Document:

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                                                                   EXHIBIT 10.10

                             TERM CREDIT AGREEMENT

                                     among

                      PAN PACIFIC RETAIL PROPERTIES, INC.,

                                  as Borrower

          CERTAIN SUBSIDIARIES OF PAN PACIFIC RETAIL PROPERTIES, INC.,

                                 as Guarantors

                         THE LENDERS IDENTIFIED HEREIN

                                      and

                             BANK OF AMERICA, N.A.,

                            as Administrative Agent

                               November 13, 2000

                        BANC OF AMERICA SECURITIES LLC,

                  as Sole Lead Arranger and Sole Book Manager

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                                TABLE OF CONTENTS

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SECTION 1  DEFINITIONS AND ACCOUNTING TERMS......................................1

         1.1    Definitions......................................................1

         1.2    Computation of Time Periods and Other Definition Provisions.....20

         1.3    Accounting Terms................................................20

         1.4    Joint Venture Investments.......................................20

         1.5    Time............................................................20

SECTION 2  CREDIT FACILITY......................................................21

         2.1    Term Loans......................................................21

         2.2    Continuations and Conversions...................................22

         2.3    Notes...........................................................23

SECTION 3  GENERAL PROVISIONS APPLICABLE TO TERM LOANS..........................23

         3.1    Interest........................................................23

         3.2    Place and Manner of Payments....................................23

         3.3    Prepayments.....................................................24

         3.4    Fees............................................................24

         3.5    Payment in full at Maturity; Extension of Maturity..............24

         3.6    Computations of Interest and Fees...............................25

         3.7    Pro Rata Treatment..............................................26

         3.8    Sharing of Payments.............................................26

         3.9    Capital Adequacy................................................27

         3.10   Inability To Determine Interest Rate............................27

         3.11   Illegality......................................................28

         3.12   Requirements of Law.............................................28

         3.13   Taxes...........................................................28

         3.14   Compensation....................................................30

         3.15   Determination and Survival of Provisions........................31

SECTION 4  GUARANTY.............................................................31

         4.1    Guaranty of Payment.............................................31

         4.2    Obligations Unconditional.......................................31

         4.3    Modifications...................................................32

         4.4    Waiver of Rights................................................33

         4.5    Reinstatement...................................................33

         4.6    Remedies........................................................33

         4.7    Limitation of Guaranty..........................................33

         4.8    Rights of Contribution..........................................34

SECTION 5  CONDITIONS PRECEDENT.................................................34

         5.1    Closing Conditions..............................................34

         5.2    Conditions to Funding of Term Loans.............................39
</TABLE>

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<TABLE>
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SECTION 6  REPRESENTATIONS AND WARRANTIES.......................................40

         6.1    Organization and Good Standing..................................40

         6.2    Due Authorization...............................................40

         6.3    Enforceable Obligations.........................................40

         6.4    No Conflicts....................................................40

         6.5    Consents........................................................41

         6.6    Financial Condition.............................................41

         6.7    No Material Change..............................................41

         6.8    Disclosure......................................................41

         6.9    No Default......................................................41

         6.10   Litigation......................................................42

         6.11   Taxes...........................................................42

         6.12   Compliance with Law.............................................42

         6.13   Licenses, etc...................................................42

         6.14   Ownership of Properties.........................................42

         6.15   Insurance.......................................................42

         6.16   Use of Proceeds.................................................43

         6.17   Government Regulation...........................................43

         6.18   No Burdensome Restrictions......................................43

         6.19   Compliance with ERISA...........................................44

         6.20   Environmental Matters...........................................45

         6.21   Organization Structure/Subsidiaries.............................46

         6.22   Properties......................................................47

         6.23   Solvency........................................................47

SECTION 7  AFFIRMATIVE COVENANTS................................................47

         7.1    Information Covenants...........................................47

         7.2    Financial Covenants.............................................50

         7.3    Preservation of Existence.......................................51

         7.4    Maintenance of Assets...........................................51

         7.5    Insurance.......................................................51

         7.6    Performance of Obligations......................................52

         7.7    Compliance with Law.............................................52

         7.8    Payment of Taxes and Other Indebtedness.........................52

         7.9    Books and Records...............................................52

         7.10   Audits/Inspections..............................................52

         7.11   Use of Proceeds.................................................53

         7.12   Additional Credit Parties.......................................53

         7.14   Consents; Cure of Defaults......................................53

SECTION 8  NEGATIVE COVENANTS...................................................54

         8.1    Indebtedness....................................................54

         8.2    Liens...........................................................54

         8.3    Nature of Business..............................................54

         8.4    Consolidation and Merger........................................55
</TABLE>

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         8.5    Sale or Lease of Assets.........................................55

         8.6    Investments.....................................................55

         8.7    Restricted Payments.............................................55

         8.8    Transactions with Affiliates....................................56

         8.9    Fiscal Year; Organizational Documents...........................56

         8.10   No Limitations..................................................56

         8.11   Other Negative Pledges..........................................56

         8.12   Construction and Development....................................56

SECTION 9  EVENTS OF DEFAULT....................................................57

         9.1    Events of Default...............................................57

         9.2    Acceleration; Remedies..........................................60

         9.3    Allocation of Payments After Event of Default...................61

SECTION 10  AGENCY PROVISIONS...................................................62

         10.1   Appointment.....................................................62

         10.2   Delegation of Duties............................................62

         10.3   Exculpatory Provisions..........................................62

         10.4   Reliance on Communications......................................63

         10.5   Notice of Default...............................................63

         10.6   Non-Reliance on Administrative Agent and Other Lenders..........64

         10.7   Indemnification.................................................64

         10.8   Administrative Agent in Its Individual Capacity.................65

         10.9   Successor Agent.................................................65

SECTION 11  MISCELLANEOUS.......................................................66

         11.1   Notices.........................................................66

         11.2   Right of Set-Off, Automatic Debits..............................66

         11.3   Benefit of Agreement............................................67

         11.4   No Waiver; Remedies Cumulative..................................70

         11.5   Payment of Expenses; Indemnification............................70

         11.6   Amendments, Waivers and Consents................................71

         11.7   Counterparts/Telecopy...........................................72

         11.8   Headings........................................................72

         11.9   Defaulting Lender...............................................72

         11.10  Survival of Indemnification and Representations and Warranties..72

         11.11  Governing Law...................................................72

         11.12  Waiver of Jury Trial; Waiver of Consequential Damages...........72

         11.13  Severability....................................................73

         11.14  Entirety........................................................73

         11.15  Binding Effect..................................................73

         11.16  Confidentiality.................................................73

         11.17  Further Assurances..............................................74
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SCHEDULES

Schedule 1.1(a)   Commitment Percentages
Schedule 6.5      Consents
Schedule 6.21     Organization Structure/Subsidiaries
Schedule 6.22     Properties
Schedule 11.1     Notices

EXHIBITS

Exhibit 2.1(b)    Form of Request for Funding of Term Loans
Exhibit 2.2       Form of Notice of Continuation/Conversion
Exhibit 2.3       Form of Note
Exhibit 7.1(c)    Form of Officer's Certificate
Exhibit 7.12      Form of Joinder Agreement
Exhibit 11.3      Form of Assignment Agreement

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                                                             OBLIGOR  # 00224394

                              TERM CREDIT AGREEMENT

     THIS TERM CREDIT AGREEMENT (this "Credit Agreement") is entered into as of
November 13, 2000 among PAN PACIFIC RETAIL PROPERTIES, INC., a Maryland
corporation (the "Borrower"), certain Subsidiaries of the Borrower as
Guarantors, the Lenders (as defined herein), and BANK OF AMERICA, N.A., as
Administrative Agent for the Lenders (the "Administrative Agent"), and Banc of
America Securities LLC, as Sole Lead Arranger and Sole Book Manager.

                                    RECITALS

     WHEREAS, the Borrower has requested that the Lenders provide it with a term
credit facility for the purposes set forth herein;

     WHEREAS, the Guarantors will benefit, directly or indirectly, from such
revolving credit facility and, therefore are willing to provide credit support
for the obligations incurred thereunder; and

     WHEREAS, the Lenders have agreed to make the requested term credit facility
available to the Borrower on the terms and subject to the conditions hereinafter
set forth.

     NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

                                    SECTION 1

                        DEFINITIONS AND ACCOUNTING TERMS

     1.1  DEFINITIONS.

     As used herein, the following terms shall have the meanings herein
specified unless the context otherwise requires. Defined terms herein shall
include in the singular number the plural and in the plural the singular:

          "Actual Debt Service" means for any period, without duplication, the
     sum of (a) Consolidated Interest Expense, plus (b) subject to Section 1.4,
     the aggregate amount of all principal and other payments due during such
     period with respect to Indebtedness of the Combined Parties (excluding,
     however, any principal "balloon payments" paid or payable by any member of
     the Consolidated Group during such period), plus (c) cash dividends paid on
     any preferred stock of the Borrower.

          "Adjusted Current Value" means, for any Property, as of any date, the
     quotient of

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     (a) Net Operating Income for such Property as of such date divided by (b)
     the Applicable Cap Rate; provided, however, that if the Administrative
     Agent has not received quarterly operating statements for such Property for
     each of the immediately preceding four calendar quarters (due to the fact
     that the applicable Combined Party has owned such Property for less than
     four calendar quarters), then the "Adjusted Current Value" for such
     Property shall be the lesser of (i) the Adjusted Current Value as
     calculated above, or (ii) the purchase price paid by the applicable
     Combined Party (or by any predecessor thereto) upon acquiring such
     Property, net of all brokerage commissions, finder's fees and other closing
     costs or expenses incurred by such Combined Party in connection with the
     acquisition of such Property.

          "Adjusted EBITDA" means, for any period, with respect to the Combined
     Parties, an amount equal to:

               (a) Consolidated Net Income for such period excluding the effect
          of any extraordinary or other non-recurring gains (including, without
          limitation, any gain from the sale of property not in the ordinary
          course of business) and any extraordinary or other non-recurring
          losses; plus

               (b) amounts which in the determination of Consolidated Net Income
          for such period have been deducted for:

                    (i)   Consolidated Interest Expense for such period,

                    (ii)  total federal, state, foreign or other income or
               franchise taxes for such period,

                    (iii) depreciation,

                    (iv)  amortization, and

                    (v)   other non-cash charges and expenses; plus

               (c) an amount equal to the sum of (i) without duplication, net
          income for such period (as determined in accordance with GAAP) from
          all Combined Parties other than members of the Consolidated Group but
          only to the extent of the aggregate ownership interests of the members
          of the Consolidated Group in such Combined Parties and (ii)
          Investments by members of the Consolidated Group in such Combined
          Parties made during such period; minus

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               (d) an amount equal to the greater of (i) $0.25 times the monthly
          weighted average aggregate net rentable square footage of all
          Properties of the Consolidated Group for such period and (ii) all
          actual Capital Expenditures made by the Consolidated Group for all
          Properties of the Consolidated Group during such period; minus

               (e) the sum of (i) without duplication, net losses (as determined
          in accordance with GAAP) of the Combined Parties other than members of
          the Consolidated Group but only to the extent of the aggregate
          ownership interests of the members of the Consolidated Group in such
          Combined Parties and (ii) dividends, distributions, loan payments and
          other cash returns on Investments made by members of the Consolidated
          Group in such Combined Parties.

          "Adjusted LIBOR Rate" means the LIBOR Rate plus one and one-fifth
     percent (1.2%) per annum.

          "Administrative Agent" means Bank of America, N.A. (or any successor
     thereto) or any successor administrative agent appointed pursuant to
     Section 10.9.

          "Affiliate" means, with respect to any Person, any other Person
     directly or indirectly controlling (including but not limited to all
     directors and officers of such Person), controlled by or under direct or
     indirect common control with such Person. A Person shall be deemed to
     control a corporation, partnership, limited liability company or real
     estate investment trust if such Person possesses, directly or indirectly,
     the power (i) to vote 10% or more of the Voting Stock of such corporation
     or to vote 10% or more of the ownership interests of such partnership,
     limited liability company, or real estate investment trust or (ii) to
     direct or cause direction of the management and policies of such
     corporation, partnership, limited liability company or real estate
     investment trust, whether through the ownership of Voting Stock, as
     managing or general partner, by contract or otherwise.

          "Agency Services Address" means Bank of America, N.A./Loan
     Administration, 5 Park Plaza, Suite 500, Irvine, California 92614,
     Attention: Nancy Miller, or such other address as may be identified by
     written notice from the Administrative Agent to the Borrower and the
     Lenders.

          "Agent-Related Person" means the Administrative Agent, together with
     its Affiliates, including the Arranger, and their respective officers,
     directors, employees, agents, counsel and attorneys-in-fact.

          "Aggregate Adjusted Current Value" means, as of any date of
     determination, the sum of the Adjusted Current Values as of such date for
     all Properties owned by the Consolidated Group.

          "Applicable Cap Rate" means 9.50% for all Properties; provided,
     however, that the Required Lenders shall have the right, at the end of any
     calendar year, to review and adjust,

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     in their reasonable discretion, the Applicable Cap Rate, which change shall
     become effective immediately upon written notice by the Administrative
     Agent to the Borrower.

          "Arranger" means Banc of America Securities LLC, in its capacity as
     sole lead arranger and sole book manager.

          "Assignment Agreement" means any assignment agreement between an
     assigning Lender and an Eligible Assignee substantially in the form of
     Exhibit 11.3.

          "Attorney Costs" means all reasonable fees and disbursements of any
     law firm or other external counsel and the reasonable allocated cost of
     internal legal services and all disbursements of internal counsel.

          "Bank of America" means Bank of America, N.A., a national banking
     association.

          "Bankruptcy Code" means the Bankruptcy Code in Title 11 of the United
     States Code, as amended, modified, succeeded or replaced from time to time.

          "BAS" means Banc of America Securities LLC or any successor thereto.

          "Base Rate" means, for any day, the rate per annum equal to the
     greater of (a) the Federal Funds Rate in effect on such day plus 1/2 of 1%
     or (b) the Prime Rate in effect on such day. Any change in the Base Rate
     due to a change in the Prime Rate or the Federal Funds Rate shall be
     effective on the effective date of such change in the Prime Rate or the
     Federal Funds Rate, respectively.

          "Base Rate Loan" means a Term Loan bearing interest based at a rate
     determined by reference to the Base Rate.

          "Borrower" means Pan Pacific Retail Properties, Inc., a Maryland
     corporation.

          "Business Day" means any day other than a Saturday, a Sunday, a legal
     holiday or a day on which banking institutions are authorized or required
     by law or other governmental action to close in Los Angeles, California;
     provided that in the case of LIBOR Loans, such day is also a day on which
     dealings between banks are carried on in U.S. dollar deposits in the London
     interbank market.

          "Capital Expenditures" means all actual expenditures of any Person for
     replacements and substitutions of improvements to any Property that, in
     accordance with GAAP, would be classified on the balance sheet of such
     Person as Capital Expenditures, including, without limitation, Capital
     Leases.

          "Capital Lease" means, as applied to any Person, any lease of any
     property (whether real, personal or mixed) by that Person as lessee which,
     in accordance with GAAP, is or should be accounted for as a capital lease
     on the balance sheet of such Person.

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          "Capital Stock" means (a) in the case of a corporation, all classes of
     capital stock of such corporation, (b) in the case of a partnership,
     partnership interests (whether general, limited or operating partnership
     units), (c) in the case of a limited liability company, membership
     interests and (d) any other interest or participation that confers on a
     Person the right to receive a share of the profits and losses of, or
     distribution of assets of, the issuing Person.

          "Cash Equivalents" means (a) securities issued or directly and fully
     guaranteed or insured by the United States of America or any agency or
     instrumentality thereof (provided that the full faith and credit of the
     United States of America is pledged in support thereof) having maturities
     of not more than twelve months from the date of acquisition, (b) U.S.
     dollar denominated time and demand deposits and certificates of deposit of
     (i) any Lender or any of its Affiliates, (ii) any domestic commercial bank
     having capital and surplus in excess of $500,000,000 or (iii) any bank
     whose short-term commercial paper rating from S&P is at least A-1 or the
     equivalent thereof or from Moody's is at least P-1 or the equivalent
     thereof (any such bank being an "Approved Bank"), in each case with
     maturities of not more than 270 days from the date of acquisition, (c)
     commercial paper and variable or fixed rate notes issued by any Approved
     Bank (or by the parent company thereof) or any variable rate notes issued
     by, or guaranteed by, any domestic corporation rated A-1 (or the equivalent
     thereof) or better by S&P or P-1 (or the equivalent thereof) or better by
     Moody's and maturing within six months of the date of acquisition, (d)
     repurchase agreements with a bank or trust company (including any of the
     Lenders) or securities dealer having capital and surplus in excess of
     $500,000,000 for direct obligations issued by or fully guaranteed by the
     United States of America in which a Credit Party shall have a perfected
     first priority security interest (subject to no other Liens) and having, on
     the date of purchase thereof, a fair market value of at least 100% of the
     amount of the repurchase obligations and (e) Investments, classified in
     accordance with GAAP as current assets, in money market investment programs
     registered under the Investment Company Act of 1940, as amended, which are
     administered by financial institutions having capital of at least
     $500,000,000 and the portfolios of which are limited to Investments of the
     character described in the foregoing subdivisions (a) through (d).

          "Change of Control" means either of the following events:

               (a) other than Revenue Properties (U.S.), Inc., a Delaware
          corporation any "person" or "group" (within the meaning of Section
          13(d) or 14(d) of the Exchange Act) has become, directly or
          indirectly, the "beneficial owner" (as defined in Rules 13d-3 and
          13d-5 under the Exchange Act), by way of merger, consolidation or
          otherwise of 20% or more of the Voting Stock of the Borrower on a
          fully-diluted basis, after giving effect to the conversion and
          exercise of all outstanding warrants, options and other securities of
          the Borrower convertible into or exercisable for Voting Stock of the
          Borrower (whether or not such securities are then currently
          convertible or exercisable); or

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               (b) during any period of two consecutive calendar years,
          individuals who at the beginning of such period constituted the board
          of directors of the Borrower together with any new members of such
          board of directors whose elections by such board or board of directors
          or whose nomination for election by the stockholders of the Borrower
          was approved by a vote of a majority of the members of such board of
          directors then still in office who either were directors at the
          beginning of such period or whose election or nomination for election
          was previously so approved cease for any reason to constitute a
          majority of the directors of the Borrower then in office.

          "Closing Date" means the date hereof.

          "Code" means the Internal Revenue Code of 1986, as amended, and any
     successor statute thereto, as interpreted by the rules and regulations
     issued thereunder, in each case as in effect from time to time. References
     to sections of the Code shall be construed also to refer to any successor
     sections.

          "Combined Parties" means the Credit Parties and their Subsidiaries and
     all joint ventures or general or limited partnerships to which a Credit
     Party or one of its Subsidiaries is a party.

          "Commitment" means, with respect to each Lender, such Lender's
     Commitment Percentage of the Term Loan Amount and "Commitments" means,
     collectively, the sum of each Lender's Commitment.

          "Commitment Percentage" means, for each Lender, the percentage
     identified as its Commitment Percentage on Schedule 1.1(a), as such
     percentage may be increased or decreased as a result of any assignment made
     in accordance with the provisions of Section 11.3.

          "Consolidated Group" means the Credit Parties and all Subsidiaries of
     the Credit Parties, the financial statements of whom are consolidated with
     those of the Borrower in accordance with GAAP.

          "Consolidated Interest Expense" means, for any period, subject to
     Section 1.4, the interest expense of the Combined Parties (including,
     without limitation, imputed interest on Capital Leases, all commissions,
     discounts and other fees and charges owed with respect to letters of credit
     and bankers' acceptance financing, the net costs associated with Hedging
     Obligations, amortization of other financing fees and expenses, the
     interest portion of any deferred payment obligation, amortization of
     discounts or premiums, if any, and all non-cash interest expense).

          "Consolidated Net Income" means, for any period, subject to Section
     1.4, the net income (or loss) of the Combined Parties.

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          "Consolidated Tangible Net Worth" means, as of any date of
     calculation, an amount equal to (a) total assets of the Consolidated Group
     as determined in accordance with GAAP minus (b) the amount of intangible
     assets of the Consolidated Group as determined in accordance with GAAP,
     including, without limitation, deferred costs associated with goodwill,
     intellectual property, franchises, organizational expenses, deferred
     financing charges, debt acquisition costs, start-up costs, pre-opening
     costs, prepaid pension costs or any other deferred charges minus (c) the
     total liabilities of the Consolidated Group as determined in accordance
     with GAAP.

          "Credit Documents" means this Credit Agreement, the Notes, any Request
     for Funding of Term Loans, any Notice of Continuation/Conversion and all
     other related agreements and documents issued or delivered hereunder or
     thereunder or pursuant hereto or thereto.

          "Credit Exposure" has the meaning set forth in the definition of
     Required Lenders in this Section 1.1.

          "Credit Parties" means the Borrower and the Guarantors and "Credit
     Party" means any one of them.

          "Debt Rating" means, as to any Person, the long-term, senior,
     unsecured, non-credit enhanced debt rating of such Person from S&P or
     Moody's.

          "Default" means any event, act or condition which with notice or lapse
     of time, or both, would constitute an Event of Default.

          "Defaulting Lender" means, at any time, any Lender that, (a) has
     failed to make its Term Loan or purchase a Participation Interest required
     pursuant to the terms of this Credit Agreement (but only for so long as
     such Term Loan is not made or such Participation Interest is not
     purchased), (b) has failed to pay to the Administrative Agent or any Lender
     an amount owed by such Lender pursuant to the terms of this Credit
     Agreement (but only for so long as such amount has not been repaid) or (c)
     has been deemed insolvent or has become subject to a bankruptcy or
     insolvency proceeding or to a receiver, trustee or similar official.

          "Dollars" and "$" means dollars in lawful currency of the United
     States of America.

          "Effective Date" means the date on which the conditions set forth in
     Section 5.1 shall have been fulfilled (or waived in the sole discretion of
     the Lenders).

          "Eligible Assignee" means (a) any Lender or any Affiliate or
     Subsidiary of a Lender (without the approval or consent of any Person) and
     (b) any other Person approved by the Administrative Agent and the Borrower
     (such approval not to be unreasonably withheld or delayed); provided that
     (i) the Borrower's consent is not required during the existence and
     continuation of an Event of Default and (ii) approval by the Borrower shall
     be deemed

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<PAGE>   13

     given if no objection is received by the assigning Lender and the
     Administrative Agent from the Borrower within five Business Days after
     notice of such proposed assignment has been received by the Borrower.

          "Environmental Claim" means any investigation, written notice,
     violation, written demand, written allegation, action, suit, injunction,
     judgment, order, consent decree, penalty, fine, lien, proceeding, or
     written claim whether administrative, judicial or private in nature arising
     (a) pursuant to, or in connection with, an actual or alleged violation of,
     any Environmental Law, (b) in connection with any Hazardous Material, (c)
     from any assessment, abatement, removal, remedial, corrective, or other
     response action in connection with an Environmental Law or other order of a
     Governmental Authority or (d) from any actual or alleged damage, injury,
     threat, or harm to health, safety, natural resources, or the environment.

          "Environmental Laws" means any current or future legal requirement of
     any Governmental Authority pertaining to (a) the protection of surface
     water and groundwater from contamination with Hazardous Materials, (b) the
     management, manufacture, possession, presence, use, generation,
     transportation, treatment, storage, disposal, release, threatened release,
     abatement, removal, remediation or handling of, or exposure to, any
     hazardous or toxic substance or material or (c) pollution (including any
     release to land surface water and groundwater) and includes, without
     limitation, the Comprehensive Environmental Response, Compensation, and
     Liability Act of 1980, as amended by the Superfund Amendments and
     Reauthorization Act of 1986, 42 USC 9601 et seq., Solid Waste Disposal Act,
     as amended by the Resource Conservation and Recovery Act of 1976 and
     Hazardous and Solid Waste Amendment of 1984, 42 USC 6901 et seq., Federal
     Water Pollution Control Act, as amended by the Clean Water Act of 1977, 33
     USC 1251 et seq., Clean Air Act of 1966, as amended, 42 USC 7401 et seq.,
     Toxic Substances Control Act of 1976, 15 USC 2601 et seq., Hazardous
     Materials Transportation Act, 49 USC App. 1801 et seq., Occupational Safety
     and Health Act of 1970, as amended, 29 USC 651 et seq., Oil Pollution Act
     of 1990, 33 USC 2701 et seq., Emergency Planning and Community
     Right-to-Know Act of 1986, 42 USC 11001 et seq., National Environmental
     Policy Act of 1969, 42 USC 4321 et seq., Safe Drinking Water Act of 1974,
     as amended, 42 USC 300(f) et seq., any analogous implementing or successor
     law, and any amendment, rule, regulation, order, or directive issued
     thereunder.

          "Equity Issuance" means any issuance by a member of the Consolidated
     Group to any Person of (a) shares of its Capital Stock or other equity
     interests, (b) any shares of its Capital Stock or other equity interests
     pursuant to the exercise of options (other than stock issued to employees
     and directors pursuant to employees or directors stock option plans) or
     warrants or (c) any shares of its Capital Stock or other equity interests
     pursuant to the conversion of any debt securities to equity.

          "ERISA" means the Employee Retirement Income Security Act of 1974, as
     amended, and any successor statute thereto, as interpreted by the rules and
     regulations thereunder, all as the same may be in effect from time to time.
     References to sections of

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<PAGE>   14

     ERISA shall be construed also to refer to any successor sections.

