant
System, the Franchisee will only play the music and music selections that have
been approved by Elephant & Castle as set forth in the Standard Operations
Manual.

         APPROVED ADVERTISING.

The Franchisee will not conduct any advertising and/or promotion for its
Elephant & Castle-Registered Trademark- Restaurant business unless and until
Elephant & Castle has given the Franchisee prior written approval for all
concepts, materials and media proposed for any such advertising and/or
promotion. The Franchisee will not permit any third party to advertise its
business, services or products on the premises of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant without the prior written approval of
Elephant & Castle.

         COMPLIANCE WITH APPLICABLE LAW.

The Franchisee will, at its expense, comply with all applicable federal,
state, city, local and municipal laws, statutes, ordinances, rules and
regulations pertaining to the construction or remodeling of the Franchised
Location and the operation of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant including, but not limited to, all health, food service
and liquor licensing laws, all health and safety regulations, all
environmental laws, all laws relating to employees, including all wage and
hour laws, employment laws, workers' compensation laws, discrimination laws,
sexual harassment laws, and disability discrimination laws. The Franchisee
will, at its expense, be solely and exclusively responsible for determining
the licenses and permits required by law for the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant, for obtaining and qualifying for all
such licenses and permits, and for complying with all applicable laws.

         PAYMENT OF TAXES.

The Franchisee will be absolutely and exclusively responsible and liable for
filing all required tax returns and for the prompt payment of all federal,
state, city and local taxes including, but not limited to, individual and
corporate income taxes, sales and use taxes, franchise taxes, gross receipts
taxes, employee withholding taxes, F.I.C.A. taxes, inventory taxes, liquor
taxes, personal property taxes and

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-85                           426304 9

<PAGE>

real estate taxes (hereinafter referred to as "taxes") payable in connection
with the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
business. Elephant & Castle will have no liability for these or any other
taxes which arise or result from the Franchisee's Restaurant business and the
Franchisee will indemnify Elephant & Castle for any such taxes that may be
assessed or levied against Elephant & Castle which arise out of or result
from the Franchisee's Restaurant.

         "FRANCHISE" AND OTHER TAXES.

If any "franchise" or other tax which is based upon the Gross Sales,
receipts, sales, business activities or operation of the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant is imposed upon Elephant &
Castle by any taxing authority, then the Franchisee will reimburse Elephant &
Castle in an amount equal to the amount of such taxes and related costs
imposed upon and paid by Elephant & Castle. The Franchisee will be notified
in writing when Elephant & Castle is entitled to reimbursement for the
payment of such taxes and, in that event, the Franchisee will pay Elephant &
Castle the amount specified in the written notice within ten (10) days after
receipt of the written notice.

         PAYMENTS TO CREDITORS.

The Franchisee will timely pay all of its obligations and liabilities due and
payable to Elephant & Castle, suppliers, lessors and its creditors.

         SECURITY INTEREST IN FRANCHISE AGREEMENT.

This Agreement and the Franchise granted to the Franchisee hereunder may not be
used as collateral or be the subject of a security interest, lien, levy,
attachment or execution by the Franchisee's creditors or any financial
institution, except with the prior written approval of Elephant & Castle.

         INSPECTION RIGHTS.

The Franchisee will permit Elephant & Castle or its representatives to enter,
remain on, and inspect the Franchised Location, whenever Elephant & Castle
reasonably deems it appropriate and without prior notice, to interview the
Franchisee's employees and customers, to take photographs and videotapes of
and to examine the interior and exterior of the Franchised Location, to
examine representative samples of the foods, beverages and other products
sold or used at the Franchisee's Restaurant and to evaluate the quality of
the foods, beverages, products and services provided by the Franchisee to its
customers. Elephant & Castle will also have the right to send a
representative of Elephant & Castle to dine at the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant to evaluate the operations of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant and the
quality of the foods and services provided by the Franchisee to its
customers. Elephant & Castle will have the right to use all interviews,
photographs and videotapes of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant for such purposes as Elephant & Castle deems
appropriate including, but not limited to, use in advertising, marketing and
promotional materials. The Franchisee will not be entitled to, and hereby
expressly waives, any right that it may have to be compensated by Elephant &
Castle, its advertising agencies, and other Elephant & Castle franchisees for
the use of such photographs or videotapes for advertising, marketing and
promotional purposes.

         DEFAULT NOTICES AND SIGNIFICANT CORRESPONDENCE.

The Franchisee will deliver to Elephant & Castle, immediately upon receipt by
the Franchisee or delivery at the Franchised Location, an exact copy of all:
(a) notices of default received from the landlord of the Franchised Location
or any mortgagee, trustee under any deed of trust, contract for deed holder,
lessor, or any other party with respect to the Franchised Location; (b)
notifications or other correspondence relating to any legal proceeding or
lawsuit relating in any way to the Franchisee's Restaurant or to the
Franchised Location; (c) consumer lawsuits, complaints or claims filed with
or served upon the Franchisee or a better business bureau; (d) employee
lawsuits, complaints or claims; and (e) inspection reports or any other
notices, claims, reports, warnings or citations from or by any governmental
authority, including any health or safety authority. Upon a

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-86                           426304 9

<PAGE>

written request from Elephant & Castle, the Franchisee will provide such
additional information as may be required by Elephant & Castle regarding the
subject matter of the correspondence or other documents received by the
Franchisee.

PRODUCTS AND SERVICES

         LIMITATIONS ON PRODUCTS AND SERVICES.

The Franchisee will sell only those foods, beverages, food products, clothing,
and services and other items approved by Elephant & Castle in writing and will
offer for sale all foods, beverages, food products, clothing, services and other
items prescribed by Elephant & Castle or approved by Elephant & Castle in
writing. Prior to the opening of the Restaurant, Elephant & Castle will provide
the Franchisee with a written schedule of all foods, food products, beverages,
clothing, and other items for sale, and the fixtures, supplies and equipment
necessary and required to commence operation of the Franchisee's Restaurant. The
Franchisee will maintain sufficient inventories of foods, beverages, food
products, clothing, and other items to realize the full potential of the
Restaurant. The Franchisee will conform to all customer service standards
prescribed by Elephant & Castle in writing. The Franchisee will have the
absolute right to sell all foods, beverages, food products, clothing, services
and other items at whatever prices and on whatever terms it deems appropriate.

         LIMITATION ON SALES.

The Franchisee will offer for sale and sell those foods, beverages, food
products, clothing, services and other items offered for sale in connection
with the Franchisee's Elephant & Castle-Registered Trademark- Restaurant or
which are sold under any of the Marks only on a retail basis at the
Franchisee's Franchised Location. The Franchisee will not offer for sale or
sell on a wholesale or retail basis at any other location or in any other
premises, or by means of the Internet, catalogue or mail order sales,
telemarketing, or by any other method of sales or distribution, any of the
foods, beverages, food products, clothing, services or other items offered
for sale or sold in connection with the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant or which are sold under any of the
Marks.

         APPROVED SUPPLIERS AND DISTRIBUTORS.

The Franchisee will purchase from suppliers and distributors approved in
writing by Elephant & Castle those foods, food items, beverages, recipe
ingredients, goods, products, clothing, merchandise, supplies, sundries,
uniforms, machinery, signs, furniture, fixtures, equipment and services
(sometimes referred to in this Agreement as "products and services")
designated in writing by Elephant & Castle which are to be used or sold by
the Franchisee and which Elephant & Castle determines must meet the standards
of quality and uniformity required to protect the valuable goodwill and
uniformity symbolized by and associated with the Marks and the Restaurant
System and/or to protect the health and safety of the Franchisee's employees,
customers and guests. Elephant & Castle will provide the Franchisee with a
list of the approved suppliers and distributors for these products and
services. The Franchisee will have the right and option to purchase these
products and services from other or outside suppliers and distributors
provided that such products and services conform in quality to the standards
and specifications of Elephant & Castle and provided that Elephant & Castle
determines that the supplier's or distributor's business reputation, quality
standards, delivery performance, credit rating, and other factors determined
by Elephant & Castle are satisfactory. If the Franchisee desires to purchase
any products or services from such other suppliers and distributors, then the
Franchisee must, at its expense, submit samples and specifications, and other
business and product information as requested, to Elephant & Castle for
review and/or product testing to determine whether the supplier or
distributor and its products and services are satisfactory to Elephant &
Castle and comply with Elephant & Castle's standards and specifications.
Elephant & Castle will also have the right to inspect the facilities of the
proposed supplier or distributor. The Franchisee will reimburse Elephant &
Castle for the costs and expenses incurred by Elephant & Castle to conduct an
inspection of the facilities of

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-87                           426304 9

<PAGE>

the unapproved supplier or distributor within thirty (30) days after the
Franchisee's receipt of an invoice for such costs and expenses from Elephant
& Castle. Elephant & Castle will complete all product testing within thirty
(30) days after Elephant & Castle receives the samples and other requested
information from the Franchisee, and will notify the Franchisee of its
determination within fifteen (15) days after completion of the testing
process. The written approval of Elephant & Castle must be obtained by the
Franchisee before any previously unapproved products and services are sold by
or used by the Franchisee or any previously unapproved supplier or
distributor is used by the Franchisee.

         DESIGNATED SUPPLIERS.

The Franchisee will purchase from designated suppliers those proprietary
seasonings and other foods, food items and recipe ingredients, and clothing
items designated in writing by Elephant & Castle which are to be used or sold by
the Franchisee and which Elephant & Castle determines must meet the standards of
quality and uniformity required to protect the valuable goodwill and uniformity
symbolized by and associated with the Marks and the Restaurant System. In
addition, the Franchisee will purchase and use in its Restaurant operations all
the brand name products required by Elephant & Castle. Such required brand name
products may be purchased from any commercial supplier of such products.

         USE OF REBATES FROM SUPPLIERS.

Any rebates or other payments paid to Elephant & Castle by a supplier as a
result of the Franchisee's purchases from the supplier will be used by
Elephant & Castle for the creation, development and production of advertising
and promotional materials, marketing or related research and development,
advertising and marketing expenses, product and food research and
development, advertising materials, production costs, brochures, ad slicks,
radio, film and television commercials, videotapes, newspaper, magazine and
other print advertising, direct mail pieces, photographer costs, photographs,
pictures, designs, services provided by advertising agencies, public
relations firms or other marketing, research or consulting firms or agencies,
market research and marketing surveys, menu design and graphics, customer
incentive programs, sponsorships, marketing meetings, sales incentives,
development of Home Pages on the Internet, Internet access provider costs,
Internet/World Wide Web programming and advertising, subscriptions to
industry newsletters or magazines, marketing or industry studies, books and
research materials, administrative costs or salaries for marketing support
personnel.

         LIMITATION ON BRANDING, DEVELOPMENT AND SALE OF PRODUCTS.

Nothing in this Agreement gives the Franchisee the right to, and the
Franchisee will not: (a) use or display the Marks on or in connection with
any product or service other than those products and services prescribed or
approved by Elephant & Castle; (b) acquire, develop or manufacture any
product using the name "Elephant & Castle-Registered Trademark-" or any of
the Marks, or direct any other person or entity to do so; (c) acquire,
develop or manufacture any product that has been developed or manufactured by
or for Elephant & Castle for use in the Restaurant System and which is sold
under any of the Marks, or direct any other person or entity to do so; and
(d) use, have access to, or have any rights to any proprietary formulas,
ingredients, or recipes for any product created by or at the direction of
Elephant & Castle and sold under the name "Elephant & Castle-Registered
Trademark-" or any of the Marks.

         INDEPENDENT SHOPPING SERVICES.

Elephant & Castle will have the right to hire an independent shopping service
to visit, dine at and evaluate the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant and the quality of the foods, beverages and services
provided to customers by the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant. Elephant & Castle will determine the number and
frequency of the visits the shopping service will make to the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant and the form of the
reports the shopping service will provide to Elephant & Castle. The fees
charged by the shopping service for visiting and evaluating the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant will be paid by Elephant &
Castle. Elephant & Castle

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-88                           426304 9

<PAGE>

will provide the Franchisee with copies of all reports prepared by the
shopping service evaluating the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant.

STANDARD OPERATIONS MANUAL

         COMPLIANCE WITH MANUAL.

In order to protect the reputation and goodwill of Elephant & Castle, and to
maintain the uniform operating standards under the Marks and the Restaurant
System, the Franchisee will at all times conduct its business and operate its
Elephant & Castle-Registered Trademark- Restaurant in compliance with
Elephant & Castle's confidential and copyrighted Standard Operations Manual
(sometimes referred to as the "Manual") which is incorporated herein and made
part of this Agreement. The Franchisee will conform to the common image and
identity created by the foods, beverages, products, music, food portions,
recipes, ingredients, cooking techniques and processes, cleanliness,
sanitation and services associated with the Elephant & Castle-Registered
Trademark- Restaurant which are portrayed and described by the Manual. The
Franchisee acknowledges having received on loan from Elephant & Castle one
copy of the Manual.

         REVISIONS TO MANUAL.

Elephant & Castle reserves the right to and may from time to time revise the
Standard Operations Manual. The Franchisee will, as promptly as reasonably
possible, modify the operations of the Restaurant to implement all changes,
additions and supplements made by Elephant & Castle to the Restaurant System
which are reflected by the Manual. The Franchisee will implement all operational
changes to the Restaurant System deemed necessary by Elephant & Castle to: (a)
improve the standards of service or the food, food items, beverages, and
products offered for sale under the Restaurant System; (b) protect the goodwill
associated with the Marks; (c) improve the operation of the Franchisee's
Restaurant; or (d) protect the health and safety of the Franchisee's employees,
customers or guests. The Franchisee will at all times keep its copy of the
Manual current and up-to-date, and in the event of any dispute regarding the
Manual, the terms of the master copy of the Manual maintained by Elephant &
Castle will be controlling in all respects.

         CONFIDENTIALITY OF MANUAL.

The Standard Operations Manual, and all revisions thereto, will at all times
during the term of this Agreement and thereafter remain the sole and
exclusive property of Elephant & Castle, which will own all copyright and
other interests related to the Manual. The Franchisee will at all times
during the term of this Agreement and thereafter treat the Manual and any
other manuals created for or approved for use in the operation of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant as secret and
confidential, and the Franchisee will use all reasonable means to keep such
information secret and confidential. Neither the Franchisee nor any employees
of the Franchisee will make any copy, duplication, record or reproduction of
the Manual, or any portion thereof, available to any unauthorized person. The
Franchisee will not use the Manual or any information contained therein in
connection with the operation of any other business or for any purpose other
than in conjunction with the operation of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant.

         CONFIDENTIALITY OF OTHER INFORMATION.

Elephant & Castle and the Franchisee expressly understand and agree that
Elephant & Castle will be disclosing and providing to the Franchisee certain
confidential and proprietary information concerning the Restaurant System and
the procedures, operations, technology and data used in connection with the
Restaurant System. The Franchisee will not, during the term of this Agreement
or thereafter, communicate, divulge or use for the benefit of any other
person or entity any such confidential and proprietary information, knowledge
or know-how concerning the methods of operation of the Elephant &
Castle-Registered Trademark- Restaurant which may be communicated to the
Franchisee, or of which the Franchisee may

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-89                           426304 9

<PAGE>

be apprised by virtue of this Agreement. The Franchisee will divulge such
confidential and proprietary information only to its employees who must have
access to it in order to operate the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant. Any and all information, knowledge
and know-how including, without limitation, drawings, client lists,
materials, equipment, technology, methods, procedures, techniques, recipes,
specifications, computer programs, systems and other data which Elephant &
Castle copyrights or designates as confidential or proprietary will be deemed
confidential and proprietary for the purposes of this Agreement.

BUSINESS PREMISES

         SITE LOCATION.

The Franchisee will be solely responsible for selecting the site of the
Franchised Location for the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant, regardless of whether the Franchised Location is owned
or leased by the Franchisee. The Franchisee will retain an experienced
commercial real estate broker or salesperson who has at least five (5) years
experience in locating restaurant sites to advise the Franchisee and to
locate, acquire, purchase or lease the site for the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant. Accordingly, no provision in this
Agreement will be construed or interpreted to impose any obligation upon
Elephant & Castle to locate a site for the Franchised Location, to assist the
Franchisee in the selection of a suitable site for the Franchised Location,
or to provide any assistance to the Franchisee in the purchase or lease of
the Franchised Location.

         SITE LOCATION CRITERIA.

Elephant & Castle may require that the Franchisee provide to Elephant &
Castle for its review site information relating to, among other things,
accessibility, visibility, potential traffic flows, population trends,
household income and financial statistics, lease terms and other demographic
information. The review of the site conducted by Elephant & Castle will not
be deemed to be a warranty, representation or guaranty by Elephant & Castle
that if the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
is opened and operated at that site, it will be a financial success. Elephant
& Castle will have the right to require the Franchisee to obtain, at the
Franchisee's expense, an economic feasibility and demographics study for the
proposed site of the Franchised Location. Any feasibility and demographics
study required by Elephant & Castle will be completed by a real estate or
marketing expert mutually agreed upon in writing by Elephant & Castle and the
Franchisee.

         CONSTRUCTION AND REMODELING COSTS.

The Franchisee will, at its cost, retain a licensed architect and will be
responsible for the preparation of the floor plans, layouts, working drawings
and construction plans and architectural plans and specifications for the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant. The
Franchisee will be responsible for the accuracy of such floor plans, layouts,
drawings, plans and specifications. The Franchisee will, at its expense, be
solely responsible for all costs and expenses incurred for the construction,
renovation or remodeling of the Franchisee's Elephant & Castle-Registered
Trademark- Restaurant at the Franchised Location including, but not limited
to, all costs for architectural plans and specifications, all modifications
to the floor plans and layouts necessitated by the structure, construction or
layout of the Franchised Location, building permits, site preparation,
demolition, construction of the parking lot, landscaping, heating,
ventilation and air conditioning, interior decorations, furniture, fixtures,
equipment, leasehold improvements, labor, architectural and engineering fees,
electricians, plumbers, general contractors and subcontractors.

         COMPLIANCE WITH SPECIFICATIONS.

The Franchised Location and the Franchisee's Restaurant will conform to all
specifications for decor, furniture, fixtures, equipment, exterior and
interior decorating designs and color schemes established by Elephant &
Castle. The Franchisee will obtain and pay for the furniture, fixtures,
supplies and

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-90                           426304 9

<PAGE>

equipment required by Elephant & Castle and used by the Franchisee for the
operation of its Elephant & Castle-Registered Trademark- Restaurant. The
furniture, fixtures and equipment used in the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant must be installed and located in
accordance with the floor plans approved by Elephant & Castle, and must
conform to the quality standards and uniformity requirements established by
Elephant & Castle.

         INSPECTION DURING CONSTRUCTION OR RENOVATION.

The Franchisee will be solely responsible for inspecting the Franchised Location
during construction or renovation to confirm that the Franchised Location is
being constructed or renovated in a workmanlike manner and according to the
specifications established by Elephant & Castle. The Franchisee will be solely
responsible for complying with all applicable local, state and federal laws,
ordinances, statutes and building codes, and for acquiring all licenses and
building and other permits required by all federal, state, city, municipal and
local laws in connection with the construction or renovation of the Franchisee's
business premises at the Franchised Location. Elephant & Castle will have no
responsibility to the Franchisee or any other party if the Franchised Location
is not constructed or renovated by the Franchisee or its architect or
contractor: (a) according to the standard specifications established by Elephant
& Castle; (b) in compliance with all applicable federal, state or local laws or
ordinances; or (c) in a workmanlike manner. The Franchisee will not open the
Restaurant for business without the prior written approval of Elephant & Castle.

         MAINTENANCE.

The Franchisee will, at its expense, repair, paint and keep in a clean and
sanitary condition the interior, the exterior, the parking lot, signage,
exterior lighting, and the grounds of the Franchised Location and the
Franchisee's Restaurant, and will replace all floor covering, wall coverings,
light fixtures, curtains, blinds, shades, furniture, room furnishings, wall
hangings, signs, fixtures and other decor items as they become worn-out, soiled
or in disrepair. All mechanical equipment, including ventilation, heating and
air conditioning, must be kept in good working order by the Franchisee at all
times. All replacement equipment, decor items, furniture, fixtures, signs,
supplies and other items used in the Restaurant by the Franchisee must comply
with the then-current standards and specifications of Elephant & Castle.

         REMODELING OF BUSINESS PREMISES.

The Franchisee will make the reasonable capital expenditures necessary to
extensively remodel, modernize, redecorate and renovate ("remodel" or
"remodeling") the Franchisee's Restaurant and to replace and modernize the
furniture, fixtures, supplies and equipment ("FF&E") so that the Franchisee's
Restaurant will reflect the then-current image of an Elephant &
Castle-Registered Trademark- Restaurant. All remodeling and all replacements
for the FF&E must conform to the then-current specifications of Elephant &
Castle. The Franchisee will commence remodeling the Franchised Location
within four (4) months after the date the Franchisee receives written notice
from Elephant & Castle specifying the required remodeling, and will
diligently complete such remodeling within a reasonable time after its
commencement. Except as provided for in Article 11.6 of this Agreement, the
Franchisee will not be required to remodel the Restaurant, or to replace and
modernize its FF&E more than once every five (5) years during the term of
this Agreement.

SIGNS

         APPROVED SIGNS.

The signs used at the Franchised Location (the "Signs") must comply with the
standard sign plans and specifications established by Elephant & Castle.
Elephant & Castle will provide the Franchisee with a copy of the standard
sign plans and specifications and the Franchisee will, at its expense,
prepare or cause the preparation of complete and detailed plans and
specifications for the Signs and will submit such plans and specifications to
Elephant & Castle for its written approval. Elephant & Castle

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-91                           426304 9

<PAGE>

will have the absolute right to inspect, examine, videotape and photograph
the Signs for any reason at any time during the term of this Agreement.

         PAYMENT OF COSTS AND EXPENSES.

The Franchisee will, at its expense, be responsible for any and all installation
costs, sign costs, architectural fees, engineering costs, construction costs,
permits, licenses, repairs, maintenance, utilities, insurance, taxes,
assessments and levies in connection with the construction, erection,
maintenance or use of the Signs including, if applicable, all electrical work,
construction of the base and foundation, relocation of power lines and all
required soil preparation work. The Franchisee will comply with all federal,
state and local laws, regulations, building codes and ordinances relating to the
construction, erection, maintenance and use of the Signs.

         MODIFICATIONS; INSPECTION.

The Franchisee may not alter, remove, change, modify, or redesign the Signs
unless approved by Elephant & Castle in writing. Elephant & Castle will have
the unequivocal and unilateral right to redesign the plans and specifications
for the Signs during the term of this Agreement without the approval or
consent of the Franchisee. Within thirty (30) days after receipt of written
notice from Elephant & Castle, the Franchisee must, at its expense, either
modify or replace the Signs so that the Signs displayed at the Franchised
Location will comply with the redesigned plans and specifications as issued
by Elephant & Castle. The Franchisee will not be required to modify or
replace the Signs more than once every five (5) years.

TELECOMMUNICATION AND COMPUTER EQUIPMENT

         TELECOMMUNICATION EQUIPMENT.

The Franchisee will, at its sole expense, obtain and maintain at all times
during the term of this Agreement, the telephone answering equipment,
electronic telephone facsimile ("fax") equipment, and such other
telecommunications equipment as may from time to time be required by Elephant
& Castle for use in the operation of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant business. At all times during the
term of this Agreement, all telecommunication and fax equipment must be in
compliance with the then-current standards and specifications established by
Elephant & Castle, and must be in operation to send and receive information
at such times as may be required by Elephant & Castle.

         SATELLITE AND CABLE TELEVISION.

The Franchisee will, at its sole expense, obtain, maintain and provide for
viewing by the customers in the Franchisee's Restaurant, those cable and
satellite television stations, networks and/or systems as may be specified in
writing from time to time by Elephant & Castle. The Franchisee will, at its
sole expense, obtain and maintain all services and equipment necessary to
receive and display such cable and satellite television stations in
accordance with the Standard Operations Manual.

         COMPUTER HARDWARE.

The Franchisee will, at its sole expense, purchase the computer hardware and
peripherals, including printers, monitors, modems and networking equipment
(the "Computer Equipment") that will serve as, or integrate with, the
Franchisee's point-of-sale cash register. All Computer Equipment must meet
the standards and specifications established by Elephant & Castle and must be
compatible with the software described in Article 13.4. The Franchisee will
update the Computer Equipment as may from time to time be required by
Elephant & Castle. The Franchisee will purchase a maintenance agreement for
on-site maintenance of the Franchisee's point-of-sale cash register.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-92                           426304 9

<PAGE>

         SOFTWARE.

The Franchisee will purchase the computer software and operating system
specified by Elephant & Castle, including software for accounting and cost
control, which meets the specifications described in the Standard Operations
Manual. The Franchisee will, from time to time, update the computer software to
meet the then-current standards and specifications issued by Elephant & Castle.

         ACCESS TO COMPUTER DATA.

Elephant & Castle will, at all times during the term of this Agreement, have
the right to directly access all sales, financial, marketing, management and
other business information and all other data maintained and stored by the
Franchisee in its computer databases ("Data and Information"). The Franchisee
will, at its expense, configure its computer and maintain the communications
software and hardware necessary to permit Elephant & Castle to access the
Data and Information by modem and telephone lines and to upload and download
the Data and Information and other business information from and to the
Franchisee's computers, computer data bases and software programs.

         INTERNET PROVIDER.

The Franchisee will, at all times during the term of this Agreement, at the
Franchisee's expense, have access to the Internet through the Microsoft
Network, America Online, Prodigy, CompuServe or other Internet access
provider designated or approved by Elephant & Castle.

         E-MAIL ADDRESS.

The Franchisee will, at all times during the term of this Agreement, maintain
an e-mail address on the Internet. The Franchisee's e-mail address will be
provided to Elephant & Castle and will be used as a method for the Franchisee
and Elephant & Castle to communicate with each other and to transmit
documents and other information. The Franchisee will not use the words
"Elephant & Castle-Registered Trademark-" as any part of its e-mail address
or its domain name if a Home Page is maintained by the Franchisee on the
Internet. The Franchisee will review its e-mail at least once a day and will
respond to all e-mails within twenty-four (24) hours, except for weekend
e-mails, which will be answered every Monday.

INSURANCE

         GENERAL LIABILITY INSURANCE.