          "ERISA Affiliate" means an entity, whether or not incorporated, which
     is under common control with a member of the Consolidated Group within the
     meaning of Section 4001(a)(14) of ERISA, or is a member of a group which
     includes a member of the Consolidated Group and which is treated as a
     single employer under Sections 414(b), (c), (m) or (o) of the Code.

          "ERISA Event" means (a) with respect to any Single Employer or
     Multiple Employer Plan, the occurrence of a Reportable Event or the
     substantial cessation of operations (within the meaning of Section 4062(e)
     of ERISA); (b) the withdrawal of the Borrower, any member of the
     Consolidated Group or any ERISA Affiliate from a Multiple Employer Plan
     during a plan year in which it was a substantial employer (as such term is
     defined in Section 4001(a)(2) of ERISA), or the termination of a Multiple
     Employer Plan; (c) the distribution of a notice of intent to terminate or
     the actual termination of a Plan pursuant to Section 4041(a)(2) or 4041A of
     ERISA; (d) the institution of proceedings to terminate or the actual
     termination of any Plan by the PBGC under Section 4042 of ERISA; (e) any
     event or condition which might constitute grounds under Section 4042 of
     ERISA for the termination of, or the appointment of a trustee to
     administer, any Plan; (f) the complete or partial withdrawal of the
     Borrower, any member of the Consolidated Group or any ERISA Affiliate from
     a Multiemployer Plan or notification that a Multiemployer Plan is in
     reorganization; (g) the conditions for imposition of a lien under Section
     302(f) of ERISA exist with respect to any Plan; or (h) the adoption of an
     amendment to any Plan requiring the provision of security to such Plan
     pursuant to Section 307 of ERISA.

          "Event of Default" means any of the events or circumstances described
     in Section 9.1.

          "Exchange Act" means the Securities Exchange Act of 1934, as amended,
     modified, succeeded or replaced from time to time, and the rules and
     regulations promulgated thereunder.

          "Extended Maturity Date" means February 13, 2002.

          "Federal Funds Rate" means, for any day, the rate set forth in the
     weekly statistical release designated as H.15(519), or any successor
     publication, published by the Federal Reserve Bank of New York on the
     preceding Business Day opposite the caption "Federal Funds (Effective)";
     or, if for any relevant day such rate is not so published on any such
     preceding Business Day, the rate for such day will be the arithmetic mean
     as determined by the Administrative Agent of the rates for the last
     transaction in overnight Federal funds arranged prior to 9:00 a.m. (New
     York City time) on that day by each of three leading brokers of Federal
     funds transactions in New York City selected by the Administrative Agent.

          "Fee Letter" means that certain letter agreement, dated as of November
     13, 2000,

                                       9
<PAGE>   15

     between the Administrative Agent and the Borrower, as amended, modified,
     supplemented or replaced from time to time.

          "Fixed Charge Coverage Ratio" means, for any period, the ratio of (a)
     Adjusted EBITDA for the twelve month period ending on such date to (b)
     Actual Debt Service for the twelve month period ending on such date.

          "Funds From Operations", when used with respect to any Person, shall
     have the meaning given to such term in, and shall be calculated in
     accordance with, standards promulgated by the National Association of Real
     Estate Investment Trusts in effect from time to time.

          "GAAP" means generally accepted accounting principles in the United
     States applied on a consistent basis and subject to Section 1.3.

          "Governmental Authority" means any Federal, state, local or provincial
     court or governmental agency, authority, instrumentality or regulatory
     body.

          "Guarantor" means (a) each Subsidiary of the Borrower that is
     identified as a Guarantor on the signature pages hereto and (b) any such
     Person who may from time to time execute a Joinder Agreement or otherwise
     consent in writing to becoming a Guarantor hereunder, as required by
     Section 7.12 or otherwise, in each case together with their successors and
     assigns.

          "Guaranty Obligations" means, with respect to any Person, without
     duplication, any obligations (other than endorsements in the ordinary
     course of business of negotiable instruments for deposit or collection)
     guaranteeing or intended to guarantee any Indebtedness of any other Person
     in any manner, whether direct or indirect, and including without limitation
     any obligation, whether or not contingent, (a) to purchase any such
     Indebtedness or other obligation or any property constituting security
     therefor, (b) to advance or provide funds or other support for the payment
     or purchase of such indebtedness or obligation or to maintain working
     capital, solvency or other balance sheet condition of such other Person
     (including, without limitation, maintenance agreements, comfort letters,
     take or pay arrangements, put agreements or similar agreements or
     arrangements) for the benefit of the holder of Indebtedness of such other
     Person, (c) to lease or purchase property, securities or services primarily
     for the purpose of assuring the owner of such Indebtedness or (d) to
     otherwise assure or hold harmless the owner of such Indebtedness or
     obligation against loss in respect thereof. The amount of any Guaranty
     Obligation shall be deemed equal to the stated or determinable amount of
     the primary obligation in respect of which such Guaranty Obligation is made
     or, if not stated or if indeterminable, the maximum reasonably anticipated
     liability in respect thereof.

          "Hazardous Materials" means any substance, material or waste defined
     or regulated in or under any Environmental Laws.

                                       10
<PAGE>   16

          "Hedging Obligations" means, with respect to any Person, the net
     obligations of such Person pursuant to any interest rate hedging agreement
     or any foreign exchange contract, currency swap arrangement, or other
     similar agreement to which such Person is a party or of which such Person
     is a beneficiary.

          "Indebtedness" of any Person means, without duplication, subject to
     Section 1.4 (a) all indebtedness for borrowed money; (b) all obligations
     issued, undertaken or assumed as the deferred purchase price of property or
     services (other than intercompany items or trade payables entered into in
     the ordinary course of business on ordinary terms); (c) all reimbursement
     or payment obligations with respect to Surety Instruments; (d) all
     obligations evidenced by notes, bonds, debentures or similar instruments,
     including obligations so evidenced incurred in connection with the
     acquisition of property, assets or businesses; (e) all indebtedness created
     or arising under any conditional sale or other title retention agreement,
     or incurred as financing, in either case with respect to property acquired
     by such Person (even though the rights and remedies of the seller or bank
     under such agreement in the event of default are limited to repossession or
     sale of such property); (f) all obligations to purchase any materials,
     supplies or other property from, or to obtain the services of, another
     Person if the relevant contract or other related document or obligation
     requires that payment for such materials, supplies or other property, or
     for such services, shall be made regardless of whether delivery of such
     materials, supplies or other property is ever made or tendered, or such
     services are ever performed or tendered; (g) all Hedging Obligations; (h)
     the principal portion of all obligations of such Person under (1) Capital
     Leases, (2) any Synthetic Lease and (3) any forward purchase commitment or
     forward equity sale, (i) all preferred stock issued by such Person and
     required by the terms thereof to be redeemed, or for which mandatory
     sinking fund payments are due, by a fixed date, (j) the aggregate amount of
     uncollected accounts receivable of such Person subject at such time to a
     sale of receivables (or similar transaction) regardless of whether such
     transaction is effected without recourse to such Person or in a manner that
     would not be reflected on the balance sheet of such Person in accordance
     with GAAP, (k) all indebtedness referred to in clauses (a) through (j)
     above secured by (or for which the holder of such Indebtedness has an
     existing right, contingent or otherwise, to be secured by) any Lien upon or
     in property (including accounts and contracts rights) owned by such Person,
     even though such Person has not assumed or become liable for the payment of
     such Indebtedness; and (l) all Guaranty Obligations in respect of
     indebtedness or obligations of others of the kinds referred to in clauses
     (a) through (j) above. "Indebtedness" does not include, however, security
     deposits, accounts payable, accrued liabilities and any prepaid rents (as
     such terms are defined in accordance with GAAP). For the purposes of
     calculating Indebtedness, the amount of any contingent obligations with
     respect to Hedging Obligations, Surety Instruments or other Indebtedness
     shall be equal to the maximum reasonably anticipated liability in respect
     thereof.

          "Indemnified Liabilities" has the meaning set forth in Section 11.5.

          "Initial Maturity Date" means November 12, 2001.

                                       11
<PAGE>   17

          "Interest Payment Date" means (a) as to Base Rate Loans, the first
     calendar day of each month and the Maturity Date, (b) as to any LIBOR Loan
     having an Interest Period of one month or less, the first calendar day of
     the next succeeding month following the last day of such Interest Period
     and the Maturity Date and (c) as to any LIBOR Loan having an Interest
     Period of more than one month, the first calendar day of each month, the
     first calendar day of the next succeeding month following the last day of
     such Interest Period, and the Maturity Date.

          "Interest Period" means, as to LIBOR Loans, a period of seven days or
     a period of one, two, three, four or six months' duration as the Borrower
     may elect, commencing, in each case, on the date of the borrowing
     (including continuations and conversions thereof); provided, however, (a)
     no Interest Period shall end on a day which is not a Business Day, and (b)
     no Interest Period shall extend beyond the Maturity Date.

          "Investment" in any Person means (a) the acquisition (whether for
     cash, property, services, assumption of Indebtedness, securities or
     otherwise) of assets, (including, without limitation, raw land, non-retail
     properties and minority interests in joint ventures) Capital Stock, bonds,
     notes, debentures or other securities of such other Person, (b) any deposit
     with, or advance, loan or other extension of credit to, such Person (other
     than deposits made in connection with the purchase of equipment or other
     assets in the ordinary course of business) or (c) any other capital
     contribution to or investment in such Person, including, without
     limitation, any Guaranty Obligation (including any support for a letter of
     credit issued on behalf of such Person) incurred for the benefit of such
     Person; provided that Investment shall not include any retail property that
     is a neighborhood retail shopping center.

          "IRS" means the Internal Revenue Service of the United States of
     America, or any successor agency thereof.

          "Joinder Agreement" means a Joinder Agreement substantially in the
     form of Exhibit 7.12.

          "Lender" means any of the Persons identified as a "Lender" on the
     signature pages hereto, and any Person which may become a Lender by way of
     assignment in accordance with the terms hereof, together with their
     successors and permitted assigns.

          "Lending Office" means, as to any Lender, the office or offices of
     such Lender described as such on Schedule 11.1, or such other office or
     offices as a Lender may from time notify to the Borrower and the
     Administrative Agent.

          "Leverage Ratio" means the ratio of (a) total Indebtedness of the
     Consolidated Group to (b) Total Assets.

          "LIBOR Banking Day" means any Business Day on which banks are open for

                                       12
<PAGE>   18

     business in London, England.

          "LIBOR Base Rate" means the offered rate (determined solely by the
     Administrative Agent) for a period of time comparable to the number of days
     in the applicable Interest Period for deposits in Dollars, as shown on
     Telerate Page 3750 as of 11:00 a.m. London time two LIBOR Banking Days
     prior to the first day of the applicable Interest Period, or if Telerate
     Page 3750 is unavailable, the rate for such deposits determined by the
     Administrative Agent at such time based on such other published service of
     general application as shall be selected by the Administrative Agent for
     such purpose. The determination of the LIBOR Base Rate by the
     Administrative Agent shall be conclusive in the absence of manifest error.
     "Telerate Page 3750" means the display designated as such on Teleratesystem
     Incorporated (or such other page as may replace page 3750 on that service
     for the purpose of displaying London interbank offered rates of major banks
     for Dollar deposits).

          "LIBOR Loan" means a Term Loan bearing interest based at a rate
     determined by reference to the Adjusted LIBOR Rate.

          "LIBOR Rate" means, for each LIBOR Loan comprising part of the same
     borrowing (including conversions, extensions and renewals), a per annum
     interest rate determined pursuant to the following formula:

           LIBOR Rate  =        LIBOR Base Rate
                          ----------------------------
                          1 - LIBOR Reserve Percentage

          "LIBOR Reserve Percentage" means the total of the maximum reserve
     percentages for determining the reserves to be maintained by member banks
     of the Federal Reserve System for Eurocurrency Liabilities, as defined in
     Regulation D. The Reserve Percentage shall be expressed as a decimal and
     rounded upward, if necessary, to the nearest 1/100th of one percent, and
     shall include marginal, emergency, supplemental, special and other reserve
     percentages.

          "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
     arrangement, security interest, encumbrance, lien (statutory or otherwise),
     preference, priority or charge of any kind, including, without limitation,
     any agreement to give any of the foregoing, any conditional sale or other
     title retention agreement, and any lease in the nature thereof.

          "Margin Increase" means, with respect to any Term Loan, the Adjusted
     LIBOR Rate or the Base Rate, as applicable, plus one-quarter of one percent
     (.25%).

          "Material Adverse Effect" means (a) a material adverse change in or
     effect upon the operations, business, properties, condition (financial or
     otherwise) or prospects of the Consolidated Group, taken as a whole, (b) a
     material impairment of the ability of a Credit Party to perform its
     respective obligations under this Credit Agreement or any of the other

                                       13
<PAGE>   19

     Credit Documents, or (c) a material adverse effect upon the legality,
     validity, binding effect or enforceability against the Credit Parties of
     this Credit Agreement or any of the other Credit Documents.

          "Maturity Date" means the Initial Maturity Date or, if the conditions
     set forth in Section 3.5 have been satisfied, the Extended Maturity Date.

          "Minority Interests" means interests owned by Persons (other than a
     member of the Consolidated Group) in a Subsidiary of the Borrower in which
     less than 100% of the Capital Stock is owned by the members of the
     Consolidated Group.

          "Moody's" means Moody's Investors Service, Inc., or any successor or
     assignee of the business of such company in the business of rating
     securities.

          "Multiemployer Plan" means a Plan which is a multiemployer plan as
     defined in Sections 3(37) or 4001(a)(3) of ERISA.

          "Multiple Employer Plan" means a Plan covered by Title IV of ERISA
     (other than a Multiemployer Plan) in which a member of the Consolidated
     Group or any ERISA Affiliate and at least one employer other than a member
     of the Consolidated Group or any ERISA Affiliate are contributing sponsors.

          "Net Cash Proceeds" means the gross cash proceeds received from a
     Public Debt Issuance or Equity Issuance, in each case net of actual
     transaction costs paid or payable to third parties.

          "Net Operating Income" or "NOI" means, for any Property, subject to
     Section 1.4, as of any date and calculated on a cash basis, (a) the gross
     rental income of such Property for the immediately preceding four
     consecutive calendar quarters, minus (b) the aggregate amount of all actual
     operating expenses (excluding Capital Expenditures) for such Property
     during such period, minus (c) imputed Capital Expenditures in an amount
     equal to the greater of (i) the product of (A) the monthly weighted average
     net rentable square footage of such Property for such period times (B)
     $0.25 and (ii) the aggregate amount of all Capital Expenditures for such
     Property during such period.

          In the event the Administrative Agent receives operating statements
     covering only a portion of the relevant four calendar quarter period (due
     to the fact that the Property has been owned for less than four calendar
     quarters), the Administrative Agent shall calculate Net Operating Income
     for such Property based on an annualization of the operating statements
     which have been provided, subject to such adjustments as the Administrative
     Agent deems appropriate in its sole discretion to accurately reflect
     anticipated annualized operating results. In the event (a) the Borrower
     has, within the two calendar quarters preceding the date of calculation,
     completed the build-out of additional in-line shop space or pad space on
     any Property, (b) such additional space has been leased to tenants who have
     commenced paying rent, are in occupancy and have opened for business in
     such

                                       14
<PAGE>   20

     space, and (c) the Administrative Agent determines that, as a result of the
     leasing of such additional space, annual Net Operating Income for such
     Property will increase by at least $250,000 for the following year, then
     Net Operating Income for such Property shall be calculated based upon the
     operating statement for such Property covering the most recently completed
     calendar quarter, subject to such adjustments as the Administrative Agent
     deems appropriate in its sole discretion to accurately reflect anticipated
     annualized operating results. In addition, the Administrative Agent may, in
     its sole discretion, reduce the Net Operating Income for any Property by
     the amount of rents attributable to any leases (i) which are in default or
     which have terminated or are otherwise no longer in effect, or (ii) which
     are otherwise unacceptable to the Administrative Agent in its sole
     discretion.

          For the purposes of calculating Net Operating Income for any Property
     acquired by a Combined Party as a result of the Western Acquisition, such
     Property shall be deemed to have been owned by such Combined Party for a
     period equal to (A) the amount of time Western or one of its Subsidiaries
     owned such Property prior to the Western Acquisition plus (B) the amount of
     time such Property has been owned by a Combined Party following the Western
     Acquisition.

          "Note" or "Notes" means the promissory notes of the Borrower in the
     form of Exhibit 2.3 in favor of each of the Lenders evidencing the Term
     Loans, individually or collectively, as appropriate, as such promissory
     notes may be amended, modified, supplemented, extended, renewed or replaced
     from time to time.

          "Notice of Continuation/Conversion" means a request by the Borrower to
     continue an existing LIBOR Loan to a new Interest Period or to convert a
     LIBOR Loan to a Base Rate Loan or to convert a Base Rate Loan to a LIBOR
     Loan, in the form of Exhibit 2.2.

          "Obligations" means, without duplication, all of the obligations of
     the Credit Parties to the Lenders and the Administrative Agent, whenever
     arising, under this Credit Agreement, the Notes, or any of the other Credit
     Documents to which a Credit Party is a party.

          "Other Taxes" has the meaning set forth in Section 3.13(b).

          "Participation Interest" means the extension of credit by a Lender by
     way of a purchase of a participation in any Term Loans as provided in
     Section 3.8.

          "PBGC" means the Pension Benefit Guaranty Corporation established
     pursuant to Subtitle A of Title IV of ERISA and any successor thereto.

          "Person" means any individual, partnership, joint venture, firm,
     corporation, limited liability company, association, trust, REIT or other
     enterprise (whether or not incorporated), or any Governmental Authority.

                                       15
<PAGE>   21

          "Plan" means any employee benefit plan (as defined in Section 3(3) of
     ERISA) which is covered by ERISA and with respect to which a member of the
     Consolidated Group or any ERISA Affiliate is (or, if such plan were
     terminated at such time, would under Section 4069 of ERISA be deemed to be)
     an "employer" within the meaning of Section 3(5) of ERISA.

          "Plaza Escuela Note Receivable" means the account receivable of the
     Borrower evidenced by the promissory note of Plaza Escuela, LLC, dated as
     of December 31, 1999, in favor of Western and acquired by the Borrower
     pursuant to the Western Acquisition.

          "Prime Rate" means the per annum rate of interest established from
     time to time by the Administrative Agent at its principal office in
     Charlotte, North Carolina as its "prime rate". Any change in the interest
     rate resulting from a change in the Prime Rate shall become effective as of
     12:01 a.m. of the Business Day on which each change in the Prime Rate is
     announced by the Administrative Agent. The Prime Rate is a rate set by Bank
     of America based upon various factors, including Bank of America's costs
     and desired return, general economic conditions and other factors, and is
     used as a reference point for pricing some loans, which may be priced at,
     above, or below such announced rate. Any change in such rate announced by
     Bank of America shall take effect at the opening of business on the day
     specified in the public announcement of such change.

          "Properties" means all real properties owned by the Combined Parties.

          "Public Debt Issuance" means the issuance of any Indebtedness for
     borrowed money by a member of the Consolidated Group, pursuant to a public
     debt offering.

          "Register" has the meaning set forth in Section 11.3(c).

          "Regulation A, D, T, U or X" means Regulation A, D, O, T, U or X,
     respectively, of the Board of Governors of the Federal Reserve System as
     from time to time in effect and any successor to all or a portion thereof.

          "REIT" means a real estate investment trust as defined in Sections
     856-860 of the Code.

          "Reportable Event" means any of the events set forth in Section
     4043(c) of ERISA, other than those events as to which the notice
     requirement has been waived by regulation or by the PBGC.

          "Request for Funding of Term Loans" means a request by the Borrower
     for the funding of the Term Loans, in the form of Exhibit 2.1(b).

          "Required Lenders" means the Administrative Agent together with the
     Lenders whose aggregate Credit Exposure (as hereinafter defined)
     constitutes more than 66-2/3 % of the Credit Exposure of all Lenders at
     such time; provided, however, that if any Lender shall

                                       16
<PAGE>   22

     be a Defaulting Lender at such time then there shall be excluded from the
     determination of Required Lenders the aggregate principal amount of Credit
     Exposure of such Lender at such time. For purposes of the preceding
     sentence, the term "Credit Exposure" as applied to each Lender shall mean
     (a) at any time prior to the making of the Term Loans, the Commitment of
     such Lender and (b) at any time on and after the making of the Term Loans,
     the principal balance of the outstanding Term Loans of such Lender.

          "Requirement of Law" means, as to any Person, the articles or
     certificate of incorporation and by-laws or other organizational or
     governing documents of such Person, and any law, treaty, rule or regulation
     or final, non-appealable determination of an arbitrator or a court or other
     Governmental Authority, in each case applicable to or binding upon such
     Person or to which any of its material property is subject.

          "Revolving Credit Agreement" means that certain Revolving Credit
     Agreement, dated as of the Closing Date, among the Borrower, the
     Guarantors, the Administrative Agent and the lenders party thereto, as the
     same may be amended, restated, replaced, supplemented or extended from time
     to time.

          "S&P" means Standard & Poor's Ratings Group, a division of McGraw
     Hill, Inc., or any successor or assignee of the business of such division
     in the business of rating securities.

          "Secured Debt" means all Indebtedness of the Consolidated Group that
     is secured by a Lien in favor of the creditor holding such Indebtedness;
     provided that any Indebtedness owed to the Lenders hereunder shall be
     considered to be Unsecured Debt even if a Lien has been granted in favor of
     the Lenders.

          "Secured Debt Ratio" means the ratio of (a) Secured Debt to (b)
     Aggregate Adjusted Current Value.

          "Securities Act" means the Securities Act of 1933, as amended,
     modified, succeeded or replaced from time to time, and the rules and
     regulations promulgated thereunder.

          "Senior Notes" means (a) those certain senior, unsecured 7.78% notes
     due 2004, in the aggregate principal amount of $50,000,000, issued by
     Western pursuant to that certain Indenture, dated as of February 24, 1994,
     between Western and Boatman's Trust Company, as trustee and (b) those
     certain senior, unsecured 7.1%, 7.2% and 7.3% notes due 2006, 2008 and
     2010, respectively, in the aggregate principal amount of $75,000,000,
     issued by Western pursuant to that certain Indenture, dated as of September
     1, 1997, between Western and The Bank of New York, as trustee.

          "Significant Acquisition" means the acquisition by any Credit Party of
     (a) all of the assets or Capital Stock of a Person or (b) a Property or
     portfolio of Properties, in each case where the purchase price of such
     assets, Capital Stock, Property or Properties exceeds 15% of "total assets"
     of the Consolidated Group, as determined in accordance with GAAP, as

                                       17
<PAGE>   23

     calculated immediately prior to such acquisition; provided that the Western
     Acquisition shall not be considered a Significant Acquisition.

          "Single Employer Plan" means any Plan which is covered by Title IV of
     ERISA, but which is not a Multiemployer Plan or a Multiple Employer Plan.

          "Solvent" means, with respect to any Person as of a particular date,
     that on such date (a) such Person is able to pay its debts and other
     liabilities, contingent obligations and other commitments as they mature in
     the normal course of business, (b) such Person does not intend to, and does
     not believe that it will, incur debts or liabilities beyond such Person's
     ability to pay as such debts and liabilities mature in their ordinary
     course, (c) such Person is not engaged in a business or a transaction, and
     is not about to engage in a business or a transaction, for which such
     Person's assets would constitute unreasonably small capital after giving
     due consideration to the prevailing practice in the industry in which such
     Person is engaged or is to engage, (d) the fair value of the assets of such
     Person is greater than the total amount of liabilities, including, without
     limitation, contingent liabilities, of such Person and (e) the present fair
     saleable value of the assets of such Person is not less than the amount
     that will be required to pay the probable liability of such Person on its
     debts as they become absolute and matured. In computing the amount of
     contingent liabilities at any time, it is intended that such liabilities
     will be computed at the amount which, in light of all the facts and
     circumstances existing at such time, represents the amount that can
     reasonably be expected to become an actual or matured liability.

          "Subsidiary" means, as to any Person, any corporation, partnership,
     association, joint venture, limited liability company, real estate
     investment or other trust or other entity more than 50% of whose Voting
     Stock (irrespective of whether or not at the time, any such Voting Stock
     shall have or might have voting power or control by reason of the happening
     of any contingency) is at the time owned by such Person directly or
     indirectly through Subsidiaries.

          "Surety Instruments" means all letters of credit (including standby
     and commercial), banker's acceptances, bank guaranties, shipside bonds,
     surety bonds and similar instruments.

          "Synthetic Lease" means any synthetic lease, tax retention operating
     lease, off-balance sheet loan or similar off-balance sheet financing
     product where such transaction is considered borrowed money indebtedness
     for tax purposes but is classified as an operating lease in accordance with
     GAAP.

          "Taxes" has the meaning set forth in Section 3.13(a).

          "Term Loan Amount" means ONE HUNDRED MILLION DOLLARS ($100,000,000).

          "Term Loans" means the term loans made to the Borrower pursuant to
     Section 2.1.

                                       18
<PAGE>   24

          "Total Assets" means, as of any date of calculation, without
     duplication, subject to Section 1.4, the sum of (a) the Aggregate Adjusted
     Current Value plus (b) all cash and Cash Equivalents of the Consolidated
     Group plus (c) provided that no default has occurred and is continuing
     under the Plaza Escuela Note Receivable, the outstanding principal balance
     of the Plaza Escuela Note Receivable plus (d) all cash Investments as of
     such date by any member of the Consolidated Group in any Properties
     currently under development.

          "Unencumbered Debt Service Coverage Ratio" means the ratio of (a) the
     aggregate amount of NOI with respect to all Unencumbered Properties for the
     prior twelve month period to (b) Actual Debt Service with respect to
     Unsecured Debt for the prior twelve month period.

          "Unencumbered Properties" means all Properties that are not subject to
     a Lien other than (a) nonconsensual Liens permitted by the terms of Section
     8.2(a)(i) and (ii) of the Revolving Credit Agreement and (b) Liens in favor
     of the Lenders.

          "Unsecured Debt" means the sum of all Indebtedness of the Consolidated
     Group that was incurred, and continues to be outstanding, without granting
     a Lien to the creditor holding such Indebtedness; provided that all
     Indebtedness of the Consolidated Group owing to the Lenders under this
     Credit Agreement shall be considered to be Unsecured Debt even if a Lien
     has been granted in favor of the Lenders.

          "Unsecured Debt Ratio" means the ratio of (a) Unsecured Debt to (b)
     the Adjusted Current Values of all Unencumbered Properties.

          "Voting Stock" means (a) with respect to a corporation, all classes of
     the Capital Stock of such corporation then outstanding and normally
     entitled to vote in the election of directors and (b) with respect to a
     partnership, association, joint venture, limited liability company, real
     estate investment or other trust or other entity, all Capital Stock of such
     entity entitled to exercise voting power or management control.

          "Western" means Western Properties Trust, a California real estate
     investment trust.

          "Western Acquisition" means the merger of Western with and into the
     Borrower pursuant to that certain Agreement and Plan of Merger, dated as of
     August 21, 2000, between the Borrower and Western, as such Agreement and
     Plan of Merger may be amended or modified.

          "Western Mortgage" means that certain Deed of Trust, Assignment of
     Rents and Security Agreement, dated as of April 15, 1994, of the Property
     known as Lakewood Village Shopping Center, located in Windsor, California,
     granted by LVI Partners, as trustor, to North Bay Title Company, as
     trustee, for the benefit of Lincoln National Life Insurance Company, as
     beneficiary.

                                       19
<PAGE>   25

     1.2  COMPUTATION OF TIME PERIODS AND OTHER DEFINITION PROVISIONS.

     For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding." References in this Credit Agreement to "Articles", "Sections",
"Schedules" or "Exhibits" shall be to Articles, Sections, Schedules or Exhibits
of or to this Credit Agreement unless otherwise specifically provided.

     1.3  ACCOUNTING TERMS.

     Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All financial statements delivered to the Lenders hereunder shall be
accompanied by a statement from the Borrower that GAAP has not changed since the
most recent financial statements delivered by the Borrower to the Lenders or if
GAAP has changed describing such changes in detail and explaining how such
changes affect the financial statements. All calculations made for the purposes
of determining compliance with this Credit Agreement shall (except as otherwise
expressly provided herein) be made by application of GAAP applied on a basis
consistent with the most recent annual or quarterly financial statements
delivered pursuant to Section 7.1 (or, prior to the delivery of the first
financial statements pursuant to Section 7.1, consistent with the financial
statements described in Section 5.1(d)); provided, however, if (a) the Borrower
shall object to determining such compliance on such basis at the time of
delivery of such financial statements due to any change in GAAP or the rules
promulgated with respect thereto or (b) the Administrative Agent or the Required
Lenders shall so object in writing within 60 days after delivery of such
financial statements (or after the Lenders have been informed of the change in
GAAP affecting such financial statements, if later), then such calculations
shall be made on a basis consistent with the most recent financial statements
delivered by the Borrower to the Lenders as to which no such objection shall
have been made.

     1.4  JOINT VENTURE INVESTMENTS.

     With respect to any ownership of a Property by a member of the Consolidated
Group through an entity that is not wholly-owned, directly or indirectly by the
Borrower, (a) Actual Debt Service, Adjusted EBITDA, Consolidated Interest
Expense, Consolidated Net Income, NOI and Total Assets shall be calculated in
accordance with such member of the Consolidated Group's ownership interest in
such Person and (b) Indebtedness shall be calculated as follows: (i) if the
Indebtedness of such Person is recourse to such member of the Consolidated
Group, then the amount of such Indebtedness that is recourse to such member of
the Consolidated Group, and (ii) if the Indebtedness of such Person is not
recourse to such member of the Consolidated Group, then such member of the
Consolidated Group's pro rata interest in such Indebtedness.

     1.5  TIME.

     All references to time herein shall be references to Pacific Standard Time
or Pacific Daylight Time, as the case may be, unless specified otherwise.

                                       20
<PAGE>   26

                                    SECTION 2

                                 CREDIT FACILITY

     2.1  TERM LOANS.

          (a) Term Loans. Subject to the terms and conditions set forth herein,
     each Lender severally agrees, on the Effective Date or within fifteen days
     thereafter, to make a term loan (each a "Term Loan" and, collectively, the
     "Term Loans") to the Borrower, in Dollars, in an amount equal to such
     Lender's Commitment Percentage of the Term Loan Amount; provided that (i)
     the aggregate amount of Term Loans made shall not exceed the Term Loan
     Amount and (ii) the Term Loans shall only be made in a single funding. Once
     repaid, Term Loans may not be reborrowed.

          (b) Request for Term Loans. At or before 9:00 a.m. on (i) the
     Effective Date, (ii) the date within fifteen days of the Effective Date on
     which the Borrower requests that the Term Loans be funded solely as Base
     Rate Loans, or (iii) three Business Days prior to the date within fifteen
     days of the Effective Date on which the Borrower requests that the Term
     Loans be funded either (A) solely as LIBOR Loans or (B) as a combination of
     Base Rate and LIBOR Loans, the Borrower shall submit a written Request for
     Funding of Term Loans in the form of Exhibit 2.1(b) to the Administrative
     Agent. The Request for Funding of Term Loans shall set forth (A) the date
     on which the Borrower requests that the Term Loans be funded, (B) whether
     the Borrower is requesting that the Term Loans be funded as Base Rate Loans
     or LIBOR Loans and (C) with respect to Term Loans that shall be LIBOR
     Loans, the Interest Period applicable thereto. If the Borrower shall fail
     to specify an Interest Period in the case of LIBOR Loans, the such LIBOR
     Loans shall be deemed to have an Interest Period of one month.

          (c) Funding of Term Loans. Upon receipt of a Request for Funding of
     Term Loans, the Administrative Agent shall promptly inform the Lenders as
     to the terms thereof. Each Lender will make its Commitment Percentage of
     the Term Loan Amount available to the Administrative Agent by 11:00 a.m. on
     the date specified in the Request for Funding of Term Loans, by deposit, in
     Dollars and in immediately available funds, at the Agency Services Address.
     The amount of the Term Loans will then be made available to the Borrower by
     the Administrative Agent by crediting the account of the Borrower on the
     books of such office of the Administrative Agent, to the extent the amount
     of such Term Loans are made available to the Administrative Agent.

          No Lender shall be responsible for the failure or delay by any other
     Lender in its obligation to make its Term Loan hereunder; provided,
     however, that the failure of any Lender to fulfill its obligations
     hereunder shall not relieve any other Lender of its obligations hereunder.
     If a Lender shall have delivered and released an executed signature page to
     this Credit Agreement (whether an original or via telecopy) to the
     Administrative Agent, the Administrative Agent may assume that such Lender
     has or will make the amount

                                       21
<PAGE>   27

     of its Term Loans available to the Administrative Agent on the date
     specified in the Request for Funding of Term Loans, and the Administrative
     Agent in reliance upon such assumption, may (in its sole discretion but
     without any obligation to do so) make available to the Borrower a
     corresponding amount. If such corresponding amount is not in fact made
     available to the Administrative Agent, the Administrative Agent shall be
     able to recover such corresponding amount from such Lender. If such Lender
     does not pay such corresponding amount forthwith upon the Administrative
     Agent's demand therefor, the Administrative Agent will promptly notify the
     Borrower, and the Borrower shall immediately pay such corresponding amount
     to the Administrative Agent. The Administrative Agent shall also be
     entitled to recover from the Lender or the Borrower, as the case may be,
     interest on such corresponding amount in respect of each day from the date
     such corresponding amount was made available by the Administrative Agent to
     the Borrower to the date such corresponding amount is recovered by the
     Administrative Agent at a per annum rate equal to (i) from the Borrower at
     the applicable rate or rates specified in the Request for Funding of Term
     Loans and (ii) from a Lender at the Federal Funds Rate.

     2.2  CONTINUATIONS AND CONVERSIONS.

          (a) Generally. The Borrower shall have the option, on any Business
     Day, to continue existing LIBOR Loans for a subsequent Interest Period, to
     convert Base Rate Loans into LIBOR Loans, or to convert LIBOR Loans into
     Base Rate Loans; provided, however, that (i) each such continuation or
     conversion must be requested by the Borrower pursuant to a written Notice
     of Continuation/Conversion, in the form of Exhibit 2.2, in compliance with
     the terms set forth below, (ii) except as provided in Section 3.11, LIBOR
     Loans may only be continued or converted on the last day of the Interest
     Period applicable thereto, (iii) LIBOR Loans may not be continued nor may
     Base Rate Loans be converted into LIBOR Loans during the existence and
     continuation of a Default or Event of Default, (iv) any request to continue
     a LIBOR Loan that fails to comply with the terms hereof or any failure to
     request a continuation of a LIBOR Loan at the end of an Interest Period
     shall result in a conversion of such LIBOR Loan to a Base Rate Loan on the
     last day of the applicable Interest Period and (v) any request for
     continuation of a LIBOR Loan which shall fail to specify an Interest Period
     shall be deemed to be a request for an Interest Period of one month. Each
     continuation or conversion must be requested by the Borrower no later than
     9:00 a.m. (A) one Business Day prior to the date for a requested conversion
     of a LIBOR Loan to a Base Rate Loan or (B) three Business Days prior to the
     date for a requested continuation of a LIBOR Loan or conversion of a Base
     Rate Loan to a LIBOR Loan, in each case pursuant to a written Notice of
     Continuation/Conversion submitted to the Administrative Agent which shall
     set forth (x) whether the Borrower wishes to continue or convert such Term
     Loans and (y) if the request is to continue a LIBOR Loan or convert a Base
     Rate Loan to a LIBOR Loan, the Interest Period applicable thereto.

          (b) Minimum Amounts. Each request for a conversion or continuation
     shall be subject to the requirements that (i) each LIBOR Loan shall be in a
     minimum amount of $3,000,000 and in integral multiples of $100,000 in
     excess

                                       22
<PAGE>   28

     thereof, (ii) each Base Rate Loan shall be in a minimum amount of $250,000
     and integral multiples of $100,000 in excess thereof and (iii) no more than
     four LIBOR Loans shall be outstanding at any one time. For the purposes of
     this Section 2.2(b), all LIBOR Loans with the same Interest Periods
     beginning on the same date shall be considered as one LIBOR Loan, but LIBOR
     Loans with different Interest Periods, even if they begin on the same date,
     shall be considered as separate LIBOR Loans.

     2.3  NOTES.

     The Term Loans made by each Lender shall be evidenced by a duly executed
promissory note of the Borrower to each Lender in substantially the form of
Exhibit 2.3.

                                    SECTION 3

                   GENERAL PROVISIONS APPLICABLE TO TERM LOANS

     3.1  INTEREST.

          (a) Interest Rate. All Base Rate Loans shall accrue interest at the
     Base Rate. All LIBOR Loans shall accrue interest at the Adjusted LIBOR
     Rate.

          (b) Default Rate of Interest. Upon the occurrence, and during the
     continuance, of an Event of Default, the principal of and, to the extent
     permitted by law, interest on the Term Loans and any other amounts owing
     hereunder or under the other Credit Documents (including without limitation
     fees and expenses) shall bear interest, payable on demand, at a per annum
     rate equal to three percent (3%) plus the rate which would otherwise be
     applicable (or if no rate is applicable, then the rate for Base Rate Loans
     plus three percent (3%) per annum).

          (c) Interest Payments. Interest on Term Loans shall be due and payable
     in arrears on each Interest Payment Date.

     3.2  PLACE AND MANNER OF PAYMENTS.

     All payments of principal, interest, fees, expenses and other amounts to be
made by the Borrower under this Credit Agreement shall be received not later
than 11:00 a.m. on the date when due, in Dollars and in immediately available
funds, by the Administrative Agent at the Agency Services Address. Payments
received after such time shall be deemed to have been received on the next
Business Day. The Borrower shall, at the time it makes any payment under this
Credit Agreement, specify to the Administrative Agent the Term Loans, fees or
other amounts payable by the Borrower hereunder to which such payment is to be
applied (and in the event that it fails to specify, or if such application would
be inconsistent with the terms hereof, the Administrative Agent shall, subject
to Section 3.7, distribute such payment to the Lenders in such manner as the
Administrative Agent may deem appropriate). The Administrative Agent will
distribute any such payment to the Lenders on the day received if such payment
is received prior to 11:00 a.m.; otherwise the Administrative Agent will
distribute such payment to the Lenders on the next

                                       23
<PAGE>   29

succeeding Business Day. Whenever any payment hereunder shall be stated to be
due on a day which is not a Business Day, the due date thereof shall be extended
to the next succeeding Business Day (provided that accrual of interest and fees
shall only be through the end of a calendar month).

     3.3  PREPAYMENTS.

          (a) Voluntary Prepayments. The Borrower shall have the right to prepay
     Term Loans in whole or in part from time to time without premium or
     penalty; provided, however, that (i) LIBOR Loans may only be prepaid on
     three Business Days' prior written notice to the Administrative Agent and
     any prepayment of LIBOR Loans will be subject to Section 3.14 and (ii) each
     such partial prepayment of Term Loans shall be in the minimum principal
     amount of $250,000 and integral multiples of $100,000 in excess thereof.

          (b) Mandatory Prepayments.

               (i) Equity Issuances. Upon receipt by any member of the
          Consolidated Group of the proceeds from an Equity Issuance, the
          Borrower shall immediately forward 100% of the Net Cash Proceeds of
          such Equity Issuance to the Administrative Agent as a prepayment of
          the Term Loans (to be applied as set forth in Section 3.3(c)).

               (ii) Public Debt Issuances. Upon receipt by any member of the
          Consolidated Group of the Net Cash Proceeds from a Public Debt
          Issuance, the Borrower shall immediately forward 100% of the Net Cash
          Proceeds of such Public Debt Issuance to the Administrative Agent as a
          prepayment of the Term Loans (to be applied as set forth in Section
          3.3(c)).

          (c) Application of Prepayments. All amounts required to be paid
     pursuant to this Section 3.3 shall be applied first to Base Rate Loans and
     second to LIBOR Loans in direct order of Interest Period maturities. All
     prepayments hereunder shall be subject to Section 3.14. Once repaid, Term
     Loans may not be reborrowed.

     3.4  FEES.

     The Borrower agrees to pay to the Administrative Agent, for its own account
or for the pro rata benefit of the Lenders, as applicable, the fees set forth in
the Fee Letter.

     3.5  PAYMENT IN FULL AT MATURITY; EXTENSION OF MATURITY.

     Unless accelerated sooner pursuant to Section 9.2, the entire outstanding
principal balance of all Term Loans, together with accrued but unpaid interest
and fees and all other sums owing with respect thereto, shall be due and payable
in full on:

          (a)  the Initial Maturity Date; or

                                       24
<PAGE>   30

          (b) subject to satisfaction of all of the following conditions, the
     Extended Maturity Date:

               (i) the Borrower shall deliver written notice to the
          Administrative Agent of such extension request at least 30 days but
          not more than 60 days prior to the Initial Maturity Date;

               (ii) no Default or Event of Default shall exist and be continuing
          on either the date of such notice or on the Initial Maturity Date; and

               (iii) on the Initial Maturity Date, the Borrower shall pay to the
          Lenders (A) the Extension Fee (as defined in the Fee Letter), to be
          shared pro rata among the Lenders in accordance with their respective
          Commitment Percentages and (B) all unpaid interest and other fees
          accrued to the Initial Maturity Date.

     3.6  COMPUTATIONS OF INTEREST AND FEES.

          (a) All computations of interest and fees hereunder shall be made on
     the basis of the actual number of days elapsed over a year of 360 days.
     Interest shall accrue from and include the date of borrowing (or
     continuation or conversion) but exclude the date of payment.

          (b) It is the intent of the Lenders and the Credit Parties to conform
     to and contract in strict compliance with applicable usury law from time to
     time in effect. All agreements between the Lenders and the Credit Parties
     are hereby limited by the provisions of this paragraph which shall override
     and control all such agreements, whether now existing or hereafter arising
     and whether written or oral. In no way, nor in any event or contingency
     (including but not limited to prepayment or acceleration of the maturity of
     any obligation), shall the interest taken, reserved, contracted for,
     charged, or received under this Credit Agreement, under the Notes or
     otherwise, exceed the maximum nonusurious amount permissible under
     applicable law. If, from any possible construction of any of the Credit
     Documents or any other document, interest would otherwise be payable in
     excess of the maximum nonusurious amount, any such construction shall be
     subject to the provisions of this paragraph and such interest shall be
     automatically reduced to the maximum nonusurious amount permitted under
     applicable law, without the necessity of execution of any amendment or new
     document. If any Lender shall ever receive anything of value which is
     characterized as interest on the Term Loans under applicable law and which
     would, apart from this provision, be in excess of the maximum lawful
     amount, an amount equal to the amount which would have been excessive
     interest shall, without penalty, be applied to the reduction of the
     principal amount owing on the Term Loans and not to the payment of
     interest, or refunded to the Credit Parties or the other payor thereof if
     and to the extent such amount which would have been excessive exceeds such
     unpaid principal amount of the Term Loans. The right to demand payment of
     the Term Loans or any other indebtedness evidenced by any of the Credit
     Documents does not include the right to receive any interest which has not
     otherwise accrued on the date of such demand, and the Lenders do not intend

                                       25
<PAGE>   31

     to charge or receive any unearned interest in the event of such demand. All
     interest paid or agreed to be paid to the Lenders with respect to the Term
     Loans shall, to the extent permitted by applicable law, be amortized,
     prorated, allocated, and spread throughout the full stated term (including
     any renewal or extension) of the Term Loans so that the amount of interest
     on account of such indebtedness does not exceed the maximum nonusurious
     amount permitted by applicable law.

     3.7  PRO RATA TREATMENT.

     Except to the extent otherwise provided herein, the funding of the Term
Loans, each payment or prepayment of principal of any Term Loan, each payment of
fees, and each conversion or continuation of any Term Loan, shall (except as
otherwise provided in Section 3.11) be allocated pro rata among the Lenders in
accordance with the respective Commitment Percentages of such Lenders (or, if
the Term Loans have been made, in accordance with the respective principal
amounts of the outstanding Term Loans and Participation Interests of such
Lenders); provided that, if any Lender shall have failed to pay its applicable
pro rata share of any Term Loan, then any amount to which such Lender would
otherwise be entitled pursuant to this Section 3.7 shall instead be payable to
the Administrative Agent until the share of such Term Loan not funded by such
Lender has been repaid; provided further, that in the event any amount paid to
any Lender pursuant to this Section 3.7 is rescinded or must otherwise be
returned by the Administrative Agent, each Lender shall, upon the request of the
Administrative Agent, repay to the Administrative Agent the amount so paid to
such Lender, with interest for the period commencing on the date such payment is
returned by the Administrative Agent until the date the Administrative Agent
receives such repayment at a rate per annum equal to, during the period to but
excluding the date two Business Days after such request, the Federal Funds Rate,
and thereafter, at the Base Rate plus three percent (3%) per annum.

     3.8 SHARING OF PAYMENTS.

     The Lenders agree among themselves that, except to the extent otherwise
provided herein, in the event that any Lender shall obtain payment in respect of
any Term Loan or any other obligation owing to such Lender under this Credit
Agreement through the exercise of a right of setoff, banker's lien or
counterclaim, or pursuant to a secured claim under Section 506 of the Bankruptcy
Code or other security or interest arising from, or in lieu of, such secured
claim, received by such Lender under any applicable bankruptcy, insolvency or
other similar law or otherwise, or by any other means, in excess of its pro rata
share of such payment as provided for in this Credit Agreement, such Lender
shall promptly pay in cash or purchase from the other Lenders a participation in
such Term Loans and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by payment in cash or a
repurchase of a participation theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect thereto)
to

                                       26
<PAGE>   32

each Lender whose payment shall have been rescinded or otherwise restored. The
Credit Parties agree that any Lender so purchasing such a participation may, to
the fullest extent permitted by law, exercise all rights of payment, including
setoff, banker's lien or counterclaim, with respect to such participation as
fully as if such Lender were a holder of such Term Loan or other obligation in
the amount of such participation. Except as otherwise expressly provided in this
Credit Agreement, if any Lender shall fail to remit to the Administrative Agent
or any other Lender an amount payable by such Lender to the Administrative Agent
or such other Lender pursuant to this Credit Agreement on the date when such
amount is due, such payments shall be made together with interest thereon for
each date from the date such amount is due until the date such amount is paid to
the Administrative Agent or such other Lender at a rate per annum equal to the
Federal Funds Rate. If under any applicable bankruptcy, insolvency or other
similar law, any Lender receives a secured claim in lieu of a setoff to which
this Section 3.8 applies, such Lender shall, to the extent practicable, exercise
its rights in respect of such secured claim in a manner consistent with the
rights of the Lenders under this Section 3.8 to share in the benefits of any
recovery on such secured claim.

     3.9  CAPITAL ADEQUACY.

     If, after the date thereof, any Lender determines that the introduction of
any law, rule or regulation or other Requirement of Law regarding capital
adequacy or any change therein or in the interpretation thereof, or compliance
by such Lender (or its Lending Office) therewith, has or would have the effect
of reducing the rate of return on the capital or assets of such Lender or any
corporation controlling such Lender as a consequence of such Lender's
obligations hereunder (taking into consideration its policies with respect to
capital adequacy and such Lender's desired return on capital), then from time to
time upon demand of such Lender (with a copy of such demand to the
Administrative Agent), the Borrower shall pay to such Lender such additional
amounts as will compensate such Lender for such reduction.

     3.10 INABILITY TO DETERMINE INTEREST RATE.

     If the Administrative Agent determines (which determination shall be
conclusive and binding upon the Borrower) in connection with any request for a
LIBOR Loan or a conversion to or continuation thereof that (a) Dollar deposits
are not being offered to banks in the applicable offshore Dollar market for the
applicable amount and Interest Period of such LIBOR Loan, (b) adequate and
reasonable means do not exist for determining the LIBOR Rate for such LIBOR
Loan, or (c) the LIBOR Rate for such LIBOR Loan does not adequately and fairly
reflect the cost to the Lenders of funding such LIBOR Loan, the Administrative
Agent will promptly notify the Borrower and all the Lenders. Thereafter, the
obligation of the Lenders to make or maintain LIBOR Loans shall be suspended
until the Administrative Agent revokes such notice. Upon receipt of such notice,
the Borrower may revoke any pending Request for Funding of Term Loans or Notice
of Continuation/Conversion with respect to LIBOR Loans or, failing that, will be
deemed to have converted such request into a request for a borrowing of or
conversion into a Base Rate Loan in the amount specified therein.

                                       27
<PAGE>   33

     3.11 ILLEGALITY.

     If any Lender determines that any Requirement of Law has made it unlawful,
or that any Governmental Authority has asserted that it is unlawful, for any
Lender or its applicable Lending Office to make, maintain or fund LIBOR Loans,
or materially restricts the authority of such Lender to purchase or sell, or to
take deposits of, Dollars in the applicable offshore Dollar market, or to
determine or charge interest rates based upon the LIBOR Rate, then, on notice
thereof by such Lender to the Borrower through the Administrative Agent, any
obligation of such Lender to make or continue LIBOR Loans or to convert Base
Rate Loans to LIBOR Loans shall be suspended until such Lender notifies the
Administrative Agent and the Borrower that the circumstances giving rise to such
determination no longer exist. Upon receipt of such notice, the Borrower shall,
upon demand from such Lender (with a copy to the Administrative Agent), prepay
or, if applicable, convert all LIBOR Loans of such Lender to Base Rate Loans,
either on the last day of the Interest Period thereof, if such Lender may
lawfully continue to maintain such LIBOR Loans to such day, or immediately, if
such Lender may not lawfully continue to maintain such LIBOR Loans. Upon any
such prepayment or conversion, the Borrower shall also pay interest on the
amount so prepaid or converted, together with any amounts due with respect
thereto pursuant to Section 3.14. Each Lender agrees to designate a different
Lending Office if such designation will avoid the need for such notice and will
not, in the good faith judgment of such Lender, otherwise be materially
disadvantageous to such Lender.

     3.12 REQUIREMENTS OF LAW.

     If any Lender determines that as a result of the introduction of or any
change in, or in the interpretation of, any Requirement of Law, or such Lender's
compliance therewith, there shall be any increase in the cost to such Lender of
agreeing to make or making, funding or maintaining LIBOR Loans, or a reduction
in the amount received or receivable by such Lender in connection with any of
the foregoing (excluding for purposes of this subsection (a) any such increased
costs or reduction in amount resulting from (i) Taxes or Other Taxes (as to
which Section 3.13 shall govern) and (ii) reserve requirements utilized in the
determination of the LIBOR Rate), then from time to time, within 10 days of
demand of such Lender (with a copy of such demand to the Administrative Agent),
the Borrower shall pay to such Lender such additional amounts as will compensate
such Lender for such increased cost or reduction in yield.