The Franchisee will procure and maintain in full force and effect, at its
sole cost and expense, a general liability insurance policy with coverage of
at least one million dollars ($1,000,000) per occurrence insuring the
Franchisee, Elephant & Castle and their respective officers, directors,
agents and employees from and against any and all loss, liability, claim or
expense of any kind whatsoever, including bodily injury, personal injury,
food poisoning or other sickness, death, property damage, products liability
and all other occurrences resulting from the condition, operation, use,
business or occupancy of the Franchisee's Restaurant and the Franchised
Location, including the surrounding premises or area, the parking area and
the sidewalks of the Franchised Location.

         LIQUOR LIABILITY INSURANCE.

The Franchisee will procure and maintain in full force and effect, at its
sole cost and expense, liquor liability insurance with coverage of at least
two million dollars ($2,000,000) per occurrence insuring the Franchisee,
Elephant & Castle and their respective officers, directors, agents and
employees from any and all loss, liability, claim or expense of any kind
whatsoever, including bodily injury, personal injury, death, property damage
and all other occurrences resulting from the sale of liquor by the Franchisee
or any of the Franchisee's employees in connection with the Franchisee's
Restaurant.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-93                           426304 9

<PAGE>

         AUTOMOBILE LIABILITY INSURANCE.

The Franchisee will procure and maintain in full force and effect, at its sole
cost and expense, automobile liability insurance with coverage of at least one
million dollars ($1,000,000) per occurrence insuring the Franchisee, Elephant &
Castle and their respective officers, directors, agents and employees from any
and all loss, liability, claim or expense of any kind whatsoever resulting from
the use, operation or maintenance of all automobiles or vehicles owned by the
Franchisee or used by the Franchisee or any of the Franchisee's employees
(including automobiles owned or leased by any employee of the Franchisee) in
connection with the Franchisee's Restaurant.

         PROPERTY INSURANCE.

The Franchisee will procure and maintain in full force and effect, at its sole
cost and expense, "all risks" property insurance coverage, which will include
fire and extended coverage, for the inventory, machinery, equipment, fixtures
and furnishings owned or leased by the Franchisee and used by the Franchisee at
the Franchised Location. The Franchisee's property insurance policy (including
fire and extended coverage) must have coverage limits equal to at least
"replacement" cost.

         BUILDING INSURANCE.

If the Franchisee, or any of the Franchisee's Owners, owns, either directly or
indirectly, the building or the business premises at the Franchised Location,
then the Franchisee will insure the building or the business premises for and
against all risk, loss and damages in an amount equal to at least "replacement"
cost. If the Franchised Location is either partially or completely destroyed by
fire or any other catastrophe, then the Franchisee will use the insurance
proceeds to repair or reconstruct the Franchised Location and recommence
business as soon as reasonably possible.

         UMBRELLA LIABILITY.

The Franchisee will, at its sole cost and expense, purchase and maintain
umbrella liability insurance in the amount of one million dollars ($1,000,000)
that will provide liability insurance coverage for any liability incurred by the
Franchisee in excess of the primary general liability, liquor liability,
automobile liability and other liability insurance coverage carried by the
Franchisee.

         INSURANCE REQUIRED BY LAW.

The Franchisee will, at its sole cost and expense, procure and maintain all
other insurance required by state or federal law, including workers'
compensation insurance for its employees.

         INSURANCE COMPANIES; EVIDENCE OF COVERAGE.

All insurance companies providing coverage to the Franchisee must be acceptable
to and approved by Elephant & Castle, and must be licensed in the state where
coverage is provided. The Franchisee will provide Elephant & Castle with
certificates of insurance evidencing the insurance coverage required of the
Franchisee pursuant to this Article no later than the date the Franchisee opens
for business, and the Franchisee will immediately provide, upon expiration,
change or cancellation, a new certificate of insurance to Elephant & Castle.

         DEFENSE OF CLAIMS.

All liability insurance policies procured and maintained by the Franchisee in
connection with the Franchisee's Restaurant will require the insurance company
to provide and pay for attorneys to defend any legal actions, lawsuits or claims
brought against the Franchisee, Elephant & Castle, and their respective
officers, directors, agents and employees.

         RIGHTS OF ELEPHANT & CASTLE.

All insurance policies procured and maintained by the Franchisee pursuant to
this Article will name Elephant & Castle as an additional insured, will contain
endorsements by the insurance companies

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-94                           426304 9

<PAGE>

waiving all rights of subrogation against Elephant & Castle, and will
stipulate that Elephant & Castle will receive copies of all notices of
cancellation, nonrenewal, or coverage reduction or elimination at least
thirty (30) days prior to the effective date of such cancellation, nonrenewal
or coverage change.

LICENSING OF MARKS AND RESTAURANT SYSTEM

         RIGHT TO LICENSE MARKS.

Elephant & Castle warrants that, except as otherwise provided for herein, it has
the right to grant the Franchise and to license the Marks and the Restaurant
System to the Franchisee. Any and all improvements made by the Franchisee to the
Marks or the Restaurant System will be the sole and absolute property of
Elephant & Castle, which will have the exclusive right to register and protect
all such improvements in its name in accordance with applicable law. The
Franchisee's right to use and identify with the Marks and the Restaurant System
will exist concurrently with the term of this Agreement and such use by the
Franchisee will inure exclusively to the benefit of Elephant & Castle.

         CONDITIONS TO LICENSE OF MARKS.

Elephant & Castle hereby grants to the Franchisee the nonexclusive personal
right to use the Marks and the Restaurant System in accordance with the
provisions of this Agreement. The Franchisee's nonexclusive personal right to
use "Elephant & Castle-Registered Trademark-" as the name of the Franchisee's
Restaurant and its right to use the Marks and the Restaurant System applies
only to the Franchisee's Restaurant at the Franchised Location and such
rights will exist only so long as the Franchisee fully performs and complies
with all of the conditions, terms and covenants of this Agreement.
"Nonexclusive," for the purposes of this Article, will mean that Elephant &
Castle has or will grant franchises to other franchisees authorizing such
franchisees to operate Elephant & Castle-Registered Trademark- Restaurants in
conformity with the Restaurant System using the name "Elephant &
Castle-Registered Trademark-" and the other Marks, and that Elephant &
Castle, its affiliates and/or subsidiaries have operated and will operate
Elephant & Castle-Registered Trademark- Restaurants.

         FRANCHISEE'S USE OF MARKS.

The Franchisee will only use the Marks designated by Elephant & Castle and
only in the manner authorized and permitted by Elephant & Castle. The
Franchisee's right to use the Marks is limited to the uses set forth in this
Agreement and any unauthorized use will constitute an infringement of the
rights of Elephant & Castle under this Agreement and under the Lanham Act (15
U.S.C. Sections 1051, ET SEQ.). The Franchisee will not have or acquire any
rights in any of the Marks or the Restaurant System other than the right of
use as provided herein. The Franchisee will have the right to use the Marks
and the Restaurant System only in the manner prescribed, directed and
approved by Elephant & Castle in writing and will not have the right to use
the Marks in connection with the sale of any products or services other than
those prescribed or approved by Elephant & Castle for sale by the Franchisee.
If, in the judgment of Elephant & Castle, the acts of the Franchisee infringe
upon or demean the goodwill, uniformity, quality or business standing
associated with the Marks or the Restaurant System, then the Franchisee will,
upon written notice from Elephant & Castle, immediately modify its use of the
Marks or the Restaurant System in the manner prescribed by Elephant & Castle
in writing.

         ADVERSE CLAIMS TO MARKS.

If there are any claims by any third party that its rights to any or all of the
Marks are superior to those of Elephant & Castle and if the attorneys for
Elephant & Castle are of the opinion that such claim by a third party is legally
meritorious, or if there is an adjudication by a court of competent jurisdiction
that any party's rights to the Marks are superior to those of Elephant & Castle,
then upon receiving written notice from Elephant & Castle, the Franchisee will,
at its sole expense, immediately adopt and use the changes and amendments to the
Marks that are specified by Elephant & Castle. If so specified, the

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-95                           426304 9

<PAGE>

Franchisee will immediately cease using the Marks specified by Elephant &
Castle, and will, as soon as reasonably possible, commence using the new
trademarks, trade names, service marks, logos, designs and commercial symbols
designated by Elephant & Castle in writing at the Franchised Location, and in
connection with all advertising, marketing and promotion of the Franchisee's
Restaurant. The Franchisee will not make any changes or amendments whatsoever
to the Marks or the Restaurant System unless specified or approved in advance
by Elephant & Castle in writing.

         DEFENSE OR ENFORCEMENT OF RIGHTS TO MARKS.

The Franchisee will have no right to and will not defend or enforce any rights
associated with the Marks or the Restaurant System in any court or other
proceedings for or against imitation, infringement, prior use or for any other
claim or allegation. The Franchisee will give Elephant & Castle immediate
written notice of any and all claims or complaints made against or associated
with the Marks and the Restaurant System and will, without compensation for its
time and at its expense, cooperate in all respects with Elephant & Castle in any
lawsuits or other proceedings involving the Marks and the Restaurant System.
Elephant & Castle will have the sole and absolute right to determine whether it
will commence or defend any litigation involving the Marks and/or the Restaurant
System, and the cost and expense of all litigation incurred by Elephant &
Castle, including attorneys' fees, specifically relating to the Marks or the
Restaurant System will be paid by Elephant & Castle.

         TENDER OF DEFENSE.

If the Franchisee is named as a defendant or party in any action involving the
Marks or the Restaurant System and if the Franchisee is named as a defendant or
party solely because the plaintiff or claimant is alleging that the Franchisee
does not have the right to use the Marks or the Restaurant System licensed by
Elephant & Castle to the Franchisee at the Franchised Location pursuant to this
Agreement, then the Franchisee will have the right to tender the defense of the
action to Elephant & Castle and Elephant & Castle will, at its expense, defend
the Franchisee in the action provided that the Franchisee has tendered defense
of the action to Elephant & Castle within seven (7) days after receiving service
of the pleadings or the Summons and Complaint relating to the action. Elephant &
Castle will indemnify and hold the Franchisee harmless from any damages assessed
against the Franchisee in any actions resulting solely from the Franchisee's
proper and authorized use of the Marks and the Restaurant System at the
Franchised Location if the Franchisee has timely tendered defense of the action
to Elephant & Castle.

         FRANCHISEE'S RIGHT TO PARTICIPATE IN LITIGATION.

The Franchisee may, at its expense, retain an attorney to represent it
individually in all litigation and court proceedings involving the Marks or the
Restaurant System, and may do so with respect to matters involving only the
Franchisee (I.E., not involving Elephant & Castle or its interests); however,
Elephant & Castle and its attorneys will control and conduct all litigation
involving the Marks or the Restaurant System and the rights of Elephant &
Castle. Except as expressly provided for herein, Elephant & Castle will have no
liability to the Franchisee for any costs that the Franchisee may incur in any
litigation involving the Marks or the Restaurant System, and the Franchisee will
pay for all costs, including attorneys' fees, that it may incur in any
litigation or proceeding arising as a result of matters referred to under this
Article, unless it tenders the defense to Elephant & Castle in a timely manner
pursuant to and in accordance with Article 15.6.

TRAINING PROGRAM; OPENING ASSISTANCE

         TRAINING.

Elephant & Castle will provide a training program for the Franchisee (or the
Franchisee's Operating Partner), the Franchisee's General Manager and the
Franchisee's Chef at an approved training site designated by Elephant &
Castle, to educate, familiarize and acquaint them with the Restaurant

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-96                           426304 9

<PAGE>

System and the operations of the Elephant & Castle-Registered Trademark-
Restaurant. The Elephant & Castle training program will include on-the-job
instruction on basic business procedures, equipment operation and
maintenance, hiring and training of employees, scheduling, advertising and
promotion, purchasing procedures, food preparation, food safety, food
presentation, food quality, food portions, liquor service, food and beverage
inventory and cost control, customer service, janitorial service, general
maintenance and other topics selected by Elephant & Castle. The Franchisee
(or the Franchisee's Operating Partner), the Franchisee's General Manager and
the Franchisee's Chef must successfully complete the Elephant & Castle
training program and be certified in writing by Elephant & Castle prior to
commencing the business operations of the Franchisee's Restaurant. The
training program will be scheduled by Elephant & Castle in its sole
discretion and will be for a minimum of five (5) consecutive days for the
Franchisee (or the Franchisee's Operating Partner), and for a minimum of
thirty (30) consecutive days for the Franchisee's General Manager and for the
Franchisee's Chef. The Franchisee (or the Franchisee's Operating Partner),
the Franchisee's General Manager and the Franchisee's Chef must begin
training within ninety (90) days after the date of this Agreement, unless the
parties agree in writing to a different date due to conflicts with the
construction or opening schedule for the Restaurant. If the Franchisee (or
the Franchisee's Operating Partner), the Franchisee's General Manager or the
Franchisee's Chef do not successfully complete the required training program
within one hundred twenty (120) days after the date of this Agreement, then
such person(s) will not be permitted or authorized to participate in the
operations of the Franchisee's Restaurant, and Elephant & Castle will have
the right to terminate this Agreement pursuant to Article 4.2.

         CHANGES IN PERSONNEL.

The Franchisee must at all times employ General Managers and Chefs who have
successfully completed the prescribed training program and, consequently,
have been certified in writing by Elephant & Castle to participate in the
operation of the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant. The Franchisee will immediately notify Elephant & Castle in
writing of any personnel changes in the positions of General Manager or Chef
of the Franchisee's Restaurant. If the Franchisee hires a new General Manager
or a new Chef who has not successfully completed the required Elephant &
Castle training program, then that person must begin the training program
within thirty (30) days after the date of hire by the Franchisee, and must
attend and successfully complete the training program. If, in the judgment of
Elephant & Castle, the new General Manager or the new Chef does not
successfully complete the required Elephant & Castle training program, then
the Franchisee will not permit that person to continue to participate in the
operation of the Franchisee's Restaurant.

         INITIAL TRAINING OF NEW PERSONNEL.

The initial training program for new General Managers and new Chefs, as required
by Article 16.2 of this Agreement, will be conducted by Elephant & Castle either
at the Franchised Location or at another location designated by Elephant &
Castle at the sole discretion of Elephant & Castle. If Elephant & Castle
provides the initial training program for a new General Manager or a new Chef at
the Franchised Location, then the Franchisee will pay Elephant & Castle the
then-current per day on-site training fee and reimburse Elephant & Castle for
all expenses it incurs in connection with providing the training at the
Franchised Location, including travel, lodging, food, and automobile rental
costs. If the initial training program of new personnel is provided by Elephant
& Castle at another site designated by Elephant & Castle other than the
Franchised Location, then there will be no per day training fee and the
Franchisee will not be required to reimburse Elephant & Castle for its expenses.

         PAYMENT OF SALARIES AND EXPENSES.

The Franchisee will pay the salaries, fringe benefits, payroll taxes,
unemployment compensation, workers' compensation insurance, lodging, food,
automobile rental, travel costs and all other expenses for all persons who
attend any type of Elephant & Castle training program on behalf of the
Franchisee.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-97                           426304 9

<PAGE>

         OPENING ASSISTANCE.

After the Franchisee (or the Franchisee's Operating Partner), the
Franchisee's General Manager and the Franchisee's Chef have successfully
completed the Elephant & Castle training program and have been certified,
Elephant & Castle will arrange for a training coordinator, a host/hostess
trainer, a barkeeping trainer, four (4) kitchen staff trainers, and five (5)
service staff trainers to be at the Franchised Location for a period of not
less than fourteen (14) consecutive days to provide opening assistance to the
Franchisee. The opening assistance will include implementing internal
controls, assistance with training employees, and implementing the
Franchisee's initial business operations. The Franchisee will pay Elephant &
Castle an opening assistance fee of twenty thousand dollars ($20,000) within
five (5) days after the date the Franchisee opens its Restaurant for
business. The Franchisee will accept and fully cooperate with the opening
assistance provided by Elephant & Castle, and will not open and commence
initial business operations until Elephant & Castle has given the Franchisee
written approval to open the Franchisee's Restaurant.

         ADVISORY ASSISTANCE.

If, after the opening of the Franchisee's Restaurant, Elephant & Castle provides
any advisory management, operations or other assistance to the Franchisee at the
Franchised Location, then within five (5) days after receipt of an invoice from
Elephant & Castle specifying the amount owed, the Franchisee will pay Elephant &
Castle the then-current per diem fees charged by Elephant & Castle and reimburse
Elephant & Castle for the expenses Elephant & Castle incurred in connection with
providing the advisory assistance to the Franchisee at the Franchised Location,
including travel costs, lodging, food and automobile rental costs.

         HIRING AND TRAINING OF EMPLOYEES BY FRANCHISEE.

The Franchisee will hire all employees of the Restaurant, will be exclusively
responsible for the terms of their employment and compensation, and will
implement a training program for employees of the Restaurant in compliance with
the Standard Operations Manual. The Franchisee will at all times maintain a
staff of trained employees sufficient to efficiently operate the Restaurant in
compliance with Elephant & Castle's standards.

ASSIGNMENT

         ASSIGNMENT BY ELEPHANT & CASTLE.

This Agreement may be unilaterally assigned by Elephant & Castle to a person or
entity without the approval of the Franchisee and will inure to the benefit of
the successors and assigns of Elephant & Castle. Elephant & Castle will provide
the Franchisee with written notice of any such assignment, and the assignee will
be required to fully perform all obligations of Elephant & Castle under this
Agreement.

         ASSIGNMENT BY FRANCHISEE TO OWNED OR CONTROLLED ENTITY.

If the Franchisee is an individual or a partnership, this Agreement may be
transferred by the Franchisee to a corporation or limited liability company
that is owned or controlled by the Franchisee without paying any transfer
fee, provided that: (a) the Franchisee and the shareholders who own the
voting capital stock of the assignee corporation or the members who own the
membership interests of the assignee limited liability company sign or have
signed a personal guaranty in the form attached to this Agreement; (b) the
Franchisee furnishes prior written proof to Elephant & Castle substantiating
that the assignee corporation or limited liability company will be
financially able to perform all of the terms and conditions of this
Agreement; and (c) none of the shareholders or members operate, franchise,
develop, manage or control any Anglo/British style pub or related restaurant
concept that is in any way similar to or competitive with the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant. The Franchisee will give
Elephant & Castle fifteen (15) days prior written notice of the assignment of
this Agreement to a corporation or limited liability company owned or
controlled by the Franchisee;

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-98                           426304 9

<PAGE>

however, the assignment of this Agreement will not be valid or effective
until Elephant & Castle has received the documents which its attorneys deem
reasonably necessary to properly and legally document the assignment of this
Agreement to the corporation or limited liability company as provided herein.

         ASSIGNMENT BY INDIVIDUAL FRANCHISEE IN EVENT OF DEATH OR PERMANENT
         DISABILITY.

If the Franchisee is an individual, then in the event of the death or
permanent disability of the Franchisee, this Agreement may be assigned,
transferred or bequeathed by the Franchisee to any designated person or
beneficiary without the payment of any transfer fee. However, the assignment
of this Agreement to the transferee, assignee or beneficiary of the
Franchisee will be subject to the applicable provisions of Article 17.6, and
will not be valid or effective until Elephant & Castle has received the
properly executed legal documents which its attorneys deem necessary to
properly and legally document the transfer, assignment or bequest of this
Agreement. The transferee, assignee or beneficiary must agree to be
unconditionally bound by the terms and conditions of this Agreement and to
personally guarantee the performance of the Franchisee's obligations under
this Agreement. Furthermore, the transferee, assignee or beneficiary must
complete the initial training program as set forth in Article 16.1 of this
Agreement. The training will be conducted by Elephant & Castle at a location
designated by Elephant & Castle. There will be no charge to the transferee,
assignee or beneficiary for the initial training program, but that person's
salary and expenses will be paid in accordance with Article 16.4 of this
Agreement.

         SALE OF OWNERSHIP INTERESTS TO PUBLIC.

If the Franchisee is a corporation or limited liability company and intends
to sell any Ownership Interests to the public under any foreign, federal or
state securities laws, then the Franchisee will provide Elephant & Castle
with written notice of the proposed public offering and with a copy of the
proposed placement memorandum, offering circular or prospectus for its review
at least twenty (20) days prior to the time that any such document is filed
with any foreign or state securities commission or the Securities and
Exchange Commission. The Franchisee's Owner(s), prior to the public offering
will, at all times, retain ownership of at least a fifty-one percent (51%) of
the Ownership Interests of the Franchisee. Elephant & Castle will have the
absolute right to attend all "due diligence" meetings held in preparation for
the offer to sell Ownership Interests to the public, and the Franchisee will
give Elephant & Castle at least five (5) business days prior written notice
of such meetings. The Franchisee will pay Elephant & Castle twenty thousand
dollars ($20,000) for the legal, accounting and related due diligence costs
incurred by Elephant & Castle in connection with any public offering. This
amount will be payable in full within thirty (30) days after the date on
which the Franchisee provides written notice of the proposed public offering
to Elephant & Castle and will be payable even if the Franchisee is unable to
complete the public offering. The Franchisee will not offer any Ownership
Interests using or under the name "Elephant & Castle-Registered Trademark-,"
or any similar name. The Franchisee will not have the right to sell any
Ownership Interests to the public or to any other person or entity until the
Franchisee has complied in all respects with the applicable provisions of
this Agreement.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-99                           426304 9

<PAGE>

         ELEPHANT & CASTLE'S WARRANT.

The Franchisee hereby agrees to grant to Elephant & Castle, effective upon
the sale of any Ownership Interests to the public, a warrant or an option (a
"Warrant") to purchase for a period of five (5) years up to five percent (5%)
of the Ownership Interests purchased in such offering at an exercise price
equal to the purchase price of the Ownership Interests in such offering. The
Warrant will contain customary anti-dilution provisions, incidental or
"piggyback" registration rights and a cashless conversion right whereby
Elephant & Castle will have the right to require the Franchisee to convert
the Warrant into Ownership Interests using the current market value of the
Ownership Interests without payment by Elephant & Castle of any cash exercise
price at any time prior to its expiration as provided for in this provision.

         ASSIGNMENT BY FRANCHISEE.

This Agreement and the rights granted to the Franchisee pursuant to this
Agreement may be sold, assigned or transferred by the Franchisee only with
the prior written approval of Elephant & Castle. Elephant & Castle will not
unreasonably withhold its written consent to any sale, assignment or transfer
of this Agreement, if the sale, assignment or transfer does not violate
Article 17.9 of this Agreement and if the Franchisee and/or the transferee
franchisee comply with the following conditions: (a) the Franchisee has
provided written notice to Elephant & Castle of the proposed sale, assignment
or transfer of this Agreement at least ninety (90) days prior to the
transaction; (b) all of the Franchisee's monetary obligations due to Elephant
& Castle have been paid in full, and the Franchisee is not otherwise in
default under this Agreement; (c) the Franchisee has executed a written
agreement, in a form satisfactory to Elephant & Castle, in which the
Franchisee agrees to observe all applicable provisions of this Agreement,
including the provisions with obligations and covenants that continue beyond
the expiration or termination of this Agreement, which includes the covenants
not to compete contained in Article 21 of this Agreement; (d) Elephant &
Castle and the Franchisee have executed a joint and mutual release, in a form
satisfactory to Elephant & Castle, of any and all claims against Elephant &
Castle or the Franchisee and of any and all claims against their officers,
directors, shareholders, Owners, agents and employees, in their corporate and
individual capacities arising from, in connection with, or as a result of
this Agreement or the Franchisee's purchase of the Franchise including,
without limitation, all claims arising under any federal or state franchising
laws or any other federal, state or local law, rule or ordinance; provided,
however, that Elephant & Castle and the Franchisee may exclude from the
coverage of the release any prior or concurrent written agreements between
them; (e) the transferee franchisee has demonstrated to the satisfaction of
Elephant & Castle that he, she or it meets the managerial, financial and
business standards required by Elephant & Castle for new franchisees,
possesses a good business reputation and credit rating, and possesses the
aptitude and ability to operate the Elephant & Castle-Registered Trademark-
Restaurant in an economic and businesslike manner (as may be evidenced by
prior related business experience or otherwise); (f) the transferee
franchisee and all parties having a legal or beneficial interest in the
transferee franchisee including, if applicable, the transferee franchisee's
Owners and the Personal Guarantors, execute the transfer and assignment
agreement between Elephant & Castle, the Franchisee and the transferee
franchisee and such other ancillary agreements as Elephant & Castle or its
legal counsel may require for the transfer of this Agreement for the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant to the
transferee franchisee; (g) the transferee franchisee has purchased the
Franchised Location, acquired the lease for the Franchised Location or
otherwise acquired possession of and access to the Franchised Location for a
term consistent with the remaining term of this Agreement; (h) the transferee
franchisee has purchased or otherwise acquired a valid liquor license and a
valid food service license for the Elephant & Castle-Registered Trademark-
Restaurant at the Franchised Location; and (i) the transferee franchisee has
successfully completed the initial training program as set forth in Article
16.1 of this Agreement.

         ACKNOWLEDGMENT OF RESTRICTIONS.

The Franchisee acknowledges and agrees that the restrictions on transfer
imposed herein are reasonable and necessary to protect the Restaurant System
and the Marks, as well as the reputation

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-100                          426304 9

<PAGE>

and image of Elephant & Castle, and are for the protection of Elephant &
Castle, the Franchisee and all other franchisees who own and operate Elephant
& Castle-Registered Trademark- Restaurants. Any assignment or transfer
permitted by this Article will not be effective until Elephant & Castle
receives a completely executed copy of all transfer documents and Elephant &
Castle consents to the transfer in writing. Any attempted assignment or
transfer made without complying with the requirements of this Article will be
void.

         TRANSFER FEE.

If this Agreement is assigned, transferred or bequeathed to another person or
entity, or if the Franchisee's Owner(s) transfers in the aggregate controlling
interest in the Franchisee to a third party, then except as provided for in
Article 17.2 or Article 17.3, the Franchisee will pay Elephant & Castle on or
before the date of transfer a transfer fee of five thousand dollars ($5,000) to
cover the costs incurred by Elephant & Castle in connection with the transfer,
including attorneys' fees, accountants' fees, out-of-pocket expenses, long
distance telephone calls, administrative costs and the time of its employees and
officers. The transfer fee also covers the cost to Elephant & Castle to provide
the initial training program to the transferee franchisee at the location
designated by Elephant & Castle. However, the transfer fee does not cover the
salary of or expenses incurred by the transferee franchisee in connection with
attending the initial training program, and salary and expenses of that person
will be paid in accordance with Article 16.5 of this Agreement.

         TRANSFER TO COMPETITOR PROHIBITED.