     3.13 TAXES.

          (a) Any and all payments by a Credit Party to or for the account of
     the Administrative Agent or any Lender under any Credit Document shall be
     made free and clear of and without deduction for any and all present or
     future income, stamp or other taxes, duties, levies, imposts, deductions,
     assessments, fees, withholdings or similar charges, and all liabilities
     with respect thereto, but excluding, in the case of the Administrative
     Agent and each Lender, taxes imposed on or measured by its net income, and
     franchise taxes imposed on it (in lieu of net income taxes), by the
     jurisdiction (or any political subdivision thereof) under the laws of which
     the Administrative Agent or such Lender, as the case may be, is organized
     or maintains its Lending Office (all such non-

                                       28
<PAGE>   34

     excluded taxes, duties, levies, imposts, deductions, assessments, fees,
     withholdings or similar charges, and liabilities being hereinafter referred
     to as "Taxes"). If a Credit Party shall be required by any Requirement of
     Law to deduct any Taxes from or in respect of any sum payable under any
     Credit Document to the Administrative Agent or any Lender, (i) the sum
     payable shall be increased as necessary so that after making all required
     deductions (including deductions applicable to additional sums payable
     under this Section 3.13(a)), the Administrative Agent and such Lender
     receives an amount equal to the sum it would have received had no such
     deductions been made, (ii) such Credit Party shall make such deductions,
     (iii) such Credit Party shall pay the full amount deducted to the relevant
     taxation authority or other authority in accordance with applicable
     Requirements of Law, and (iv) within 30 days after the date of such
     payment, such Credit Party shall furnish to the Administrative Agent (which
     shall forward the same to such Lender) the original or a certified copy of
     a receipt evidencing payment thereof.

          (b) In addition, each Credit Party agrees to pay any and all present
     or future stamp, court or documentary taxes and any other excise or
     property taxes or charges or similar levies which arise from any payment
     made under any Credit Document or from the execution, delivery,
     performance, enforcement or registration of, or otherwise with respect to,
     any Credit Document (hereinafter referred to as "Other Taxes").

          (c) If a Credit Party shall be required to deduct or pay any Taxes or
     Other Taxes from or in respect of any sum payable under any Credit Document
     to the Administrative Agent or any Lender, such Credit Party shall also pay
     to the Administrative Agent (for the account of such Lender) or to such
     Lender, at the time interest is paid, such additional amount that such
     Lender specifies as necessary to preserve the after-tax yield (after
     factoring in all taxes, including taxes imposed on or measured by net
     income) such Lender would have received if such Taxes or Other Taxes had
     not been imposed.

          (d) Each Credit Party agrees to indemnify the Administrative Agent and
     each Lender for (i) the full amount of Taxes and Other Taxes (including any
     Taxes or Other Taxes imposed or asserted by any jurisdiction on amounts
     payable under this Section 3.13(d)) paid by the Administrative Agent and
     such Lender, (ii) amounts payable under Section 3.13(c) and (iii) any
     liability (including penalties, interest and expenses) arising therefrom or
     with respect thereto, in each case whether or not such Taxes or Other Taxes
     were correctly or legally imposed or asserted by the relevant Governmental
     Authority.

          (e) Each Lender that is a "foreign corporation, partnership or trust"
     within the meaning of the Code shall deliver to the Administrative Agent,
     prior to receipt of any payment subject to withholding under the Code (or
     after accepting an assignment of an interest herein), two duly signed
     completed copies of either IRS Form W-8BEN or any successor thereto
     (relating to such Lender and entitling it to an exemption from, or
     reduction of, withholding tax on all payments to be made to such Lender by
     the Credit Parties pursuant to this Agreement) or IRS Form W-8ECI or any
     successor thereto (relating to all payments to be made to such Lender by a
     Credit Party pursuant to this

                                       29
<PAGE>   35

     Agreement) or such other evidence satisfactory to the Borrower and the
     Administrative Agent that such Lender is entitled to an exemption from, or
     reduction of, U.S. withholding tax. Thereafter and from time to time, each
     such Lender shall (i) promptly submit to the Administrative Agent such
     additional duly completed and signed copies of one of such forms (or such
     successor forms as shall be adopted from time to time by the relevant
     United States taxing authorities) as may then be available under then
     current United States laws and regulations to avoid, or such evidence as is
     satisfactory to the Borrower and the Administrative Agent of any available
     exemption from or reduction of, United States withholding taxes in respect
     of all payments to be made to such Lender by the Borrower pursuant to this
     Agreement, (ii) promptly notify the Agent of any change in circumstances
     which would modify or render invalid any claimed exemption or reduction,
     and (iii) take such steps as shall not be materially disadvantageous to it,
     in the reasonable judgment of such Lender, and as may be reasonably
     necessary (including the re-designation of its Lending Office) to avoid any
     Requirement of Law that the Credit Parties make any deduction or
     withholding for taxes from amounts payable to such Lender. If such Lender
     fails to deliver the above forms or other documentation, then the
     Administrative Agent may withhold from any interest payment to such Lender
     an amount equivalent to the applicable withholding tax imposed by Sections
     1441 and 1442 of the Code, without reduction. If any Governmental Authority
     asserts that the Administrative Agent did not properly withhold any tax or
     other amount from payments made in respect of such Lender, such Lender
     shall indemnify the Administrative Agent therefor, including all penalties
     and interest, any taxes imposed by any jurisdiction on the amounts payable
     to the Administrative Agent under this Section 3.13(e), and costs and
     expenses (including Attorney Costs) of the Administrative Agent. The
     obligation of the Lenders under this Section 3.13(e) shall survive the
     payment of all Obligations and the resignation or replacement of the
     Administrative Agent.

     3.14 COMPENSATION.

     Upon the written demand of any Lender, the Borrower shall promptly
compensate such Lender for and hold such Lender harmless from any loss, cost or
expense incurred by it as a result of:

          (a) any continuation, conversion, payment or prepayment of any LIBOR
     Loan on a day other than the last day of the Interest Period for such LIBOR
     Loan (whether voluntary, mandatory, automatic, by reason of acceleration,
     or otherwise); or

          (b) any failure by the Borrower (for a reason other than the failure
     of such Lender to make a LIBOR Loan) to prepay, borrow, continue or convert
     any LIBOR Loan on the date or in the amount previously requested by the
     Borrower.

The amount each such Lender shall be compensated pursuant to this Section 3.14
shall include (a) any loss incurred by such Lender in connection with the
re-employment of funds prepaid, repaid, not borrowed or paid, as the case may
be, and the amount of such loss shall be the excess, if any, of (i) interest or
other cost to such Lender of the deposit or other source of funding used to

                                       30
<PAGE>   36

make any such LIBOR Loan over (ii) the interest earned (or to be earned) by such
Lender upon the re-lending or other re-employment of the amount of such LIBOR
Loan for the remainder of its respective Interest Period plus (b) any other loss
of anticipated profits and any loss or expense arising from the liquidation or
re-employment of funds obtained by it to maintain such Term Loan or from fees
payable to terminate the deposits from which such funds were obtained plus (c)
$250 plus (d) any reasonable out-of-pocket expenses (including Attorney Costs)
incurred and reasonably attributable thereto.

For purposes of calculating amounts payable by the Borrower to the Lenders under
this Section 3.14, each Lender may deem that it funded each LIBOR Loan made by
it at the LIBOR Rate for such LIBOR Loan by a matching deposit or other
borrowing in the applicable offshore Dollar interbank market for a comparable
amount and for a comparable period, whether or not such LIBOR Loan was in fact
so funded.

     3.15 DETERMINATION AND SURVIVAL OF PROVISIONS.

     All determinations by the Administrative Agent or a Lender of amounts owing
under Sections 3.9 through 3.14, inclusive, shall, absent manifest error, be
conclusive and binding on the parties hereto. In determining such amount, the
Administrative Agent or such Lender may use any reasonable averaging and
attribution methods. Section 3.9 through 3.14, inclusive, shall survive the
termination of this Credit Agreement and the payment of all amounts owing
hereunder.

                                    SECTION 4

                                    GUARANTY

     4.1  GUARANTY OF PAYMENT.

     Subject to Section 4.7 below, each of the Guarantors hereby, jointly and
severally, unconditionally guarantees to each Lender, the prompt payment of the
Obligations in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration or otherwise). This Guaranty is a guaranty of
payment and not of collection and is a continuing guaranty and shall apply to
all Obligations whenever arising.

     4.2  OBLIGATIONS UNCONDITIONAL.

     The obligations of the Guarantors hereunder are absolute and unconditional,
irrespective of the value, genuineness, validity, regularity or enforceability
of any of the Credit Documents or any other agreement or instrument referred to
therein, to the fullest extent permitted by applicable law, irrespective of any
other circumstance whatsoever which might otherwise constitute a legal or
equitable discharge or defense of a surety or guarantor. Each Guarantor agrees
that this Guaranty may be enforced by the Lenders without the necessity at any
time of resorting to or exhausting any other security or collateral and without
the necessity at any time of having recourse to the Notes or any other of the
Credit Documents or any collateral, if any, hereafter securing the Obligations
or

                                       31
<PAGE>   37

otherwise and each Guarantor hereby waives the right to require the Lenders to
proceed against the Borrower or any other Person (including a co-guarantor) or
to require the Lenders to pursue any other remedy or enforce any other right.
Each Guarantor further agrees that it shall have no right (a) of subrogation,
indemnity, reimbursement or contribution against the Borrower or any other
Guarantor of the Obligations for amounts paid under this Guaranty or (b) to
payment of Indebtedness owing by any other Credit Party to such Guarantor until
such time as the Obligations have been paid in full, all Commitments under this
Credit Agreement have been terminated and no Person or Governmental Authority
shall have any right to request any return or reimbursement of funds from the
Lenders in connection with monies received under the Credit Documents. Each
Guarantor further agrees that nothing contained herein shall prevent the Lenders
from suing on the Notes or any of the other Credit Documents or foreclosing its
security interest in or Lien on any collateral, if any, securing the Obligations
or from exercising any other rights available to it under this Credit Agreement,
the Notes, any other of the Credit Documents, or any other instrument of
security, if any, and the exercise of any of the aforesaid rights and the
completion of any foreclosure proceedings shall not constitute a discharge of
any of any Guarantor's obligations hereunder; it being the purpose and intent of
each Guarantor that its obligations hereunder shall be absolute, independent and
unconditional under any and all circumstances. Neither any Guarantor's
obligations under this Guaranty nor any remedy for the enforcement thereof shall
be impaired, modified, changed or released in any manner whatsoever by an
impairment, modification, change, release or limitation of the liability of the
Borrower or by reason of the bankruptcy or insolvency of the Borrower. Each
Guarantor waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Administrative Agent or any Lender upon this Guarantee or acceptance of this
Guarantee. The Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Guarantee. All dealings between the Borrower and
any of the Guarantors, on the one hand, and the Administrative Agent and the
Lenders, on the other hand, likewise shall be conclusively presumed to have been
had or consummated in reliance upon this Guarantee. The Guarantors further agree
to all rights of set-off as set forth in Section 11.2.

     4.3  MODIFICATIONS.

     Each Guarantor agrees that (a) all or any part of the collateral, if any,
now or hereafter held for the Obligations, if any, may be exchanged, compromised
or surrendered from time to time; (b) the Lenders shall not have any obligation
to protect, perfect, secure or insure any such security interests, liens or
encumbrances now or hereafter held, if any, for the Obligations or the
properties subject thereto; (c) the time or place of payment of the Obligations
may be changed or extended, in whole or in part, to a time certain or otherwise,
and may be renewed or accelerated, in whole or in part; (d) the Borrower and any
other party liable for payment under the Credit Documents may be granted
indulgences generally; (e) any of the provisions of the Notes or any of the
other Credit Documents may be modified, amended or waived; (f) any party
(including any co-guarantor) liable for the payment thereof may be granted
indulgences or be released; and (g) any deposit balance for the credit of the
Borrower or any other party liable for the payment of the Obligations or liable
upon any security therefor may be released, in whole or in part, at, before or
after the stated, extended or accelerated maturity of the Obligations, all
without notice to or further assent by such

                                       32
<PAGE>   38

Guarantor, which shall remain bound thereon, notwithstanding any such exchange,
compromise, surrender, extension, renewal, acceleration, modification,
indulgence or release.

     4.4  WAIVER OF RIGHTS.

     Each Guarantor expressly waives to the fullest extent permitted by
applicable law: (a) notice of acceptance of this Guaranty by the Lenders and of
all extensions of credit to the Borrower by the Lenders; (b) presentment and
demand for payment or performance of any of the Obligations; (c) protest and
notice of dishonor or of default (except as specifically required in this Credit
Agreement) with respect to the Obligations or with respect to any security
therefor; (d) notice of the Lenders obtaining, amending, substituting for,
releasing, waiving or modifying any security interest, lien or encumbrance, if
any, hereafter securing the Obligations, or the Lenders' subordinating,
compromising, discharging or releasing such security interests, liens or
encumbrances, if any; and (e) all other notices to which such Guarantor might
otherwise be entitled.

     4.5  REINSTATEMENT.

     The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Obligations is rescinded or must be
otherwise restored by any holder of any of the Obligations, whether as a result
of any proceedings in bankruptcy or reorganization or otherwise, and each
Guarantor agrees that it will indemnify the Administrative Agent and each Lender
on demand for all reasonable costs and expenses (including, without limitation,
reasonable Attorney Costs) incurred by the Administrative Agent or such Lender
in connection with such rescission or restoration, including any such costs and
expenses incurred in defending against any claim alleging that such payment
constituted a preference, fraudulent transfer or similar payment under any
bankruptcy, insolvency or similar law.

     4.6  REMEDIES.

     The Guarantors agree that, as between the Guarantors, on the one hand, and
the Administrative Agent and the Lenders, on the other hand, the Obligations may
be declared to be forthwith due and payable as provided in Section 9 (and shall
be deemed to have become automatically due and payable in the circumstances
provided in Section 9) notwithstanding any stay, injunction or other prohibition
preventing such declaration (or preventing such Obligations from becoming
automatically due and payable) as against any other Person and that, in the
event of such declaration (or such Obligations being deemed to have become
automatically due and payable), such Obligations (whether or not due and payable
by any other Person) shall forthwith become due and payable by the Guarantors.

     4.7  LIMITATION OF GUARANTY.

     Notwithstanding any provision to the contrary contained herein or in any of
the other Credit Documents:

                                       33
<PAGE>   39

          (a) to the extent the obligations of any Guarantor shall be
     adjudicated to be invalid or unenforceable for any reason (including,
     without limitation, because of any applicable state or federal law relating
     to fraudulent conveyances or transfers) then the obligations of such
     Guarantor hereunder shall be limited to the maximum amount that is
     permissible under applicable law (whether federal or state and including,
     without limitation, the Bankruptcy Code); and

          (b) with respect to any Guarantor that is a partnership, the
     obligations of such Guarantor under this Section 4 shall (except as
     identified below) only extend to and be binding upon such partnership
     Guarantor and its assets, and, other than general partners that are a
     member of the Consolidated Group, shall in no manner extend to or be
     binding upon the individual general partners of such Guarantor, whether
     natural or non-natural Persons.

     4.8  RIGHTS OF CONTRIBUTION.

     The Credit Parties agree among themselves that, in connection with payments
made hereunder, each Credit Party shall have contribution rights against the
other Credit Parties as permitted under applicable law. Such contribution rights
shall be subordinate and subject in right of payment to the obligations of the
Credit Parties under the Credit Documents and no Credit Party shall exercise
such rights of contribution until all Obligations have been paid in full and the
Commitments terminated.

                                    SECTION 5

                              CONDITIONS PRECEDENT

     5.1  CLOSING CONDITIONS.

     The obligation of the Lenders to enter into this Credit Agreement is
subject to satisfaction of the following conditions:

          (a) Executed Credit Documents. Receipt by the Administrative Agent of
     duly executed copies of this Credit Agreement, the Notes and all other
     Credit Documents required to be delivered on or before the Effective Date,
     each in form and substance reasonably acceptable to the Administrative
     Agent in its sole discretion.

          (b) Authority Documents.

               (i) Partnership Documents. With respect to each Credit Party that
          is a partnership, receipt by the Administrative Agent of the
          following:

                    (A) Authorization. Authorization of the general partner(s)
               of such Credit Party, as of the Closing Date, approving and
               adopting the Credit Documents to be executed by such Credit
               Party, the transactions contemplated herein and therein and the
               execution, delivery and

                                       34
<PAGE>   40

               performance hereof and thereof, certified by such general
               partner(s) or a secretary or assistant secretary of such general
               partner(s) to be true, correct and complete as of the Effective
               Date.

                    (B) Partnership Agreements. A copy of the partnership
               agreement of such Credit Party, together with all amendments
               thereto, certified by a general partner of such Credit Party or a
               secretary or assistant secretary of the general partner(s) to be
               true, correct and complete as of the Effective Date.

                    (C) Certificates of Good Standing or Existence. Certificates
               of good standing, existence or their equivalent for such Credit
               Party issued as of a recent date by the appropriate Governmental
               Authorities of its jurisdiction of organization and each other
               state where the failure to qualify or be in good standing would
               have or would reasonably be expected to have a Material Adverse
               Effect.

                    (D) Incumbency. An incumbency certificate of the general
               partner(s) of such Credit Party, certified by a secretary or
               assistant secretary of such general partner to be true and
               correct as of the Effective Date.

               (ii) Corporate Documents. With respect to each Credit Party that
          is a corporation, receipt by the Administrative Agent of the
          following:

                    (A) Charter Documents. Copies of the articles or certificate
               of incorporation or other charter documents of such Credit Party
               certified to be true and complete as of a recent date by the
               appropriate Governmental Authority of the state or other
               jurisdiction of its incorporation and certified by a secretary or
               assistant secretary of such Credit Party to be true and correct
               as of the Effective Date.

                    (B) Bylaws. A copy of the bylaws of such Credit Party
               certified by a secretary or assistant secretary of such Credit
               Party to be true and correct as of the Effective Date.

                    (C) Resolutions. Copies of resolutions of the board of
               directors of such Credit Party, approving and adopting the Credit
               Documents to which it is a party, the transactions contemplated
               herein and therein and authorizing the execution, delivery and
               performance hereof and thereof, certified by a secretary or
               assistant secretary of such Credit Party to be true and correct
               and in full force and effect as of the Effective Date.

                    (D) Good Standing. (x) Certificates of good standing,
               existence or their equivalent with respect to such Credit Party
               certified as of a recent date by the appropriate Governmental
               Authorities of the state or other

                                       35
<PAGE>   41

               jurisdiction of incorporation and each other jurisdiction in
               which the failure to so qualify and be in good standing could
               have a Material Adverse Effect and (y) to the extent available, a
               certificate indicating payment of all corporate franchise taxes
               certified as of a recent date by the appropriate governmental
               taxing authorities.

                    (E) Incumbency. An incumbency certificate of such Credit
               Party certified by a secretary or assistant secretary of such
               Credit Party to be true and correct as of the Effective Date.

               (iii) Limited Liability Company Documents. With respect to each
          Credit Party that is a limited liability company, receipt by the
          Administrative Agent of the following:

                    (A) Certificate of Formation. A copy of the certificate of
               formation of such Credit Party certified to be true and complete
               by the appropriate Governmental Authority of the jurisdiction of
               its formation and certified by the sole or managing member of
               such Credit Party to be true and correct as of the Effective
               Date.

                    (B) LLC Agreement. A copy of the LLC Agreement of such
               Credit Party certified by the sole or managing member of such
               Credit Party to be true and correct as of the Effective Date.

                    (C) Resolutions. Copies of resolutions of the members or
               managing members of such Credit Party, as the case may be,
               approving and adopting the Credit Documents to which it is a
               party, the transactions contemplated herein and therein and
               authorizing the execution, delivery and performance hereof and
               thereof, certified by the sole or managing member of such Credit
               Party to be true and correct as of the Effective Date.

                    (D) Good Standing. Certificates of good standing, existence
               or their equivalent with respect to such Credit Party certified
               as of a recent date by the appropriate Governmental Authorities
               of the state or other jurisdiction of formation and each other
               jurisdiction in which the failure to so qualify and be in good
               standing could have a Material Adverse Effect.

               (iv) Trust Documents. With respect to each Credit Party that is a
          REIT, receipt by the Administrative Agent of the following:

                    (A) Declaration of Trust. A copy of the Declaration of Trust
               of such Credit Party certified to be true and complete by the
               appropriate Governmental Authority of the jurisdiction of its
               formation and certified by the trustee of such Credit Party to be
               true and correct as of the Effective Date.

                                       36
<PAGE>   42

                    (B) Bylaws. A copy of the Bylaws of such Credit Party
               certified by the trustee of such Credit Party to be true and
               complete as of the Effective Date.

                    (C) Resolutions. Copies of the resolutions of the trustee or
               Board of Trustees of such Credit Party, as the case may be,
               approving and adopting the Credit Documents to which it is a
               party, the transactions contemplated herein and therein and
               authorizing the execution, delivery and performance hereof and
               thereof, certified by the trustee of such Credit Party to be
               true, correct and complete as of the Effective Date.

                    (D) Good Standing. Certificates of good standing, existence
               or their equivalent with respect to such Credit Party certified
               as of a recent date by the appropriate Governmental Authorities
               of the state or other jurisdiction of formation and each other
               jurisdiction in which the failure to so qualify and be in good
               standing could have a Material Adverse Effect.

          (c)  Opinion of Counsel. Receipt by the Administrative Agent of an
     opinion or opinions of counsel to the Credit Parties (which shall cover,
     among other things, authority, legality, validity, binding effect and
     enforceability), in form and substance satisfactory to the Administrative
     Agent, addressed to the Administrative Agent on behalf of the Lenders and
     dated as of the Effective Date.

          (d) Financial Statements and Projections. Receipt and approval by the
     Lenders of: (i) the consolidated financial statements of the Consolidated
     Group for each of the three years ended December 31, 1997, 1998 and 1999,
     including balance sheets and income and cash flow statements, audited by
     nationally recognized independent public accountants and containing an
     unqualified opinion of such firm that such statements present fairly, in
     all material respects, the consolidated financial position and results of
     operations of such Person, and are prepared in conformity with GAAP, (ii)
     interim consolidated financial statements of the Consolidated Group for the
     six months ended June 30, 2000, including balance sheets and income and
     cash flow statements, accompanied by a certificate of the chief financial
     officer of the Borrower to the effect that such interim financial
     statements fairly present in all material respects the financial condition
     of the Consolidated Group and have been prepared in accordance with GAAP
     and (iii) financial projections for the Combined Parties and pro forma
     financial statements and pro forma compliance with the financial covenants
     set forth in Section 7.2 of the Consolidated Group (on an annual basis
     through the year ended December 31, 2002), including a balance sheet and
     income and cash flow statements, giving effect to the Western Acquisition.

          (e) Material Adverse Effect. There shall not have occurred any event
     or condition since December 31, 1999 that has had or would reasonably be
     expected to have a Material Adverse Effect.

                                       37
<PAGE>   43

          (f) Litigation. There shall not exist any pending or threatened
     action, suit, investigation or proceeding against any member of the
     Consolidated Group that would have or would reasonably be expected to have
     a Material Adverse Effect.

          (g) Officer's Certificates. The Administrative Agent shall have
     received a certificate of the chief financial officer of the Borrower on
     behalf of the Credit Parties as of the Effective Date stating that (i) each
     member of the Consolidated Group is in compliance with all existing
     material financial obligations and all terms and conditions set forth
     herein, (ii) no action, suit, investigation or proceeding is pending or
     threatened in any court or before any arbitrator or Governmental Authority
     that purports to affect a member of the Consolidated Group or any
     transaction contemplated by the Credit Documents, if such action, suit,
     investigation or proceeding would have or would reasonably be expected to
     have a Material Adverse Effect, (iii) the financial statements and
     information delivered pursuant to Section 5.1(d) were prepared in good
     faith and using reasonable assumptions and (iv) immediately after giving
     effect to this Credit Agreement, the other Credit Documents and all the
     transactions contemplated herein and therein to occur on such date, (A)
     each of the Credit Parties is Solvent, (B) no Default or Event of Default
     exists, (C) all representations and warranties contained herein and in the
     other Credit Documents are true and correct in all material respects, and
     (D) the Credit Parties are in compliance on a pro forma basis with each of
     the financial covenants set forth in Section 7.2 (after giving effect to
     the Western Acquisition), together with evidence thereof.

          (h) Fees and Expenses. Payment by the Credit Parties of all fees and
     expenses owed by them to the Lenders and the Administrative Agent,
     including, without limitation, payment to the Administrative Agent of the
     fees set forth in the Fee Letter.

          (i) Consents and Approvals. Except for consents from the mortgagees of
     the Properties set forth on Schedule 6.5, all governmental, shareholder,
     partner, member and third-party consents and approvals necessary or, in the
     opinion of the Administrative Agent, desirable in connection with the Term
     Loans and the transactions contemplated under the Credit Documents shall
     have been duly obtained and shall be in full force and effect, including,
     without limitation, consent to the assumption by a member of the
     Consolidated Group of the Senior Notes and the Western Mortgage, and a copy
     of each such consent or approval shall have been delivered to the
     Administrative Agent upon request of the Administrative Agent.

          (j) Due Diligence. Completion by the Lenders of all due diligence with
     respect to (i) the Combined Parties, including, but not limited to, a
     review of all existing Indebtedness of the Combined Parties, (ii) all
     Properties and (iii) the Western Acquisition, in each case in scope and
     content reasonably satisfactory to the Lenders.

          (k) Existing Indebtedness. Receipt by the Administrative Agent of
     satisfactory evidence of the repayment of all Indebtedness owing by Western
     and its Subsidiaries prior to the Western Acquisition, other than the
     Senior Notes and the Western Mortgage.

                                       38
<PAGE>   44

                                   SECTION 6

          (l) Western Acquisition. The Borrower shall have certified and
     delivered to the Administrative Agent a true, correct and complete copy of
     all documentation evidencing the Western Acquisition (the "Merger
     Agreement"). The Merger Agreement shall not have been altered, amended or
     otherwise changed or supplemented in any material respect or any material
     condition precedent therein waived, without the prior written consent of
     the Administrative Agent. The Western Acquisition shall have been
     consummated in all material respects in accordance with the terms of the
     Merger Agreement and in compliance with applicable laws and regulatory
     approvals, and all conditions precedent to the obligations of the Combined
     Parties under the Merger Agreement shall have been satisfied or, with the
     prior approval of the Administrative Agent, waived. All filings required by
     the Merger Agreement shall have been made in accordance with applicable
     law.

          (m) Revolving Credit Agreement. The Revolving Credit Agreement shall
     have been executed and delivered and shall have become effective, and the
     revolving credit facility thereunder shall be available to the Borrower.

          (n) Other. Receipt by the Lenders of such other documents,
     instruments, agreements or information as reasonably and timely requested
     by any Lender, including, but not limited to, information regarding
     litigation, tax, accounting, labor, insurance, pension liabilities (actual
     or contingent), real estate leases, material contracts, debt agreements,
     property ownership and contingent liabilities of the Combined Parties.

     5.2  CONDITIONS TO FUNDING OF TERM LOANS.

     In addition to the conditions precedent stated elsewhere herein, the
Lenders shall not be obligated to make the Term Loans unless:

          (a) Delivery of Notice. The Borrower shall have delivered a Request
     for Funding of Term Loans duly executed and completed, by the time
     specified in Section 2.1.

          (b) Representations and Warranties. The representations and warranties
     made by any Credit Party in any Credit Document are true and correct in all
     material respects at and as if made as of such date, except to the extent
     they expressly relate to an earlier date.

          (c) No Default. No Default or Event of Default shall exist or be
     continuing either prior to or after giving effect thereto.

The delivery of a Request for Funding of Term Loans shall constitute a
representation and warranty by the Borrower of the correctness of the matters
specified in subsections (b) and (c) above.

                                       39
<PAGE>   45

                                    SECTION 6

                         REPRESENTATIONS AND WARRANTIES

     The Credit Parties hereby represent to the Administrative Agent and each
Lender that:

     6.1  ORGANIZATION AND GOOD STANDING.

     Each Credit Party (a) is either a partnership, a corporation or a limited
liability company duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization, (b) is duly qualified and in
good standing as a foreign organization and authorized to do business in every
other jurisdiction unless the failure to be so qualified, in good standing or
authorized would not have or would not reasonably be expected to have a Material
Adverse Effect and (c) has the power and authority to own its properties and to
carry on its business as now conducted and as currently proposed to be
conducted.

     6.2  DUE AUTHORIZATION.

     Each Credit Party (a) has the power and authority to execute, deliver and
perform this Credit Agreement and the other Credit Documents to which it is a
party and to incur the obligations herein and therein provided for and (b) has
duly taken all necessary action to authorize, and is duly authorized, to
execute, deliver and perform this Credit Agreement and the other Credit
Documents to which it is a party.

     6.3  ENFORCEABLE OBLIGATIONS.

     This Credit Agreement and the other Credit Documents have been duly
executed and delivered by each Credit Party and constitute legal, valid and
binding obligations of such Credit Party enforceable against such Credit Party
in accordance with their respective terms, except as may be limited by
bankruptcy or insolvency laws or similar laws affecting creditors' rights
generally or by general equitable principles.

     6.4  NO CONFLICTS.

     Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated herein and therein, nor the
performance of or compliance with the terms and provisions hereof and thereof by
a Credit Party will (a) violate, contravene or conflict with any provision of
its organizational documents, (b) violate, contravene or conflict with any
Requirement of Law (including, without limitation, Regulation U or Regulation
X), order, writ, judgment, injunction, decree, license or permit applicable to
it, (c) violate, contravene or conflict with contractual provisions of, or cause
an event of default under, any indenture, loan agreement, mortgage, deed of
trust, contract or other agreement or instrument to which it is a party or by
which it or its properties may be bound, or (d) result in or require the
creation of any Lien upon or with respect to its properties.

                                       40
<PAGE>   46

     6.5  CONSENTS.

     Except for (a) consents, approvals and authorizations which have been
obtained and (b) consents from the mortgagees of the Properties set forth on
Schedule 6.5, no consent, approval, authorization or order of, or filing,
registration or qualification with, any Governmental Authority, equity owner or
third party in respect of any Credit Party is required in connection with the
execution, delivery or performance of this Credit Agreement or any of the other
Credit Documents, or the consummation of any transaction contemplated herein or
therein, including, without limitation, the Western Acquisition, by such Credit
Party.

     6.6  FINANCIAL CONDITION.

     The financial statements delivered to the Administrative Agent and the
Lenders pursuant to Section 5.1(d) and Sections 7.1(a) and (b): (a) have been
prepared in accordance with GAAP, (b) present fairly the consolidated financial
condition, results of operations and cash flows of the Consolidated Group as of
such date and for such periods and (c) show all material indebtedness and other
liabilities, direct or contingent, of the Consolidated Group. Since December 31,
1999, there has been no sale, transfer or other disposition by any member of the
Consolidated Group of any material part of the business or property of the
Consolidated Group, taken as a whole, and no purchase or other acquisition by
any of them of any business or property (including any Capital Stock of any
other Person) material in relation to the consolidated financial condition of
the Consolidated Group, taken as a whole, (other than the Western Acquisition)
in each case, which, is not (i) reflected in the most recent financial
statements delivered to the Lenders pursuant to Section 5.1(d) and Section 7.1
or in the notes thereto or (ii) otherwise permitted by the terms of this Credit
Agreement and communicated to the Administrative Agent and the Lenders.

     6.7  NO MATERIAL CHANGE.

     Since December 31, 1999, there has been no development or event relating to
or affecting a Combined Party which has had or would be reasonably expected to
have a Material Adverse Effect.

     6.8  DISCLOSURE.

     Neither this Credit Agreement, nor any financial statements delivered to
the Administrative Agent or the Lenders nor any other document, certificate or
statement furnished to the Administrative Agent or the Lenders by or on behalf
of any Credit Party in connection with the transactions contemplated hereby
contains any untrue statement of a material fact or omits to state a material
fact necessary in order to make the statements contained therein or herein not
misleading in light of the circumstances in which made.

     6.9 NO DEFAULT.

     No Combined Party is in default in any material respect under any material
contract, lease, loan agreement, indenture, mortgage, security agreement or
other agreement or obligation to which it is a party or by which any of its
properties is bound, other than any default occurring solely as a

                                       41
<PAGE>   47

result of the consummation of the Western Acquisition under the mortgages, loan
documents or other agreements with each of the mortgagees of the Properties set
forth on Schedule 6.5. No Default or Event of Default has occurred and is
continuing or would result from the consummation of the transactions
contemplated by this Credit Agreement and the other Credit Documents.

     6.10 LITIGATION.

     There are no actions, suits or legal, equitable, arbitration or
administrative proceedings, pending or, to the knowledge of any Credit Party,
threatened against, a Combined Party or with respect to its properties or
revenues which (a) purport to affect or pertain to this Credit Agreement or the
other Credit Documents or the transactions contemplated herein and therein or
(b) would have or would reasonably be expected to have a Material Adverse
Effect.

     6.11 TAXES.

     Each member of the Consolidated Group has filed, or caused to be filed, all
tax returns (federal, state, local and foreign) required to be filed and has
paid (a) all amounts of taxes shown thereon to be due (including interest and
penalties) and (b) all other taxes, fees, assessments and other governmental
charges (including mortgage recording taxes, documentary stamp taxes and
intangibles taxes) owing by it, except for such taxes (i) which are not yet
delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Credit Party is aware of any proposed tax assessments
against it or any other member of the Consolidated Group.

     6.12 COMPLIANCE WITH LAW.

     Each Combined Party is in compliance with all Requirements of Law
(including, without limitation, but subject to Section 6.20, Environmental Laws)
and all material orders, writs, injunctions and decrees applicable to it, or to
its properties.

     6.13 LICENSES, ETC.

     The Combined Parties have obtained, and hold in full force and effect, all
franchises, licenses, permits, certificates, authorizations, qualifications,
accreditations, easements, rights of way, intellectual property rights and other
rights, consents and approvals which are necessary for the operation of their
respective businesses as presently conducted.

     6.14 OWNERSHIP OF PROPERTIES.

     The Combined Parties have good title in fee simple to all Properties.

     6.15 INSURANCE.

     The properties of the Consolidated Group are insured with financially sound
and reputable insurance companies that are not Affiliates of the Borrower, in
such amounts, with

                                       42
<PAGE>   48

such deductibles and covering such risks, as are customarily carried by
companies engaged in similar businesses and owning similar properties in
localities where the members of the Consolidated Group operate.

     6.16 USE OF PROCEEDS.

     The proceeds of the Term Loans hereunder will be used solely for the
purposes specified in Section 7.11. No proceeds of the Term Loans hereunder will
be used for the acquisition of another Person unless the board of directors (or
other comparable governing body) or stockholders (or other equity owners), as
appropriate, of such Person has approved such acquisition.

     6.17 GOVERNMENT REGULATION.

          (a) No proceeds of the Term Loans will be used, directly or
     indirectly, for the purpose of purchasing or carrying any "margin stock"
     within the meaning of Regulation U, or for the purpose of purchasing or
     carrying or trading in any securities. No Indebtedness being reduced or
     retired out of the proceeds of the Term Loans was or will be incurred for
     the purpose of purchasing or carrying any margin stock within the meaning
     of Regulation U or any "margin security" within the meaning of Regulation
     T. "Margin stock" within the meaning of Regulation U does not constitute
     more than 25% of the value of the consolidated assets of the Consolidated
     Group. None of the transactions contemplated by the Credit Documents
     (including, without limitation, the direct or indirect use of the proceeds
     of the Term Loans) will violate or result in a violation of (i) the
     Securities Act, (ii) the Exchange Act or (iii) Regulations T, U or X.

          (b) No member of the Consolidated Group is subject to regulation under
     the Public Utility Holding Company Act of 1935, the Federal Power Act or
     the Investment Company Act of 1940, each as amended. In addition, no member
     of the Consolidated Group is (i) an "investment company" registered or
     required to be registered under the Investment Company Act of 1940, as
     amended, and is not controlled by an "investment company", or (ii) a
     "holding company", or a "subsidiary company" of a "holding company", or an
     "affiliate" of a "holding company" or of a "subsidiary" of a "holding
     company", within the meaning of the Public Utility Holding Company Act of
     1935, as amended.

          (c) No director, executive officer or principal shareholder of a
     member of the Consolidated Group is a director, executive officer or
     principal shareholder of any Lender. For the purposes hereof the terms
     "director," "executive officer" and "principal shareholder" (when used with
     reference to any Lender) have the respective meanings assigned thereto in
     Regulation O issued by the Board of Governors of the Federal Reserve
     System.

     6.18 NO BURDENSOME RESTRICTIONS.

     No Combined Party is a party to any agreement or instrument or subject to
any other

                                       43
<PAGE>   49

obligation or any charter or corporate restriction or any provision of
any applicable law, rule or regulation which, individually or in the aggregate,
would have or would reasonably be expected to have a Material Adverse Effect.

     6.19 COMPLIANCE WITH ERISA.

     Except as would not result in or be reasonably expected to result in a
liability in excess of $500,000:

          (a) (i) No ERISA Event has occurred, and, to the best knowledge of
     each member of the Consolidated Group and each ERISA Affiliate, no event or
     condition has occurred or exists as a result of which any ERISA Event could
     reasonably be expected to occur, with respect to any Plan; (ii) no
     "accumulated funding deficiency," as such term is defined in Section 302 of
     ERISA and Section 412 of the Code, whether or not waived, has occurred with
     respect to any Plan and no application for a funding waiver or an extension
     of any amortization period pursuant to Section 412 of the Code has been
     made with respect to any Plan; (iii) each Plan has been maintained,
     operated, and funded in compliance with its own terms and in material
     compliance with the provisions of ERISA, the Code, and any other applicable
     federal or state laws; (iv) each Plan that is intended to qualify under
     Section 401(a) of the Code has received a favorable determination letter
     from the IRS or an application for such a letter is currently being
     processed by the IRS with respect thereto and, to the best knowledge of the
     Borrower, nothing has occurred which would prevent, or cause the loss of,
     such qualification; and (v) no Lien in favor or the PBGC or a Plan has
     arisen or is reasonably likely to arise on account of any Plan.

          (b) The actuarial present value of all "benefit liabilities" (as
     defined in Section 4001(a)(16) of ERISA), whether or not vested, under each
     Single Employer Plan, as of the last annual valuation date prior to the
     date on which this representation is made or deemed made (determined, in
     each case, in accordance with Financial Accounting Standards Board
     Statement 87, utilizing the actuarial assumptions used in such Plan's most
     recent actuarial valuation report), did not exceed as of such valuation
     date the fair market value of the assets of such Plan allocated to such
     accrued liabilities.

          (c) No member of the Consolidated Group nor any ERISA Affiliate has
     incurred, or, to the best of each such party's knowledge, is reasonably
     expected to incur, any liability under Title IV of ERISA with respect to
     any Single Employer Plan, or any withdrawal liability under ERISA to any
     Multiemployer Plan or Multiple Employer Plan. No member of the Consolidated
     Group nor any ERISA Affiliate would become subject to any withdrawal
     liability under ERISA if any such party were to withdraw completely from
     all Multiemployer Plans and Multiple Employer Plans as of the valuation
     date most closely preceding the date on which this representation is made
     or deemed made. No member of the Consolidated Group nor any ERISA Affiliate
     has received any notification that any Multiemployer Plan is in
     reorganization (within the meaning of Section 4241 of ERISA), is insolvent
     (within the meaning of Section 4245 of ERISA), or has been terminated
     (within the meaning of Title IV of ERISA), and no Multiemployer Plan is, to
     the best of each such

                                       44
<PAGE>   50

     Person's knowledge, reasonably expected to be in reorganization, insolvent,
     or terminated. No member of the Consolidated Group nor any ERISA Affiliate
     has engaged in a transaction that could be subject to Sections 4069 or
     4212(c) of ERISA.

          (d) No prohibited transaction (within the meaning of Section 406 of
     ERISA or Section 4975 of the Code) or breach of fiduciary responsibility
     has occurred with respect to a Plan which has subjected or may subject any
     member of the Consolidated Group or any ERISA Affiliate to any liability
     under Sections 406, 409, 502(i), or 502(l) of ERISA or Section 4975 of the
     Code, or under any agreement or other instrument pursuant to which any
     member of the Consolidated Group or any ERISA Affiliate has agreed or is
     required to indemnify any person against any such liability. There are no
     pending or, to the best knowledge of the Borrower, threatened claims,
     actions or lawsuits, or action by any Governmental Authority, with respect
     to any Plan that could be reasonably expected to have a Material Adverse
     Effect.

          (e) No member of the Consolidated Group nor any ERISA Affiliate has
     any material liability with respect to "expected post-retirement benefit
     obligations" within the meaning of the Financial Accounting Standards Board
     Statement 106. Each Plan that is a welfare plan (as defined in Section 3(1)
     of ERISA) to which Sections 601-609 of ERISA and Section 4980B of the Code
     apply has been administered in compliance in all material respects with
     such sections.

     6.20 ENVIRONMENTAL MATTERS.

          (a) Except as would not or would not reasonably be expected to result
     in a liability in excess of $200,000:

               (i) Each of the Properties and all operations at the Properties
          are in material compliance with all applicable Environmental Laws, and
          there is no violation of any Environmental Law with respect to the
          Properties or the businesses operated thereon by a Combined Party (the
          "Businesses"), and there are no conditions relating to the Businesses
          or Properties that would be reasonably expected to give rise to
          liability under any applicable Environmental Laws.

               (ii) No member of the Consolidated Group has received any written
          notice of, or written inquiry from any Governmental Authority
          regarding, any violation, alleged violation, non-compliance, liability
          or potential liability regarding Hazardous Materials or compliance
          with Environmental Laws with regard to any of the Properties or the
          Businesses, nor does any member of the Consolidated Group have
          knowledge that any such notice is being threatened.

               (iii) To the knowledge of the Consolidated Group, Hazardous
          Materials have not been transported or disposed of from the
          Properties, or generated, treated, stored or disposed of at, on or
          under any of the Properties or any other location, in each case by, or
          on behalf or with the permission of, any Combined

                                       45
<PAGE>   51

          Party in a manner that would reasonably be expected to give rise to
          liability under any applicable Environmental Law.

               (iv) No judicial proceeding or governmental or administrative
          action is pending or, to the knowledge of any member of the
          Consolidated Group, threatened, under any Environmental Law to which
          any Combined Party is or will be named as a party, nor are there any
          consent decrees or other decrees, consent orders, administrative
          orders or other orders, or other administrative or judicial
          requirements outstanding under any Environmental Law with respect to
          any Combined Party, the Properties or the Businesses, in any amount
          reportable under the federal Comprehensive Environmental Response,
          Compensation and Liability Act or any analogous state law, except
          releases in compliance with any Environmental Laws.

               (v) To the knowledge of the Consolidated Group, there has been no
          release or threat of release of Hazardous Materials at or from the
          Properties, or arising from or related to the operations (including,
          without limitation, disposal) of a Combined Party in connection with
          the Properties or otherwise in connection with the Businesses except
          in compliance with Environmental Laws.

               (vi) None of the Properties contains, or to the best knowledge of
          the Consolidated Group, has previously contained, any Hazardous
          Materials at, on or under the Properties in amounts or concentrations
          that, if released, constitute or constituted a violation of, or could
          give rise to liability under, Environmental Laws.

               (vii) No Combined Party has assumed any liability of any Person
          under any Environmental Law.

          (b) Each Combined Party has adopted procedures that are designed to
     (i) ensure that each such Person, any of its operations and each of the
     Properties owned by such Person remains in compliance with applicable
     Environmental Laws and (ii) minimize any liabilities or potential
     liabilities that each such Person, any of its operations and each of the
     Properties owned by each such Person may have under applicable
     Environmental Laws.

     6.21 ORGANIZATION STRUCTURE/SUBSIDIARIES.

     Set forth on Schedule 6.21 is a complete and accurate list of all
Subsidiaries of the Credit Parties and an accurate organization chart of the
Combined Parties. No Credit Party has any Subsidiaries or owns an interest,
directly or indirectly, in any Person or joint venture, except as set forth on
Schedule 6.21. Schedule 6.21 shall be updated from time to time by the Borrower
by giving written notice thereof to the Administrative Agent.

                                       46
<PAGE>   52

     6.22 PROPERTIES.

     Set forth on Schedule 6.22 is (a) the name, location and ownership of each
Property, (b) the year such Property was built, (c) the total square footage and
net rentable square footage of such Property, (d) a complete rent roll for such
Property, including name, address and lease expiration date for each lessee and
percentage occupancy, (e) operating statements for such property for the fiscal
year ended December 31, 1999 and the six months ended June 30, 2000, (f)
projected NOI for the next two fiscal year ends for such Properties, (g) a list
of Liens on such Property, if any, including the mortgage balance and maturity
date and (h) an identification of all Unencumbered Properties. Schedule 6.22
shall be updated from time to time by the Borrower by giving written notice
thereof to the Administrative Agent.

     6.23 SOLVENCY.

     Each Credit Party, is and, after consummation of the transactions
contemplated by this Credit Agreement, will be Solvent.

                                    SECTION 7

                              AFFIRMATIVE COVENANTS

     Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Term Loans, together with interest and fees
and other obligations then due and payable hereunder, have been paid in full and
the Commitments hereunder shall have terminated:

     7.1  INFORMATION COVENANTS.

     The Borrower will furnish, or cause to be furnished, to the Administrative
Agent and each of the Lenders:

          (a) Annual Financial Statements. As soon as available, and in any
     event within 90 days after the close of each fiscal year of the
     Consolidated Group, a consolidated balance sheet and income statement of
     the Consolidated Group as of the end of such fiscal year, together with
     related consolidated statements of operations and retained earnings and of
     cash flows for such fiscal year, setting forth in comparative form
     consolidated figures for the preceding fiscal year, all such financial
     information described above to be in reasonable form and detail and audited
     by independent certified public accountants of recognized national standing
     reasonably acceptable to the Administrative Agent and whose opinion shall
     be to the effect that such financial statements have been prepared in
     accordance with GAAP (except for changes with which such accountants
     concur) and shall not be limited as to the scope of the audit or qualified
     in any manner.

          (b) Quarterly Financial Statements. As soon as available, and in any
     event within 45 days after the close of the first three fiscal quarters of
     the Consolidated Group, (i) a consolidated balance sheet and income
     statement of the Consolidated Group, as of the end

                                       47
<PAGE>   53

     of such fiscal quarter, together with related consolidated statements of
     operations and retained earnings and of cash flows for such fiscal quarter
     in each case setting forth in comparative form consolidated figures for the
     corresponding period of the preceding fiscal year all such financial
     information described above to be in reasonable form and detail and
     reasonably acceptable to the Administrative Agent, and accompanied by a
     certificate of the chief financial officer of the Borrower to the effect
     that such quarterly financial statements fairly present in all material
     respects the financial condition of the Consolidated Group and have been
     prepared in accordance with GAAP, subject to changes resulting from audit
     and normal year-end audit adjustments and (ii) a quarterly operating
     statement for each Property.

          (c) Officer's Certificate. At the time of delivery of the financial
     statements provided for in Sections 7.1(a) and 7.1(b) above and within 45
     days after the end of the fourth fiscal quarter of the Borrower, a
     certificate of the chief financial officer of the Borrower, substantially
     in the form of Exhibit 7.1(c), (i) demonstrating compliance with the
     financial covenants contained in Section 7.2 by calculation thereof as of
     the end of each such fiscal period and demonstrating compliance with
     Sections 8.6, 8.7 and 8.12, (ii) stating that no Default or Event of
     Default exists, or if any Default or Event of Default does exist,
     specifying the nature and extent thereof and what action the Borrower
     proposes to take with respect thereto and (iii) attaching an operating
     statement for each Property for the most recent fiscal quarter.

          (d) Annual Information and Projections. Within 60 days after the end
     of each fiscal year of the Consolidated Group, projected financial
     statements (including projected consolidated balance sheets and income and
     cash flow projections) for the Consolidated Group on a GAAP basis for the
     next succeeding two fiscal year periods.

          (e) Auditor's Reports. Promptly upon receipt thereof, a copy of any
     "management letter" submitted by independent accountants to any member of
     the Consolidated Group in connection with any annual, interim or special
     audit of the books of such member of the Consolidated Group.

          (f) Reports. Promptly upon transmission or receipt thereof, (i) copies
     of any filings and registrations with, and reports to or from, the
     Securities and Exchange Commission, or any successor agency, and copies of
     all financial statements, proxy statements, notices and reports as any
     member of the Consolidated Group shall send to its equityholders generally,
     (ii) copies of all income tax returns filed by a member of the Consolidated
     Group as may be requested by the Administrative Agent and (iii) upon the
     written request of the Administrative Agent, all reports and written
     information to and from the United States Environmental Protection Agency,
     or any state or local agency responsible for environmental matters, the
     United States Occupational Health and Safety Administration, or any state
     or local agency responsible for health and safety matters, or any successor
     agencies or authorities concerning environmental, health or safety matters.

          (g) Notices. Upon a Credit Party obtaining knowledge thereof, such
     Credit

                                       48
<PAGE>   54

     Party will give written notice to the Administrative Agent immediately of:
     (i) the occurrence of an event or condition constituting a Default or Event
     of Default, stating that such notice is a "notice of default" and
     specifying the nature and existence thereof and what action the Credit
     Parties propose to take with respect thereto, (ii) the adoption by any
     member of the Consolidated Group of any material change in accounting or
     financial reporting policies, (iii) any change in either Debt Rating of the
     Borrower, and (iv) the occurrence of any of the following with respect to
     any member of the Consolidated Group (A) the pendency or commencement of
     any litigation, arbitral or governmental proceeding against any member of
     the Consolidated Group which if adversely determined would have or would
     reasonably be expected to have (1) damages in the amount of $200,000 or
     more or (2) a Material Adverse Effect or (B) the institution of any
     proceedings against any member of the Consolidated Group with respect to,
     or the receipt of notice by such Person of potential liability or
     responsibility for, violation or alleged violation of any federal, state or
     local law, rule or regulation, including, but not limited to, Environmental
     Laws.

          (h) ERISA. Upon a member of the Consolidated Group or any ERISA
     Affiliate obtaining knowledge thereof, such member of the Consolidated
     Group or ERISA Affiliate will give written notice to the Administrative
     Agent and each of the Lenders promptly (and in any event within five
     Business Days) of: (i) any event or condition, including, but not limited
     to, any Reportable Event, that constitutes, or might reasonably lead to, an
     ERISA Event; (ii) with respect to any Multiemployer Plan, the receipt of
     notice as prescribed in ERISA or otherwise of any withdrawal liability
     assessed against a member of the Consolidated Group or any ERISA Affiliate,
     or of a determination that any Multiemployer Plan is in reorganization or
     insolvent (both within the meaning of Title IV of ERISA); (iii) the failure
     to make full payment on or before the due date (including extensions)
     thereof of all amounts which a member of the Consolidated Group or any
     ERISA Affiliate is required to contribute to each Plan pursuant to its
     terms and as required to meet the minimum funding standard set forth in
     ERISA and the Code with respect thereto; or (iv) any change in the funding
     status of any Plan that could have a Material Adverse Effect; in each case,
     together with a description of any such event or condition or a copy of any
     such notice and a statement by the chief financial officer of the Borrower
     briefly setting forth the details regarding such event, condition, or
     notice, and the action, if any, which has been or is being taken or is
     proposed to be taken by such member of the Consolidated Group or such ERISA
     Affiliate with respect thereto. Promptly upon request, the Credit Parties
     shall furnish the Administrative Agent and the Lenders with such additional
     information concerning any Plan as may be reasonably requested, including,
     but not limited to, copies of each annual report/return (Form 5500 series),
     as well as all schedules and attachments thereto required to be filed with
     the Department of Labor and/or the Internal Revenue Service pursuant to
     ERISA and the Code, respectively, for each "plan year" (within the meaning
     of Section 3(39) of ERISA).