The Franchisee and the Franchisee's Owners will not sell, assign or transfer
this Agreement or their Ownership Interests in the Franchisee or in the
Franchise to any person, partnership, corporation or entity that owns,
operates, franchises, develops, consults with, manages, is involved in, or
controls any Anglo/British style pub restaurant business that is in any way
competitive with an Elephant & Castle-Registered Trademark- Restaurant. If
Elephant & Castle refuses to permit a transfer of this Agreement under this
Article, then the Franchisee's and the Franchisee's Owners only remedy will
be to have an arbitrator determine whether the proposed transferee is a
competitor of Elephant & Castle.

TERMINATION RIGHTS OF ELEPHANT & CASTLE

         CONDITIONS OF BREACH.

In addition to its other rights of termination contained in this Agreement,
Elephant & Castle will have the right to terminate this Agreement if: (a) the
Franchisee fails to open and commence operations of its Elephant &
Castle-Registered Trademark-Restaurant within twelve (12) months after the
date of this Agreement or when the Franchised Location is ready for the
Franchisee's occupancy, whichever is earlier; (b) the Franchisee violates any
material provision, term or condition of this Agreement including, but not
limited to, the failure to timely pay the Initial Fee, any Continuing Fees,
or any other monetary obligations or fees due pursuant to this Agreement; (c)
the Franchisee or any of its directors, officers or majority Owners are
convicted of, or plead guilty to or no contest to, a charge of violating any
law relating to the Franchisee's Elephant & Castle-Registered
Trademark-Restaurant, or any felony; (d) the Franchisee fails to timely pay
any of its obligations or liabilities due and owing to Elephant & Castle,
suppliers, banks, purveyors, other creditors or to any federal, state or
municipal government (including, if applicable, federal and state income,
sales, property, withholding and unemployment taxes); (e) the Franchisee is
determined to be insolvent within the meaning of applicable state or federal
law, any involuntary petition for bankruptcy is filed against the Franchisee,
or the Franchisee files for bankruptcy or is

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-101                          426304 9

<PAGE>

adjudicated a bankrupt under applicable state or federal law; (f) the
Franchisee makes an assignment for the benefit of creditors or enters into
any similar arrangement for the disposition of its assets for the benefit of
creditors; (g) any check issued by the Franchisee is dishonored because of
insufficient funds (except where the check is dishonored because of an error
in bookkeeping or accounting) or closed accounts; (h) the Franchisee
voluntarily or otherwise abandons the franchised Restaurant; (i) the
Franchisee is involved in any act or conduct which materially impairs the
goodwill associated with the name "Elephant & Castle-Registered Trademark-"
or any other Marks or the Restaurant System; (j) the lease for the Franchised
Location is terminated or canceled for non-payment of rent or other legal
reasons, or the Franchisee otherwise loses possession of all or a significant
portion of the Franchised Location; (k) the Franchisee's food service license
or liquor license for the Franchised Location is terminated or canceled for
any reason, or the Franchisee otherwise loses the food service license or
liquor license for its Elephant & Castle-Registered Trademark- Restaurant;
(l) the Franchisee fails to timely file any federal or state income or sales
tax return or fails to timely pay any federal or state income or sales taxes,
or (m) the Franchisee fails or refuses to provide the documents, records and
other materials requested by Elephant & Castle to substantiate the Monthly
Reports and Financial Statements pursuant to Article 7.3 or to produce and
permit Elephant & Castle to audit the Franchisee's Financial Records in
accordance with Article 7.5 of this Agreement.

         NOTICE OF BREACH.

Except as provided in Article 4.2, Article 18.5 and Article 18.6 of this
Agreement, Elephant & Castle will not have the right to terminate this
Agreement until: (a) written notice setting forth the alleged breach in
detail has been delivered to the Franchisee by Elephant & Castle; and (b)
after receiving the written notice, the Franchisee fails to correct the
alleged breach within the period of time specified by applicable law. If
applicable law does not specify a time period to correct an alleged breach,
then the Franchisee will have thirty (30) days after receipt of the written
notice to correct the alleged breach, except where the written notice states
that the Franchisee is delinquent in the payment of any Initial Fees,
Continuing Fees or other fees payable to Elephant & Castle pursuant to this
Agreement, in which case the Franchisee will have ten (10) days after receipt
of written notice to correct the breach by making full payment (including
administrative fees and interest as provided for herein) to Elephant &
Castle. If the Franchisee fails to correct the alleged breach set forth in
the written notice within the applicable period of time, then this Agreement
may be terminated by Elephant & Castle as provided for in this Agreement. For
the purposes of this Agreement, an alleged breach of this Agreement by the
Franchisee will be deemed to be "corrected" if both Elephant & Castle and the
Franchisee agree in writing that the alleged breach has been corrected.

         ARBITRATION.

If the Franchisee notices arbitration in accordance with Article 23 of this
Agreement within the time period established in Article 18.2 for correcting
the alleged breach, then Elephant & Castle will not have the right to
terminate this Agreement until the facts of the alleged breach have been
submitted to arbitration, the arbitrator determines that the Franchisee has
breached this Agreement and the Franchisee fails to correct the breach within
the applicable time period. If the arbitrator determines that the Franchisee
has violated or breached this Agreement as alleged by Elephant & Castle in
the written notice given to the Franchisee, then unless applicable law
specifies otherwise, the Franchisee will have thirty (30) days from the date
the arbitrator issues a written determination on the matter to correct the
specified breach or violation of this Agreement, except where the
Franchisee's breach is for failure to pay any fees or other payments to
Elephant & Castle, in which case the Franchisee will have ten (10) days to
make full payment, including all interest and administrative fees, to
Elephant & Castle. If the Franchisee does timely correct the specified breach
or violation of this Agreement, then this Agreement will remain in full force
and effect. For the purpose of this Agreement, any controversy or dispute on
the issue of whether the Franchisee has timely corrected the specified breach
or violation of this Agreement will also be subject to arbitration as
provided for herein. The time limitations set forth in this Article within
which the Franchisee may demand arbitration of a dispute or controversy
relating

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-102                          426304 9

<PAGE>

to the right of Elephant & Castle to terminate this Agreement for an alleged
breach are mandatory. If the Franchisee fails to comply with the time
limitations set forth in this Article, then Elephant & Castle may terminate
this Agreement as provided for herein.

         NOTICE OF TERMINATION.

Except as provided in Article 18.5 and Article 18.6, if Elephant & Castle has
complied with the provisions of Article 18.2 and the Franchisee has not
corrected the alleged breach set forth in the written notice within the time
period specified in this Agreement, then Elephant & Castle will have the
absolute right to terminate this Agreement by giving the Franchisee written
notice stating to the Franchisee that this Agreement is terminated and in
that event the effective date of termination of this Agreement will be the
day the written notice of termination is received by the Franchisee.

         IMMEDIATE TERMINATION RIGHTS OF ELEPHANT & CASTLE.

Elephant & Castle will have the absolute right, unless precluded by
applicable law, to immediately terminate this Agreement if: (a) the
Franchisee or any of its directors, officers or majority Owners are convicted
of, or plead guilty to or no contest to a charge of violating any law
relating to the Franchisee's Elephant & Castle-Registered Trademark-
Restaurant, or any felony; (b) the Franchisee is deemed insolvent within the
meaning of applicable state or federal law, any involuntary petition for
bankruptcy is filed against the Franchisee, or the Franchisee files for
bankruptcy or is adjudicated a bankrupt under applicable state or federal
law; (c) the Franchisee makes an assignment for the benefit of creditors or
enters into any similar arrangement for the disposition of its assets for the
benefit of creditors; (d) the Franchisee voluntarily or otherwise abandons
the Restaurant; (e) the Franchisee fails or refuses to provide the documents,
records and other materials requested by Elephant & Castle to substantiate
the Monthly Reports and Financial Statements pursuant to Article 7.3 or to
produce and permit Elephant & Castle to audit the Franchisee's Financial
Records in accordance with Article 7.5 of this Agreement; (f) the Franchisee
is involved in any act or conduct which materially impairs the goodwill
associated with the Marks of Elephant & Castle or with the Restaurant System
and the Franchisee fails to correct the breach within twenty-four (24) hours
after receipt of written notice from Elephant & Castle of the breach; or (g)
the Franchisee violates any provision, term or condition of this Agreement
three (3) or more times during a twelve (12) month period, without regard to
whether the violations were of a similar or different nature or whether the
violations were corrected within the prescribed cure period after receipt of
written notice of the violations.

         NOTICE OF IMMEDIATE TERMINATION.

Except as set forth in Article 18.5(f), if this Agreement is terminated by
Elephant & Castle pursuant to Article 18.5 above, then Elephant & Castle will
give the Franchisee written notice by personal service or prepaid registered
or certified mail that this Agreement is terminated and in that event the
effective date of termination of this Agreement will be the day the written
notice of termination is received by the Franchisee. If this Agreement is
terminated by Elephant & Castle pursuant to Article 18.5(f), then this
Agreement will terminate on the first minute of the twenty-fifth hour after
receipt of the written notice of termination if the Franchisee fails to
correct the alleged breach within twenty-four (24) hours after receiving the
written notice of termination.

         OTHER REMEDIES.

Nothing in this Article will preclude Elephant & Castle from seeking other
remedies or damages under state or federal laws, common law, or under this
Agreement against the Franchisee including, but not limited to, attorneys' fees,
punitive damages and injunctive relief. If this Agreement is terminated by
Elephant & Castle pursuant to this Article, or if the Franchisee breaches this
Agreement by a wrongful termination or a termination that is not in strict
compliance with the terms and conditions of Article 19 of this Agreement, then
Elephant & Castle will be entitled to all damages from the Franchisee that
Elephant & Castle has sustained and will sustain in the future as a result of
the Franchisee's breach of this Agreement.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-103                          426304 9

<PAGE>

FRANCHISEE'S TERMINATION RIGHTS

         CONDITIONS OF BREACH.

The Franchisee will have the right to terminate this Agreement, as provided
herein, if Elephant & Castle violates any material provision, term or condition
of this Agreement, or fails to timely pay any material uncontested obligations
due and owing to the Franchisee.

         NOTICE OF BREACH.

The Franchisee will not have the right to terminate this Agreement or to
commence any action, lawsuit or proceeding against Elephant & Castle for
breach of this Agreement, injunctive relief, violation of any state, federal
or local law (including alleged violations of franchise laws), violation of
common law (including allegations of fraud and misrepresentation),
rescission, general or punitive damages, or termination, unless and until:
(a) written notice setting forth the alleged breach or violation in detail
has been delivered to Elephant & Castle by the Franchisee; and (b) Elephant &
Castle fails to correct the alleged breach or violation within thirty (30)
days after receipt of the written notice. If Elephant & Castle fails to
correct the alleged breach or violation within thirty (30) days after
receiving written notice, then this Agreement may be terminated by the
Franchisee as provided for in this Agreement. For the purposes of this
Agreement, an alleged breach or violation of this Agreement by Elephant &
Castle will be deemed to be "corrected" if both Elephant & Castle and the
Franchisee agree in writing that the alleged breach or violation has been
corrected.

         ARBITRATION.

If Elephant & Castle notices arbitration in accordance with Article 23 of this
Agreement within thirty (30) days after the date Elephant & Castle receives
written notice of any alleged breach of this Agreement from the Franchisee, then
the Franchisee will not have the right to terminate this Agreement until the
facts of the alleged breach have been submitted to arbitration, the arbitrator
determines that Elephant & Castle has breached this Agreement and Franchisee
fails to timely correct the breach as set forth in this Agreement. If the
arbitrator determines that Elephant & Castle has violated or breached this
Agreement as alleged by the Franchisee in the written notice given to Elephant &
Castle, then Elephant & Castle will have thirty (30) days after the date the
arbitrator issues a written determination on the matter to correct the specified
breach or violation of this Agreement, then this Agreement will remain in full
force and effect. If Elephant & Castle does timely correct the specified breach
or violation of this Agreement, then this Agreement will remain in full force
and effect. If Elephant & Castle does not correct the specified breach or
violation of this Agreement, then the Franchisee will have the right to
terminate this Agreement by giving Elephant & Castle written notice by personal
service or prepaid registered or certified mail that this Agreement is
terminated and in that event the effective date of termination of this Agreement
will be the day the written notice of termination is received by Elephant &
Castle. For the purpose of this Agreement, any controversy or dispute on the
issue of whether Elephant & Castle has timely corrected the specified breach or
violation of this Agreement will also be subject to arbitration as provided for
herein. The time limitation set forth in this Article within which Elephant &
Castle may demand arbitration of a dispute or controversy relating to the right
of the Franchisee to terminate this Agreement for an alleged breach is
mandatory. If Elephant & Castle fails to comply with the time limitation set
forth in this Article, then the Franchisee may terminate this Agreement as
provided for herein.

         WAIVER.

The Franchisee must give Elephant & Castle immediate written notice of any
alleged breach or violation of this Agreement after the Franchisee has
knowledge of, believes, determines, is of the opinion, or becomes aware of
facts and circumstances reasonably indicating that there has been an alleged
breach or violation of this Agreement by Elephant & Castle. If the Franchisee
fails to give

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-104                          426304 9

<PAGE>

written notice to Elephant & Castle as provided for herein of
any alleged breach or violation of this Agreement within one (1) year after
the date that the Franchisee has knowledge of, believes, determines, is of
the opinion that, or becomes aware of facts and circumstances reasonably
indicating that the Franchisee may have a claim under any state law, federal
law or common law because there has been an alleged breach or violation by
Elephant & Castle, then the alleged breach or violation by Elephant & Castle
will be deemed to be condoned, approved and waived by the Franchisee, the
alleged breach or violation by Elephant & Castle will not be deemed to be a
breach or violation of this Agreement by Elephant & Castle, and the
Franchisee will be barred from commencing any action against Elephant &
Castle for that specific alleged breach or violation.

         INJUNCTIVE RELIEF.

Notwithstanding any of the foregoing provisions, if the Franchisee gives
Elephant & Castle written notice of an alleged breach or violation of this
Agreement or of any federal or state laws that give rise to a claim that the
Franchisee has the right to terminate this Agreement, then Elephant & Castle
will have the absolute right to immediately commence legal action against the
Franchisee to enjoin and prevent the termination of this Agreement by the
Franchisee without giving the Franchisee any notice and without regard to any
waiting period that may be contained in this Agreement. If Elephant & Castle
commences such legal action against the Franchisee, then the Franchisee will not
have the right to terminate this Agreement, unless and until a court of
competent jurisdiction has ruled on the merits that Elephant & Castle has
breached this Agreement in the manner alleged by the Franchisee, and then only
if Elephant & Castle fails to begin the actions necessary to correct the breach
or violation within sixty (60) days after a final judgment has been entered
against Elephant & Castle and all time for appeals by Elephant & Castle has
expired.

FRANCHISEE'S OBLIGATIONS UPON TERMINATION

         TERMINATION OF USE OF MARKS; OTHER OBLIGATIONS.

If this Agreement is canceled or terminated for any reason or this Agreement
expires, then the Franchisee will: (a) within five (5) days after
termination, pay all Continuing Fees, other fees and other amounts due and
owing under this Agreement or under any other contract, promissory note or
other obligation due and owing by the Franchisee to Elephant & Castle; (b)
immediately return to Elephant & Castle by first class prepaid United States
mail the Manual, menus, advertising materials and all other printed materials
pertaining to the Restaurant; and (c) comply with all other applicable
provisions of this Agreement. Upon termination or expiration of this
Agreement for any reason, the Franchisee's right to use "Elephant &
Castle-Registered Trademark-," the other Marks and the Restaurant System will
terminate immediately.

         ALTERATION OF FRANCHISED LOCATION.

If this Agreement expires or is terminated for any reason or if the
Franchised Location ever ceases to be used for the Franchisee's Elephant &
Castle-Registered Trademark-Restaurant, then within thirty (30) days after
the date of the expiration or termination of this Agreement, the Franchisee
will, at its expense, alter, modify and change both the exterior and interior
appearance of the building and the Franchised Location so that it will be
clearly distinguished from the standard appearance of an Elephant &
Castle-Registered Trademark- Restaurant. At a minimum, such changes and
modifications to the Franchised Location will include: (a) repainting and,
where applicable, recovering both the exterior and interior walls of the
Franchised Location with totally different colors, including removing any
distinctive colors, designs and paneling from the walls; (b) removing all
furniture, fixtures and decor items associated with an Elephant &
Castle-Registered Trademark- Restaurant and replacing them with other decor
items not of the general type and appearance customarily used in Elephant &
Castle-Registered Trademark-Restaurants; (c) removing all exterior and
interior Elephant & Castle-Registered Trademark- signs; and (d) immediately
discontinuing use of the approved wall decor items and window decals, and

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-105                          426304 9

<PAGE>

refraining from using any items which may be confusingly similar to those
used in an Elephant & Castle-Registered Trademark- Restaurant.

         CANCELLATION OF TELEPHONE DIRECTORY LISTINGS.

Upon termination or expiration of this Agreement, or if Elephant & Castle
acquires the Franchisee's Elephant & Castle-Registered Trademark- Restaurant
pursuant to this Agreement, Elephant & Castle will have the absolute right to
notify the telephone company and all listing agencies of the termination or
expiration of the Franchisee's right to use all telephone numbers and all
classified and other directory listings for the Restaurant and to authorize
the telephone company and all listing agencies to transfer to Elephant &
Castle or its assignee all telephone numbers and directory listings of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant. The
Franchisee acknowledges and agrees that Elephant & Castle has the absolute
right and interest in and to all telephone numbers and directory listings
associated with the Marks, and the Franchisee hereby authorizes Elephant &
Castle to direct the telephone company and all listing agencies to transfer
the Franchisee's telephone numbers and directory listings to Elephant &
Castle or to an assignee of Elephant & Castle, if this Agreement expires or
is terminated or if Elephant & Castle acquires the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant. The telephone company and all
listing agencies may accept this Agreement as evidence of the exclusive
rights of Elephant & Castle to such telephone numbers and directory listings
and this Agreement will constitute the authority from the Franchisee for the
telephone company and listing agency to transfer all such telephone numbers
and directory listings to Elephant & Castle. This Agreement will constitute a
release of the telephone company and listing agencies by the Franchisee from
any and all claims, actions and damages that the Franchisee may at any time
have the right to allege against them in connection with this Article.

         CONTINUATION OF OBLIGATIONS.

The indemnities and covenants contained in this Agreement will continue in
full force and effect subsequent to and notwithstanding the expiration or
termination of this Agreement.

FRANCHISEE'S COVENANTS NOT TO COMPETE

         CONSIDERATION.

The Franchisee, the Owners and the Personal Guarantors acknowledge that the
Franchisee, its officers, executives and employees will receive specialized
training, marketing and advertising plans, business strategies, confidential
recipe, cooking, and food preparation information, and trade secrets from
Elephant & Castle pertaining to the Restaurant System and the operation of
the Elephant & Castle-Registered Trademark- Restaurant. In consideration for
this information, the Franchisee, the Owners and the Personal Guarantors will
comply in all respects with the provisions of this Article. Elephant & Castle
has advised the Franchisee that this provision is a material provision of
this Agreement, and that Elephant & Castle will not sell an Elephant &
Castle-Registered Trademark- Restaurant Franchise to any person or entity
that owns or intends to own, operate or be involved in any business that
competes directly or indirectly with an Elephant & Castle-Registered
Trademark- Restaurant; provided however, that Elephant & Castle may, under
certain circumstances, exclude from the coverage of Article 21.2 and Article
21.3 existing operational restaurant(s) owned and operated by the Franchisee
as of the date of this Agreement, and the Franchisee may, with the written
consent of Elephant & Castle, continue to own and operate such restaurants
during the term of this Agreement and thereafter.

         IN-TERM COVENANT NOT TO COMPETE.

The Franchisee, the Owners and the Personal Guarantors will not, during the
term of this Agreement, on their own account or as an employee, agent,
consultant, affiliate, licensee, partner, officer, director, or shareholder
of any other person, firm, entity, partnership or corporation, own, operate,
lease, franchise, conduct, engage in, be connected with, have any interest
in, or assist any person or entity

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-106                          426304 9

<PAGE>

engaged in any Anglo/British style pub restaurant concept that is in any way
similar to or competitive with an Elephant & Castle-Registered Trademark-
Restaurant, except with the prior written consent of Elephant & Castle.

         POST-TERM COVENANT NOT TO COMPETE.

The Franchisee, the Owners and the Personal Guarantors will not, for a period
of twelve (12) months after the termination or expiration of this Agreement
on their own account or as an employee, principal, agent, independent
contractor, consultant, affiliate, licensee, partner, officer, director or
shareholder of any other person, firm, entity, partnership or corporation,
own, operate, lease, franchise, conduct, engage in, be connected with, have
any interest in or assist any person or entity engaged in any Anglo/British
style pub restaurant concept that is in any way similar to or competitive
with an Elephant & Castle-Registered Trademark-Restaurant and which is
located within ten (10) miles of the Franchised Location or any other
Elephant & Castle-Registered Trademark- Restaurant, or within any exclusive
area granted by Elephant & Castle or any affiliate of Elephant & Castle
pursuant to a Development Agreement or other territorial agreement. The
Franchisee, the Owners and the Personal Guarantors expressly agree that the
time and geographical limitations set forth in this provision are reasonable
and necessary to protect Elephant & Castle and its franchisees if this
Agreement expires or is terminated by either party for any reason, and that
this covenant not to compete is necessary to permit Elephant & Castle the
opportunity to resell and/or develop a new Elephant & Castle-Registered
Trademark- Restaurant at or in the area near the Franchised Location.

         INJUNCTIVE RELIEF.

The Franchisee, the Owners and the Personal Guarantors agree that the
provisions of this Article are necessary to protect the legitimate business
interest of Elephant & Castle and its franchisees including, without
limitation, preventing the unauthorized dissemination of marketing,
promotional and other confidential information to competitors of Elephant &
Castle and its franchisees, protecting recipes, cooking and food preparation
techniques and other trade secrets, protecting the integrity of the franchise
system of Elephant & Castle, preventing duplication of the Restaurant System
by unauthorized third parties, and preventing damage to and/or loss of
goodwill associated with the Marks. The Franchisee, the Owners and the
Personal Guarantors also agree that damages alone cannot adequately
compensate Elephant & Castle if there is a violation of this Article by the
Franchisee, the Owners or the Personal Guarantors, and that injunctive relief
against the Franchisee is essential for the protection of Elephant & Castle
and its franchisees. The Franchisee, the Owners and the Personal Guarantors
agree, therefore, that if Elephant & Castle alleges that the Franchisee, the
Owners or the Personal Guarantors have breached or violated this Article,
then Elephant & Castle will have the right to petition a court of competent
jurisdiction for injunctive relief against the Franchisee, the Owners and the
Personal Guarantors, in addition to all other remedies that may be available
to Elephant & Castle. Elephant & Castle will not be required to post a bond
or other security for any injunctive proceeding. If Elephant & Castle is
granted ex parte injunctive relief against the Franchisee, the Owners or the
Personal Guarantors, then the Franchisee, the Owners or the Personal
Guarantors will have the right to petition the court for a hearing on the
merits at the earliest time convenient to the court.

         SEVERABILITY.

It is the desire and intent of the parties to this Agreement, including the
Owners and the Personal Guarantors, that the provisions of this Article be
enforced to the fullest extent permissible under the laws and public policy
applied in each jurisdiction in which enforcement is sought. Accordingly, if any
part of this Article is adjudicated to be invalid or unenforceable, then this
Article will be deemed to modify or delete that portion thus adjudicated to be
invalid or unenforceable, such modification or deletion to apply only with
respect to the operation of this Article in the particular jurisdiction in which
the adjudication is made. Further, to the extent any provision of this Article
is deemed unenforceable by virtue of its scope or limitation, the parties to
this Agreement, including the Owners and the Personal Guarantors, agree that the
scope and limitation provisions will nevertheless, be enforceable

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-107                          426304 9

<PAGE>

to the fullest extent permissible under the laws and public policies applied
in such jurisdiction where enforcement is sought.

INDEPENDENT CONTRACTORS; INDEMNIFICATION

         INDEPENDENT CONTRACTORS.

Elephant & Castle and the Franchisee are each independent contractors and, as a
consequence, there is no employer-employee or principal-agent relationship
between Elephant & Castle and the Franchisee. The Franchisee will not have the
right to and will not make any agreements, representations or warranties in the
name of or on behalf of Elephant & Castle or represent that their relationship
is other than that of franchisor and franchisee. Neither Elephant & Castle nor
the Franchisee will be obligated by or have any liability to the other under any
agreements or representations made by the other to any third parties.

         INDEMNIFICATION.

Elephant & Castle will not be obligated to any person or entity for any
damages arising out of, from, in connection with, or as a result of the
Franchisee's negligence, the Franchisee's wrongdoing or the operation of the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant. Therefore,
the Franchisee will indemnify and hold Elephant & Castle harmless against,
and will reimburse Elephant & Castle for, all damages for which Elephant &
Castle is held liable and for all costs incurred by Elephant & Castle in the
defense of any claim or action brought against Elephant & Castle arising
from, in connection with, arising out of, or as a result of the Franchisee's
negligence, the Franchisee's wrongdoing or the operation of the Franchisee's
Elephant & Castle-Registered Trademark- Restaurant including, without
limitation, attorneys' fees, investigation expenses, court costs, deposition
expenses, and travel and living expenses. The Franchisee will indemnify
Elephant & Castle, without limitation, for all claims and damages arising
from, out of, in connection with, or as a result of: (a) any personal injury,
property damage, commercial loss or environmental contamination resulting
from any act or omission of the Franchisee or its employees, agents or
representatives; (b) any failure on the part of the Franchisee to comply with
any requirement of any laws or any governmental authority; (c) any failure of
the Franchisee to pay any of its obligations to any person or entity; (d) any
failure of the Franchisee to comply with any requirement or condition of this
Agreement or any other agreement with Elephant & Castle; (e) any misfeasance
or malfeasance by the Franchisee; and (f) any tort. Elephant & Castle will
have the right to defend any claim made against it arising from, as a result
of, in connection with or out of the Franchisee's negligence or the operation
of the Franchisee's Elephant & Castle-Registered Trademark- Restaurant.

         PAYMENT OF COSTS AND EXPENSES.

The Franchisee will indemnify Elephant & Castle for all costs and expenses
incurred by Elephant & Castle in enforcing any term, condition or provision of
this Agreement or in enjoining any violation of this Agreement by the Franchisee
including, without limitation, attorneys' fees, expert witness fees, costs of
investigation, court costs, litigation expenses, arbitration fees, costs and
expenses, and travel and living expenses.