          (i)  Environmental.

               (i) Subsequent to a notice from any Governmental Authority that
          would reasonably cause concern or during the existence of an Event of
          Default,

                                       49
<PAGE>   55

          and upon the written request of the Administrative Agent, the Credit
          Parties will furnish or cause to be furnished to the Administrative
          Agent, at the Credit Parties' expense, an updated report of an
          environmental assessment of reasonable scope, form and depth,
          including, where appropriate, invasive soil or groundwater sampling,
          by a consultant reasonably acceptable to the Administrative Agent as
          to the nature and extent of the presence of any Hazardous Materials on
          any Property and as to the compliance by the Combined Parties with
          Environmental Laws. If the Credit Parties fail to deliver such an
          environmental report within seventy-five (75) days after receipt of
          such written request then the Administrative Agent may arrange for
          same, and the Credit Parties hereby grant, shall cause their
          Subsidiaries to grant and shall use their best efforts to cause any
          other Combined Parties to grant to the Administrative Agent and its
          representatives access to the Properties and a license of a scope
          reasonably necessary to undertake such an assessment (including, where
          appropriate, invasive soil or groundwater sampling). The reasonable
          cost of any assessment arranged for by the Administrative Agent
          pursuant to this provision will be payable by the Credit Parties on
          demand and added to the Obligations hereunder.

               (ii) Each member of the Consolidated Group will conduct and
          complete all investigations, studies, sampling, and testing and all
          remedial, removal, and other actions necessary to address all
          Hazardous Materials on, from, or affecting any Property to the extent
          necessary to be in compliance with all Environmental Laws and all
          other applicable federal, state, and local laws, regulations, rules
          and policies and with the orders and directives of all Governmental
          Authorities exercising jurisdiction over such Property to the extent
          any failure to so comply would have or would reasonably be expected to
          have a Material Adverse Effect.

          (j) Other Information. With reasonable promptness upon any such
     request, such other information regarding the Properties or regarding the
     business, assets or financial condition of the Combined Parties as the
     Administrative Agent or any Lender may reasonably request.

     7.2  FINANCIAL COVENANTS.

          (a) Consolidated Tangible Net Worth. Consolidated Tangible Net Worth
     shall at all times be greater than or equal to the sum of (i) 85% of the
     amount of consolidated owners' equity of the Consolidated Group, as
     determined in accordance with GAAP, as of the date of consummation of the
     Western Acquisition and after giving effect thereto plus (ii) 85% of the
     Minority Interests of the Consolidated Group as of the date of consummation
     of the Western Acquisition and after giving effect thereto plus (iii) 85%
     of the Net Cash Proceeds from all Equity Issuances occurring on and after
     the Closing Date.

          (b) Fixed Charge Coverage Ratio. As of the last day of each fiscal
     quarter of the Consolidated Group, the Fixed Charge Coverage Ratio shall be
     greater than or equal to 2.0 to 1.0.

                                       50
<PAGE>   56

          (c) Leverage Ratio. Except as set forth below, the Leverage Ratio
     shall at all times be less than or equal to 0.50 to 1.0.

     Notwithstanding the above, if, as a direct result of the consummation by
     any Credit Party of a Significant Acquisition, the Leverage Ratio exceeds
     .50 to 1.0 but is less than or equal to .55 to 1.0, the Borrower may
     request in writing to the Administrative Agent that the maximum Leverage
     Ratio increase to .55 to 1.0 for a period not to exceed six months from
     such request (the "Temporary Leverage Ratio Period"); provided that (a) the
     Administrative Agent must consent to such increase in its sole discretion
     (such consent not to be unreasonably withheld) and (b) if the Borrower does
     request the increase in the maximum Leverage Ratio as set forth above, and
     the Administrative Agent does so consent, (i) the Borrower must pay the
     Margin Increase on all outstanding Term Loans during the Temporary Leverage
     Ratio Period and (ii) during the Temporary Leverage Ratio Period, the
     Leverage Ratio must at all times be less than or equal to .55 to 1.0.

          (d) Unencumbered Debt Service Coverage Ratio. As of the last day of
     each fiscal quarter of the Consolidated Group, the Unencumbered Debt
     Service Coverage Ratio shall be greater than or equal to 2.0 to 1.0.

          (e) Secured Debt Ratio. The Secured Debt Ratio shall at all times be
     less than or equal to .35 to 1.0.

          (f) Unsecured Debt Ratio. The Unsecured Debt Ratio shall at all times
     be less than or equal to .50 to 1.0.

     7.3  PRESERVATION OF EXISTENCE.

     Each of the Credit Parties will, and will cause each member of the
Consolidated Group to, do all things necessary to preserve and keep in full
force and effect its existence, rights, franchises, intellectual property and
authority except as permitted by Section 8.4. Without limiting the generality of
the foregoing, the Borrower will do all things necessary to maintain its status
as a REIT.

     7.4  MAINTENANCE OF ASSETS.

     Each of the Credit Parties will, and will cause each member of the
Consolidated Group to, maintain and preserve its Properties and all other assets
in good repair, working order and condition, normal wear and tear excepted, and
will make, or cause to be made, in the Properties and other assets, from time to
time, all repairs, renewals, replacements, extensions, additions, betterments
and improvements thereto as may be needed or proper, in accordance with normal
industry practice.

     7.5  INSURANCE.

     Each of the Credit Parties will, and will cause each member of the
Consolidated Group to,

                                       51
<PAGE>   57

at all times maintain in full force and effect insurance (including worker's
compensation insurance, liability insurance, casualty insurance and business
interruption insurance) with reputable national companies that are not
Affiliates of the Borrower, in such amounts, covering such risks and liabilities
and with such deductibles as are in accordance with normal industry practice.

     7.6  PERFORMANCE OF OBLIGATIONS.

     Each of the Credit Parties will, and will cause each member of the
Consolidated Group to, perform in all material respects all of its obligations
under the terms of all material agreements, indentures, mortgages, security
agreements or other debt instruments to which it is a party or by which it or
its properties may be bound.

     7.7  COMPLIANCE WITH LAW.

     Each of the Credit Parties will, and will cause each member of the
Consolidated Group to, comply in all material respects with all Requirements of
Law, and all applicable material restrictions imposed by all Governmental
Authorities, applicable to it or its property (including, without limitation,
Environmental Laws and ERISA).

     7.8  PAYMENT OF TAXES AND OTHER INDEBTEDNESS.

     Each of the Credit Parties will, and will cause each member of the
Consolidated Group to, pay, settle or discharge (a) all taxes, assessments and
governmental charges or levies imposed upon it, or upon its income or profits,
or upon any of its properties, before they shall become delinquent, (b) all
lawful claims (including claims for labor, materials and supplies) which, if
unpaid, might give rise to a Lien upon any of its properties, and (c) except as
prohibited hereunder, all of its other Indebtedness as it shall become due;
provided, however, that such Credit Party or any member of the Consolidated
Group shall not be required to pay any such tax, assessment, charge, levy, claim
or Indebtedness which is being contested in good faith by appropriate
proceedings and as to which adequate reserves therefor have been established in
accordance with GAAP, unless the failure to make any such payment (i) would give
rise to an immediate right to foreclose on a Lien securing such amounts or (ii)
would have a Material Adverse Effect.

     7.9  BOOKS AND RECORDS.

     Each of the Credit Parties will, and will cause each member of the
Consolidated Group to, keep complete and accurate books and records of its
transactions in accordance with good accounting practices on the basis of GAAP
(including the establishment and maintenance of appropriate reserves).

     7.10 AUDITS/INSPECTIONS.

     (a)(i) At all times prior to an Event of Default, upon reasonable (and in
any case, no less than 48 hours') notice and during normal business hours and
(ii) at any time and without notice upon the occurrence and during the
continuation of an Event of Default, (b) subject to the rights of

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tenants upon such Property, and (c) at the expense of the Credit Parties, each
Credit Party will, will cause its Subsidiaries to, and will use its best efforts
to cause any other Combined Party to, permit representatives appointed by the
Administrative Agent, including, without limitation, independent accountants,
agents, attorneys and appraisers to visit and inspect such Credit Party's,
Subsidiary's or other Combined Party's property, including, without limitation,
the Properties, including its books and records, its accounts receivable and
equipment, its facilities and its other business assets, and to make photocopies
or photographs thereof and to write down and record any information such
representative obtains and shall permit the Administrative Agent or its
representatives to investigate and verify the accuracy of information provided
to it or to the Lenders, and to discuss all such matters with the officers,
employees and representatives of the Credit Parties, the members of the
Consolidated Group and any other Combined Party.

     7.11 USE OF PROCEEDS.

     The Borrower will use the proceeds of the Term Loans solely for (a) general
working capital in the ordinary course, (b) to fund acquisitions, development
and construction of, and improvements to, Properties, (c) refinancing existing
and future Indebtedness, including the repayment of Indebtedness in connection
with the Western Acquisition, and (d) for other lawful corporate purposes.

     7.12 ADDITIONAL CREDIT PARTIES.

     Prior to the joinder of a new guarantor under the Revolving Credit
Agreement, the Borrower shall notify the Administrative Agent and, if such
Person is not already a Credit Party, shall cause such Person to: (a) execute a
Joinder Agreement in substantially the form of Exhibit 7.12 and (b) deliver such
other documentation as the Administrative Agent may reasonably request in
connection with the foregoing, including, without limitation, certified
resolutions and other organizational and authorizing documents of such Person
and favorable opinions of counsel to such Person (which shall cover, among other
things, the legality, validity, binding effect and enforceability of the
documentation referred to above) in each case in form and substance acceptable
to the Administrative Agent.

     7.13 CONSENTS; CURE OF DEFAULTS.

     On or before 90 days after the Closing Date, the Borrower shall obtain the
consent of each of the mortgagees of the Properties set forth on Schedule 6.5
and take such other action as may be necessary to ensure that any default under
any mortgage, loan document or other agreement with such mortgagee as a result
of the consummation of the Western Acquisition and/or the failure to obtain such
consents prior to such consummation is cured and ceases to exist.

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                                    SECTION 8

                               NEGATIVE COVENANTS

     Each Credit Party hereby covenants and agrees that so long as this Credit
Agreement is in effect and until the Term Loans, together with interest, fees
and other obligations hereunder, have been paid in full and the Commitments
hereunder shall have terminated:

     8.1  INDEBTEDNESS.

     No Credit Party will, nor will it permit any member of the Consolidated
Group to, contract, create, incur, assume or permit to exist any Indebtedness,
except:

          (a) Indebtedness arising under this Credit Agreement and the other
     Credit Documents;

          (b) Indebtedness arising under the Revolving Credit Agreement;

          (c) Indebtedness owing from one Credit Party to another Credit Party;

          (d) Indebtedness in respect of current accounts payable and accrued
     expenses incurred in the ordinary course of business;

          (e) Indebtedness that is secured by Properties but that is
     non-recourse to any member of the Consolidated Group;

          (f) the Senior Notes or other senior unsecured notes of the Borrower
     issued as a Public Debt Issuance, as long as the proceeds thereof are
     forwarded to the Administrative Agent as a mandatory prepayment in
     accordance with Section 3.3(b)(ii); and

          (g) that certain letter of credit, dated as of November 10, 2000, in
     the stated amount of $3,476,800, issued to Marc Paul, Inc. as beneficiary
     by Sanwa Bank California for the account of the Borrower.

     8.2  LIENS.

     No Credit Party will, nor will it permit any Subsidiary to, contract,
create, incur, assume or permit to exist any Liens on any Properties or other
property or assets of such Person other than Liens permitted by the terms of the
Revolving Credit Agreement.

     8.3  NATURE OF BUSINESS.

     No Credit Party will, nor will it permit any member of the Consolidated
Group to, alter the character of its business from that of the investment in,
and leasing and operation of, retail commercial real estate.

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<PAGE>   60

     8.4  CONSOLIDATION AND MERGER.

     Except as set forth below, no Credit Party will, nor will it permit any
member of the Consolidated Group to, enter into any transaction of merger or
consolidation or liquidate, wind up or dissolve itself (or suffer any
liquidation or dissolution). Notwithstanding the foregoing, (a) any Credit Party
may be merged or consolidated with or into another Credit Party, (b) a Person
may be merged with or into a Credit Party or (c) any member of the Consolidated
Group that is not a Credit Party may merge with or into another Person that is
not a Credit Party; provided that (i) if the transaction is between the Borrower
and another Person, the Borrower shall be the continuing or surviving entity;
(ii) if that transaction is between a Credit Party and a Person that is not a
Credit Party, the Credit Party shall be the surviving entity; (iii) the
Administrative Agent shall be given 30 days prior written notice of any such
action; (iv) the Credit Parties shall execute and deliver such documents,
instruments, certificates and opinions in connection therewith as the
Administrative Agent may reasonably request; and (v) after giving effect
thereto, no Default or Event of Default shall exist.

     8.5  SALE OR LEASE OF ASSETS.

     No Property may be conveyed, sold, leased, transferred or otherwise
disposed of except if, after giving effect thereto, (i) the Credit Parties are
in compliance on a pro forma basis with the financial covenants set forth in
Section 7.2 and (ii) no Default or Event of Default exists. The Consolidated
Group will not sell, or agree to sell, all or substantially all of their assets.

     8.6  INVESTMENTS.

     During the term of this Credit Agreement, no Credit Party will, nor will it
permit any member of the Consolidated Group to, make Investments that exceed, in
the aggregate, 15% of Total Assets as calculated as of the end of the most
recent fiscal quarter.

     8.7  RESTRICTED PAYMENTS.

          (a) No Credit Party will, nor will it permit any member of the
     Consolidated Group to, directly or indirectly, declare or pay any dividends
     or make any other distribution upon any of its Capital Stock in any fiscal
     quarter that exceed, in the aggregate, the lesser of (i) 100% of Funds From
     Operations for such quarter and (ii) 95% of the average quarterly Funds
     From Operations for the immediately preceding four fiscal quarters;
     provided that (i) any Subsidiary of a Credit Party may pay dividends or
     make distributions to its parent and (ii) the Borrower may pay such
     dividends as is necessary to maintain its status as a REIT.

          (b) Other than as may be necessary in connection with the conversion
     of operating partnership units or operating limited liability company
     units, as the case may be, of: (i) Pan Pacific (Portland), LLC, (ii) Pan
     Pacific (Rancho Las Palmas), LLC, (iii) Pan Pacific (Kienow), L.P. or (iv)
     Pan Pacific (Pinecreek), L.P., no Credit Party will, nor will it permit any
     member of the Consolidated Group to, at any time purchase, redeem or

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<PAGE>   61

     otherwise acquire or retire or make any provisions for the redemption,
     acquisition or retirement of any of its Capital Stock of any type or class
     or any warrants or options to purchase any such Capital Stock.

     8.8  TRANSACTIONS WITH AFFILIATES.

     No Credit Party will, nor will it permit any member of the Consolidated
Group to, enter into any transaction or series of transactions, whether or not
in the ordinary course of business, with any officer, director, shareholder,
Subsidiary, Combined Party or Affiliate other than on terms and conditions
substantially as favorable as would be obtainable in a comparable arm's-length
transaction with a Person other than an officer, director, shareholder,
Subsidiary, Combined Party or Affiliate.

     8.9  FISCAL YEAR; ORGANIZATIONAL DOCUMENTS.

     No Credit Party will, nor will it permit any member of the Consolidated
Group to, (a) change its fiscal year or (b) change its organizational or
formation documents in any manner that would have an adverse effect on the
rights of the Lenders under the Credit Documents; provided that (i) the Borrower
may take such action, with prior written notice to the Administrative Agent, as
is necessary to maintain its status as a REIT and (ii) the Credit Parties will
provide prompt written notice of any change made in compliance with the terms of
this Section 8.9.

     8.10 NO LIMITATIONS.

     No Credit Party will, nor will it permit any member of the Consolidated
Group to, directly or indirectly, create or otherwise cause, incur, assume,
suffer or permit to exist or become effective any consensual encumbrance or
restriction of any kind on the ability of any such Person to (a)(i) pay
dividends or make any other distribution of any of such Person's Capital Stock,
(ii) pay any Indebtedness owed to the Borrower or any other Credit Party, (iii)
make loans or advances to any Credit Party or (iv) transfer any of its property
to any Credit Party, or (b) repay or prepay the Term Loans and other Obligations
or to perform its obligations hereunder and under the other Credit Documents.

     8.11 OTHER NEGATIVE PLEDGES.

     No Credit Party will, nor will it permit any member of the Consolidated
Group to, enter into, assume or become subject to any agreement prohibiting or
otherwise restricting the creation or assumption of any Lien upon its Properties
or assets, whether now owned or hereafter acquired, or requiring the grant of
any security for such obligation if security is given for some other obligation
except as provided under the Credit Documents.

     8.12 CONSTRUCTION AND DEVELOPMENT.

     No Credit Party will, nor will it permit any member of the Consolidated
Group to, at any time (a) commit to, commence or continue or (b) make an
Investment in any Combined Party

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that is committed to, commencing or continuing, construction of any improvements
on any undeveloped or partially developed Property or Properties, if the sum,
without duplication, of (i) with respect to clause (a) above, the aggregate cost
to date of all such construction, together with the aggregate estimated cost to
complete such construction, plus (ii) with respect to clause (b) above, the
aggregate Investments to date, together with the required or estimated future
Investments of members of the Consolidated Group in all such Combined Parties,
would exceed 10% of the Aggregate Adjusted Current Value. Furthermore, if the
limitation set forth in this Section 8.12 shall cause a Combined Party to cease
construction of or development on a Borrowing Base Development Property, such
Development Property shall be excluded from the Borrowing Base and the Borrower
shall provide the Administrative Agent with a Borrowing Base Certificate
reflecting such exclusion.

                                    SECTION 9

                                EVENTS OF DEFAULT

     9.1  EVENTS OF DEFAULT.

     An Event of Default shall exist upon the occurrence of any of the following
specified events (each an "Event of Default"):

          (a) Payment. The Credit Parties shall default in the payment (i) when
     due of any principal amount of any Term Loans or (ii) within five days of
     when due of any interest, fees or other amounts owing hereunder, under any
     of the other Credit Documents or in connection herewith.

          (b) Representations. Any representation, warranty or statement made or
     deemed to be made by any Credit Party herein, in any of the other Credit
     Documents, or in any statement or certificate delivered or required to be
     delivered pursuant hereto or thereto shall prove untrue in any material
     respect on the date as of which it was made or deemed to have been made.

          (c) Covenants. Any Credit Party shall:

               (i) default in the due performance or observance of any term,
          covenant or agreement contained in Sections 7.2, 7.3, 7.7, 7.10, 7.11
          or 8.1 through 8.12 inclusive; provided that if the Credit Parties
          fail to comply with Section 7.2(c) solely as a result of a change in
          the Applicable Cap Rate by the Lenders, a Default or an Event of
          Default shall not exist unless the Credit Parties also fail to comply
          with Section 7.2(c) as of the last day of any subsequent fiscal
          quarter of the Consolidated Group;

               (ii) default in the due performance or observance by it of any
          term, covenant or agreement contained in Section 7.1 and such default
          shall continue unremedied for a period of five Business Days after the
          earlier of a Credit

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<PAGE>   63

          Party becoming aware of such default or notice thereof given by the
          Administrative Agent; or

               (iii) default in the due performance or observance by it of any
          term, covenant or agreement (other than those referred to in
          subsections (a), (b) or (c)(i) or (ii) of this Section 9.1) contained
          in this Credit Agreement and such default shall continue unremedied
          for a period of at least 30 days after the earlier of a Credit Party
          becoming aware of such default or notice thereof given by the
          Administrative Agent.

          (d) Other Credit Documents. (i) Any Credit Party shall default in the
     due performance or observance of any term, covenant or agreement in any of
     the other Credit Documents and such default shall continue unremedied for a
     period of at least 30 days after the earlier of a Credit Party becoming
     aware of such default or notice thereof given by the Administrative Agent,
     or (ii) any Credit Document (or any provision of any Credit Document,
     including Section 4 of this Credit Agreement) shall fail to be in full
     force and effect or any Credit Party shall so assert or any Credit Document
     shall fail to give the Administrative Agent and/or the Lenders the security
     interests, liens, rights, powers and privileges purported to be created
     thereby.

          (e) Bankruptcy, etc. The occurrence of any of the following with
     respect to any member of the Consolidated Group (i) a court or governmental
     agency having jurisdiction in the premises shall enter a decree or order
     for relief in respect of any member of the Consolidated Group in an
     involuntary case under any applicable bankruptcy, insolvency or other
     similar law now or hereafter in effect, or appoint a receiver, liquidator,
     assignee, custodian, trustee, sequestrator or similar official of any
     member of the Consolidated Group or for any substantial part of its
     property or ordering the winding up or liquidation of its affairs; or (ii)
     an involuntary case under any applicable bankruptcy, insolvency or other
     similar law now or hereafter in effect is commenced against any member of
     the Consolidated Group and such petition remains unstayed and in effect for
     a period of 60 consecutive days; or (iii) any member of the Consolidated
     Group shall commence a voluntary case under any applicable bankruptcy,
     insolvency or other similar law now or hereafter in effect, or consent to
     the entry of an order for relief in an involuntary case under any such law,
     or consent to the appointment or taking possession by a receiver,
     liquidator, assignee, custodian, trustee, sequestrator or similar official
     of such Person or any substantial part of its property or make any general
     assignment for the benefit of creditors; (iv) any member of the
     Consolidated Group shall admit in writing its inability to pay its debts
     generally as they become due; or (v) any writ or warrant of attachment or
     execution or similar process shall be issued or levied against all or any
     material part of the property of any member of the Consolidated Group and
     is not released, vacated or fully bonded within 30 days after its issue or
     levy.

          (f) Defaults under Other Agreements. With respect to any Indebtedness
     (other than Indebtedness outstanding under this Credit Agreement) of any
     member of the Consolidated Group: (i) such member of the Consolidated Group
     shall (A) default in any

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     payment (beyond the applicable grace period with respect thereto, if any)
     with respect to any such Indebtedness, or (B) default (after giving effect
     to any applicable grace period) in the observance or performance of any
     term, covenant or agreement relating to such Indebtedness or contained in
     any instrument or agreement evidencing, securing or relating thereto, or
     any other event or condition shall occur or condition exist, the effect of
     which default or other event or condition is to cause, or permit, the
     holder or holders of such Indebtedness (or trustee or agent on behalf of
     such holders) to cause (determined without regard to whether any notice or
     lapse of time is required) any such Indebtedness to become due prior to its
     stated maturity; or (ii) any such Indebtedness shall be declared due and
     payable, or required to be prepaid other than by a regularly scheduled
     required prepayment prior to the stated maturity thereof; or (iii) any such
     Indebtedness shall mature and remain unpaid; provided that, notwithstanding
     anything to the contrary in this subsection 9.1(f), a default under the
     Indebtedness owed to each of the mortgagees of the Properties set forth on
     Schedule 6.5 shall not be deemed an Event of Default hereunder if such
     default (x) occurs solely as a result of the consummation of the Western
     Acquisition and (y) ceases to exist on or before 90 days following the
     Closing Date.

          (g) Judgments. One or more judgments, orders, or decrees shall be
     entered against any one or more members of the Consolidated Group (i)
     involving a liability of $500,000 or more, in the aggregate (to the extent
     not paid or covered by insurance provided by a carrier who has acknowledged
     coverage) or (ii) that would have or would reasonably be expected to have a
     Material Adverse Effect, and such judgments, orders or decrees (A) are the
     subject of any enforcement proceeding commenced by any creditor or (B)
     shall continue unsatisfied, undischarged and unstayed for a period ending
     on the first to occur of (x) the last day on which such judgment, order or
     decree becomes final and unappealable or (y) 45 days.

          (h) ERISA Events. The occurrence of any of the following events or
     conditions if such event or occurrence would, or would reasonably be likely
     to, result in liability in excess of $500,000: (i) any "accumulated funding
     deficiency," as such term is defined in Section 302 of ERISA and Section
     412 of the Code, whether or not waived, shall exist with respect to any
     Plan, or any lien shall arise on the assets of a member of the Consolidated
     Group or any ERISA Affiliate in favor of the PBGC or a Plan; (ii) an ERISA
     Event shall occur with respect to a Single Employer Plan, which is, in the
     reasonable opinion of the Administrative Agent, likely to result in the
     termination of such Plan for purposes of Title IV of ERISA; (iii) an ERISA
     Event shall occur with respect to a Multiemployer Plan or Multiple Employer
     Plan, which is, in the reasonable opinion of the Administrative Agent,
     likely to result in (A) the termination of such Plan for purposes of Title
     IV of ERISA, or (B) a member of the Consolidated Group or any ERISA
     Affiliate incurring any liability in connection with a withdrawal from,
     reorganization of (within the meaning of Section 4241 of ERISA), or
     insolvency (within the meaning of Section 4245 of ERISA) of such Plan; (iv)
     any prohibited transaction (within the meaning of Section 406 of ERISA or
     Section 4975 of the Code) or breach of fiduciary responsibility shall occur
     which may subject a member of the Consolidated Group or any ERISA Affiliate
     to any liability under Sections 406, 409, 502(i), or 502(l) of ERISA or
     Section 4975 of the Code, or under any agreement or other

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<PAGE>   65

     instrument pursuant to which a member of the Consolidated Group or any
     ERISA Affiliate has agreed or is required to indemnify any Person against
     any such liability; or (v) a member of the Consolidated Group or any ERISA
     Affiliate fails to pay when due, after the expiration of any applicable
     grace period, any installment payment with respect to its withdrawal
     liability under Section 4201 of ERISA under a Multiemployer Plan in an
     aggregate amount in excess of $500,000.