         CONTINUATION OF OBLIGATIONS.

The indemnification and other obligations contained herein will continue in full
force and effect subsequent to and notwithstanding the expiration or termination
of this Agreement.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-108                          426304 9

<PAGE>

ARBITRATION

         MEDIATION.

Elephant & Castle and the Franchisee acknowledge that resolving disputes
prior to commencing arbitration hearings or court proceedings is in the best
interests of both parties. Therefore, the Franchisee and Elephant & Castle
will, when practical, attempt to resolve disputes by non-binding mediation.
The parties agree that they will act in good faith to settle any dispute
between them; however, either party will have the right to decline to mediate
the dispute.

         DISPUTES SUBJECT TO ARBITRATION.

Except as expressly provided to the contrary in Article 23.7 of this
Agreement, all disputes and controversies, including allegations of fraud,
misrepresentation and violation of any state or federal laws or regulations,
arising under, as a result of, or in connection with this Agreement, the
Franchised Location, the Franchisee's Restaurant business or the Personal
Guaranty attached to this Agreement are subject to and will be resolved
exclusively by arbitration conducted in accordance with the Commercial Rules
and Regulations of the American Arbitration Association.

         NOTICE OF DISPUTE.

The party alleging the dispute must provide the other party with written
notice setting forth the alleged dispute in detail. The party who receives
written notice alleging the dispute will have thirty (30) days after receipt
of the written notice to resolve the dispute specified in the written notice.
If the written notice alleges that the Franchisee is delinquent in the
payment of any fees or other payments payable to Elephant & Castle, the
Franchisee will have ten (10) days to make full payment (including interest
and administrative fees as provided for herein) to Elephant & Castle.

         DEMAND FOR ARBITRATION.

If the dispute alleged by either party has not been corrected, settled or
compromised within the time period provided for in this Agreement, then either
party may demand arbitration by giving the other party written notice. Within
ten (10) days after a written demand for arbitration has been delivered by the
party demanding arbitration, either party will have the right to request the
office of the American Arbitration Association in Minneapolis, Minnesota to
initiate the procedures necessary to appoint an arbitrator. Either party will
have the right to demand that the arbitration hearings be conducted by three (3)
arbitrators. The arbitrator(s) will be appointed as provided herein within sixty
(60) days after a written demand for arbitration has been made in accordance
with the Rules and Regulation of the American Arbitration Association.

         VENUE AND JURISDICTION.

All arbitration hearings will take place exclusively in Hennepin County,
Minnesota or at the general offices of Elephant & Castle, and will be held no
earlier than ninety (90) days after the arbitrator(s) has (have) been selected.
Elephant & Castle and the Franchisee, its officers and directors, and the Owners
and Personal Guarantors do hereby agree and submit to personal jurisdiction in
the State of Minnesota in connection with any arbitration hearings hereunder and
any suits brought to enforce the decision of the arbitrator(s), and do hereby
waive any rights to contest venue and jurisdiction in the State of Minnesota and
any claims that venue and jurisdiction are invalid.

         POWERS OF ARBITRATOR(S).

The authority of the arbitrator(s) will be limited to making a finding,
judgment, decision and award relating to the interpretation of or adherence to
the written provisions of this Agreement. The Federal Rules of Evidence (the
"Rules") will apply to all arbitration hearings and the introduction of all
evidence, testimony, records, affidavits, documents and memoranda in any
arbitration hearing must comply in

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-109                          426304 9

<PAGE>

all respects with the Rules and legal precedents interpreting the Rules. Both
parties will have the absolute right to cross-examine any person who has
testified against them or in favor of the other party. The arbitrator(s) will
have no authority to add to, delete or modify in any manner the terms and
provisions of this Agreement. All findings, judgments, decisions and awards
of the arbitrator(s) will be limited to the dispute set forth in the written
demand for arbitration, and the arbitrator(s) will have no authority to
decide any other issues. The arbitrator(s) will not have the right or
authority to award punitive damages to either Elephant & Castle or the
Franchisee or their officers, directors, shareholders, Owners and Personal
Guarantors, and Elephant & Castle and the Franchisee and their officers,
directors, shareholders or Owners, and the Personal Guarantors expressly
waive their rights to plead or seek punitive damages. All findings,
judgments, decisions and awards by the arbitrator(s) will be in writing, will
be made within sixty (60) days after the arbitration hearings have been
completed, and will be final and binding on Elephant & Castle and the
Franchisee, except as provided for in Article 23.9. The written decision of
the arbitrator(s) will be deemed to be an order, judgment and decree and may
be entered as such in any court of competent jurisdiction by either party
thirty (30) days thereafter, unless any party elects to pursue its rights
under Article 23.9.

         DISPUTES NOT SUBJECT TO ARBITRATION.

The following disputes between Elephant & Castle and the Franchisee will not be
subject to arbitration: (a) any disputes arising between Elephant & Castle and
the Franchisee which are set forth in Article 24.1; (b) any dispute involving
the Marks or which arise under or as a result of Article 15 of this Agreement;
(c) any dispute involving immediate termination of this Agreement by Elephant &
Castle pursuant to Article 18.5 and Article 18.6 of this Agreement; and (d) any
dispute involving enforcement of the covenants not to compete contained in
Article 21 of this Agreement.

         NO COLLATERAL ESTOPPEL OR CLASS ACTIONS.

Except as provided by Article 23.9, all arbitration findings, conclusions,
orders and awards made by the arbitrator(s) will be final and binding on
Elephant & Castle and the Franchisee; however, such arbitration findings,
conclusions, orders and awards may not be used: (a) to collaterally estop either
the Franchisee or Elephant & Castle from raising any like or similar issue or
defense in any subsequent arbitration, litigation, court hearing or other
proceeding involving third parties, including other franchisees; or (b) by any
third party or other franchisee to establish any fact, action, finding,
violation or otherwise used by any third party or other franchisee as evidence,
in any arbitration, litigation, court hearing or other proceeding involving
Elephant & Castle or the Franchisee. In any arbitration between them, neither
Elephant & Castle nor the Franchisee may introduce as evidence, or otherwise use
to establish any fact, action, finding or violation, any findings, conclusions,
orders or awards resulting from any prior arbitration, litigation, court hearing
or other proceeding involving the Franchisee and a third party, or Elephant &
Castle and a third party or other franchisees. No party except Elephant &
Castle, the Franchisee, and their officers, directors, shareholders or Owners
and the Personal Guarantors will have the right to join in any arbitration
proceeding arising under this Agreement, and therefore, the arbitrator(s) will
not be authorized to permit class actions or to permit any other party to be
involved in any arbitration proceeding brought by either party under this
Agreement.

         DE NOVO HEARING ON MERITS.

If the arbitrator(s) awards either Elephant & Castle or the Franchisee damages
(including actual damages, costs and attorneys' fees) in excess of one hundred
thousand dollars ($100,000) in any arbitration proceeding commenced pursuant to
this Agreement, then the party who has been held liable by the arbitrator(s)
will have the right to a de novo hearing on the merits by commencing an action
in a court of competent jurisdiction in accordance with the provisions of this
Agreement. If the party held liable by the arbitrator(s) commences a court
action as provided for herein, then neither party will have the right to
introduce the arbitrator's(s') decision or findings in any such court action and
the arbitrator's(s') decision and findings will be of no force and effect and
will not be final or binding on

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-110                          426304 9

<PAGE>

either Elephant & Castle or the Franchisee. If the party who has been held
liable by the arbitrator(s) for over one hundred thousand dollars ($100,000)
in damages fails to commence a court action within thirty (30) days after
receiving the arbitrator's(s') written award, then the arbitrator's(s')
findings, judgments, decisions and awards will be final and binding on
Elephant & Castle, the Franchisee and all other parties and may be entered as
an order decree and judgment in any court of competent jurisdiction by any
party.

         CONFIDENTIALITY.

All evidence, testimony, records, documents, findings, decisions, judgments and
awards pertaining to any arbitration hearing between Elephant & Castle and the
Franchisee will be secret and confidential in all respects. Elephant & Castle
and the Franchisee will not disclose the decision or award of the arbitrator(s)
and will not disclose any evidence, testimony, records, documents, findings,
orders, or other matters from the arbitration hearing to any person or entity
except as required by law. Nothing herein will prevent either party from
disclosing or using any information presented in any arbitration proceeding in
any subsequent court hearing brought pursuant to Article 23.9.

         PERFORMANCE DURING ARBITRATION OF DISPUTES.

Elephant & Castle and the Franchisee will fully comply with all of the terms and
conditions of this Agreement and will fully perform their respective obligations
under this Agreement during the entire time of the arbitration process.

ENFORCEMENT

         INJUNCTIVE RELIEF.

Elephant & Castle will have the right to petition a court of competent
jurisdiction for the entry of temporary and permanent injunctions and orders
of specific performance enforcing the provisions of this Agreement for any
action relating to: (a) the Franchisee's improper use of the Marks or the
Restaurant System; (b) the obligations of the Franchisee upon termination or
expiration of this Agreement; (c) the sale, transfer or assignment of this
Agreement, the Franchisee's Restaurant or the Ownership Interests of the
Franchisee; (d) the Franchisee's violation of the provisions of this
Agreement relating to confidentiality and the covenants not to compete; and
(e) any act or omission by the Franchisee or the Franchisee's employees that
(1) constitutes a violation of any applicable law, ordinance or regulation,
(2) is dishonest or misleading to the guests or customers of the Franchisee's
Restaurant or other Elephant & Castle-Registered Trademark- Restaurants, (3)
constitutes a danger to the employees, public, guests, or customers of the
Franchisee's Restaurant, or (4) may impair the goodwill associated with the
Marks or the Restaurant System.

         SEVERABILITY.

All provisions of this Agreement are severable and this Agreement will be
interpreted and enforced as if all completely invalid or unenforceable
provisions were not contained herein and partially valid and enforceable
provisions will be enforced to the extent valid and enforceable. If any
applicable law or rule of any jurisdiction requires a greater prior notice of
the termination of this Agreement than is required hereunder or the taking of
some other action not required hereunder, or if under any applicable law or
rule of any jurisdiction, any provision of this Agreement or any
specification, standard or operating procedure prescribed by Elephant &
Castle is invalid or unenforceable under applicable law, then the prior
notice or other action required by such law or rule will be substituted for
the notice requirements hereof, or such invalid or unenforceable provision,
specification, standard or operating procedure will be modified to the extent
required to be valid and enforceable. Such modifications to this Agreement
will be effective only in such jurisdiction.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-111                          426304 9

<PAGE>

         WAIVER.

Elephant & Castle and the Franchisee may, by written instrument signed by
Elephant & Castle and the Franchisee, waive any obligation of or restriction
upon the other under this Agreement. Acceptance by Elephant & Castle of any
payment by the Franchisee and the failure, refusal or neglect of Elephant &
Castle to exercise any right under this Agreement or to insist upon full
compliance by the Franchisee of its obligations hereunder including, without
limitation, any mandatory specification, standard or operating procedure,
will not constitute a waiver by Elephant & Castle of any provision of this
Agreement. Elephant & Castle will have the right to waive obligations or
restrictions for other franchisees under their franchise agreements without
waiving those obligations or restrictions for the Franchisee and, except to
the extent provided by law, Elephant & Castle will have the right to
negotiate terms and conditions, grant concessions and waive obligations for
other franchisees of Elephant & Castle without granting those same rights to
the Franchisee and without incurring any liability to the Franchisee
whatsoever.

         PAYMENTS TO ELEPHANT & CASTLE.

The Franchisee will not, on grounds of the alleged nonperformance by Elephant &
Castle of any of its obligations under this Agreement, any other contract
between Elephant & Castle and the Franchisee, or for any other reason, withhold
payment of any Continuing Fees or any other fees or payments due Elephant &
Castle pursuant to this Agreement or pursuant to any other contract, agreement
or obligation to Elephant & Castle. The Franchisee will not have the right to
"offset" or withhold any liquidated or unliquidated amounts, damages or other
funds allegedly due to the Franchisee by Elephant & Castle against any
Continuing Fees or any other fees or payments due to Elephant & Castle under
this Agreement.

         EFFECT OF WRONGFUL TERMINATION.

If either Elephant & Castle or the Franchisee takes any action to terminate
this Agreement or the Franchisee takes any action to convert its Elephant &
Castle-Registered Trademark-Restaurant to another business, and such actions
were taken without first complying with the terms and conditions of Article
18 or Article 19 of this Agreement, as applicable, then such actions will not
relieve either party of, or release either party from, any of its obligations
under this Agreement, and the terms and conditions of this Agreement will
remain in full force and effect and the parties will be obligated to fully
perform all terms and conditions until such time as this Agreement expires or
is terminated in accordance with the provisions of this Agreement and
applicable law, as determined by arbitration or a court of competent
jurisdiction.

         CUMULATIVE RIGHTS.

The rights of Elephant & Castle hereunder are cumulative and no exercise or
enforcement by Elephant & Castle of any right or remedy hereunder will preclude
the exercise or enforcement by Elephant & Castle of any other right or remedy
hereunder or which Elephant & Castle is entitled by law to enforce.

         BINDING AGREEMENT.

This Agreement is binding upon the parties hereto and their respective
executors, administrators, heirs, assigns and successors in interest.

         JOINT AND SEVERAL LIABILITY.

If the Franchisee consists of more than one person, their liability under this
Agreement will be deemed to be joint and several.

         NO ORAL MODIFICATION.

No modification, change, addition, rescission, release, amendment or waiver of
this Agreement and no approval, consent or authorization required by any
provision of this Agreement may be made by any person except by a written
agreement signed by a duly authorized officer or partner of the Franchisee and
the President or a Vice President of Elephant & Castle.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-112                          426304 9

<PAGE>

         ENTIRE AGREEMENT.

This Agreement supersedes and terminates all prior agreements, either oral or
in writing, between the parties involving the franchise relationship and
therefore, representations, inducements, promises or agreements alleged by
either Elephant & Castle or the Franchisee that are not contained in this
Agreement will not be enforceable. The Recitals are part of this Agreement,
which constitutes the entire agreement of the parties, and there are no other
oral or written understandings or agreements between Elephant & Castle and
the Franchisee relating to the subject matter of this Agreement. This
Agreement will not supersede any written agreements or contracts that are
signed concurrently with this Agreement.

         HEADINGS; TERMS.

The headings of the Articles are for convenience only and do not in any way
define, limit or construe the contents of such Articles. The term "Franchisee"
as used herein is applicable to one or more individuals, a corporation, a
limited liability company, a partnership or a limited partnership, as the case
may be, and the singular usage includes the plural, the masculine usage includes
the neuter and the feminine, and the neuter usage includes the masculine and the
feminine. References to "Franchisee," "assignee" and "transferee" which are
applicable to an individual or individuals will mean the Owner or Owners of the
equity or operating control of the Franchisee or any such assignee or transferee
if the Franchisee or such assignee or transferee is a corporation, a limited
liability company, a partnership, or a limited partnership.

         VENUE AND JURISDICTION.

All litigation, court proceedings, arbitration proceedings, mediation
proceedings, lawsuits, court hearings and other hearings initiated by the
Franchisee or Elephant & Castle must and will be venued exclusively in
Hennepin County, Minnesota. The Franchisee, each of its officers and
directors, and the Owners and Personal Guarantors do hereby agree and submit
to personal jurisdiction in the State of Minnesota for the purposes of any
suit, proceeding or hearing brought to enforce or construe the terms of this
Agreement or to resolve any dispute or controversy arising under, as a result
of, or in connection with this Agreement, the Franchised Location or the
Franchisee's Elephant & Castle-Registered Trademark- Restaurant, and do
hereby agree and stipulate that any such suits, proceedings and hearings will
be exclusively venued and held in Hennepin County, Minnesota. The Franchisee,
each of its officers and directors, and the Owners and Personal Guarantors
waive any rights to contest such venue and jurisdiction and any claims that
such venue and jurisdiction are invalid.

         FEDERAL ARBITRATION ACT.

Any issue regarding arbitration will be governed by the Federal Arbitration Act
and the federal common law of arbitration.

         CONTRACTUAL STATUTE OF LIMITATIONS.

Any and all claims and actions arising out of or relating to this Agreement, the
relationship of the Franchisee and Elephant & Castle, or the Franchisee's
operation of the Restaurant brought by either party against the other, whether
in arbitration or any other proceeding, will be commenced within one (1) year
from the occurrence of the facts giving rise to such claim or action, or such
claim or action will be barred.

NOTICES

All notices to Elephant & Castle will be in writing and will be made by personal
service upon an officer or director of Elephant & Castle or sent by prepaid
registered or certified mail addressed to Mr. Martin O'Dowd, President and Chief
Executive Officer of Elephant & Castle International, Inc., 7657 Anagram

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-113                          426304 9

<PAGE>

Drive, Eden Prairie, Minnesota 55344 or such other address as Elephant &
Castle may subsequently designate in writing, with a copy to G. Thomas
MacIntosh, II, Attorney at Law, Mackall, Crounse & Moore, PLC, 1400 AT&T
Tower, 901 Marquette Avenue, Minneapolis, Minnesota 55402-2859. All notices
to the Franchisee will be made by personal service upon the Franchisee (or,
if applicable, upon an officer or director of the Franchisee) or sent by
prepaid registered or certified mail addressed to the Franchisee at the
Franchised Location, or such other address as the Franchisee may subsequently
designate in writing. For the purposes of this Agreement, personal service
will include service by a recognized overnight delivery service (such as
Federal Express, Airborne Express or UPS) which requires a written receipt of
delivery from the addressee.

DISCLAIMER; ACKNOWLEDGMENTS

         DISCLAIMER.

Elephant & Castle does not warrant or guarantee to the Franchisee that the
Franchisee will derive income or profit from the Elephant & Castle-Registered
Trademark-Restaurant, or that Elephant & Castle will refund all or part of
the Initial Fee or the price paid for the Franchisee's Restaurant or
repurchase any of the supplies, products, technology or equipment supplied or
sold by Elephant & Castle or by an approved or designated supplier if the
Franchisee is in any way unsatisfied with its Restaurant. Elephant & Castle
expressly disclaims the making of any express or implied representations or
warranties regarding the sales, earnings, income, profits, Gross Sales,
business or financial success, or value of the Franchisee's Restaurant except
as contained in the Elephant & Castle Uniform Franchise Offering Circular
received by the Franchisee.

         ACKNOWLEDGMENTS BY FRANCHISEE.

The Franchisee acknowledges that it has conducted an independent
investigation of the Elephant & Castle-Registered Trademark- Restaurant and
recognizes that the business venture contemplated by this Agreement involves
business and economic risks. The Franchisee acknowledges that the financial,
business and economic success of the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant will be primarily dependent upon the
personal efforts of the Franchisee, its management and its employees, and on
economic conditions in the area where the Franchised Location is located and
economic conditions in general. The Franchisee acknowledges that it has not
received any estimates, projections, representations, warranties or
guaranties, expressed or implied, regarding potential sales, Gross Sales,
income, profits, earnings, expenses, financial or business success, value of
the Restaurant, or other economic matters pertaining to the Franchisee's
Restaurant from Elephant & Castle or any of its agents that were not
expressly set forth in the Elephant & Castle Uniform Franchise Offering
Circular received by the Franchisee from Elephant & Castle (hereinafter
referred to in this provision as "Representations"). The Franchisee further
acknowledges that if it had received any such Representations, it would not
have executed this Agreement, and that it would have promptly notified the
President of Elephant & Castle in writing of the person or persons making
such Representations, and provided to Elephant & Castle a specific written
statement detailing the Representations made.

         OTHER FRANCHISEES.

The Franchisee acknowledges that other franchisees of Elephant & Castle have
or will be granted franchises at different times, different locations, under
different economic conditions and in different situations, and further
acknowledges that the economics and terms and conditions of such other
franchises may vary substantially in form and in substance from those
contained in this Agreement.

         RECEIPT OF AGREEMENT AND UNIFORM FRANCHISE OFFERING CIRCULAR.

The Franchisee acknowledges that it received a copy of this Agreement with
all material blanks fully completed at least five (5) business days prior to
the date that this Agreement was executed by the Franchisee. The Franchisee
further acknowledges that it received a copy of the Elephant & Castle

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-114                          426304 9

<PAGE>

Uniform Franchise Offering Circular at least ten (10) business days prior to
the date on which this Agreement was executed.

                  ALAMO GRILL-TM- RESTAURANTS.

The Franchisee agrees and acknowledges that the Alamo Grill-TM- restaurants
which are or will be operated or franchised by Elephant & Castle ("Alamo
Grill-TM- Restaurants") are restaurants that address different markets and
thus are not competitive with Elephant & Castle-Registered Trademark-
Restaurants. Further, the Franchisee acknowledges and agrees that, except as
restricted by the terms of the Franchise Agreements with its Alamo Grill
franchisees, Elephant & Castle will have the absolute right to develop, own,
manage, license and franchise Alamo Grill-TM- Restaurants at any location in
the world, and the Franchisee hereby waives any and all rights that it may
have or allege against Elephant & Castle or any affiliate of Elephant &
Castle resulting from the operation of any Alamo Grill-TM- Restaurant,
including those Alamo Grill-TM- Restaurants that may be in, near or adjacent
to the Franchisee's Exclusive Area or the Franchisee's Elephant &
Castle-Registered Trademark- Restaurant.

FRANCHISEE'S LEGAL COUNSEL

The Franchisee acknowledges that this Agreement constitutes a legal document
which grants certain rights to and imposes certain obligations upon the
Franchisee. The Franchisee has been advised by Elephant & Castle to retain an
attorney or advisor prior to the execution of this Agreement to review the
Elephant & Castle Uniform Franchise Offering Circular, to review this
Agreement in detail, to review all legal documents, to review the economics,
operations and other business aspects of the Elephant & Castle-Registered
Trademark- Restaurant, to determine compliance with franchising and other
applicable laws, and to advise the Franchisee on economic risks, liabilities,
obligations and rights under this Agreement and to advise the Franchisee on
tax issues, financing matters, applicable state and federal laws, liquor
laws, health and safety laws, environmental laws, employee issues, insurance,
structure of the Restaurant business, and other business matters. The name of
the Franchisee's attorney or other advisor is:

         Attorney's Name:____________________________________________________

         Name of Firm:_______________________________________________________

         Address:____________________________________________________________

         City, State, Zip Code:_______________________

         Telephone Number: (    )_____________________

         Fax Number: (    )___________________________

GOVERNING LAW; STATE MODIFICATIONS

         GOVERNING LAW; SEVERABILITY.

Except to the extent governed by the United States Trademark Act of 1946 (Lanham
Act, 15 U.S.C. Sections 1051, et seq.), this Agreement and the relationship
between Elephant & Castle and the Franchisee will be governed by the laws of the
state in which the Franchised Location is located. The provisions of this
Agreement which conflict with or are inconsistent with applicable governing law
will be superseded and/or modified by such applicable law only to the extent
such provisions are inconsistent. All other provisions of this Agreement will be
enforceable as originally made and entered into upon the execution of this
Agreement by the Franchisee and Elephant & Castle.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-115                          426304 9

<PAGE>

         APPLICABLE STATE LAWS.

If applicable, the following states have statutes which may supersede the
provisions of this Agreement in the Franchisee's relationship with Elephant &
Castle in the areas of termination and renewal of the Franchise: ARKANSAS
[Stat. Section 70-807], CALIFORNIA [Bus. & Prof. Code Sections 20000-20043],
CONNECTICUT [Gen. Stat. Section 42-133e, ET SEQ.], DELAWARE
[Code Section 2552], HAWAII [Rev. Stat. Section 482E-1], ILLINOIS
[815 ILCS 705/19-20], INDIANA [Stat. Section 23-2-2.7], MICHIGAN
[Stat. Section 19.854(27)], MINNESOTA [Stat. Section 80C.14], MISSISSIPPI
[Code Section 75-24-51], MISSOURI [Stat. Section 407.400], NEBRASKA
[Rev. Stat. Section 87-401], NEW JERSEY [Stat. Section 56:10-1], SOUTH DAKOTA
[Codified Laws Section 37-5A-51], VIRGINIA [Code 13.1-557-574-13.1-564],
WASHINGTON [Code Section 19.100.180], and WISCONSIN [Stat. Section 135.03].
These and other states may have court decisions which may supersede the
provisions of this Agreement in the Franchisee's relationship with Elephant &
Castle in the areas of termination and renewal of the Franchise.

         STATE LAW MODIFICATIONS.

If the Franchisee's Elephant & Castle-Registered Trademark- Restaurant is
located in any one of the states indicated below in this Article, or if the
laws of any such state are otherwise applicable, then the designated
provisions of this Agreement will be amended and revised as follows:

         (a) CALIFORNIA. If this Agreement is governed by the laws of the State
         of California, then: (1) the covenant not to compete upon termination
         or expiration of this Agreement contained in Article 21.3 may be
         unenforceable, except in certain circumstances provided by law; and (2)
         provisions of this Agreement giving Elephant & Castle the right to
         terminate in the event of the Franchisee's bankruptcy may not be
         enforceable under federal bankruptcy laws (11 U.S.C. Sec. 101, ET
         SEQ.).

        (b) ILLINOIS. If this Agreement is governed by the laws of the State of
         Illinois, then: (1) the designation of jurisdiction and venue in
         Hennepin County, Minnesota contained in Article 23.5 and Article 24.12
         of this Agreement will be inapplicable; provided, however, that such
         inapplicability will not be construed to mean that such venue is
         improper, or that the Franchisee, its officers, directors, Owners and
         the Personal Guarantors are not subject to jurisdiction in the State of
         Minnesota, or in any other state; (2) Article 24.14 of this Agreement
         is hereby amended to provide that Section 27 of the Illinois Franchise
         Disclosure Act will be applicable to any action maintained by the
         Franchisee to enforce any liability created by the Act; and (3) any
         condition, stipulation or provision of this Agreement requiring the
         Franchisee to waive compliance with any provision of the Illinois
         Franchise Disclosure Act is void; therefore, any acknowledgments
         contained in Article 26.2 and Article 26.4 of this Agreement which
         waive compliance with the Illinois Franchise Disclosure Act will be
         deleted from this Agreement.

         (c) INDIANA. If this Agreement is governed by the laws of the State of
         Indiana, then: (1) Article 17.6(d) of this Agreement will be
         inapplicable; (2) the post-term covenant not to compete contained in
         Article 21.3 of this Agreement will be enforceable only within the
         Exclusive Area; (3) Article 21.4 and Article 24.1 of this Agreement
         will be amended to provide that a court of competent jurisdiction will
         determine whether Elephant & Castle will be entitled to injunctive
         relief in any injunctive proceeding commenced by Elephant & Castle
         against the Franchisee; (4) the designation of jurisdiction and venue
         in Hennepin County, Minnesota contained in Article 24.12 of this
         Agreement is inapplicable; provided, however, that such inapplicability
         will not be construed to mean that such venue is improper, or that the
         Franchisee, its officers, directors, Owners and the Personal Guarantors
         are not subject to jurisdiction in the State of Minnesota, or in any
         other state; (5) arbitration hearings will be conducted in
         Indianapolis, Indiana or at a mutually agreed upon location; (6) the
         Franchisee

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-116                          426304 9

<PAGE>

         does not, by signing this Agreement, waive its rights under
         Indiana law with respect to any representations made by Elephant &
         Castle prior to the date of this Agreement; (7) notwithstanding any
         provision of this Agreement to the contrary, the Franchisee will have
         up to two years to bring an action against Elephant & Castle for a
         violation of the Indiana Deceptive Franchise Practices Act, and up to
         three years from the date of discovery to bring an action against
         Elephant & Castle for a violation of the Indiana Franchise Disclosure
         Law; and (8) notwithstanding any provisions of this Agreement to the
         contrary, a court of competent jurisdiction will determine whether
         Elephant & Castle will be required to post a bond or other security,
         and the amount of such bond or other security, in any injunctive
         proceeding commenced by Elephant & Castle against the Franchisee.

         (d) MARYLAND. If this Agreement is governed by the laws of the State of
         Maryland, then: (1) Article 17.6(d) of this Agreement is hereby amended
         to provide that such release will not relieve Elephant & Castle from
         any liability imposed by the Maryland Franchise Registration and
         Disclosure Law; (2) with the exception of mediation or arbitration
         proceedings, the designation of jurisdiction and venue in Hennepin
         County, Minnesota contained in Article 23.5 and Article 24.12 will be
         inapplicable; provided, however, that such inapplicability in the State
         of Maryland will not be construed to mean that venue in Hennepin
         County, Minnesota is improper, or that the Franchisee, its officers,
         directors, Owners and Personal Guarantors are not subject to
         jurisdiction in Hennepin County, Minnesota, or in any other state; and
         (3) the acknowledgments made by the Franchisee contained in Article 26
         of this Agreement will not be construed to act as a waiver of the
         Franchisee's rights under the Maryland Franchise Registration and
         Disclosure Law.

         (e) MINNESOTA. If this Agreement is governed by the laws of the State
         of Minnesota, then: (1) Article 3 of this Agreement will be amended to
         provide that, except in certain circumstances specified by law,
         Elephant & Castle must give the Franchisee at least one hundred eighty
         (180) days prior written notice of nonrenewal of the Franchise; (2)
         Article 18.2 will be amended to require that, except as set forth in
         Article 18.5 and 18.6, in the event Elephant & Castle gives the
         Franchisee written notice that the Franchisee has breached this
         Agreement, such written notice will be given to the Franchisee at least
         ninety (90) days prior to the date this Agreement is terminated by
         Elephant & Castle, and the Franchisee will have sixty (60) days after
         such written notice within which to correct the breach specified in the
         written notice; (3) notwithstanding any provisions of this Agreement to
         the contrary, a court of competent jurisdiction will determine whether
         Elephant & Castle will be required to post a bond or other security,
         and the amount of such bond or other security, in any injunctive
         proceeding commenced by Elephant & Castle against the Franchisee, the
         Owners or the Personal Guarantors; (4) Article 17.6(d) of this
         Agreement will be inapplicable; and (5) in accordance with Minn. Stat.
         Sec. 80C.17, Subd. 5, the Franchisee will have no more than three years
         after the cause of action accrues to commence an action pursuant to
         Minn. Stat. Sec. 80C.17.

         (f) NEW YORK. If this Agreement is governed by the laws of the State of
         New York, then: (1) Article 17.1 of this Agreement will be amended to
         provide that Elephant & Castle may not assign this Agreement unless, in
         its reasonable judgment, the assignee will be able to perform Elephant
         & Castle's obligations under this Agreement; (2) Article 22.1 of this
         Agreement will be amended to provide that the Franchisee will not be
         required to indemnify Elephant & Castle against claims arising out of
         Elephant & Castle's breach of contract, negligence or other civil
         wrong; however, such amendment of Article 22.1 will not affect in any
         way the Franchisee's obligation to obtain and maintain insurance
         coverage in accordance with Article 14; (3) any modifications to the
         Manual made by Elephant & Castle will not unreasonably increase the
         Franchisee's obligations under this Agreement and will not place an
         excessive economic

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-117                          426304 9

<PAGE>

         burden on the Franchisee's operations; and (4)
         Article 17.6(d) of this Agreement is hereby amended to provide that all
         rights arising in the Franchisee's favor from the provisions of Article
         33 of the GBL of the State of New York and the regulations issued
         thereunder shall remain in force, it being the intent of this provision
         that the non-waiver provisions of Sections 687.4 and 687.5 of the GBL
         be satisfied.

         (g) NORTH DAKOTA. If this Agreement is governed by the laws of the
         State of North Dakota, then: (1) the covenant not to compete upon
         termination or expiration of this Agreement contained in Article 21.3
         of this Agreement may be unenforceable, except in certain circumstances
         provided by law; (2) arbitration hearings will be conducted in Fargo,
         North Dakota or at a mutually agreed upon location; (3) Article 24.2 is
         amended to provide that the prevailing party will pay all attorneys'
         fees, costs and expenses incurred by the other party in enforcing any
         term, condition or provision of this Agreement or in enjoining any
         violation of this Agreement by the other party; and (4) the consent by
         the Franchisee to jurisdiction and venue in Hennepin County, Minnesota
         contained in Article 24.12 is inapplicable; provided, however, that
         such inapplicability in the State of North Dakota will not be construed
         to mean that venue in Hennepin County, Minnesota is improper, or that
         the Franchisee, its officers, directors, Owners and the Personal
         Guarantors are not subject to jurisdiction in the State of Minnesota,
         or in any other state.

         (h) RHODE ISLAND. If this Agreement is governed by the laws of the
         State of Rhode Island, then any provision of this Agreement which
         restricts jurisdiction or venue to a forum outside the State of Rhode
         Island is void with respect to a claim otherwise enforceable under the
         Rhode Island Franchise Investment Act.

         (i) SOUTH DAKOTA. If this Agreement is governed by the laws of the
         State of South Dakota, then: (1) Article 18 of this Agreement will be
         amended to provide that if the Franchisee breaches the provisions of
         this Agreement, including the failure to meet performance or quality
         standards or to pay any fees or other payments payable to Elephant &
         Castle pursuant to this Agreement, Elephant & Castle will provide the
         Franchisee with at least thirty (30) days written notice and an
         opportunity to cure prior to the termination of this Agreement by
         Elephant & Castle; (2) the covenant not to compete upon termination or
         expiration of this Agreement contained in Article 21.3 of this
         Agreement may be unenforceable, except in certain circumstances
         provided by law; (3) any provision of this Agreement which designates
         jurisdiction or venue outside of the State of South Dakota or requires
         the Franchisee to agree to jurisdiction or venue in a forum outside of
         the State of South Dakota is void with respect to any cause of action
         which is otherwise enforceable in the State of South Dakota; (4)
         pursuant to SDCL Sections 37-5A-86, any acknowledgment provision,
         disclaimer, integration clause or provision having a similar effect in
         this Agreement will not negate or act to remove from judicial review
         any statement, misrepresentation or action that violates Chapter 37-5A
         or a rule or order under Chapter 37-5A; (5) arbitration hearings will
         be conducted in Sioux Falls, South Dakota or at a mutually agreed upon
         location; and (6) provisions of this Agreement which require that
         actions be commenced within one year and that limit the parties' rights
         to recover punitive, exemplary, incidental, indirect, special or
         consequential damages may not be enforceable under South Dakota law.

         (j) WASHINGTON. If this Agreement is governed by the laws of the State
         of Washington, then: (1) in the event of a conflict of laws, the
         provisions of the Washington Franchise Investment Protection Act,
         Chapter 19.100 RCW, will prevail; (2) a release or waiver of rights
         executed by the Franchisee will not include rights under the Washington
         Franchise Investment Protection Act, except when executed pursuant to a
         negotiated settlement after this Agreement is in effect and where the
         parties are represented by independent counsel; (3) any

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-118                          426304 9

<PAGE>

         provision of this Agreement which unreasonably restricts or limits the
         statute of limitations period for claims under the Washington Franchise
         Investment Protection Act, rights or remedies under the Washington
         Franchise Investment Protection Act, such as a right to a jury trial,
         may not be enforceable; and (4) transfer fees are collectible by
         Elephant & Castle to the extent that they reflect Elephant & Castle
         reasonable estimated or actual costs in effecting a transfer.

         SEVERABILITY.

The severability provisions of this Agreement will pertain to all of the
applicable laws which conflict with or modify the provisions of this Agreement
including, but not limited to, the provisions of this Agreement specifically
addressed in Article 28.3 above.

ELEPHANT & CASTLE INTERNATIONAL, INC.                        15 GTM/RCA 032999
FRANCHISE AGREEMENT                    F-119                          426304 9

<PAGE>

IN WITNESS WHEREOF, Elephant & Castle, the Franchisee and the Franchisee's
Owners have respectively signed this Agreement effective as of the day and year
set forth on Page F-1 of this Agreement.

In the Presence of:                      ELEPHANT & CASTLE INTERNATIONAL, INC.

                                         By
-----------------------------------          --------------------------------
                                         Its
-----------------------------------          --------------------------------

In the Presence of:                      "FRANCHISEE"

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

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

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

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

The undersigned Owners of the Franchisee hereby agree to be bound by the
terms and conditions of this Agreement.

In the Presence of:       OWNERS                          Percentage of
                                                            Ownership

------------------------  ----------------------------  ----------------- %

------------------------  ----------------------------  ----------------- %

------------------------  ----------------------------  ----------------- %

------------------------  ----------------------------  ----------------- %

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                F-120                            426304 9
<PAGE>

                   PERSONAL GUARANTY AND AGREEMENT TO BE BOUND
                     PERSONALLY BY THE TERMS AND CONDITIONS
                           OF THE FRANCHISE AGREEMENT

In consideration of the execution of this Agreement by Elephant & Castle, and
for other good and valuable consideration, the undersigned, for themselves,
their heirs, successors, and assigns, do individually, jointly and severally
hereby become surety and guaranty for the payment of all amounts and the
performance of the covenants, terms and conditions of this Agreement,
including the covenants not to compete, to be paid, kept and performed by the
Franchisee.

Further, the undersigned, individually and jointly, hereby agree to be
personally bound by each and every condition and term contained in this
Agreement, including the covenants not to compete, and agree that this
Personal Guaranty should be construed as though the undersigned and each of
them executed an agreement containing the identical terms and conditions of
this Agreement.

If any default should at any time be made therein by the Franchisee, then the
undersigned, their heirs, successors and assigns, do hereby, individually,
jointly and severally, promise and agree to pay to Elephant & Castle all
Initial Fees, Continuing Fees and other fees due and payable to Elephant &
Castle under the terms and conditions of this Agreement.

In addition, if the Franchisee fails to comply with any other terms and
conditions of this Agreement, then the undersigned, their heirs, successors
and assigns, do hereby, individually, jointly and severally, promise and
agree to comply with the terms and conditions of this Agreement for and on
behalf of the Franchisee.

If the Franchisee is at any time in default on any obligation to pay monies
to Elephant & Castle or any subsidiary or affiliate of Elephant & Castle,
whether for Initial Fees, Continuing Fees, merchandise, products, supplies,
furniture, fixtures, equipment or other products purchased by the Franchisee
from Elephant & Castle or any subsidiary or affiliate of Elephant & Castle,
or for any other indebtedness of the Franchisee to Elephant & Castle or any
subsidiary or affiliate of Elephant & Castle, then the undersigned, their
heirs, successors and assigns, do hereby, individually, jointly and
severally, promise and agree to pay all such monies due and payable from the
Franchisee to Elephant & Castle or any subsidiary or affiliate of Elephant &
Castle upon default by the Franchisee.

The maximum individual liability that each Personal Guarantor will incur
under this Personal Guaranty is two hundred fifty thousand dollars ($250,000).

It is further understood and agreed by the undersigned that the provisions,
covenants and conditions of this Personal Guaranty will inure to the benefit
of the successors and assigns of Elephant & Castle.

Except as provided by applicable law, all litigation, actions or proceedings
pertaining to this Personal Guaranty will be brought and venued in accordance
with Article 24.12 of the Franchise Agreement.

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                F-121                            426304 9
<PAGE>

                             PERSONAL GUARANTORS

-------------------------------------   -------------------------------------
Individually                            Individually

Percentage of Ownership Interest ___%   Percentage of Ownership Interest ___%

-------------------------------------   -------------------------------------
Address                                 Address

-------------------------------------   -------------------------------------
City           State         Zip Code   City           State         Zip Code

-------------------------------------   -------------------------------------
Telephone                               Telephone

-------------------------------------   -------------------------------------
Individually                            Individually

Percentage of Ownership Interest ___%   Percentage of Ownership Interest ___%

-------------------------------------   -------------------------------------
Address                                 Address

-------------------------------------   -------------------------------------
City           State         Zip Code   City           State         Zip Code

-------------------------------------   -------------------------------------
Telephone                               Telephone

-------------------------------------   -------------------------------------
Individually                            Individually

Percentage of Ownership Interest ___%   Percentage of Ownership Interest ___%

-------------------------------------   -------------------------------------
Address                                 Address

-------------------------------------   -------------------------------------
City           State         Zip Code   City           State         Zip Code

-------------------------------------   -------------------------------------
Telephone                               Telephone

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                F-122                            426304 9
<PAGE>

                      ELEPHANT & CASTLE INTERNATIONAL, INC.
                               7657 Anagram Drive
                          Eden Prairie, Minnesota 55344
                                 (612) 294-1333
                               Fax: (612) 294-1342

                         ELEPHANT & CASTLE-R- RESTAURANT
                               FRANCHISE AGREEMENT

       FRANCHISEE                                 FRANCHISED LOCATION

-------------------------------------   -------------------------------------
               Name                                      Street

-------------------------------------   -------------------------------------
              Street                    City            State        Zip Code

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

                                        (        )
-------------------------------------   -------------------------------------
City         State           Zip Code   Area Code                   Telephone

(        )                              (        )
-------------------------------------   -------------------------------------
Area Code                   Telephone   Area Code                         Fax

(        )
-------------------------------------   -------------------------------------
Area Code                         Fax                E-Mail Address

                                        Franchised Restaurant No.
-------------------------------------                             -----------
           E-Mail Address

                    -------------------------------------
                         Date of Franchise Agreement

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                                                 426304 9
<PAGE>

                      ELEPHANT & CASTLE INTERNATIONAL, INC.
                            FRANCHISE AGREEMENT INDEX

                                                                       Page

ARTICLE 1 DEFINITIONS....................................................74
         1.1 Designated Market Area......................................74
         1.2 Dollars.....................................................74
         1.3 Franchise...................................................74
         1.4 General Manager.............................................74
         1.5 Gross Sales.................................................74
         1.6 Marks.......................................................75
         1.7 Ownership Interest..........................................75
         1.8 Owner.......................................................75
         1.9 Restaurant System...........................................75
         1.10 Week.......................................................75

ARTICLE 2 GRANT OF FRANCHISE.............................................76
         2.1 Franchised Location.........................................76
         2.2 Exclusive Area..............................................76
         2.3 Undetermined Franchised Location............................76
         2.4 Lease or Purchase of Franchised Location....................76
         2.5 Relocation..................................................76
         2.6 Conditions..................................................77
         2.7 Personal License............................................77

ARTICLE 3 TERM OF AGREEMENT..............................................77
         3.1 Term........................................................77
         3.2 Term of Lease...............................................77
         3.3 Reacquisition Option........................................77
         3.4 Terms of Option.............................................78

ARTICLE 4 INITIAL FEE; APPROVAL OF FRANCHISEE............................78
         4.1 Initial Fee.................................................78
         4.2 Termination of Franchise....................................78
         4.3 Refund of Initial Fee.......................................79

ARTICLE 5 CONTINUING FEE.................................................79
         5.1 Amount of Continuing Fee; Date Payable......................79
         5.2 Interest on Unpaid Continuing Fees..........................79
         5.3 Reports.....................................................79
         5.4 Franchisee's Obligation to Pay..............................79
         5.5 Pre-Authorized Bank Debits..................................80

ARTICLE 6 LOCAL ADVERTISING..............................................80
         6.1 Local Advertising Expenditure...............................80
         6.2 Reports of Local Advertising Expenditures...................80
         6.3 Telephone Directory Listings................................80
         6.4 Grand Opening Advertising...................................81

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                    -i-                          426304 9
<PAGE>

ARTICLE 7 FINANCIAL STATEMENTS...........................................81
         7.1 Monthly Reports and Financial Statements....................81
         7.2 Due Date; Verification of Monthly Reports and Financial
             Statements..................................................81
         7.3 Substantiation of Monthly Reports and Financial Statements..81
         7.4 Sales and Income Tax Returns................................82
         7.5 Audit Rights................................................82
         7.6 Payment of Audit Costs......................................82
         7.7 Refusal to Submit Records or Permit Audit...................82

ARTICLE 8 QUALITY CONTROL, UNIFORMITY AND STANDARDS......................82
         8.1 Quality and Service Standards...............................82
         8.2 Identification of Restaurant................................83
         8.3 Compliance with Standards...................................83
         8.4 Alterations to Restaurant...................................83
         8.5 Prohibited Sales............................................83
         8.6 Other Business..............................................83
         8.7 Franchisee's Name...........................................83
         8.8 Operation of Elephant & Castle-R-Restaurant.................84
         8.9 Business Hours..............................................84
         8.10 Personnel..................................................84
         8.11 Standards of Service.......................................84
         8.12 Alcoholic Beverages........................................84
         8.13 Vending Machines and Entertainment Devices.................84
         8.14 Gambling Machines; Tickets.................................84
         8.15 Standard Attire or Uniforms................................85
         8.16 Credit Cards...............................................85
         8.17 Gift Certificates and Coupons..............................85
         8.18 Music and Music Selection..................................85
         8.19 Approved Advertising.......................................85
         8.20 Compliance with Applicable Law.............................85
         8.21 Payment of Taxes...........................................85
         8.22 "Franchise" and Other Taxes................................86
         8.23 Payments to Creditors......................................86
         8.24 Security Interest in Franchise Agreement...................86
         8.25 Inspection Rights..........................................86
         8.26 Default Notices and Significant Correspondence.............86

ARTICLE 9 PRODUCTS AND SERVICES..........................................87
         9.1 Limitations on Products and Services........................87
         9.2 Limitation on Sales.........................................87
         9.3 Approved Suppliers and Distributors.........................87
         9.4 Designated Suppliers........................................88
         9.5 Use of Rebates from Suppliers...............................88
         9.6 Limitation on Branding, Development and Sale of Products....88
         9.7 Independent Shopping Services...............................88

ARTICLE 10 STANDARD OPERATIONS MANUAL....................................89
         10.1 Compliance with Manual.....................................89
         10.2 Revisions to Manual........................................89
         10.3 Confidentiality of Manual..................................89

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                   -ii-                          426304 9
<PAGE>

         10.4 Confidentiality of Other Information.......................89

ARTICLE 11 BUSINESS PREMISES.............................................90
         11.1 Site Location..............................................90
         11.2 Site Location Criteria.....................................90
         11.3 Construction and Remodeling Costs..........................90
         11.4 Compliance with Specifications.............................90
         11.5 Inspection During Construction or Renovation...............91
         11.6 Maintenance................................................91
         11.7 Remodeling of Business Premises............................91

ARTICLE 12 SIGNS.........................................................91
         12.1 Approved Signs.............................................91
         12.2 Payment of Costs and Expenses..............................92
         12.3 Modifications; Inspection..................................92

ARTICLE 13 TELECOMMUNICATION AND COMPUTER EQUIPMENT......................92
         13.1 Telecommunication Equipment................................92
         13.2 Satellite and Cable Television.............................92
         13.3 Computer Hardware..........................................92
         13.4 Software...................................................93
         13.5 Access to Computer Data....................................93
         13.6 Internet Provider..........................................93
         13.7 E-Mail Address.............................................93

ARTICLE 14 INSURANCE.....................................................93
         14.1 General Liability Insurance................................93
         14.2 Liquor Liability Insurance.................................93
         14.3 Automobile Liability Insurance.............................94
         14.4 Property Insurance.........................................94
         14.5 Building Insurance.........................................94
         14.6 Umbrella Liability.........................................94
         14.7 Insurance Required by Law..................................94
         14.8 Insurance Companies; Evidence of Coverage..................94
         14.9 Defense of Claims..........................................94
         14.10 Rights of Elephant & Castle...............................94

ARTICLE 15 LICENSING OF MARKS AND RESTAURANT SYSTEM......................95
         15.1 Right to License Marks.....................................95
         15.2 Conditions to License of Marks.............................95
         15.3 Franchisee's Use of Marks..................................95
         15.4 Adverse Claims to Marks....................................95
         15.5 Defense or Enforcement of Rights to Marks..................96
         15.6 Tender of Defense..........................................96
         15.7 Franchisee's Right to Participate in Litigation............96

ARTICLE 16 TRAINING PROGRAM; OPENING ASSISTANCE..........................96
         16.1 Training...................................................96
         16.2 Changes in Personnel.......................................97
         16.3 Initial Training of New Personnel..........................97

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                   -iii-                         426304 9
<PAGE>

         16.4 Payment of Salaries and Expenses............................97
         16.5 Opening Assistance..........................................98
         16.6 Advisory Assistance.........................................98
         16.7 Hiring and Training of Employees by Franchisee..............98

ARTICLE 17 ASSIGNMENT.....................................................98
         17.1 Assignment by Elephant & Castle.............................98
         17.2 Assignment by Franchisee to Owned or Controlled Entity......98
         17.3 Assignment by Individual Franchisee in Event of Death or
              Permanent Disability........................................99
         17.4 Sale of Ownership Interests to Public.......................99
         17.5 Elephant & Castle's Warrant................................100
         17.6 Assignment by Franchisee...................................100
         17.7 Acknowledgment of Restrictions.............................100
         17.8 Transfer Fee...............................................101
         17.9 Transfer to Competitor Prohibited..........................101

ARTICLE 18 TERMINATION RIGHTS OF ELEPHANT & CASTLE.......................101
         18.1 Conditions of Breach.......................................101
         18.2 Notice of Breach...........................................102
         18.3 Arbitration................................................102
         18.4 Notice of Termination......................................103
         18.5 Immediate Termination Rights of Elephant & Castle..........103
         18.6 Notice of Immediate Termination............................103
         18.7 Other Remedies.............................................103

ARTICLE 19 FRANCHISEE'S TERMINATION RIGHTS...............................104
         19.1 Conditions of Breach.......................................104
         19.2 Notice of Breach...........................................104
         19.3 Arbitration................................................104
         19.4 Waiver.....................................................104
         19.5 Injunctive Relief..........................................105

ARTICLE 20 FRANCHISEE'S OBLIGATIONS UPON TERMINATION.....................105
         20.1 Termination of Use of Marks; Other Obligations.............105
         20.2 Alteration of Franchised Location..........................105
         20.3 Cancellation of Telephone Directory Listings...............106
         20.4 Continuation of Obligations................................106

ARTICLE 21 FRANCHISEE'S COVENANTS NOT TO COMPETE.........................106
         21.1 Consideration..............................................106
         21.2 In-Term Covenant Not to Compete............................106
         21.3 Post-Term Covenant Not to Compete..........................107
         21.4 Injunctive Relief..........................................107
         21.5 Severability...............................................107

ARTICLE 22 INDEPENDENT CONTRACTORS; INDEMNIFICATION......................108
         22.1 Independent Contractors....................................108
         22.2 Indemnification............................................108
         22.3 Payment of Costs and Expenses..............................108
         22.4 Continuation of Obligations................................108

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                   -iv-                          426304 9
<PAGE>

ARTICLE 23 ARBITRATION...................................................109
         23.1 Mediation..................................................109
         23.2 Disputes Subject to Arbitration............................109
         23.3 Notice of Dispute..........................................109
         23.4 Demand for Arbitration.....................................109
         23.5 Venue and Jurisdiction.....................................109
         23.6 Powers of Arbitrator(s)....................................109
         23.7 Disputes Not Subject to Arbitration........................110
         23.8 No Collateral Estoppel or Class Actions....................110
         23.9 De Novo Hearing on Merits..................................110
         23.10 Confidentiality...........................................110
         23.11 Performance During Arbitration of Disputes................110

ARTICLE 24 ENFORCEMENT...................................................111
         24.1 Injunctive Relief..........................................111
         24.2 Severability...............................................111
         24.3 Waiver.....................................................112
         24.4 Payments to Elephant & Castle..............................112
         24.5 Effect of Wrongful Termination.............................112
         24.6 Cumulative Rights..........................................112
         24.7 Binding Agreement..........................................112
         24.8 Joint and Several Liability................................112
         24.9 No Oral Modification.......................................112
         24.10 Entire Agreement..........................................113
         24.11 Headings; Terms...........................................113
         24.12 Venue and Jurisdiction....................................113
         24.13 Federal Arbitration Act...................................113
         24.14 Contractual Statute of Limitations........................113

ARTICLE 25 NOTICES.......................................................113

ARTICLE 26 DISCLAIMER; ACKNOWLEDGMENTS...................................114
         26.1 Disclaimer.................................................114
         26.2 Acknowledgments by Franchisee..............................114
         26.3 Other Franchisees..........................................114
         26.4 Receipt of Agreement and Uniform Franchise
              Offering Circular..........................................114
         26.5 Alamo Grill-TM-Restaurants.................................115

ARTICLE 27 FRANCHISEE'S LEGAL COUNSEL....................................115

ARTICLE 28 GOVERNING LAW; STATE MODIFICATIONS............................115
         28.1 Governing Law; Severability................................115
         28.2 Applicable State Laws......................................116
         28.3 State Law Modifications....................................116
         28.4 Severability...............................................119

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                   -v-                           426304 9
<PAGE>

The following information will have to be completed by Elephant & Castle and the
Franchisee prior to the time that this Agreement is signed by the parties:

<TABLE>
<CAPTION>
Article  Page  Information Required                  Completed      Person Completing
                                                                    Information
<S>      <C>   <C>                                   <C>            <C>
N/A      F-1   Date of Agreement
                                                     ------------   ------------------
N/A      F-1   Name of Franchisee
                                                     ------------   ------------------
N/A      F-1   Business Structure of Franchisee
                                                     ------------   ------------------
2.1      F-4   Franchised Location
                                                     ------------   ------------------
27       F-44  Name, address and telephone number
               of Franchisee's attorney or advisor
                                                     ------------   ------------------
N/A      F-49  Signature of Elephant & Castle
                                                     ------------   ------------------
N/A      F-49  Signature(s) of Franchisee
                                                     ------------   ------------------
N/A      F-49  Signature(s) of Owners and
               percentage of Ownership Interest
               (if applicable)
                                                     ------------   ------------------
N/A      F-51  Signature(s) of Personal Guarantors
               and percentage of Ownership
               Interest (if applicable)
                                                     ------------   ------------------
</TABLE>

ELEPHANT & CASTLE INTERNATIONAL, INC.                      15 GTM/RCA 032999
FRANCHISE AGREEMENT                   -vi-                          426304 9

<PAGE>

ARTICLE 4
INITIAL FEE; APPROVAL OF FRANCHISEE

4.1      INITIAL FEE.

The Franchisee will pay Elephant & Castle a nonrefundable Initial Fee of
thirty-five thousand dollars ($35,000), which will be payable in full on the
date the Franchisee commences business. The Initial Fee payable by the
Franchisee is payment, in part, to Elephant & Castle for the costs incurred
by Elephant & Castle to operate its business, including costs for general
sales and administrative expenses, travel, long distance telephone calls,
training, opening costs, marketing costs, legal and accounting fees,
compliance with franchising and other laws, and the initial services rendered
to the Franchisee as described in this Agreement.