          (i) Ownership. There shall occur a Change of Control.

          (j) Management. Stuart Tanz is no longer President and Chief Executive
     Officer of, or is no longer active in the business of, the Borrower.

          (k) REIT Status. The Borrower does not maintain its REIT status or is
     no longer deemed to be a REIT.

          (l) Revolving Credit Agreement. (i) All Indebtedness of the Credit
     Parties under the Revolving Credit Agreement is paid in full and the
     commitments of the lenders thereunder terminated, (ii) either Facility
     Availability or the Revolving Committed Amount (each as defined in the
     Revolving Credit Agreement) is less than $100,000,000, (iii) the Borrowing
     Base (as defined in the Revolving Credit Agreement) is less than the amount
     of Unsecured Debt or (iv) an Event of Default (as defined in the Revolving
     Credit Facility) shall occur.

     9.2  ACCELERATION; REMEDIES.

     Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived in writing by the
Required Lenders (or the Lenders as may be required hereunder), the
Administrative Agent may, or, upon the request and direction of the Required
Lenders, shall, by written notice to the Borrower, take any of the following
actions without prejudice to the rights of the Administrative Agent or any
Lender to enforce its claims against the Borrower, except as otherwise
specifically provided for herein:

          (a) Termination of Commitments. Declare the Commitments terminated
     whereupon the Commitments shall be immediately terminated.

          (b) Acceleration of Term Loans. Declare the unpaid principal of and
     any accrued interest in respect of all Term Loans and any and all other
     Indebtedness or obligations of any and every kind owing by a Credit Party
     to any of the Lenders hereunder to be due whereupon the same shall be
     immediately due and payable without presentment, demand, protest or other
     notice of any kind, all of which are hereby waived by the Credit Parties.

          (c) Enforcement of Rights. Enforce any and all rights and interests
     created and existing under the Credit Documents, including, without
     limitation, all rights and remedies existing against a Guarantor, and all
     rights of set-off.

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<PAGE>   66

Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(e) shall occur, then the Commitments shall automatically terminate and all
Term Loans, all accrued interest in respect thereof, all accrued and unpaid fees
and all other indebtedness or obligations owing to the Lenders hereunder shall
immediately become due and payable without the giving of any notice or other
action by the Administrative Agent or the Lenders, which notice or other action
is expressly waived by the Credit Parties.

Notwithstanding the delegation by the Lenders of certain enforcement powers to
the Administrative Agent, each Lender has, to the extent permitted by law, a
separate right of payment and shall be considered a separate "creditor" holding
a separate "claim" within the meaning of Section 101(5) of the Bankruptcy Code
or any other insolvency statute.

     9.3  ALLOCATION OF PAYMENTS AFTER EVENT OF DEFAULT.

     Notwithstanding any other provisions of this Credit Agreement, upon the
occurrence and during the continuation of an Event of Default, all amounts
collected or received by the Administrative Agent or any Lender on account of
amounts outstanding under any of the Credit Documents shall be paid over or
delivered as follows:

          FIRST, to the payment of all reasonable out-of-pocket costs and
     expenses (including, without limitation, reasonable Attorney Costs) of the
     Administrative Agent in connection with enforcing the rights of the Lenders
     under the Credit Documents;

          SECOND, to payment of any fees owed to the Administrative Agent;

          THIRD, to the payment of all reasonable out-of-pocket costs and
     expenses, (including, without limitation, reasonable Attorney Costs) of
     each of the Lenders in connection with enforcing its rights under the
     Credit Documents;

          FOURTH, to the payment of all accrued fees and interest payable to the
     Lenders hereunder;

          FIFTH, to the payment of the outstanding principal amount of the Term
     Loans, pro rata as set forth below;

          SIXTH, to all other obligations which shall have become due and
     payable under the Credit Documents and not repaid pursuant to clauses
     "FIRST" through "FIFTH" above; and

          SEVENTH, to the payment of the surplus, if any, to whoever may be
     lawfully entitled to receive such surplus.

In carrying out the foregoing, (a) amounts received shall be applied in the
numerical order provided until exhausted prior to application to the next
succeeding category; (b) each of the Lenders shall receive an amount equal to
its pro rata share (based on the proportion that the then outstanding

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Term Loans owed to such Lender bears to the aggregate then outstanding Term
Loans) of amounts available to be applied pursuant to clauses "THIRD", "FOURTH,"
"FIFTH," and "SIXTH" above.

                                   SECTION 10

                                AGENCY PROVISIONS

     10.1 APPOINTMENT.

     Each Lender hereby irrevocably appoints, designates and authorizes the
Administrative Agent to take such action on its behalf under the provisions of
this Credit Agreement and each other Credit Document and to exercise such powers
and perform such duties as are expressly delegated to it by the terms of this
Credit Agreement or any other Credit Document, together with such powers as are
reasonably incidental thereto. Notwithstanding any provision to the contrary
contained elsewhere herein or in any other Credit Document, the Administrative
Agent shall not have any duties or responsibilities, except those expressly set
forth herein, nor shall the Administrative Agent have or be deemed to have any
fiduciary or trustee relationship with any Lender or participant, and no implied
covenants, functions, responsibilities, duties, obligations or liabilities shall
be read into this Credit Agreement or any other Credit Document or otherwise
exist against the Administrative Agent. Without limiting the generality of the
foregoing sentence, the use of the term "agent" herein and in the other Credit
Documents with reference to the Administrative Agent is not intended to connote
any fiduciary or other implied (or express) obligations arising under agency
doctrine of any applicable law. Instead, such term is used merely as a matter of
market custom, and is intended to create or reflect only an administrative
relationship between independent contracting parties.

     10.2 DELEGATION OF DUTIES.

     The Administrative Agent may execute any of its duties under this Credit
Agreement or any other Credit Document by or through agents, employees or
attorneys-in-fact and shall be entitled to advice of counsel and other
consultants or experts concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agent or attorney-in-fact that it selects with reasonable care.

     10.3 EXCULPATORY PROVISIONS.

     No Agent-Related Person shall (a) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Credit Agreement or
any other Credit Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct in connection with its duties
expressly set forth herein), or (b) be responsible in any manner to any Lender
or participant for any recital, statement, representation or warranty made by
any Credit Party or any officer thereof, contained herein or in any other Credit
Document, or in any certificate, report, statement or other document referred to
or provided for in, or received by the Administrative Agent under or in
connection with, this Credit Agreement or any other Credit Document, or the
validity, effectiveness, genuineness, enforceability or sufficiency of this
Credit Agreement or any other Credit

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Document, or for any failure of any Credit Party or any other party to any
Credit Document to perform its obligations hereunder or thereunder. No
Agent-Related Person shall be under any obligation to any Lender or participant
to ascertain or to inquire as to the observance or performance of any of the
agreements contained in, or conditions of, this Credit Agreement or any other
Credit Document, or to inspect the properties, books or records of any Credit
Party or any Affiliate thereof.

     10.4 RELIANCE ON COMMUNICATIONS.

          (a) The Administrative Agent shall be entitled to rely, and shall be
     fully protected in relying, upon any writing, communication, signature,
     resolution, representation, notice, consent, certificate, affidavit,
     letter, telegram, facsimile, telex or telephone message, statement or other
     document or conversation believed by it to be genuine and correct and to
     have been signed, sent or made by the proper Person or Persons, and upon
     advice and statements of legal counsel (including counsel to any Credit
     Party), independent accountants and other experts selected by the
     Administrative Agent. The Administrative Agent may deem and treat each
     Lender as the owner of its interests hereunder for all purposes unless a
     written notice of assignment, negotiation or transfer thereof shall have
     been delivered to the Administrative Agent in accordance with Section
     11.3(b). The Administrative Agent shall be fully justified in failing or
     refusing to take any action under any Credit Document unless it shall first
     receive such advice or concurrence of the Required Lenders as it deems
     appropriate and, if it so requests, it shall first be indemnified to its
     satisfaction by the Lenders against any and all liability and expense which
     may be incurred by it by reason of taking or continuing to take any such
     action. The Administrative Agent shall in all cases be fully protected in
     acting, or in refraining from acting, under this Credit Agreement or any
     other Credit Document in accordance with a request or consent of the
     Required Lenders or all the Lenders, if required hereunder, and such
     request and any action taken or failure to act pursuant thereto shall be
     binding upon all the Lenders and participants, and their respective
     successors and assigns. Where this Credit Agreement expressly permits or
     prohibits an action unless the Required Lenders otherwise determine, the
     Administrative Agent shall, and in all other instances, the Administrative
     Agent may, but shall not be required to, initiate any solicitation for the
     consent or a vote of the Lenders.

          (b) For purposes of determining compliance with the conditions
     specified in Section 5.1, each Lender that has signed this Credit Agreement
     shall be deemed to have consented to, approved or accepted or to be
     satisfied with, each document or other matter either sent by the
     Administrative Agent to such Lender for consent, approval, acceptance or
     satisfaction, or required thereunder to be consented to or approved by or
     acceptable or satisfactory to a Lender.

     10.5 NOTICE OF DEFAULT.

     The Administrative Agent shall not be deemed to have knowledge or notice of
the

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occurrence of any Default or Event of Default, except with respect to defaults
in the payment of principal, interest and fees required to be paid to the
Administrative Agent for the account of the Lenders, unless the Administrative
Agent shall have received written notice from a Lender or the Borrower referring
to this Credit Agreement, describing such Default or Event of Default and
stating that such notice is a "notice of default." The Administrative Agent will
notify the Lenders of its receipt of any such notice. The Administrative Agent
shall take such action with respect to such Default or Event of Default as may
be reasonably directed by the Required Lenders in accordance with Section 9.2;
provided, however, that unless and until the Administrative Agent has received
any such direction, the Administrative Agent may (but shall not be obligated to)
take such action, or refrain from taking such action, with respect to such
Default or Event of Default as it shall deem advisable or in the best interest
of the Lenders.

     10.6 NON-RELIANCE ON ADMINISTRATIVE AGENT AND OTHER LENDERS.

     Each Lender acknowledges that no Agent-Related Person has made any
representation or warranty to it, and that no act by the Administrative Agent
hereinafter taken, including any consent to and acceptance of any assignment or
review of the affairs of any Credit Party or any Affiliate thereof, shall be
deemed to constitute any representation or warranty by any Agent-Related Person
to any Lender as to any matter, including whether Agent-Related Persons have
disclosed material information in their possession. Each Lender represents to
the Administrative Agent that it has, independently and without reliance upon
any Agent-Related Person or any other Lender and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, prospects, operations, property, financial and
other condition and creditworthiness of the Credit Parties and their respective
Affiliates, and all applicable bank or other regulatory laws relating to the
transactions contemplated hereby, and made its own decision to enter into this
Credit Agreement and to extend credit to the Borrower hereunder. Each Lender
also represents that it will, independently and without reliance upon any
Agent-Related Person or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking action under
this Credit Agreement and the other Credit Documents, and to make such
investigations as it deems necessary to inform itself as to the business,
prospects, operations, property, financial and other condition and
creditworthiness of the Borrower. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent herein, the Administrative Agent shall not have any duty or
responsibility to provide any Lender with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of any of the Credit Parties or any of their
respective Affiliates which may come into the possession of any Agent-Related
Person.

     10.7 INDEMNIFICATION.

     Whether or not the transactions contemplated hereby are consummated, the
Lenders shall indemnify upon demand each Agent-Related Person (to the extent not
reimbursed by or on behalf of any Credit Party and without limiting the
obligation of any Credit Party to do so), pro rata, and hold harmless each
Agent-Related Person from and against any and all Indemnified Liabilities

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incurred by it; provided, however, that no Lender shall be liable for the
payment to any Agent-Related Person of any portion of such Indemnified
Liabilities resulting from such Agent-Related Person's gross negligence or
willful misconduct; it being understood that no action taken in accordance with
the directions of the Required Lenders shall be deemed to constitute gross
negligence or willful misconduct for purposes of this Section 10.7. Without
limitation of the foregoing, each Lender shall reimburse the Administrative
Agent upon demand for its ratable share of any costs or out-of-pocket expenses
(including Attorney Costs) incurred by the Administrative Agent in connection
with the preparation, execution, delivery, administration, modification,
amendment or enforcement (whether through negotiations, legal proceedings or
otherwise) of, or legal advice in respect of rights or responsibilities under,
this Credit Agreement, any other Credit Document, or any document contemplated
by or referred to herein, to the extent that the Administrative Agent is not
reimbursed for such expenses by or on behalf of the Credit Parties. The
undertaking in this Section 10.7 shall survive the termination of the
Commitments, the payment of all Obligations hereunder and the resignation or
replacement of the Administrative Agent.

     10.8 ADMINISTRATIVE AGENT IN ITS INDIVIDUAL CAPACITY.

     Bank of America and its Affiliates may make loans to, issue letters of
credit for the account of, accept deposits from, acquire equity interests in and
generally engage in any kind of banking, trust, financial advisory, underwriting
or other business with each of the Credit Parties and their respective
Affiliates as though Bank of America were not the Administrative Agent hereunder
and without notice to or consent of the Lenders. The Lenders acknowledge that,
pursuant to such activities, Bank of America or its Affiliates may receive
information regarding any Credit Party or its Affiliates (including information
that may be subject to confidentiality obligations in favor of such Credit Party
or such Affiliate) and that the Administrative Agent shall be under no
obligation to provide such information to them. With respect to its Term Loans,
Bank of America shall have the same rights and powers under this Credit
Agreement as any other Lender and may exercise such rights and powers as though
it were not the Administrative Agent, and the terms "Lender" and "Lenders"
include Bank of America in its individual capacity.

     10.9 SUCCESSOR AGENT.

     The Administrative Agent may, and, at the request of the Required Lenders,
with good cause, shall, resign as Administrative Agent upon 30 days' notice to
the Lenders. If the Administrative Agent resigns under this Credit Agreement,
the Required Lenders shall appoint from among the Lenders a successor
administrative agent for the Lenders which successor administrative agent (such
appointment, absent the existence of an Event of Default, to be subject to the
consent of the Borrower, which consent of the Borrower shall not be unreasonably
withheld or delayed). If no successor administrative agent is appointed prior to
the effective date of the resignation of the Administrative Agent, the
Administrative Agent may appoint, after consulting with the Lenders and the
Borrower, a successor administrative agent from among the Lenders. Upon the
acceptance of its appointment as successor administrative agent hereunder, such
successor administrative agent shall succeed to all the rights, powers and
duties of the

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retiring Administrative Agent and the term "Administrative Agent" shall mean
such successor administrative agent and the retiring Administrative Agent's
appointment, powers and duties as Administrative Agent shall be terminated.
After any retiring Administrative Agent's resignation hereunder as
Administrative Agent, the provisions of this Section 10 and Sections 11.5 and
11.10 shall inure to its benefit as to any actions taken or omitted to be taken
by it while it was Administrative Agent under this Credit Agreement. If no
successor administrative agent has accepted appointment as Administrative Agent
by the date which is 30 days following a retiring Administrative Agent's notice
of resignation, the retiring Administrative Agent's resignation shall
nevertheless thereupon become effective and the Lenders shall perform all of the
duties of the Administrative Agent hereunder until such time, if any, as the
Required Lenders appoint a successor agent as provided for above. For the
purpose of removing the Administrative Agent pursuant to this Section 10.9, the
definition of Required Lenders shall mean solely those Lenders whose Credit
Exposure constitutes more than 66 2/3% of the Credit Exposure of all Lenders at
such time.

                                   SECTION 11

                                  MISCELLANEOUS

     11.1 NOTICES.

     Except as otherwise expressly provided herein, all notices and other
communications shall be deemed to have been duly given and shall be effective
(a) when delivered, (b) when electronic confirmation of a transmission via
telecopy (or other facsimile device) is received from such device by the sender
thereof, (c) the Business Day following the day on which the same has been
delivered prepaid (or on an invoice basis) to a reputable national overnight air
courier service, or (d) the third Business Day following the day on which the
same is sent by certified or registered mail, postage prepaid, in each case to
the respective parties at the address or telecopy numbers set forth on Schedule
11.1, or at such other address as such party may specify by written notice to
the other parties hereto.

     11.2 RIGHT OF SET-OFF, AUTOMATIC DEBITS.

          (a) In addition to any rights now or hereafter granted under
     applicable law or otherwise, and not by way of limitation of any such
     rights, upon the occurrence of an Event of Default and the commencement of
     remedies described in Section 9.2, each Lender is authorized at any time
     and from time to time, without presentment, demand, protest or other notice
     of any kind (all of which rights being hereby expressly waived), to set-off
     and to appropriate and apply any and all deposits (general or special) and
     any other indebtedness at any time held or owing by such Lender (including,
     without limitation, branches, agencies or Affiliates of such Lender
     wherever located) to or for the credit or the account of any Credit Party
     against obligations and liabilities of such Credit Party to the Lenders
     hereunder, under the Notes, the other Credit Documents or otherwise,
     irrespective of whether the

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     Administrative Agent or the Lenders shall have made any demand hereunder
     and although such obligations, liabilities or claims, or any of them, may
     be contingent or unmatured, and any such set-off shall be deemed to have
     been made immediately upon the occurrence of an Event of Default even
     though such charge is made or entered on the books of such Lender
     subsequent thereto. The Credit Parties hereby agree that any Person
     purchasing a participation in the Term Loans and Commitments hereunder
     pursuant to Sections 11.3(e) or 3.8 may exercise all rights of set-off with
     respect to its participation interest as fully as if such Person were a
     Lender hereunder.

          (b) In addition to clause (a) above, with respect to any principal or
     interest payment, fee, or any other cost or expense (including Attorney
     Costs), due and payable to the Administrative Agent or the Lenders under
     the Credit Documents, the Credit Parties hereby irrevocably authorize and
     direct the Administrative Agent to debit any deposit account of the Credit
     Parties with the Administrative Agent (as one of the Lenders) in an amount
     such that the aggregate amount debited from all such deposit accounts does
     not exceed such payment, fee, or other cost or expense. If there are
     insufficient funds in such deposit accounts to cover the amount of the
     payment, fee, other cost or expense then due, such debits will be reversed
     (in whole or in part, in the Administrative Agent's sole discretion) and
     such amount not debited shall be deemed to be unpaid. No such debit under
     this Section 11.2(b) shall be deemed a set-off.

     11.3 BENEFIT OF AGREEMENT.

          (a) Generally. This Credit Agreement shall be binding upon and inure
     to the benefit of and be enforceable by the respective successors and
     assigns of the parties hereto; provided that none of the Credit Parties may
     assign and transfer any of its interests (except as permitted by Section
     8.4) without the prior written consent of the Lenders; and provided further
     that the rights of each Lender to transfer, assign or grant participations
     in its rights and/or obligations hereunder shall be limited as set forth
     below in this Section 11.3.

          (b) Assignments. Each Lender may assign to one or more Eligible
     Assignees all or a portion of its rights and obligations under this Credit
     Agreement (including, without limitation, all or a portion of its Term
     Loans, its Note and its Commitment); provided, however, that:

               (i) each such assignment shall be to an Eligible Assignee;

               (ii) except (A) in the case of an assignment to another Lender,
          (B) in the case of an assignment of all of a Lender's rights and
          obligations under this Credit Agreement, or (C) with the consent of
          the Administrative Agent and the Borrower, any such partial assignment
          shall be in an amount at least equal to $10,000,000 (or, if less, the
          remaining amount of the Commitment being assigned by such Lender) or
          an integral multiple of $1,000,000 in excess thereof;

               (iii) each such assignment by a Lender shall be of a constant,
          and not

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          varying, percentage of all of its rights and obligations under this
          Credit Agreement and the Notes; and

               (iv) the parties to such assignment shall execute and deliver to
          the Administrative Agent for its acceptance an Assignment Agreement in
          substantially the form of Exhibit 11.3, together with a processing fee
          from the assignor of $3,500.

     Upon execution, delivery, and acceptance of such Assignment Agreement, the
     assignee thereunder shall be a party hereto and, to the extent of such
     assignment, have the obligations, rights, and benefits of a Lender
     hereunder and the assigning Lender shall, to the extent of such assignment,
     relinquish its rights and be released from its obligations under this
     Credit Agreement. Upon the consummation of any assignment pursuant to this
     Section 11.3(b), the assignor, the Administrative Agent and the Borrower
     shall make appropriate arrangements so that, if required, new Notes are
     issued to the assignor and the assignee and cancelled Notes are returned to
     the Borrower. If the assignee is not incorporated under the laws of the
     United States of America or a state thereof, it shall deliver to the
     Borrower and the Administrative Agent certification as to exemption from
     deduction or withholding of taxes in accordance with Section 3.13.

     By executing and delivering an assignment agreement in accordance with this
     Section 11.3(b), the assigning Lender thereunder and the assignee
     thereunder shall be deemed to confirm to and agree with each other and the
     other parties hereto as follows: (A) such assigning Lender warrants that it
     is the legal and beneficial owner of the interest being assigned thereby
     free and clear of any adverse claim and the assignee warrants that it is an
     Eligible Assignee; (B) except as set forth in clause (A) above, such
     assigning Lender makes no representation or warranty and assumes no
     responsibility with respect to any statements, warranties or
     representations made in or in connection with this Credit Agreement, any of
     the other Credit Documents or any other instrument or document furnished
     pursuant hereto or thereto, or the execution, legality, validity,
     enforceability, genuineness, sufficiency or value of this Credit Agreement,
     any of the other Credit Documents or any other instrument or document
     furnished pursuant hereto or thereto or the financial condition of any
     Credit Party or the performance or observance by any Credit Party of any of
     its obligations under this Credit Agreement, any of the other Credit
     Documents or any other instrument or document furnished pursuant hereto or
     thereto; (C) such assigning Lender and such assignee each represents and
     warrants that it is legally authorized to enter into such assignment
     agreement; (D) such assignee confirms that it has received a copy of this
     Credit Agreement, the other Credit Documents and such other documents and
     information as it has deemed appropriate to make its own credit analysis
     and decision to enter into such assignment agreement; (E) such assignee
     will independently and without reliance upon the Administrative Agent, such
     assigning Lender or any other Lender, and based on such documents and
     information as it shall deem appropriate at the time, continue to make its
     own credit decisions in taking or not taking action under this Credit
     Agreement and the other Credit Documents; (F) such assignee appoints and
     authorizes the Administrative Agent to take such action on its behalf and
     to exercise such powers under this Credit

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     Agreement or any other Credit Document as are delegated to the
     Administrative Agent by the terms hereof or thereof, together with such
     powers as are reasonably incidental thereto; and (G) such assignee agrees
     that it will perform in accordance with their terms all the obligations
     which by the terms of this Credit Agreement and the other Credit Documents
     are required to be performed by it as a Lender.

          (c) Register. The Administrative Agent shall maintain a copy of each
     Assignment Agreement delivered to and accepted by it and a register for the
     recordation of the names and addresses of the Lenders and the Commitment
     of, and principal amount of the Term Loans owing to each Lender from time
     to time (the "Register"). The entries in the Register shall be conclusive
     and binding for all purposes, absent manifest error, and the Borrower, the
     Administrative Agent and the Lenders may treat each Person whose name is
     recorded in the Register as a Lender hereunder for all purposes of this
     Credit Agreement. The Register shall be available for inspection by the
     Borrower or any Lender at any reasonable time and from time to time upon
     reasonable prior notice.

          (d) Acceptance. Upon its receipt of an Assignment Agreement executed
     by the parties thereto, together with any Note subject to such assignment
     and payment of the processing fee, the Administrative Agent shall, if such
     Assignment Agreement has been completed and is in substantially the form of
     Exhibit 11.3, (i) accept such Assignment Agreement, (ii) record the
     information contained therein in the Register and (iii) give prompt notice
     thereof to the parties thereto.

          (e) Participations. Each Lender may sell participations to one or more
     Persons in all or a portion of its rights, obligations or rights and
     obligations under this Credit Agreement (including all or a portion of its
     Commitment and its Term Loans); provided, however, that (i) such Lender's
     obligations under this Credit Agreement shall remain unchanged, (ii) such
     Lender shall remain solely responsible to the other parties hereto for the
     performance of such obligations, (iii) the participant shall be entitled to
     the benefit of the right of set-off contained in Section 11.2, (iv) the
     Borrower shall continue to deal solely and directly with such Lender in
     connection with such Lender's rights and obligations under this Credit
     Agreement, and (v) such Lender shall retain the sole right to enforce the
     obligations of the Borrower relating to its Term Loans and its Notes and to
     approve any amendment, modification, or waiver of any provision of this
     Credit Agreement (other than amendments, modifications, or waivers
     decreasing the amount of principal of or the rate at which interest is
     payable on such Term Loans or Notes, extending any scheduled principal
     payment date or date fixed for the payment of interest on such Term Loans
     or Notes, or releasing the Borrower or all or substantially all of the
     Guarantors from their respective obligations under the Credit Documents).