4.2      TERMINATION OF FRANCHISE.

Elephant & Castle will have the right to terminate this Agreement at any time
within one hundred twenty (120) days after the date of this Agreement if: (a)
any required or other financial, personal or other information provided by
the Franchisee to Elephant & Castle is materially false, misleading,
incomplete or inaccurate; (b) the Franchisee has not purchased or leased a
site for the Franchised Location or has done so in a manner not in compliance
with Article 2.4 and Article 11 of this Agreement; (c) the Franchisee fails
to apply for and obtain a valid license for the service of food for its
Elephant & Castle-R-Restaurant from the appropriate governmental agencies;
(d) the Franchisee fails to apply for and obtain a valid liquor license for
its Elephant & Castle-R-Restaurant from the appropriate governmental
authorities; or (e) the Franchisee (or its Operating Partner), the
Franchisee's General Manager and the Franchisee's Chef fail to complete the
Elephant & Castle training program described in Article 16.1 of this
Agreement.

4.3      PAYMENT OF COSTS.

If this Agreement is terminated by Elephant & Castle pursuant to Article 4.2,
then, within ten (10) days after termination, the Franchisee will pay
Elephant & Castle fifty percent (50%) of the Initial Fee as payment for the
administrative and out-of-pocket expenses incurred by Elephant & Castle
including, but not limited to, executives' and employees' salaries,
salespersons' commissions, attorneys' fees, accountants' fees, travel
expenses, training costs, legal compliance, marketing costs and long distance
telephone calls.

ARTICLE 5
CONTINUING FEE

5.1      AMOUNT OF CONTINUING FEE; DATE PAYABLE.

In addition to the Initial Fee payable by the Franchisee, the Franchisee will
pay Elephant & Castle a weekly Continuing Fee equal to the greater of: (a)
five percent (5%) of the Franchisee's weekly Gross Sales for the preceding
week; or (b) one thousand two hundred and fifty dollars ($1,250). The weekly
Continuing Fee will be paid to Elephant & Castle by the Franchisee by
Wednesday of each week for the preceding week. The minimum weekly Continuing
Fee of one thousand two hundred and fifty dollars ($1,250) will not be
applicable until the first full week of the seventh month after the date of
this Agreement, and beginning on Wednesday of that week, the Franchisee will
pay the greater of the amounts set forth above.

5.2      INTEREST ON UNPAID CONTINUING FEES.

If the Franchisee fails to remit the Continuing Fee due to Elephant & Castle
as provided for in Article 5.1, then the amount of the unpaid and past due
Continuing Fee will bear simple interest at the lesser of the maximum legal
rate allowable by applicable law or eighteen percent (18%) simple interest
per annum. The Franchisee will pay Elephant & Castle an administrative fee of
seventy-five dollars ($75)

<PAGE>
for each delinquent Continuing Fee payment within ten (10) days after the
delinquent<PAGE>
                                                                     Exhibit 4.1

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

                              T CELL SCIENCES, INC.

                                       and

                      STATE STREET BANK AND TRUST COMPANY,

                                 as Rights Agent

                                   ----------

                          Shareholder Rights Agreement

                          Dated as of November 10, 1994

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

<PAGE>

                                TABLE OF CONTENTS
Section                                                                    Page
-------                                                                    ----

1.   Certain Definitions ................................................... 1
2.   Appointment of Rights Agent ........................................... 5
3.   Issue of Right Certificates ........................................... 5
4.   Form of Right Certificates ............................................ 7
5.   Countersignature and Registration ..................................... 8
6.   Transfer, Split Up, Combination and Exchange of Right Certificates;
     Mutilated, Destroyed, Lost or Stolen Right Certificates ............... 9
7.   Exercise of Rights; Exercise Price; Expiration Date of Rights ......... 9
8.   Cancellation and Destruction of Right Certificates ....................11
9.   Reservation and Availability of Preferred Stock .......................12
10.  Preferred Stock Record Date ...........................................13
11.  Adjustment of Exercise Price, Number and Kind of Shares or
     Number of Rights ......................................................13
12.  Certificate of Adjusted Exercise Price or Number of Shares ............21
13.  Consolidation, Merger or Sale or Transfer of Assets or Earning Power ..21
14.  Fractional Rights and Fractional Shares ...............................24
15.  Rights of Action ......................................................24
16.  Agreement of Right Holders ............................................25
17.  Right Certificate Holder Not Deemed a Shareholder .....................25
18.  Concerning the Rights Agent ...........................................26
19.  Merger or Consolidation or Change of Name of Rights Agent .............26
20.  Duties of Rights Agent ................................................27

                                        i
<PAGE>

21.  Change of Rights Agent ................................................29
22.  Issuance of New Right Certificates ....................................30
23.  Redemption and Termination ............................................31
24.  Exchange ..............................................................31
25.  Notice of Certain Events ..............................................33
26.  Notices ...............................................................34
27.  Supplements and Amendments ............................................34
28.  Successors ............................................................35
29.  Determinations and Actions by the Board of Directors ..................35
30.  Benefits of this Agreement ............................................35
31.  Severability ..........................................................35
32.  Governing Law .........................................................36
33.  Counterparts ..........................................................36
34.  Descriptive Headings ..................................................36

                                       ii
<PAGE>

Exhibit A -- Certificate of Designation of
             Series C-1 Junior Participating
             Cumulative Preferred Stock

Exhibit B -- Form of Right Certificate

                                       iii
<PAGE>

                          SHAREHOLDER RIGHTS AGREEMENT

      Agreement, dated as of November 10, 1994, between T Cell Sciences, Inc., a
Delaware corporation (the "Company"), and State Street Bank and Trust Company, a
Massachusetts trust company (the "Rights Agent").

                               W I T N E S S E T H

      WHEREAS, the Board of Directors of the Company desires to provide
shareholders of the Company with the opportunity to benefit from the long-term
prospects and value of the Company and to ensure that shareholders of the
Company receive fair and equal treatment in the event of any proposed takeover
of the Company; and

      WHEREAS, on November 10, 1994, the Board of Directors of the Company
authorized and declared a dividend distribution of one Right (as such term is
hereinafter defined) for each outstanding share of Common Stock, par value
$0.001 per share, of the Company (the "Common Stock") outstanding as of the
close of business on November 29, 1994 (the "Record Date"), and contemplates the
issuance of one Right for each share of Common Stock of the Company issued
(whether originally issued or sold from the Company's treasury) between the
Record Date and the earlier of the Distribution Date or the Expiration Date (as
such terms are hereinafter defined), each Right initially representing the right
to purchase one one-thousandth of a share of Series C-1 Junior Participating
Cumulative Preferred Stock of the Company having the rights, powers and
preferences set forth on Exhibit A hereto, upon the terms and subject to the
conditions hereinafter set forth (the "Rights");

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

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

            (a) "Acquiring Person" shall mean any Person (as hereinafter
defined) who or which, together with all Affiliates (as such term is hereinafter
defined) and Associates (as such term is hereinafter defined) of such Person,
shall be the Beneficial Owner (as such term is hereinafter defined) of 15% or
more of the shares of Common Stock then outstanding, but shall not include (i)
the Company, (ii) any Subsidiary (as such term is hereinafter defined) of the
Company, (iii) any employee benefit plan or compensation arrangement of the
Company or any Subsidiary of the Company or (iv) any Person holding shares of
Common Stock organized, appointed or established by the Company or any
Subsidiary of the Company for or pursuant to the terms of any such employee
benefit plan or compensation arrangement (the Persons described in clauses (i)
through (iv) above are referred to herein as "Exempt Persons").

      Notwithstanding the foregoing, no Person shall become an "Acquiring
Person" as the result

<PAGE>

of an acquisition of Common Stock by the Company which, by reducing the number
of shares outstanding, increases the proportionate number of shares beneficially
owned by such Person to 15% or more of the shares of Common Stock then
outstanding; provided, however, that if a Person shall become the Beneficial
Owner of 15% or more of the shares of Common Stock of the Company then
outstanding by reason of share purchases by the Company and shall, after such
share purchases by the Company, become the Beneficial Owner of any additional
shares (other than pursuant to a stock split, stock dividend or similar
transaction) of Common Stock of the Company and immediately thereafter be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding,
then such Person shall be deemed to be an "Acquiring Person."

      In addition, notwithstanding the foregoing, a Person shall not be an
"Acquiring Person" if the Board of Directors of the Company determines that a
Person who would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this Section 1(a), has become such inadvertently, and
such Person divests as promptly as practicable a sufficient number of shares of
Common Stock so that such Person would no longer be an "Acquiring Person," as
defined pursuant to the foregoing provisions of this Section 1(a).

            (b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations (the
"Rules") under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), as in effect on the date of this Agreement; provided, however, that no
Person who is a director or officer of the Company shall be deemed an Affiliate
or an Associate of any other director or officer of the Company solely as a
result of his or her position as director or officer of the Company.

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

                  (i) which such Person or any of such Person's Affiliates or
      Associates, directly or indirectly, beneficially owns (as determined
      pursuant to Rule 13d-3 of the Rules 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 or upon the
           satisfaction of any conditions or both) 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
           (other than the Rights), warrants or options, or otherwise; provided,
           however, that a Person shall not be deemed the "Beneficial Owner" of,
           or to "beneficially own," (1) securities tendered pursuant to a
           tender or exchange offer made by or on behalf of such Person or any
           of such Person's Affiliates or Associates until such tendered
           securities are accepted for purchase or exchange; (2) securities
           issuable upon

                                       2
<PAGE>

           exercise of these Rights at any time prior to the occurrence of a
           Triggering Event; or (3) securities issuable upon exercise of Rights
           from and after the occurrence of a Triggering Event, which Rights
           were acquired by such Person or any of such Person's Affiliates or
           Associates prior to the Distribution Date or pursuant to Sections
           3(a), 11(i) or 22 hereof; 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 given in response to a public
           proxy or consent solicitation made pursuant to, and in accordance
           with, the Rules of the Exchange Act and (2) is not also then
           reportable by such person on Schedule 13D under the Exchange Act (or
           any comparable or successor report); or

                       (C) the right to dispose of pursuant to any agreement,
           arrangement or understanding (whether or not in writing) (other than
           customary arrangements with and between underwriters and selling
           group members with respect to a bona fide public offering of
           securities); or

            (iii) which are beneficially owned, directly or indirectly, by any
      other Person (or any Affiliate or Associate thereof) with which such
      Person or any of such Person's Affiliates or Associates has any agreement,
      arrangement or understanding (whether or not in writing) (other than
      customary agreements with and between underwriters and selling group
      members with respect to a bona fide public offering of securities) for the
      purpose of acquiring, holding, voting (except pursuant to a revocable
      proxy as described in clause (B) of Section 1(d)(ii) hereof) or disposing
      of any securities of the Company;

provided, however, that (1) no Person engaged in business as an underwriter of
securities shall be deemed the Beneficial Owner of any securities acquired
through such Person's participation as an underwriter in good faith in a firm
commitment underwriting until the expiration of 40 days after the date of such
acquisition, and (2) no Person who is a director or an officer of the Company
shall be deemed, as a result of his or her position as director or officer of
the Company, the Beneficial Owner of any securities of the Company that are
beneficially owned by any other director or officer of the Company.

           (d) "Business Day" shall mean any day other than a Saturday, Sunday,
or a day on which banking institutions in the Commonwealth of Massachusetts are
authorized or obligated by law or executive order to close.

           (e) "Close of business" on any given date shall mean 5:00 P.M.,
Boston, Massachusetts time, on such date; provided, however, that if such date
is not a Business Day it shall mean 5:00 P.M., Boston, Massachusetts time, on
the next succeeding Business Day.

           (f) "Common Stock" shall mean the Common Stock, par value $0.00l per

                                       3
<PAGE>

share, of the Company, except that "Common Stock" 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 interests having power to
control or direct the management, of such Person or, if such Person is a
Subsidiary of another Person, the Person which ultimately controls such
first-mentioned Person and which has issued and outstanding such capital stock,
equity securities or equity interests.

           (g) "Distribution Date" shall have the meaning defined in Section
3(a) hereof.

           (h) "Exercise Price" shall have the meaning defined in Section 4(a)
hereof.

           (i) "Expiration Date" and "Final Expiration Date" shall have the
meanings set forth in Section 7(a) hereof.

           (j) "Fair Market Value" of any securities or other property shall be
as determined in accordance with Section 11(d) hereof.

           (k) "Person" shall mean an individual, a corporation, a partnership,
an association, a joint stock company, a trust, a business trust, a government
or political subdivision, any unincorporated organization, or any other
association or entity.

           (l) "Preferred Stock" shall mean shares of Series C-1 Junior
Participating Cumulative Preferred Stock, par value $0.01 per share, of the
Company having the rights and preferences set forth in the form of Certificate
of Designation attached hereto as Exhibit A.

           (m) "Principal Party" shall have the meaning defined in Section
13(b) hereof.

           (n) "Redemption Price" shall have the meaning defined in Section 23
hereof.

           (o) "Section 11(a)(ii) Event" shall have the meaning defined in
Section 11(a)(ii) hereof.

           (p) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.

           (q) "Stock Acquisition Date" shall mean the date of the first public
announcement (which for purposes of this definition shall include, without
limitation, the issuance of a press release or the filing of a
publicly-available report or other document with the Securities and Exchange
Commission or any other governmental agency) by the Company or an Acquiring
Person that an Acquiring Person has become such.

           (r) "Subsidiary" shall mean, with respect to any Person, any other
Person of which a majority of the voting power of the voting equity securities
or voting interests is owned, directly or indirectly, by such Person, or which
is otherwise controlled by such Person.

                                       4
<PAGE>

           (s) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.

      Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date (as
hereinafter defined in Section 3(a)) also be the holders of the Common Stock) 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 Agents shall be as the Company shall determine.

      Section 3. Issue of Right Certificates.

           (a) From the date hereof until the earlier of (i) the close of
business on the tenth Business Day after the Stock Acquisition Date or (ii) the
close of business on the tenth Business Day (or such other Business Day, if any,
as the Board of Directors may determine in its sole discretion) after the date
of the commencement by any Person, other than an Exempt Person, of a tender or
exchange offer if, upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the shares of Common Stock then outstanding
(including any such date which is after the date of this Agreement and prior to
the issuance of the Rights) (the earliest of such dates being herein referred to
as the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(b) hereof) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock (which certificates
for Common Stock shall be deemed also to be certificates for Rights) and not by
separate certificates, and (y) the Rights will be transferable only in
connection with the transfer of the underlying shares of Common Stock. As soon
as practicable after the Company has notified the Rights Agent of the occurrence
of the Distribution Date, the Rights Agent will, at the Company's expense send,
by first-class, insured, postage prepaid mail, to each record holder of the
Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more
certificates, in substantially the form of Exhibit B hereto (the "Right
Certificates"), evidencing one Right for each share of Common Stock so held. In
the event that an adjustment in the number of Rights per share of Common Stock
has been made pursuant to Section 11(o) hereof, the Company shall make the
necessary and appropriate rounding adjustments (in accordance with Section 14(a)
hereof) at the time of distribution of the Right Certificates, so that Right
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the close of business
on the Distribution Date, the Rights will be evidenced solely by such Right
Certificates.

           (b) With respect to certificates for the Common Stock issued prior to
the close of business on the Record Date, the Rights will be evidenced by such
certificates for the Common Stock on or until the Distribution Date (or the
earlier redemption, expiration or termination of the Rights), and the registered
holders of the Common Stock also shall be the registered holders of the
associated Rights. Until the Distribution Date (or the earlier redemption,
expiration or termination of the Rights), the transfer of any of the
certificates for the

                                       5
<PAGE>

Common Stock outstanding prior to the date of this Agreement shall also
constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.

           (c) Certificates for the Common Stock issued after the Record Date,
but prior to the earlier of the Distribution Date or the redemption, expiration
or termination of the Rights, shall be deemed also to be certificates for
Rights, and shall bear a legend, substantially in the form set forth below:

                  This certificate also evidences and entitles the holder hereof
                  to certain Rights as set forth in a Shareholder Rights
                  Agreement between T Cell Sciences, Inc. and State Street Bank
                  and Trust Company, as Rights Agent, dated as of November 10,
                  1994 (the "Rights Agreement"), the terms of which are hereby
                  incorporated herein by reference and a copy of which is on
                  file at the principal offices of T Cell Sciences, Inc. Under
                  certain circumstances, as set forth in the Rights Agreement,
                  such Rights will be evidenced by separate certificates and
                  will no longer be evidenced by this certificate. T Cell
                  Sciences, Inc. may redeem the Rights at a redemption price of
                  $0.01 per Right, subject to adjustment, under the terms of the
                  Rights Agreement. T Cell Sciences, Inc. will mail to the
                  holder of this certificate a copy of the Rights Agreement, as
                  in effect on the date of mailing, without charge promptly
                  after receipt of a written request therefor. Under certain
                  circumstances, Rights issued to or held by Acquiring Persons
                  or any Affiliates or Associates thereof (as defined in the
                  Rights Agreement), and any subsequent holder of such Rights,
                  may become null and void.

With respect to such certificates containing the foregoing legend, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone until the Distribution Date (or the earlier
redemption, expiration or termination of the Rights), and the transfer of any of
such certificates shall also constitute the transfer of the Rights associated
with the Common Stock represented by such certificates. In the event that the
Company purchases or acquires any shares of Common Stock after the Record Date
but prior to the Distribution Date, any Rights associated with such Common Stock
shall be deemed cancelled and retired so that the Company shall not be entitled
to exercise any Rights associated with the shares of Common Stock which are no
longer outstanding. The failure to print the foregoing legend on any such Common
Stock certificate or any defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e)
hereof.

      Section 4. Form of Right Certificates.

           (a) The Right Certificates (and the forms of election to purchase
shares and of

                                       6
<PAGE>

assignment and certificate to be printed on the reverse thereof) shall each be
substantially in the form of 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 required to comply with any
applicable law, rule or regulation or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
customary usage. The Rights Certificates shall be in a machine printable format
and in a form reasonably satisfactory to the Rights Agent. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates, whenever
distributed, shall be dated as of the Record Date, shall show the date of
countersignature, and on their face shall entitle the holders thereof to
purchase such number of one one-thousandths of a share of Preferred Stock as
shall be set forth therein at the price set forth therein (the "Exercise
Price"), but the number of such shares and the Exercise Price shall be subject
to adjustment as provided herein.

           (b) Any Right Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by (i) an Acquiring Person
or any Associate or Affiliate of an Acquiring Person, (ii) a transferee of an
Acquiring Person (or of any Associate or Affiliate of an Acquiring Person) who
becomes a transferee after the Acquiring Person becomes such, or (iii) a
transferee of an Acquiring Person (or of any such Associate or Affiliate) who
becomes a transferee prior to or concurrently with the Acquiring Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether or not
for consideration) from the Acquiring Person to holders of equity interests in
such Acquiring Person or to any Person with whom the Acquiring Person has any
continuing agreement, arrangement or understanding (whether or not in writing)
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 the avoidance of Section 7(e) hereof,
and any Right Certificate issued pursuant to Section 6, Section 11 or Section 22
upon transfer, exchange, replacement or adjustment of any other Right
Certificate referred to in this sentence, shall have deleted therefrom the
second sentence of the existing legend on such Right Certificate and in
substitution therefor shall contain the following legend:

           The Rights represented by this Right Certificate are or were
           beneficially owned by a Person who was or became an Acquiring Person
           or an Affiliate or an Associate of an Acquiring Person (as such terms
           are defined in the Rights Agreement). This Right Certificate and the
           Rights represented hereby may become null and void under certain
           circumstances as specified in Section 7(e) of the Rights Agreement.

The Company shall give notice to the Rights Agent promptly after it becomes
aware of the existence and identity of any Acquiring Person or any Associate or
Affiliate thereof. The Company shall instruct the Rights Agent in writing of the
Rights which should be so legended. The failure to print the foregoing legend on
any such Right Certificate or any defect therein shall not affect in any manner
whatsoever the application or interpretation of the provisions of Section 7(e)
hereof.

                                       7
<PAGE>

      Section 5. Countersignature and Registration.

           (a) The Right Certificates shall be executed on behalf of the Company
by its Chairman of the Board, or its President or any Vice President and by its
Treasurer or any Assistant Treasurer, or by its Secretary or any Assistant
Secretary, either manually or by facsimile signature, and shall have affixed
thereto the Company's seal or a facsimile thereof which shall be attested to by
the Secretary or any Assistant Secretary of the Company, either manually or by
facsimile signature. The Right Certificates shall be manually countersigned by
an authorized signatory of the Rights Agent and shall not be valid for any
purpose unless so countersigned. In case any officer of the Company who shall
have signed any of the Right Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery by
the Company, such Right Certificates, nevertheless, may be countersigned by an
authorized signatory of 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 Certificates 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 Rights Agreement any such person was not such an officer.

           (b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at one of its offices designated as the appropriate place for
surrender of Right Certificates upon exercise or transfer, books for
registration and transfer of the Right Certificates issued hereunder. Such books
shall show the names and addresses of the respective holders of the Right
Certificates, the number of Rights evidenced on its face by each of the Right
Certificates and the date of each of the Right Certificates.

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

           (a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any Right
Certificate or Certificates may be transferred, split up, combined or exchanged
for another Right Certificate or Certificates, entitling the registered holder
to purchase a like number of one one-thousandths of a share of Preferred Stock
(or following a Triggering Event, preferred stock, cash, property, debt
securities, common stock or any combination thereof) as the Right Certificate or
Certificates surrendered then entitled such holder to purchase and at the same
Exercise Price. Any registered holder desiring to transfer, split up, combine or
exchange any Right Certificate shall make such request in writing delivered to
the Rights Agent, and shall surrender the Right Certificate or Certificates to
be transferred, split up, combined or exchanged, with the form of assignment and
certificate duly executed, at the office or offices 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 until

                                       8
<PAGE>

the registered holder shall have completed and signed the certificate contained
in the form of assignment on the reverse side of such Right Certificate and
shall have provided such additional evidence of the identity of the Beneficial
Owner (or former Beneficial Owner) or Affiliates or Associates thereof as the
Company shall reasonably request. Thereupon the Rights Agent shall, subject to
Section 4(b), Section 7(e) and Section 14 hereof, countersign and deliver to the
Person entitled thereto a Right Certificate or Certificates, as the case may be,
as so requested. The Company may require payment by the registered holder of a
Right Certificate, of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.

           (b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Right Certificate, and, in case of loss, theft or destruction, of indemnity or
security satisfactory to them, and 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 execute and deliver a new Right Certificate of like tenor to the
Rights Agent for countersignature and delivery to the registered owner in lieu
of the Right Certificate so lost, stolen, destroyed or mutilated.

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

           (a) Subject to Section 7(e) hereof, the registered holder of any
Right Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Exercise Price for the total number of
one one-thousandths of a share of Preferred Stock (or other securities, cash or
other assets, as the case may be) as to which such surrendered Rights are then
exercised, at or prior to the earlier of (i) the close of business on November
10, 2004 (the "Final Expiration Date"), (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof or (iii) the time at which such Rights
are exchanged as provided in Section 24 hereof (the earlier of (i), (ii) or
(iii) being herein referred to as the "Expiration Date"). Except as set forth in
Section 7(e) hereof and notwithstanding any other provision of this Agreement,
any Person who prior to the Distribution Date becomes a record holder of shares
of Common Stock may exercise all of the rights of a registered holder of a Right
Certificate with respect to the Rights associated with such shares of Common
Stock in accordance with the provisions of this Agreement, as of the date such
Person becomes a record holder of shares of Common Stock.

           (b) The Exercise Price for each one one-thousandth of a share of
Preferred Stock pursuant to the exercise of a Right shall initially be $16.00,
shall be subject to adjustment from time to time as provided in Section 11 and
Section 13 hereof and shall be payable in lawful money of the United States of
America in accordance with Section 7(c) below.

           (c) Upon receipt of a Right Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed,

                                       9
<PAGE>

accompanied by payment of the Exercise Price for the shares to be purchased and
an amount equal to any applicable transfer tax (as determined by the Rights
Agent) in cash, or by certified check or bank draft payable to the order of the
Company, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i)(A) requisition from any transfer agent of Preferred Stock (or make
available, if the Rights Agent is the transfer agent therefor) certificates for
the number of one one-thousandths of a share of Preferred Stock 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 shares of Preferred Stock issuable upon exercise of the Rights
hereunder with a depositary agent, requisition from the depositary agent
depositary receipts representing such number of one one-thousandths of a share
of Preferred Stock as are to be purchased (in which case certificates for the
shares of Preferred Stock represented by such receipts shall be deposited by the
transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) when appropriate, requisition
from the Company the amount of cash, if any, to be paid in lieu of issuance of
fractional shares in accordance with Section 14 hereof, (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 (including Common Stock)
of the Company, pay cash or distribute other property pursuant to Section 11(a)
hereof, the Company will make all arrangements necessary so that such other
securities, cash or other property are available for distribution by the Rights
Agent, if and when appropriate.

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

           (e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or any Associate or Affiliate of
an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any
Associate or Affiliate of an Acquiring Person) who becomes a transferee after
the Acquiring Person becomes such or (iii) a transferee of an Acquiring Person
(or of any Associate or Affiliate of an Acquiring Person) 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 the avoidance of this Section 7(e), shall become null
and void without any further action and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to

                                       10
<PAGE>

ensure that the provisions of this Section 7(e) and Section 4(b) hereof 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 an Acquiring Person or any Affiliates or Associates of an Acquiring
Person or any transferee of any of them hereunder.

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

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

      Section 9. Reservation and Availability of Preferred Stock.

           (a) The Company covenants and agrees that it will cause to be
reserved and kept available out of its authorized and unissued shares of
Preferred Stock or any authorized and issued shares of Preferred Stock held in
its treasury, the number of shares of Preferred Stock that will be sufficient to
permit the exercise in full of all outstanding and exercisable Rights.

           (b) The Company shall use its best efforts to cause, from and after
such time as the Rights become exercisable, all shares of Preferred Stock issued
or reserved for issuance to be listed, upon official notice of issuance, upon
the principal national securities exchange, if any, upon which the Common Stock
is listed or, if the principal market for the Common Stock is not on any
national securities exchange, to be eligible for quotation on the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or any
successor thereto or other comparable quotation system.

           (c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, or as soon as required by law following the Distribution Date, as the
case may be, a registration statement under the Securities Act of 1933,

                                       11
<PAGE>

as amended (the "Securities Act"), with respect to the securities purchasable
upon exercise of the Rights on an appropriate form, (ii) cause such registration
statement to become effective as soon as practicable after such filing and (iii)
cause such registration statement to remain effective (with a prospectus that at
all times meets the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for such securities or
(B) the Expiration Date. The Company will also take such action as may be
appropriate under, and which will ensure compliance with, the securities or
"blue sky" laws of the various states in connection with the exercisability of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days after the date determined in accordance with the
provisions of the first sentence of this Section 9(c), the exercisability of the
Rights in order to prepare and file such registration statement and permit it to
become effective. Upon such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect, in each case with prompt written notice to the Rights Agent.
Notwithstanding any such 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.

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

           (e) 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 certificates for shares of Preferred Stock 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 in respect of the issuance or delivery
of securities in a name other than that of, the registered holder of the Right
Certificates evidencing Rights surrendered for exercise or to issue or deliver
any certificates for securities in a name other than that of the registered
holder upon the exercise of any Rights until 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.

      Section 10. Preferred Stock Record Date. Each Person in whose name any
certificate for Preferred Stock is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Preferred Stock 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 Exercise 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 Stock transfer books of the Company
are closed, such person shall be deemed to have become the record holder of such
shares on, and such certificate shall be dated, the next succeeding Business Day
on which the Preferred Stock transfer books of the Company are open. Prior to
the exercise of the Right evidenced thereby, the holder of a Right Certificate

                                       12
<PAGE>

shall not be entitled to any rights of a shareholder of the Company with respect
to shares for which the Rights shall be exercisable, including, without
limitation, the right to vote, to receive dividends or other distributions or to
exercise any preemptive rights, and shall not be entitled to receive any notice
of any proceedings of the Company, except as provided herein.

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

           (a) (i) In the event the Company shall at any time after the date of
           this Agreement (A) declare a dividend on the Preferred Stock payable
           in shares of Preferred Stock, (B) subdivide the outstanding Preferred
           Stock, (C) combine the outstanding Preferred Stock into a smaller
           number of shares or (D) issue any shares of its capital stock in a
           reclassification of the Preferred Stock (including any such
           reclassification in connection with a consolidation or merger in
           which the Company is the continuing or surviving corporation), except
           as otherwise provided in this Section 11(a) and Section 7(e) hereof,
           the Exercise 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 Stock 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 a Right be
           less than the aggregate par value of the shares of capital stock of
           the Company issuable upon exercise of a Right. If an event occurs
           which would require an adjustment under both Section 11(a)(i) and
           Section 11(a)(ii) hereof, the adjustment provided for in this Section
           11(a)(i) shall be in addition to, and shall be made prior to, any
           adjustment required pursuant to Section 11(a)(ii) hereof.

                 (ii) Subject to the provisions of Section 24 hereof, in the
           event any Person, alone or together with its Affiliates and
           Associates, shall become an Acquiring Person (a "Section 11(a)(ii)
           Event"), then promptly following any such occurrence, proper
           provision shall be made so that each holder of a Right, except as
           provided in Section 7(e) hereof, shall thereafter have a right to
           receive, upon exercise thereof at the then current Exercise Price in
           accordance with the terms of this Agreement, such number of shares of
           Preferred Stock of the Company as shall equal the result obtained by
           (x) multiplying the then current Exercise Price by the then number of
           one one-thousandths of a share of Preferred Stock for which a Right
           was exercisable immediately prior to the first occurrence of a
           Section 11(a)(ii) Event and dividing that product by (y) 50% of the
           Fair Market

                                       13
<PAGE>

           Value per one one-thousandth of a share of the Preferred Stock
           (determined pursuant to Section 11(d)) on the date of the occurrence
           of a Section 11(a)(ii) Event.

                 (iii) In the event that there shall not be sufficient
           authorized but unissued shares of Preferred Stock to permit the
           exercise in full of the Rights in accordance with the foregoing
           Section 11(a)(ii), the Company shall take all action as may be
           necessary to authorize and reserve for issuance such number of
           additional shares of Preferred Stock as may from time to time be
           required to be issued upon the exercise in full of all Rights
           outstanding and, if necessary, shall use its best efforts to obtain
           shareholder approval thereof. Notwithstanding the foregoing
           provisions of this Section 11(a)(iii), in lieu of issuing shares of
           Preferred Stock in accordance with Section 11(a)(ii) hereof, if a
           majority of the Directors then in office determines that such action
           is necessary or appropriate and is not contrary to the interests of
           the holders of the Rights, they may elect to cause the Company to
           pay, and if sufficient shares of Preferred Stock cannot be issued for
           such purpose in accordance with the provisions hereof, the Company
           shall issue or pay upon the exercise of the Rights, cash, property,
           debt securities, shares of preferred stock or common stock, or any
           combination thereof, having an aggregate Fair Market Value equal to
           the Fair Market Value of the shares of Preferred Stock which
           otherwise would have been issuable pursuant to Section 11(a)(ii).
           Any such election by a majority of the Directors of the Company must
           be made and publicly announced within 30 days of the date on which
           any Section 11(a)(ii) Event first occurs following the Stock
           Acquisition Date.

           (b) If the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling them
(for a period expiring within 45 calendar days after such record date) to
subscribe for or purchase Preferred Stock (or securities having the same or more
favorable rights, privileges and preferences as the shares of Preferred Stock
("preferred stock equivalents")) or securities convertible into Preferred Stock
or preferred stock equivalents at a price per share of Preferred Stock or per
share of preferred stock equivalents (or having a conversion price per share, if
a security convertible into Preferred Stock or preferred stock equivalents) less
than the Fair Market Value (as determined pursuant to Section 11(d) hereof) per
share of Preferred Stock on such record date, the Exercise Price to be in effect
after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of shares of Preferred Stock which the aggregate
offering price of the total number of shares of Preferred Stock to be offered
(and the aggregate initial conversion price of the convertible securities so to
be offered) would purchase at such Fair Market Value and the denominator of
which shall be the number of shares of Preferred Stock outstanding on such
record date, plus the number of additional shares of Preferred Stock and
preferred stock equivalents 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

                                       14
<PAGE>

exercise of a Right be less than the aggregate par value of the shares of
capital stock of the Company issuable upon exercise of a 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 the Fair
Market Value thereof determined in accordance with Section 11(d) hereof. Shares
of Preferred Stock owned by or held for the account of the Company shall not be
deemed outstanding for the purpose of any such computation. Such adjustments
shall be made successively whenever such a record date is fixed; and in the
event that such rights or warrants are not so issued, the Exercise Price shall
be adjusted to be the Exercise Price which would then be in effect if such
record date had not been fixed.

           (c) If the Company shall fix a record date for the making of a
distribution to all holders of Preferred Stock (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 (other
than a regular periodic cash dividend out of the earnings or retained earnings
of the Company), assets (other than a dividend payable in Preferred Stock, but
including any dividend payable in stock other than Preferred Stock) or
convertible securities, subscription rights or warrants (excluding those
referred to in Section 11(b)), the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per one one-thousandth of a share of Preferred Stock on such record date, less
the Fair Market Value (as determined pursuant to Section 11(d) hereof) of the
portion of the cash, assets or evidences of indebtedness so to be distributed or
of such convertible securities, subscription rights or warrants applicable to
one one-thousandth of a share of Preferred Stock and the denominator of which
shall be the Fair Market Value (as determined pursuant to Section 11(d) hereof)
per one one-thousandth of a share of Preferred Stock; provided, however, that in
no event shall the consideration to be paid upon the exercise of a Right be less
than the aggregate par value of the shares of capital stock of the Company
issuable upon exercise of a Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Exercise Price shall again be adjusted to be the Exercise Price
which would be in effect if such record date had not been fixed.

           (d) For the purpose of this Agreement, the "Fair Market Value" of any
share of Preferred Stock, Common Stock or any other stock or any Right or other
security or any other property shall be determined as provided in this Section
11(d).

                 (i) In the case of a publicly-traded stock or other security,
           the Fair Market Value on any date shall be deemed to be the average
           of the daily closing prices per share of such stock or per unit of
           such other security for the 30 consecutive Trading Days (as such term
           is hereinafter defined) immediately prior to such date; provided,
           however, that in the event that the Fair Market Value per share of
           any share of stock is determined during a period following the
           announcement by the issuer of such stock of (x) a dividend or
           distribution on such stock payable in shares of such stock or
           securities convertible into shares of such stock or (y) any
           subdivision, combination or reclassification of such stock, and

                                       15
<PAGE>

prior to the expiration of the 30 Trading Day period after the ex-dividend date
for such dividend or distribution, or the record date for such subdivision,
combination or reclassification, then, and in each such case, the Fair Market
Value shall be properly adjusted to take into account ex-dividend trading. The
closing price for each day shall be the last sale price, regular way, or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices, regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange or, if the securities 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 such security is
listed or admitted to trading; or, if not listed or admitted to trading on any
national securities exchange, the last quoted price (or, if not so quoted, the
average of the last quoted 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 no bids for such security are 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 such security selected by the Board
of Directors of the Company. If on any such date no market maker is making a
market in such security, the Fair Market Value of such security on such date
shall be determined reasonably and with utmost good faith to the holders of the
Rights by the Board of Directors of the Company, provided, however, that if at
the time of such determination there is an Acquiring Person, the Fair Market
Value of such security on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors, which
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. The term
"Trading Day" shall mean a day on which the principal national securities
exchange on which such security is listed or admitted to trading is open for the
transaction of business or, if such security is not listed or admitted to
trading on any national securities exchange, a Business Day.

      (ii) If a security is not publicly held or not so listed or traded, "Fair
Market Value" shall mean the fair value per share of stock or per other unit of
such security, determined reasonably and with utmost good faith to the holders
of the Rights by the Board of Directors of the Company, provided, however, that
if at the time of such determination there is an Acquiring Person, the Fair
Market Value of such security on such date shall be determined by a nationally
recognized investment banking firm selected by the Board of Directors, which
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; provided,
however, that for the purposes of making any adjustment provided for by Section
11(a)(ii) hereof, the Fair Market Value of a share of Preferred Stock shall not
be less than the product of the then Fair Market Value of a share of Common
Stock multiplied by the higher of the then Dividend Multiple or Vote Multiple
(as both

                                       16
<PAGE>

           of such terms are defined in the Certificate of Designation attached
           as Exhibit A hereto) applicable to the Preferred Stock and shall not
           exceed 105% of the product of the then Fair Market Value of a share
           of Common Stock multiplied by the higher of the then Dividend
           Multiple or Vote Multiple applicable to the Preferred Stock.

                 (iii) In the case of property other than securities, the Fair
           Market Value thereof shall be determined reasonably and with utmost
           good faith to the holders of Rights by the Board of Directors of the
           Company, provided, however, that if at the time of such determination
           there is an Acquiring Person, the Fair Market Value of such property
           on such date shall be determined by a nationally recognized
           investment banking firm selected by the Board of Directors, which
           determination shall be described in a statement filed with the Rights
           Agent and shall be binding upon the Rights Agent and the holders of
           the Rights.

           (e) Anything herein to the contrary notwithstanding, no adjustment in
the Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest hundred-thousandth of a share of Common Stock or
ten-millionth of a share of Preferred Stock, as the case may be, or to such
other figure as the Board of Directors may deem appropriate. Notwithstanding the
first sentence of this Section 11(e), any adjustment required by this Section 11
shall be made no later than the earlier of (i) three (3) years from the date of
the transaction which mandates such adjustment or (ii) the Expiration Date.

           (f) If as a result of any provision of Section 11(a) hereof, the
holder of any Right thereafter exercised shall become entitled to receive any
shares of capital stock of the Company other than Preferred Stock, thereafter
the number of such other shares so receivable upon exercise of any Right shall
be subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred Stock
contained in Section 11(a), (b), (c), (e), (g) through (k) and (m), inclusive,
and the provisions of Sections 7, 9, 10, 13 and 14 hereof with respect to the
Preferred Stock shall apply on like terms to any such other shares.

           (g) All Rights originally issued by the Company subsequent to any
adjustment made to the Exercise Price hereunder shall evidence the right to
purchase, at the adjusted Exercise Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

           (h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Exercise Price as a result of the
calculations made in Section 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that

                                       17
<PAGE>

number of one one-thousandths of a share of Preferred Stock (calculated to the
nearest one ten-millionth) obtained by (i) multiplying (x) the number of one
one-thousandths of a share of Preferred Stock for which a Right may be
exercisable immediately prior to this adjustment by (y) the Exercise Price in
effect immediately prior to such adjustment of the Exercise Price and (ii)
dividing the product so obtained by the Exercise Price in effect immediately
after such adjustment of the Exercise Price.

           (i) The Company may elect on or after the date of any adjustment of
the Exercise Price to adjust the number of Rights, in substitution for any
adjustment in the number of shares of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one one-thousandths of a
share of Preferred Stock 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 one-hundred-thousandth) obtained by dividing the Exercise Price in effect
immediately prior to adjustment of the Exercise Price by the Exercise Price in
effect immediately after adjustment of the Exercise Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Exercise Price is adjusted or any day thereafter, but, if the Right
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Right Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Right Certificates on such record date Right Certificates evidencing,
subject to Section 14 hereof, the additional Rights to which such holders shall
be entitled as a result of such 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 Exercise Price) and shall be registered
in the names of the holders of record of Right Certificates on the record date
specified in the public announcement.

           (j) Irrespective of any adjustment or change in the Exercise Price or
the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Right Certificates theretofore and thereafter
issued may continue to express the Exercise Price per share and the number of
shares which were expressed in the initial Right Certificates issued hereunder.

           (k) Before taking any action that would cause an adjustment reducing
the Exercise Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred 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 shares of Preferred Stock

                                       18
<PAGE>

at such adjusted Exercise Price.

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

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

           (n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date and so long as the Rights have not been redeemed
pursuant to Section 23 hereof or exchanged pursuant to Section 24 hereof, (i)
consolidate with, (ii) merge with or into, or (iii) sell or transfer (or permit
any Subsidiary to sell or transfer), in one transaction or a series of related
transactions, assets or earning power aggregating 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 if (x) at the time of or immediately after such consolidation,
merger or sale there are any rights, warrants or other instruments outstanding
or agreements or arrangements in effect which would substantially diminish or
otherwise eliminate the benefits intended to be afforded by the Rights, or (y)
prior to, simultaneously with or immediately after such consolidation, merger or
sale the shareholders of a Person who constitutes, or would constitute, the
"Principal Party" for the purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates. The Company further covenants and agrees that after the
Distribution Date it will not, except as permitted by Section 23 or Section 27
hereof, 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.

           (o) In the event the Company shall at any time after the date of this
Agreement and prior to the Distribution Date (i) declare or pay any dividend on
the outstanding Common Stock payable in shares of Common Stock or (ii) effect a
subdivision, combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than

                                       19
<PAGE>

by payment of dividends in shares of Common Stock) into a greater or lesser
number of shares of Common Stock, then in any such case (A) the number of one
one-thousandths of a share of Preferred Stock purchasable after such event upon
proper exercise of each Right shall be determined by multiplying the number of
one one-thousandths of a share of Preferred Stock so purchasable immediately
prior to such event by a fraction, the numerator of which is the number of
shares of Common Stock outstanding immediately prior to such event and the
denominator of which is the number of shares of Common Stock outstanding
immediately after such event, and (B) each share of Common Stock outstanding
immediately after such event shall have issued with respect to it that number of
Rights which each share of Common Stock outstanding immediately prior to such
event had issued with respect to it. The adjustments provided for in this
Section 11(o) shall be made successively whenever such a dividend is declared or
paid or such a subdivision, combination or consolidation is effected.

           (p) The exercise of Rights under Section 11(a)(ii) shall only result
in the loss of rights under Section 11(a)(ii) to the extent so exercised and
shall not otherwise affect the rights of holders of Right Certificates under
this Rights Agreement, including rights to purchase securities of the Principal
Party following a Section 13 Event which has occurred or may thereafter occur,
as set forth in Section 13 hereof. Upon exercise of a Right Certificate under
Section 11(a)(ii), the Rights Agent shall return such Right Certificate duly
marked to indicate that such exercise has occurred.

      Section 12. Certificate of Adjusted Exercise Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 or Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent and with each transfer agent for the
Preferred Stock and the Common Stock a copy of such certificate and (c) mail a
brief summary thereof to each holder of a Right Certificate in accordance with
Section 26 hereof. The Rights Agent shall be fully protected in relying on any
such certificate and on any adjustment contained therein and shall not be deemed
to have knowledge of any such adjustment unless and until it shall have received
such certificate.

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

           (a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
is not prohibited by Section 11(n) hereof), and the Company shall not be the
continuing or surviving corporation of such consolidation or merger, (y) any
Person (other than a Subsidiary of the Company in a transaction which is not
prohibited by Section 11(n) hereof) shall consolidate with the Company, or merge
with and into the Company and the Company shall be the continuing or surviving
corporation of such merger and, in connection with such merger, all or part of
the shares of Common Stock shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the Company
shall sell, mortgage or otherwise transfer (or one or more of its Subsidiaries
shall sell, mortgage or otherwise transfer), in one transaction or a series of
related transactions, assets or earning power aggregating 50% or more

                                       20
<PAGE>

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 any Subsidiary
of the Company in one or more transactions, each of which is not prohibited by
Section 11(n) hereof), then, and in each such case, proper provision shall be
made so that: (i) each holder of a Right, except as provided in Section 7(e)
hereof, shall have the right to receive, upon the exercise thereof at the then
current Exercise Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid and nonassessable shares of
freely tradeable Common Stock of the Principal Party (as hereinafter defined in
Section 13(b)), free and clear of rights of call or first refusal, liens,
encumbrances or other adverse claims, as shall be equal to the result obtained
by (1) multiplying the then current Exercise Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right is exercisable
immediately prior to the first occurrence of a Section 13 Event, and dividing
that product by (2) 50% of the Fair Market Value (determined pursuant to Section
11(d) hereof) per share of the Common Stock of such Principal Party on the date
of consummation 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, mortgage 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, it being specifically
intended that the provisions of Section 11 hereof shall apply 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 shares of its Common Stock
to permit exercise of all outstanding Rights in accordance with this Section
13(a) and the making of payments in cash and/or other securities in accordance
with Section 11(a)(iii) hereof) in connection with such consummation as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights.

           (b) "Principal Party" shall mean

                 (i) in the case of any transaction described in clause (x) or
      (y) of the first sentence of Section 13(a), the Person that is the issuer
      of any securities into which shares of Common Stock of the Company are
      converted in such merger or consolidation, and if no securities are so
      issued, the Person that is the other party to the merger or consolidation;
      and

                 (ii) in the case of any transaction described in clause (z) of
      the first sentence of Section 13(a), the Person that is the party
      receiving the greatest portion of the assets or earning power transferred
      pursuant to such transaction or transactions;

provided, however, that in any such case, (x) if the Common Stock of such Person
is not at such time and has not been continuously over the preceding 12-month
period registered under Section 12 of the Exchange Act, and such Person is a
direct or indirect Subsidiary or Affiliate of another Person the Common Stock of
which is and has been so registered, "Principal Party" shall refer to such other
Person; (y) in case such Person is a direct or indirect Subsidiary or Affiliate
of more than one Person, the Common Stocks of two or more of which are and have
been so registered, "Principal Party" shall refer to whichever of such Persons
is the issuer of the

                                       21
<PAGE>

Common Stock having the greatest aggregate market value of shares outstanding;
and (z) in case 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 (x) and (y) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.

           (c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless prior thereto (x) the Principal Party shall have a
sufficient number of authorized shares of its Common Stock, which have not been
issued or reserved for issuance, to permit the exercise in full of the Rights in
accordance with this Section 13, and (y) the Company and each Principal Party
and each other Person who may become a Principal Party as a result of such
consolidation, merger, sale or transfer shall have executed and delivered to the
Rights Agent a supplemental agreement providing for the terms set forth in
Section 13(a) and (b) and further providing that, as soon as practicable after
the date of any consolidation, merger, sale or transfer of assets mentioned in
Section 13(a), the Principal Party at its own expense will:

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

                 (ii) use its best efforts to qualify or register the Rights and
      the securities purchasable upon exercise of the Rights under the blue sky
      laws of such jurisdictions as may be necessary or appropriate;

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

                 (iv) deliver to holders of the Rights historical financial
      statements for the Principal Party and each of its Affiliates which comply
      in all material respects with the requirements for registration on Form 10
      under the Exchange Act.

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

      Section 14. Fractional Rights and Fractional Shares.

           (a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(o) hereof, or to
distribute Right Certificates which evidence fractional Rights. If the Company
elects not to issue such fractional Rights, the Company shall pay, in lieu of
such fractional Rights, to the registered

                                       22
<PAGE>

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
Fair Market Value of a whole Right, as determined pursuant to Section 11(d)
hereof.

           (b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Right Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the Fair Market Value of one one-thousandth of a share of Preferred
Stock. For purposes of this Section 14(b), the Fair Market Value of one
one-thousandth of a share of Preferred Stock shall be determined pursuant to
Section 11(d) hereof for the Trading Day immediately prior to the date of such
exercise.

           (c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.

      Section 15. Rights of Action. All rights of action in respect of this
Agreement, other than rights of action vested in the Rights Agent pursuant to
Sections 18 and 20 hereof, are vested in the respective registered holders of
the Right Certificates (or, prior to the Distribution Date, the registered
holders of the Common Stock); and any registered holder of any Right Certificate
(or, prior to the Distribution Date, of the Common Stock), without the consent
of the Right Agent or of the holder of any other Right Certificate (or, prior to
the Distribution Date, of the Common Stock), may, on his own behalf and for his
own benefit, enforce, and may institute and maintain any suit, action or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Right 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 hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

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

           (a) prior to the Distribution Date, each Right will be transferable
only simultaneously and together with the transfer of shares of Common Stock;

           (b) after the Distribution Date, the Right Certificates are
transferable only on

                                       23
<PAGE>

the registry books of the Rights Agent if surrendered at the office or offices
of the Rights Agent designated for such purpose, duly endorsed or accompanied by
a proper instrument of transfer;

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

           (d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as the result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority prohibiting or otherwise restraining
performance of such obligations; provided, however, that the Company must use
its best efforts to have any such order, decree or ruling lifted or otherwise
overturned as soon as possible.

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

      Section 18. Concerning the Rights Agent.

            (a) The Company agrees to pay to the Rights Agent such compensation
as shall be agreed to in writing between the Company and the Rights Agent for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements 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

                                       24
<PAGE>

indirectly. The provisions of this Section 18(a) shall survive the expiration of
the Rights and the termination of this Agreement.

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

           (c) The Rights Agent shall not be liable for consequential damages
under any provision of this Agreement or for any consequential damages arising
out of any act or failure to act hereunder.

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

           (a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 hereof. 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 or in
the name of the successor Rights Agent; and in all such cases such Right
Certificates shall have the full force provided in the Right Certificates and in
this Agreement.

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

      Section 20. Duties of Rights Agent. The Rights Agent undertakes the duties
and obligations expressly 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,

                                       25
<PAGE>

shall be bound:

            (a) 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.

            (b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person and the
determination of "Fair Market Value") 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 shall be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
person believed by the Rights Agent to be the Chairman of the Board, a Vice
Chairman of the Board, the President, a Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or an Assistant Secretary of the Company and
delivered to the Rights Agent. Any such certificate shall be full authorization
to the Rights Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.

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

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

            (e) The Rights Agent shall not be under any responsibility in
respect of the validity of this Agreement or the execution and delivery hereof
(except the due execution hereof by the Rights Agent) or in respect of the
validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Agreement or in any Right Certificate;
nor shall it be responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Section 7(e) hereof) or any
adjustment required under the provisions of Sections 11, 13 or 23(c) hereof or
responsible for the manner, method or amount of any such adjustment or the
ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights evidenced by Right Certificates
after receipt of a certificate describing any such adjustment furnished in
accordance with Section 12 hereof), nor shall it be responsible for any
determination by the Board of Directors of the Company of the Fair Market Value
of the Rights or Preferred Stock pursuant to the provisions of Section 14
hereof; nor shall it by any act hereunder be deemed to make any representation
or warranty as to the authorization or reservation of any shares of Common Stock
or Preferred Stock to be issued pursuant to this Agreement or any Right
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.

                                       26
<PAGE>

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

            (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder and
certificates delivered pursuant to any provision hereof from any person believed
by the Rights Agent to be the Chairman of the Board, any Vice Chairman of the
Board, the President, a Vice President, the Secretary, an Assistant Secretary,
the Treasurer or an Assistant Treasurer of the Company, and is authorized to
apply to such officers for advice or instructions in connection with its duties,
and it shall not be liable for any action taken or suffered to be taken by it in
good faith in accordance with instructions of any such officer. 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 under this Agreement and the date on or after which
such action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.

            (h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the 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.

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

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

                                       27
<PAGE>

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

      Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company by first class
mail. The Company may remove the Rights Agent or any successor Rights Agent
(with or without cause) 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 Stock and Preferred Stock by registered or certified mail,
and to the holders of the Right Certificates by first-class mail. If the Rights
Agent shall resign or be removed or shall otherwise become incapable of acting,
the Company shall appoint a successor to the Rights Agent. If the Company shall
fail to make such appointment within a period of 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 incumbent Rights Agent or
the registered holder of any Right Certificate may apply to any court of
competent jurisdiction for the appointment of a new Rights Agent. Any successor
Rights Agent, whether appointed by the Company or by such a court, shall be (a)
a corporation organized and doing business under the laws of the United States
or of the Commonwealth of Massachusetts or the State of New York (or of any
other state of the United States so long as such corporation is authorized to do
business as a banking institution in the Commonwealth of Massachusetts or the
State of New York), in good standing, 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
$50,000,000 or (b) an Affiliate of a corporation described in clause (a) of this
sentence. 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 Stock
and the Preferred Stock, and mail a notice thereof in writing to the registered
holders of the Right Certificates. Failure to give any notice provided for in
this Section 21, however, or any defect therein, shall not affect the legality
or validity of the resignation or removal of the Rights Agent or the appointment
of the successor Rights Agent, as the case may be.

      Section 22. Issuance of New Right Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Right Certificates evidencing Rights in such form as
may be approved by its Board of Directors

                                       28
<PAGE>

to reflect any adjustment or change in the Exercise Price per share and the
number or kind or class of shares of stock or other securities or property
purchasable under the Right Certificates made in accordance with the provisions
of this Agreement. In addition, in connection with the issuance or sale of
shares of Common Stock following the Distribution Date and prior to the
redemption or expiration of the Rights, the Company (a) shall, with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by the Board of
Directors of the Company, 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 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 adjustments
shall otherwise have been made in lieu of the issuance thereof.

      Section 23. Redemption and Termination.

            (a) The Board of Directors of the Company may, at its option, redeem
all but not less than all of the then outstanding Rights at a redemption price
of $0.01 per Right, appropriately adjusted to reflect any dividend declared or
paid on the Common Stock in shares of Common Stock or any subdivision or
combination of the outstanding shares of Common Stock or similar event occurring
after the date of this Agreement (such redemption price, as adjusted from time
to time, being hereinafter referred to as the "Redemption Price"). The Rights
may be redeemed only until the earliest to occur of (i) 5:00 P.M., Boston,
Massachusetts time, on the tenth Business Day after the Stock Acquisition Date
or (ii) the Final Expiration Date.

            (b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, and without any further action
and without any notice, the right to exercise the Rights will terminate and the
only right thereafter of the holders of Rights shall be to receive the
Redemption Price for each Right so held. Promptly after the action of the Board
of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to the Rights Agent and 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 Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Company nor any of its
Affiliates or Associates may redeem, acquire or purchase for value any Rights at
any time in any manner other than that specifically set forth in this Section 23
or Section 24 hereof or in connection with the purchase of shares of Common
Stock prior to the Distribution Date.

            (c) The Company may, at its option, pay the Redemption Price in
cash, shares

                                       29
<PAGE>

of Common Stock (based on the Fair Market Value of the Common Stock as of the
time of redemption) or any other form of consideration deemed appropriate by the
Board of Directors.

      Section 24. Exchange.

            (a) The Board of Directors of the Company may, at its option, at any
time on or after the occurrence of a Section 11(a)(ii) Event, exchange all or
part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock at an exchange ratio of one share of Common Stock per
Right, appropriately adjusted to reflect any stock split, stock dividend or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the "Exchange Ratio"). Notwithstanding the foregoing,
the Board of Directors shall not be empowered to effect such exchange at any
time after any Person (other than an Exempt Person), together with all
Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or
more of the Common Stock of the Company.

            (b) Immediately upon the action of the Company ordering the exchange
of any Rights pursuant to subsection (a) of this Section 24 and without any
further action and without any notice, the right to exercise such Rights shall
terminate and the only right thereafter of a holder of such Rights shall be to
receive that number of shares of Common Stock equal to the number of such Rights
held by such holder multiplied by the Exchange Ratio. The Company shall promptly
give notice of any such exchange in accordance with Section 26 hereof; provided,
however, that the failure to give, or any defect in, such notice shall not
affect the validity of such exchange. Each such notice of exchange will state
the method by which the exchange of the shares of Common Stock for Rights will
be effected and, in the event of any partial exchange, the number of Rights
which will be exchanged. Any partial exchange shall be effected pro rata based
on the number of Rights (other than Rights which have become void pursuant to
the provisions of Section 7(e) hereof) held by each holder of Rights.

            (c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or preferred stock equivalent, as such
term is defined in Section 11(b) hereof) for Common Stock exchangeable for
Rights, at the initial rate of one one-thousandth of a share of Preferred Stock
(or preferred stock equivalent) for each share of Common Stock, as appropriately
adjusted to reflect adjustments in the voting rights of the Preferred Stock
pursuant to the terms thereof, so that the fraction of a share of Preferred
Stock delivered in lieu of each share of Common Stock shall have the same voting
rights as one share of Common Stock.

            (d) In the event that there shall not be sufficient shares of Common
Stock or Preferred Stock (or preferred stock equivalent) issued but not
outstanding or authorized but unissued to permit any exchange of Rights as
contemplated in accordance with this Section 24, the Company shall take all such
action as may be necessary to authorize additional shares of Common Stock or
Preferred Stock (or preferred stock equivalent) for issuance upon exchange of
the Rights.

                                       30
<PAGE>

            (e) The Company shall not be required to issue fractions of Common
Stock or to distribute certificates which evidence fractional shares of Common
Stock. If the Company elects not to issue such fractional shares of Common
Stock, the Company shall pay, in lieu of such fractional shares of Common Stock,
to the registered holders of the Right Certificates with regard to which such
fractional shares of Common Stock would otherwise be issuable, an amount in cash
equal to the same fraction of the Fair Market Value of a whole share of Common
Stock. For the purposes of this paragraph (e), the Fair Market Value of a whole
share of Common Stock shall be the closing price of a share of Common Stock (as
determined pursuant to the second sentence of Section 11(d)(i) hereof) for the
Trading Day immediately prior to the date of exchange pursuant to this Section
24.

      Section 25. Notice of Certain Events.

            (a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular periodic cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with, or to effect any sale, mortgage or other transfer (or to
permit one or more of its Subsidiaries to effect any sale, mortgage or other
transfer), in one transaction or a series of related 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 a Subsidiary of the Company in one
or more transactions each of which is not prohibited by Section 11(n) hereof),
or (v) to effect the liquidation, dissolution or winding up of the Company, (vi)
to declare or pay any dividend on the Common Stock payable in Common Stock or to
effect a subdivision, combination or consolidation of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock) then
in each such case, the Company shall give to each holder of a Right Certificate
and to the Rights Agent, in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares of Common Stock and/or Preferred Stock, if
any such date is to be fixed, and such notice shall be so given in the case of
any action covered by clause (i) or (ii) above at least twenty (20) days prior
to the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Common Stock
and/or Preferred Stock, whichever shall be the earlier.

            (b) In case any Section 11(a)(ii) Event shall occur, then, in any
such case, the Company shall as soon as practicable thereafter give to each
registered holder of a Right Certificate and to the Rights Agent, in accordance
with Section 26 hereof, a notice of the

                                       31
<PAGE>

occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof.

      Section 26. 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 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:

            T Cell Sciences, Inc.
            115 4th Avenue
            Needham, MA 02194

Subject to the provisions of Section 21, 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:

            State Street Bank and Trust Company
            c/o Boston Financial Data Services, Inc.
            Two Heritage Drive
            Quincy, MA 02171
            Attention:  Administration

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 shares of
Common Stock) shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as shown
on the registry books of the Company.

      Section 27. Supplements and Amendments. Prior to the Distribution Date,
the Company and the Rights Agent shall, if the Company so directs, supplement or
amend any provision of this Agreement as the Company may deem necessary or
desirable without the approval of any holders of certificates representing
shares of Common Stock. From and after the Distribution Date, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holder of Right Certificates in order (i)
to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereof in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Right Certificates (other than an Acquiring Person or any Affiliate
or Associate of an Acquiring Person); provided, however, that from and after the
Distribution Date this Agreement may not be supplemented or amended to lengthen,
pursuant to clause (iii) of this sentence, (A) a time period relating to when
the Rights may be redeemed at such time as the Rights are not then redeemable or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the

                                       32
<PAGE>

rights of, and the benefits to, the holders of Rights. Upon the delivery of such
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock. Notwithstanding
any other provision hereof, the Rights Agent's consent must be obtained
regarding any amendment or supplement pursuant to this Section 27 which alters
the Rights Agent's rights or duties.

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

      Section 29. Determinations and Actions by the Board of Directors. For all
purposes of this Agreement, any calculation of the number of shares of Common
Stock outstanding at any particular time, including for purposes of determining
the particular percentage of such outstanding shares of Common Stock 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 Rules under the Exchange Act as in effect
on the date hereof. The Board of Directors of the Company shall have the
exclusive power and authority to administer this Agreement and to exercise all
rights and powers specifically granted to the Board or to the Company, or as may
be necessary or advisable in the administration of this Agreement, including
without limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
of Directors in good faith shall (x) be final, conclusive and binding on the
Company, the Rights Agent, the holders of the Rights and all other parties, and
(y) not subject any member of the Board of Directors to any liability to the
holders of the Rights or to any other person.

      Section 30. 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 Stock) 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, registered holders
of the Common Stock).

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

                                       33
<PAGE>

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

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

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

                  [Remainder of page intentionally left blank.]

                                       34
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.

ATTEST:                                 T CELL SCIENCES, INC.

By: _______________________             By: ________________________________
                                            Name:
                                            Title:

ATTEST:                                 STATE STREET BANK AND
                                         TRUST COMPANY, as Rights Agent

By: _______________________             By: ________________________________
                                            Name:
                                            Title:

<PAGE>

                                                                       Exhibit A

                         VOTE OF DIRECTORS ESTABLISHING
                   Series C-1 JUNIOR PARTICIPATING CUMULATIVE
                                 PREFERRED STOCK

                                       of

                              T CELL SCIENCES, INC.

      Pursuant to Section 151 of the General Corporation Law of the State of
Delaware:

      VOTED, that pursuant to authority conferred upon and vested in the Board
of Directors by the Third Restated Certificate of Incorporation, as amended as
of the date hereof (the "Certificate of Incorporation"), of T Cell Sciences,
Inc. (the "Corporation"), the Board of Directors hereby establishes and
designates a series of Class C Preferred Stock of the Corporation, and hereby
fixes and determines the relative rights and preferences of the shares of such
series, in addition to those set forth in the Certificate of Incorporation, as
follows:

      Section 1. Designation and Amount. The shares of such series shall be
designated as "Series C-1 Junior Participating Cumulative Preferred Stock" (the
"Series C-1 Preferred Stock"), and the number of shares initially constituting
such series shall be 350,000; provided, however, that if more than a total of
350,000 shares of Series C-1 Preferred Stock shall be issuable upon the exercise
of Rights (the "Rights") issued pursuant to the Shareholder Rights Agreement
dated as of November 10, 1994, between the Corporation and State Street Bank and
Trust Company, as Rights Agent (the "Rights Agreement"), the Board of Directors
of the Corporation, pursuant to Section 151(g) of the General Corporation Law of
the State of Delaware, shall direct by resolution or resolutions that a
certificate be properly executed, acknowledged, filed and recorded, in
accordance with the provisions of Section 103 thereof, providing for the total
number of shares of Series C-1 Preferred Stock authorized to be issued to be
increased (to the extent that the Certificate of Incorporation then permits) to
the largest number of whole shares (rounded up to the nearest whole number)
issuable upon exercise of such Rights.

      Section 2. Dividends and Distributions.

      (A) (i) Subject to the rights of the holders of any shares of any series
of preferred stock (or any similar stock) ranking prior and superior to the
Series C-1 Preferred Stock with respect to dividends, the holders of shares of
Series C-1 Preferred Stock, in preference to the holders of shares of common
stock and of any other junior 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 C-1

<PAGE>

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 provisions for adjustment
hereinafter set forth, 1000 times the aggregate per share amount of all cash
dividends, and 1000 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 C-1 Preferred Stock. The multiple of cash and
non-cash dividends declared on the common stock to which holders of the Series
C-1 Preferred Stock are entitled, which shall be 1000 initially but which shall
be adjusted from time to time as hereinafter provided, is hereinafter referred
to as the "Dividend Multiple." In the event the Corporation shall at any time
after November 10, 1994 (the "Rights Declaration Date") (i) declare or pay any
dividend on common stock payable in shares of common stock, or (ii) effect a
subdivision or combination or consolidation of the outstanding shares of common
stock (by reclassification or otherwise than by payment of a dividend in shares
of common stock) into a greater or lesser number of shares of common stock, then
in each such case the Dividend Multiple thereafter applicable to the
determination of the amount of dividends which holders of shares of Series C-1
Preferred Stock shall be entitled to receive shall be the Dividend Multiple
applicable immediately prior to such event multiplied 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.

            (ii) Notwithstanding anything else contained in this paragraph (A),
the Corporation shall, out of funds legally available for that purpose, declare
a dividend or distribution on the Series C-1 Preferred Stock as provided in
this paragraph (A) 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 C-1 Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.

      (B) Dividends shall begin to accrue and be cumulative on outstanding
shares of Series C-1 Preferred Stock from the Quarterly Dividend Payment Date
next preceding the date of issue of such shares of Series C-1 Preferred Stock,
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 C-1 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 C-1
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 in accordance with applicable law a record date for the
determination of holders of shares of Series C-1 Preferred Stock entitled to
receive payment of a dividend or distribution declared

                                       2
<PAGE>

thereon, which record date shall be not more than such number of days prior to
the date fixed for the payment thereof as may be allowed by applicable law.

      Section 3. Voting Rights. In addition to any other voting rights required
by law, the holders of shares of Series C-1 Preferred Stock shall have the
following voting rights:

      (A) Subject to the provision for adjustment hereinafter set forth, each
share of Series C-1 Preferred Stock shall entitle the holder thereof to 1000
votes on all matters submitted to a vote of the stockholders of the Corporation.
The number of votes which a holder of a share of Series C-1 Preferred Stock is
entitled to cast, which shall initially be 1000 but which may be adjusted from
time to time as hereinafter provided, is hereinafter referred to as the "Vote
Multiple." In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare or pay any dividend on common stock payable in
shares of common stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
Vote Multiple thereafter applicable to the determination of the number of votes
per share to which holders of shares of Series C-1 Preferred Stock shall be
entitled shall be the Vote Multiple immediately prior to such event multiplied
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 or by law, the holders of shares
of Series C-1 Preferred Stock and the holders of shares of common stock and the
holders of shares of any other capital stock of this 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 otherwise required by applicable law or as set forth herein,
holders of Series C-1 Preferred Stock shall have no special voting rights and
their consent shall not be 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 dividends or distributions payable on the Series C-1
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 C-1 Preferred Stock outstanding shall have been paid in full,
the Corporation shall not:

      (i)   declare or pay dividends on, make any other distributions on, or
            redeem or purchase or otherwise acquire for consideration any shares
            of stock ranking junior (either as to dividends or upon liquidation,
            dissolution or winding up) to the Series C-1 Preferred Stock;

      (ii)  declare or pay dividends on or make any other distributions on any
            shares of stock

                                       3
<PAGE>

            ranking on a parity (either as to dividends or upon liquidation,
            dissolution or winding up) with the Series C-1 Preferred Stock,
            except dividends paid ratably on the Series C-1 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) except as permitted in subsection 4(A)(iv) below, redeem, purchase
            or otherwise acquire for consideration shares of any stock ranking
            on a parity (either as to dividends or upon liquidation, dissolution
            or winding up) with the Series C-1 Preferred Stock, provided that
            the Corporation may at any time redeem, purchase or otherwise
            acquire shares of any such parity stock in exchange for shares of
            any stock of the Corporation ranking junior (either as to dividends
            or upon dissolution, liquidation or winding up) to the Series C-1
            Preferred Stock; or

      (iv)  purchase or otherwise acquire for consideration any shares of Series
            C-1 Preferred Stock, or any shares of any stock ranking on a parity
            (either as to dividends or upon liquidation, dissolution or winding
            up) with the Series C-1 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 subsection (A) of this Section
4, purchase or otherwise acquire such shares at such time and in such manner.

      Section 5. Reacquired Shares. Any shares of Series C-1 Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
preferred stock and may be reissued as part of a new series of preferred stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.

      Section 6. Liquidation, Dissolution or Winding Up. Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made (x) to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series C-1 Preferred Stock unless, prior thereto, the holders of shares of
Series C-1 Preferred Stock shall have received an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not declared, to the date
of such payment, plus an amount equal to the greater of (1) $1000.00 per share
or (2) an aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1000 times the aggregate amount to be
distributed per share to holders of common stock, or (y) to the holders of stock
ranking on a parity (either as to dividends or upon liquidation, dissolution or
winding up) with the Series C-1 Preferred Stock, except

                                       4
<PAGE>

distributions made ratably on the Series C-1 Preferred Stock and all other 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 after the Rights Declaration Date (i)
declare or pay any dividend on common stock payable in shares of common stock,
or (ii) effect a subdivision or combination or consolidation of the outstanding
shares of common stock (by reclassification or otherwise than by payment of a
dividend in shares of common stock) into a greater or lesser number of shares of
common stock, then in each such case the aggregate amount per share to which
holders of shares of Series C-1 Preferred Stock were entitled immediately prior
to such event under clause (x) 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.

      Neither the consolidation of nor merging of the Corporation with or into
any other corporation or corporations, nor the sale or other transfer of all or
substantially all of the assets of the Corporation, shall be deemed to be a
liquidation, dissolution or winding up of the Corporation within the meaning of
this Section 6.

      Section 7. 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 the shares of
Series C-1 Preferred Stock shall at the same time be similarly exchanged or
changed in an amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1000 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,
plus accrued and unpaid dividends, if any, payable with respect to the Series
C-1 Preferred Stock. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare or pay any dividend on common stock payable
in shares of common stock, or (ii) effect a subdivision or combination or
consolidation of the outstanding shares of common stock (by reclassification or
otherwise than by payment of a dividend in shares of common stock) into a
greater or lesser number of shares of common stock, then in each such case the
amount set forth in the preceding sentence with respect to the exchange or
change of shares of Series C-1 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 8. Redemption. The shares of Series C-1 Preferred Stock shall not
be redeemable.

      Section 9. Ranking. Unless otherwise provided in the Certificate of
Incorporation or a Certificate of Vote of Directors Establishing a Class of
Stock relating to a subsequently-designated series of preferred stock of the
Corporation, the Series C-1 Preferred Stock shall rank junior to any other
series of the Corporation's preferred stock subsequently issued, as to the
payment of dividends and the distribution of assets on liquidation, dissolution
or winding up and shall rank senior to the common stock.

                                       5
<PAGE>

      Section 10. Amendment. The Certificate of Incorporation and this
Certificate of Vote of Directors shall not be amended in any manner which would
materially alter or change the powers, preferences or special rights of the
Series C-1 Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of two-thirds or more of the outstanding shares
of Series C-1 Preferred Stock, voting separately as a class.

      Section 11. Fractional Shares. Series C-1 Preferred Stock may be issued in
whole shares or in any fraction of a share that is one one-thousandth (1/1000th)
of a share or any integral multiple of such fraction, which 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 C-1 Preferred Stock. In lieu of
fractional shares, the Corporation may elect to make a cash payment as provided
in the Rights Agreement for fractions of a share other than one one-thousandth
(1/1000th) of a share or any integral multiple thereof.

                                       6
<PAGE>

                                                                       Exhibit B

                           [Form of Right Certificate]

Certificate No. R-                                                  _____ Rights

NOT EXERCISABLE AFTER NOVEMBER 10, 2004 OR EARLIER IF NOTICE OF REDEMPTION IS
GIVEN. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF T CELL SCIENCES,
INC., AT $0.01 PER RIGHT ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS
AGREEMENT BETWEEN T CELL SCIENCES, INC. AND STATE STREET BANK AND TRUST COMPANY,
AS RIGHTS AGENT, DATED AS OF NOVEMBER 10, 1994 (THE "RIGHTS AGREEMENT"). UNDER
CERTAIN CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF THE RIGHTS AGREEMENT, RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ASSOCIATE OR AFFILIATE OF AN
ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY
SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.

Right Certificate

T CELL SCIENCES, 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
Shareholder Rights Agreement dated as of November 10, 1994 (the "Rights
Agreement") between T CELL SCIENCES, INC. (the "Company") and STATE STREET BANK
AND TRUST COMPANY, as Rights Agent (the "Rights Agent"), to purchase from the
Company at any time after the Distribution Date (as such term is defined in the
Rights Agreement) and prior to the close of business on November 10, 2004 at the
office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one one-thousandth of a fully paid, non-assessable
share of the Series C-1 Junior Participating Cumulative Preferred Stock (the
"Preferred Stock") of the Company, at a purchase price of $16.00 per one
one-thousandth of a share (the "Exercise Price"), upon presentation and
surrender of this Right Certificate with the Form of Election to Purchase and
the related Certificate duly executed. The number of Rights evidenced by this
Right Certificate (and the number of shares which may be purchased upon exercise
thereof) set forth above, and the Exercise Price per share set forth above, are
the number and Exercise Price as of______, based on the Preferred Stock as
constituted at such date.

<PAGE>

      Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined
in the Rights Agreement), if the Rights evidenced by this Right Certificate are
beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of
any such Person (as such terms are defined in the Rights Agreement), (ii) a
transferee of any such Acquiring Person, Associate or Affiliate, or (iii) under
certain circumstances specified in the Rights Agreement, a transferee of a
Person who, after such transfer, became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person, such Rights shall become null and void and no
holder hereof shall have any right with respect to such Rights from and after
the occurrence of such Section 11(a)(ii) Event.

      As provided in the Rights Agreement, the Exercise Price and the number of
shares of Preferred Stock or other securities which may be purchased upon the
exercise of the Rights evidenced by this Right Certificate are subject to
modification and adjustment upon the happening of certain events.

      This Right Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Right Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the principal office of the
Company and the designated office of the Rights Agent and are also available
upon written request to the Company or the Rights Agent.

      This Right Certificate, with or without other Right Certificates, upon
surrender at the office or offices of the Rights Agent designated for such
purpose, may be exchanged for another Right Certificate or Certificates of like
tenor and date evidencing Rights entitling the holder to purchase a like
aggregate number of shares of Preferred Stock as the Rights evidenced by the
Right Certificate or 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
Certificates for the number of whole Rights not exercised. If this Right
Certificate shall be exercised in whole or in part pursuant to Section 11(a)(ii)
of the Rights Agreement, the holder shall be entitled to receive this Right
Certificate duly marked to indicate that such exercise has occurred as set forth
in the Rights Agreement.

      Under certain circumstances, subject to the provisions of the Rights
Agreement, the Board of Directors of the Company at its option may exchange all
or any part of the Rights evidenced by this Certificate for shares of the
Company's Common Stock or Preferred Stock at an exchange ratio (subject to
adjustment) of one share of Common Stock or one one-thousandth of a share of
Preferred Stock per Right.

      Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Board of Directors of the Company at its
option at a redemption price of $0.01 per Right (payable in cash, Common Stock
or other consideration deemed appropriate by the Board of Directors).

                                       2
<PAGE>

      The Company is not obligated to issue fractional shares of stock upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock, which
may, at the election of the Company, be evidenced by depositary receipts). If
the Company elects not to issue such fractional shares, in lieu thereof a cash
payment will be made, as provided in the Rights 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 shares of Preferred
Stock, Common Stock or any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of directors or upon any matter submitted to stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Right
Certificate shall have been exercised as provided in the Rights Agreement.

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

                                       3
<PAGE>

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

[Corporate Seal]                         T CELL SCIENCES, INC.

Attested:                                By ___________________________________
                                             Name:
                                             Title: [Chairman, Vice
By __________________________________               Chairman, President or
  [Secretary or Assistant Secretary]                Vice President]

Countersigned:

STATE STREET BANK
 AND TRUST COMPANY,
as Rights Agent

Authorized Signatory

Date of countersignature:

                                       4
<PAGE>

                   [Form of Reverse Side of Right Certificate]

                               FORM OF ASSIGNMENT

             (To be executed by the registered holder if such holder
                   desires to transfer the Right Certificate.)

FOR VALUE RECEIVED _____________ hereby sells, assigns and transfers unto
_______________________________ (Please print name and address of transferee)
_______________________________ this Right Certificate, together with all right,
title and interest therein, and does hereby irrevocably constitute and appoint
______________ Attorney, to transfer the within Right Certificate on the books
of the within-named Company, with full power of substitution.

Dated: ___________________

                                    ___________________________________________
                                    Signature

Signature Guaranteed: _________________________

                                   CERTIFICATE

      The undersigned hereby certifies by checking the appropriate boxes that:

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

      (2) after due inquiry and to the best knowledge of the undersigned, the
undersigned __ did __ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.

Dated: ____________________         _______________________________________
                                    Signature

                                       5
<PAGE>

                                     NOTICE

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

                                       6
<PAGE>

                          FORM OF ELECTION TO PURCHASE

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

To T CELL SCIENCES, INC.:

      The undersigned hereby irrevocably elects to exercise ______ Rights
represented by this Right Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities 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 insert social security
or other identifying taxpayer number: ____________

________________________________________________________________________________
                         (Please print name and address)

________________________________________________________________________________

      If such number of Rights shall not be all the Rights evidenced by this
Right Certificate or if the Rights are being exercised pursuant to Section
11(a)(ii) of the Rights Agreement, a new Right Certificate for the balance of
such Rights shall be registered in the name of and delivered to:

Please insert social security
or other identifying taxpayer number: ____________

________________________________________________________________________________
                         (Please print name and address)

________________________________________________________________________________

________________________________________________________________________________

Dated: ___________

                                    ____________________________________________
                                    Signature

Signature Guaranteed: ____________

                                       7
<PAGE>

                                   CERTIFICATE

      The undersigned hereby certifies by checking the appropriate boxes that:

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

      (2) after due inquiry and to the best knowledge of the undersigned, the
undersigned __ did __ did not directly or indirectly acquire the Rights
evidenced by this Right Certificate from any Person who is, was or became an
Acquiring Person or an Affiliate or Associate of any such Person.

Dated: ____________________         _______________________________________
                                    Signature

                                       8
<PAGE>

                                     NOTICE

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

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00004-of-00352.parquet"}]]