          (f) Nonrestricted Assignments. Notwithstanding any other provision set
     forth in this Credit Agreement, any Lender may at any time assign and
     pledge all or any portion of its Term Loans and its Notes to any Federal
     Reserve Bank as collateral security pursuant to Regulation A and any
     Operating Circular issued by such Federal Reserve Bank. No such assignment
     shall release the assigning Lender from its obligations

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     hereunder.

          (g) Information. Any Lender may furnish any information concerning the
     Borrower or any of its Subsidiaries in the possession of such Lender from
     time to time to assignees and participants (including prospective assignees
     and participants), subject, however, to the provisions of Section 11.16.

     11.4 NO WAIVER; REMEDIES CUMULATIVE.

     No failure or delay on the part of the Administrative Agent or any Lender
in exercising any right, power or privilege hereunder or under any other Credit
Document and no course of dealing between the Credit Parties and the
Administrative Agent or any Lender shall operate as a waiver thereof; nor shall
any single or partial exercise of any right, power or privilege hereunder or
under any other Credit Document preclude any other or further exercise thereof
or the exercise of any other right, power or privilege hereunder or thereunder.
The rights and remedies provided herein are cumulative and not exclusive of any
rights or remedies which the Administrative Agent or any Lender would otherwise
have. No notice to or demand on any Credit Party in any case shall entitle any
Credit Party to any other or further notice or demand in similar or other
circumstances or constitute a waiver of the rights of the Administrative Agent
or the Lenders to any other or further action in any circumstances without
notice or demand.

     11.5 PAYMENT OF EXPENSES; INDEMNIFICATION.

     The Credit Parties agree to: (a) pay all reasonable out-of-pocket costs and
expenses of (i) the Agent Related Persons in connection with (A) the
negotiation, preparation, execution and delivery, syndication and administration
of this Credit Agreement and the other Credit Documents and the documents and
instruments referred to therein (including, without limitation, the reasonable
fees and expenses of Moore & Van Allen, special counsel to the Administrative
Agent) and (B) any amendment, waiver or consent relating hereto and thereto
including, but not limited to, any such amendments, waivers or consents
resulting from or related to any work-out, renegotiation or restructure relating
to the performance by the Credit Parties under this Credit Agreement, and (ii)
the Agent Related Persons and the Lenders in connection with (A) enforcement of
the Credit Documents and the documents and instruments referred to therein,
including, without limitation, in connection with any such enforcement, the
reasonable Attorneys' Costs of the Administrative Agent and each of the Lenders
and (B) any bankruptcy or insolvency proceeding of any member of the
Consolidated Group, and (b) indemnify the Agent Related Persons and each Lender,
its officers, directors, employees, representatives, counsel and agents from and
hold each of them harmless against any and all losses, liabilities, claims,
damages or expenses incurred by any of them as a result of, or arising out of,
or in any way related to, or by reason of, any investigation, litigation or
other proceeding (whether or not such Agent Related Person or any Lender is a
party thereto) related to (x) the entering into and/or performance of any Credit
Document or the use of proceeds of any Term Loans (including other extensions of
credit) hereunder or the consummation of any other transactions contemplated in
any Credit Document, including, without limitation, reasonable Attorneys' Costs
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by

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reason of gross negligence or willful misconduct on the part of the Person to be
indemnified), (y) any Environmental Claim and (z) any claims for Taxes (all of
the foregoing, collectively, "Indemnified Liabilities").

     11.6 AMENDMENTS, WAIVERS AND CONSENTS.

     Neither this Credit Agreement nor any other Credit Document nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and signed by the Required Lenders; provided that no such amendment,
change, waiver, discharge or termination shall, without the consent of each
Lender affected thereby:

          (a) extend the final maturity of any Term Loan or any portion thereof
     or postpone any other date fixed for any payment of principal, other than
     pursuant to Section 3.5;

          (b) reduce the rate or extend the time of payment of interest (other
     than as a result of waiving the applicability of any post-default increase
     in interest rates) or fees hereunder;

          (c) reduce or waive the principal amount of any Term Loan;

          (d) increase the Commitment of a Lender over the amount thereof in
     effect (it being understood and agreed that a waiver of any Default or
     Event of Default shall not constitute a change in the terms of any
     Commitment of any Lender);

          (e) consent to the transfer by the Borrower of or release the Borrower
     from its obligations, or consent to the transfer by any Guarantor of or
     release all or substantially all of the Guarantors from its or their
     obligations, under the Credit Documents;

          (f) amend, modify or waive any provision of this Section 11.6 or
     Section 3.4, 3.7, 3.8, 5.2, 9.1(a), 11.2, 11.3 or 11.5; or

          (g) reduce any percentage specified in, or otherwise modify, the
     definition of Required Lenders.

No provision of Section 10 may be amended or modified without the consent of the
Administrative Agent. It is understood and agreed that each Lender shall be
given no less than five Business Days written notice of any request for an
amendment, waiver or consent under this Credit Agreement or any of the other
Credit Documents.

Notwithstanding the fact that the consent of all the Lenders is required in
certain circumstances as set forth above, (x) each Lender is entitled to vote as
such Lender sees fit on any reorganization plan that affects the Term Loans, and
each Lender acknowledges that the provisions of Section 1126(c) of the
Bankruptcy Code supersede the unanimous consent provisions set forth herein and

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(y) the Required Lenders may consent to allow a Credit Party to use cash
collateral in the context of a bankruptcy or insolvency proceeding.

     11.7 COUNTERPARTS/TELECOPY.

     This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. Delivery of executed counterparts
by telecopy shall be as effective as an original and shall constitute a
representation that an original will be delivered.

     11.8 HEADINGS.

     The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.

     11.9 DEFAULTING LENDER.

     Each Lender understands and agrees that if such Lender is a Defaulting
Lender then notwithstanding the provisions of Section 11.6 it shall not be
entitled to vote on any matter requiring the consent of the Required Lenders or
to object to any matter requiring the consent of all the Lenders; provided,
however, that all other benefits and obligations under the Credit Documents
shall apply to such Defaulting Lender.

     11.10 SURVIVAL OF INDEMNIFICATION AND REPRESENTATIONS AND WARRANTIES.

     All indemnities set forth herein and all representations and warranties
made herein shall survive the execution and delivery of this Credit Agreement,
the making and the repayment of the Term Loans and other Obligations and the
termination of the Commitments hereunder.

     11.11 GOVERNING LAW.

          (a) THIS CREDIT AGREEMENT AND THE OTHER CREDIT DOCUMENTS AND THE
     RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER AND THEREUNDER SHALL BE
     GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
     THE STATE OF CALIFORNIA.

     11.12 WAIVER OF JURY TRIAL; WAIVER OF CONSEQUENTIAL DAMAGES.

     EACH OF THE PARTIES TO THIS CREDIT AGREEMENT HEREBY IRREVOCABLY WAIVES ALL
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF
OR RELATING TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY. Each Credit Party agrees not to
assert any claim against the Administrative Agent, any Lender, any of their
Affiliates, or any of their respective

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directors, officers, employees, attorneys or agents, on any theory of liability,
for special, indirect, consequential or punitive damages arising out of or
otherwise relating to any of the transactions contemplated herein.

     11.13 SEVERABILITY.

     If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.

     11.14 ENTIRETY.

     This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.

     11.15 BINDING EFFECT.

          (a) This Credit Agreement shall become effective at such time as all
     of the conditions set forth in Section 5.1 have been satisfied or waived by
     the Lenders and it shall have been executed by the Credit Parties and the
     Administrative Agent, and the Administrative Agent shall have received
     copies hereof (by telecopy or otherwise) which, when taken together, bear
     the signatures of each Lender, and thereafter this Credit Agreement shall
     be binding upon and inure to the benefit of the Credit Parties, the
     Administrative Agent and each Lender and their respective successors and
     assigns.

          (b) This Credit Agreement shall be a continuing agreement and shall
     remain in full force and effect until all Term Loans, interest, fees and
     other Obligations have been paid in full and all Commitments have been
     terminated. Upon termination, the Credit Parties shall have no further
     obligations (other than the indemnification provisions that survive) under
     the Credit Documents; provided that should any payment, in whole or in
     part, of the Obligations be rescinded or otherwise required to be restored
     or returned by the Administrative Agent or any Lender, whether as a result
     of any proceedings in bankruptcy or reorganization or otherwise, then the
     Credit Documents shall automatically be reinstated and all amounts required
     to be restored or returned and all costs and expenses incurred by the
     Administrative Agent or Lender in connection therewith shall be deemed
     included as part of the Obligations.

     11.16 CONFIDENTIALITY.

     Each of the Administrative Agent and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates' directors, officers, employees
and agents, including accountants, legal counsel and

                                       73
<PAGE>   79

other advisors (it being understood that the Persons to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential); (b) to the extent requested
or required by any Governmental Authority; (c) to the extent required by
Requirements of Law or by any subpoena or similar legal process; (d) to any
other party to this Credit Agreement; (e) in connection with the exercise of any
remedies hereunder or any suit, action or proceeding relating to this Agreement
or the enforcement of rights hereunder; (f) subject to an agreement containing
provisions substantially the same as those of this Section 11.16, to (i) any
Eligible Assignee of or participant in, or any prospective Eligible Assignee of
or participant in, any of its rights or obligations under this Credit Agreement
or (ii) any direct or indirect contractual counterparty or prospective
counterparty (or such contractual counterparty's or prospective counterparty's
professional advisor) to any credit derivative transaction relating to
obligations of any Credit Party; (g) with the consent of the applicable Person;
(h) to the extent such Information (i) becomes publicly available other than as
a result of a breach of this Section 11.16 or (ii) becomes available to the
Administrative Agent or any Lender on a nonconfidential basis from a source
other than the applicable Person; or (i) to the National Association of
Insurance Commissioners or any other similar organization or any nationally
recognized rating agency that requires access to information about a Lender's or
its Affiliates' investment portfolio in connection with ratings issued with
respect to such Lender or its Affiliates. For the purposes of this Section
11.16, "Information" means all information received from a Credit Party or any
Affiliate of a Credit Party relating to such Person or its business, other than
any such information that is available to the Administrative Agent or any Lender
on a nonconfidential basis prior to disclosure by such Person; provided that, in
the case of information received from such Person after the date hereof, such
information is clearly identified in writing at the time of delivery as
confidential. Any Person required to maintain the confidentiality of Information
as provided in this Section 11.16 shall be considered to have complied with its
obligation to do so if such Person has exercised the same degree of care to
maintain the confidentiality of such Information as such Person would accord to
its own confidential information.

     11.17 FURTHER ASSURANCES.

     The Credit Parties agree, upon the request of the Administrative Agent, to
promptly take such actions as are necessary to carry out the intent of this
Credit Agreement and the other Credit Documents.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       74
<PAGE>   80

     Each of the parties hereto has caused a counterpart of this Credit
Agreement to be duly executed and delivered as of the date first above written.

BORROWER:                               PAN PACIFIC RETAIL PROPERTIES, INC.,
                                        a Maryland corporation

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

<PAGE>   81

GUARANTOR:                            PAN PACIFIC DEVELOPMENT (TENNESSEE), L.P.,
                                      a Delaware limited partnership

                                        By: Pan Pacific Development
                                            (Tennessee) Acquisition, Inc.,
                                            its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

<PAGE>   82

GUARANTOR:                              PAN PACIFIC (MARINA VILLAGE), LLC,
                                        a Nevada limited liability company

                                        By: Pan Pacific Retail Properties, Inc.,
                                            its sole member

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

<PAGE>   83

GUARANTOR:                              PAN PACIFIC (CABLE PARK), LLC,
                                        a Nevada limited liability company

                                        By: Pan Pacific Retail Properties, Inc.,
                                            its sole member

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

<PAGE>   84

GUARANTOR:                              GW NO. 100, a California general
                                        partnership

                                        By: Pan Pacific Retail Properties, Inc.,
                                            its general partner

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------

<PAGE>   85

                     Signature Page to Term Credit Agreement
                     for Pan Pacific Retail Properties, Inc.

LENDERS:

                                        BANK OF AMERICA, N.A.,
                                        acting in its capacity as Administrative
                                        Agent and individually as a Lender

                                        By:
                                           -------------------------------------
                                        Name:
                                             -----------------------------------
                                        Title:
                                              ----------------------------------<PAGE>   1

                                                                     EXHIBIT 4.4

                                  VIRAGE, INC.

                                       AND

                   CONTINENTAL STOCK TRANSFER & TRUST COMPANY

                                  Rights Agent

                                RIGHTS AGREEMENT

                          Dated as of November 8, 2000

<PAGE>   2

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                           Page
                                                                                           ----
<S>     <C>                                                                                <C>
1.      Certain Definitions..................................................................1

2.      Appointment of Rights Agent..........................................................5

3.      Issuance 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.........................................8

7.      Exercise of Rights; Purchase Price; Expiration Date of Rights........................9

8.      Cancellation and Destruction of Right Certificates..................................10

9.      Reservation and Availability of Shares of Preferred Stock...........................11

10.     Preferred Stock Record Date.........................................................12

11.     Adjustments to Number and Kind of Shares, Number of Rights or Purchase Price........12

12.     Certification of Adjustments........................................................21

13.     Consolidation, Merger or Sale or Transfer of Assets or Earning Power................22

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

15.     Rights of Action....................................................................26

16.     Agreement of Right Holders..........................................................26

17.     Right Certificate Holder Not Deemed a Stockholder...................................27

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

19.     Merger or Consolidation or Changed Name of Rights Agent.............................28

20.     Duties of Rights Agent..............................................................28

21.     Change of Rights Agent..............................................................31

22.     Issuance of New Right Certificates..................................................31
</TABLE>

                                       i
<PAGE>   3

                                TABLE OF CONTENTS
                                   (continued)
<TABLE>
<CAPTION>
                                                                                           Page
                                                                                           ----
<S>     <C>                                                                                <C>
23.     Redemption..........................................................................32

24.     Exchange of Rights for Common Stock.................................................32

25.     Notice of Proposed Actions..........................................................34

26.     Notices.............................................................................35

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

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

29.     Benefits of this Rights Agreement...................................................36

30.     Governing Law.......................................................................36

31.     Counterparts........................................................................36

32.     Descriptive Headings................................................................36

33.     Severability........................................................................36
</TABLE>

                                       ii
<PAGE>   4

                                RIGHTS AGREEMENT

        This Rights Agreement ("Rights Agreement"), is dated as of November 8,
2000, between Virage, Inc., a Delaware corporation (the "Company"), and
Continental Stock Transfer & Trust Company (the "Rights Agent").

                              W I T N E S S E T H:

        WHEREAS, the Board of Directors of the Company on November 8, 2000 (i)
authorized the issuance and declared a dividend of one right ("Right") for each
share of the common stock of the Company ("Common Stock") outstanding as of the
Close of Business (as such term is hereinafter defined) on December 5, 2000 (the
"Record Date"), each Right representing the right to purchase one one-thousandth
of a share of Series A Preferred Stock of the Company having the rights, powers
and preferences set forth in the form of Certificate of Designation attached
hereto as Exhibit A upon the terms and subject to the conditions hereinafter set
forth, and (ii) further authorized the issuance of one Right with respect to
each share of Common Stock of the Company that shall become outstanding between
December 5, 2000 and the Distribution Date (as such term is hereinafter
defined);

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

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

                (a) "Acquiring Person" shall mean any Person (as such term is
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, without the prior approval of the Board of Directors, shall be the
Beneficial Owner (as such term is hereinafter defined) of fifteen percent (15%)
or more of the outstanding Common Stock; provided, however, that in no event
shall a Person who or which, together with all Affiliates and Associates of such
Person, is the Beneficial Owner of less than 15% of the Company's outstanding
shares of Common Stock, become an Acquiring Person solely as a result of a
reduction of the number of shares of outstanding Common Stock, including
repurchases of outstanding shares of Common Stock by the Company, which
reduction increases the percentage of outstanding shares of Common Stock
beneficially owned by such Person, provided, however, that if a Person shall
become the Beneficial Owner of 15% or more of the Company's outstanding shares
of Common Stock then outstanding solely by reason of a reduction of the number
of shares of outstanding Common Stock, and shall thereafter become the
Beneficial Owner of any additional shares of Common Stock of the Company, then
such Person shall be deemed to be an "Acquiring Person" unless upon the
consummation of the acquisition of such additional shares of Common Stock such
person does not own fifteen percent (15%) or more of the shares of Common Stock
then outstanding, and provided further, that an Acquiring Person shall not
include an Exempt Person (as such term is hereinafter defined). Notwithstanding
the foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this paragraph (a), has become such inadvertently
(including, without limitation, because (i) such Person was unaware that it

<PAGE>   5

beneficially owned a percentage of Common Stock that would otherwise cause such
Person to be an "Acquiring Person" or (ii) such Person was aware of the extent
of its Beneficial Ownership but had no actual knowledge of the consequences of
such Beneficial Ownership under this Agreement) and without any intention of
changing or influencing control of the Company, and such Person divests as
promptly as practicable a sufficient number of shares of Common Stock so that
such Person would no longer be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph (a), then such Person shall not be deemed
to be or to have become an "Acquiring Person" for any purposes of this
Agreement.

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

                (c) A Person shall be deemed the "Beneficial Owner" of any
securities

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

                        (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) pursuant to any agreement, arrangement or understanding (other than
customary agreements with and between underwriters and selling group members
with respect to a bona fide public offering of securities), whether or not in
writing, or upon the exercise of conversion rights, exchange rights, rights
(other than the Rights), warrants or options, or otherwise; provided, however,
that a Person shall not be deemed the "Beneficial Owner" of, or to "beneficially
own," securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange; or (B) the right to vote or
dispose of or has "beneficial ownership" of (as determined pursuant to Rule
13d-3 of the General Rules and Regulations under the Exchange Act, or any
comparable or successor rule), including 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
securities if the agreement, arrangement or understanding to vote such security
(1) arises solely from a revocable proxy or consent given in response to a
public proxy or consent solicitation made pursuant to, and in accordance with,
the applicable rules and regulations of the Exchange Act and (2) is not also
then reportable by such Person on Schedule 13D under the Exchange Act (or any
comparable or successor report); or

                        (iii) which are beneficially owned, directly or
indirectly, by any other Person with which such Person or any of such Person's
Affiliates or Associates has any agreement, arrangement or understanding
(whether or not in writing) for the purpose of acquiring, holding, voting except
as described in clause (B) of subparagraph (ii) of this Section 1(c) or
disposing of any securities of the Company; provided, however, that no Person
who is an officer, director or employee of an Exempt Person shall be deemed,
solely by reason of such Person's status or authority as such, to be the
"Beneficial Owner" of, to have "Beneficial Ownership" of or to "beneficially
own" any securities that are "beneficially owned" (as defined

                                       2
<PAGE>   6

in this Section 1(c)), including, without limitation, in a fiduciary capacity,
by an Exempt Person or by any other such officer, director or employee of an
Exempt Person.

        For all purposes of this Agreement, any calculation of the number of
shares of Common Stock outstanding at any particular time, including any
calculation 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
General Rules and Regulations under the Exchange Act as in effect on the date
hereof.

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

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

                (f) "Common Stock" when used with reference to the Company shall
mean the common stock of the Company. "Common Stock" when used with reference to
any Person other than the Company which shall be organized in corporate form
shall mean the capital stock or other equity security with the greatest per
share voting power of such Person or, if such Person is a Subsidiary of or is
controlled by another Person, the Person which ultimately controls such
first-mentioned Person. "Common Stock" when used with reference to any Person
other than the Company which shall not be organized in corporate form shall mean
units of beneficial interest which shall represent the right to participate in
profits, losses, deductions and credits of such Person and which shall be
entitled to exercise the greatest voting power per unit of such Person.

                (g) "Common Stock Equivalents" shall have the meaning set forth
in Section 11(a)(iii) hereof.

                (h) "Current Market Price" shall have the meaning set forth in
Section 11(d) hereof.

                (i) "Current Value" shall have the meaning set forth in Section
11(a)(iii) hereof.

                (j) "Distribution Date" shall have the meaning set forth in
Section 3(a) hereof.

                (k) "Equivalent Preferred Stock" shall have the meaning set
forth in Section 11(b) hereof.

                (l) "Exchange Act" shall have the meaning set forth in Section
1(b) hereof.

                (m) "Exempt Person" shall mean the Company or any Subsidiary of
the Company, including, without limitation, in its fiduciary capacity, any
employee benefit plan or employee stock plan of the Company or of any Subsidiary
of the Company, or any Person,

                                       3
<PAGE>   7

organized, appointed, established or holding Common Stock for or pursuant to the
terms of any such plan or any Person funding other employee benefits for
employees of the Company or any Subsidiary of the Company.

                (n) "Final Expiration Date" shall have the meaning set forth in
Section 7(a) hereof.

                (o) "Flip-In Event" shall mean any event described in Section
11(a)(ii)(A), 11(a)(ii)(B) or 11(a)(ii)(C) hereof.

                (p) "Flip-In Trigger Date" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                (q) "Flip-Over Event" shall mean any event described in clause
(x), (y) or (z) of Section 13(a) hereof.

                (r) "NASDAQ" shall have the meaning set forth in Section 9(b)
hereof.

                (s) "Person" shall mean any individual, firm, corporation,
partnership, trust or other entity.

                (t) "Preferred Stock" shall mean the Series A Preferred Stock,
$.001 par value, of the Company having the rights, powers and preferences set
forth in Exhibit A hereto, and, to the extent that there is not a sufficient
number of shares of Series A Preferred Stock authorized to permit the full
exercise of the Rights, any other series of Preferred Stock, $.001 par value, of
the Company designated for such purpose containing terms substantially similar
to the terms of the Series A Preferred Stock.

                (u) "Principal Party" shall have the meaning set forth in
Section 13(b) hereof.

                (v) "Purchase Price" shall have the meaning set forth in Section
4(a) hereof.

                (w) "Record Date" shall have the meaning set forth in the
WHEREAS clause at the beginning of the Agreement.

                (x) "Redemption Date" shall have the meaning set forth in
Section 7(a) hereof.

                (y) "Redemption Price" shall have the meaning set forth in
Section 23(a) hereof.

                (z) "Right Certificate" shall have the meaning set forth in
Section 3(a) hereof.

                (aa) "Securities Act" shall mean the Securities Act of 1933, as
amended.

                (bb) "Stock Acquisition Date" shall mean the first date of
public announcement by the Company or an Acquiring Person that an Acquiring
Person has become such or such

                                       4
<PAGE>   8

earlier date as a majority of the directors shall become aware of the existence
of an Acquiring Person.

                (cc) "Substitution Period" shall have the meaning set forth in
Section 11(a)(iii) hereof.

                (dd) "Subsidiary" of a Person shall mean any corporation or
other entity of which securities or other ownership interests having ordinary
voting power sufficient to elect a majority of the board of directors or other
persons performing similar functions are beneficially owned, directly or
indirectly, by such Person and any corporation or other entity that is otherwise
controlled by such Person.

                (ee) "Summary of Rights" shall have the meaning set forth in
Section 3(b) hereof.

                (ff) "Trading Day" shall have the meaning set forth in Section
11(d) hereof.

                (gg) "Triggering Event" shall mean any event described in
Section 11(a)(ii)(A), 11(a)(ii)(B) or 11(a)(ii)(C) or Section 13 hereof.

                (hh) "Voting Power" shall mean the voting power of all
securities of the Company then outstanding and generally entitled to vote for
the election of directors of the Company.

        Any determination required by the definitions contained in this Section
1 shall be made by the Board of Directors of the Company in its good faith
judgment, which determination shall be binding on the Rights Agent and the
holders of the Rights.

        2. Appointment of Rights Agent. The Company hereby appoints the Rights
Agent to act as agent for the Company in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint such Co-Rights Agents as it may deem
necessary or desirable, upon ten (10) days' prior written notice to the Rights
Agent. The Rights Agent shall have no duty to supervise, and shall in no event
be liable for, the acts or omissions of any such co-Rights Agent. In the event
the Company appoints one or more Co-Rights Agents, the respective duties of the
Rights Agents and any Co-Rights Agents shall be as the Company shall determine.

        3. Issuance of Right Certificates.

                (a) Until the earlier of (i) the tenth day after the Stock
Acquisition Date (or, if the tenth day after the Stock Acquisition Date occurs
before the Record Date, the Close of Business on the Record Date) or (ii) the
tenth business day (or such later date as may be determined by action of the
Board of Directors prior to such time as any Person becomes an Acquiring Person)
after the date of the commencement by any Person (other than an Exempt Person)
of, or of the first public announcement of the intent of any Person (other than
an Exempt Person) to commence (which intention to commence remains in effect for
five (5) business days after such announcement), a tender or exchange offer upon
the successful consummation of

                                       5
<PAGE>   9

which such Person, together with its Affiliates and Associates, would be the
Beneficial Owner of 15% or more of the outstanding Common Stock (irrespective of
whether any shares are actually purchased pursuant to any such offer) (including
any such date which is after the date of this Agreement and prior to the
issuance of the Rights; the earlier of such dates being herein referred to as
the "Distribution Date"), (x) the Rights will be evidenced (subject to the
provisions of Section 3(c) hereof) by the certificates for the Common Stock
registered in the names of the holders of the Common Stock and not by separate
Right Certificates, and (y) each Right will be transferable only in connection
with the transfer of a share (subject to adjustment as hereinafter provided) of
Common Stock. As soon as practicable after the Distribution Date, the Rights
Agent will mail, at the expense of the Company, by first-class, postage prepaid
mail, to each record holder of the Common Stock as of the Close of Business on
the Distribution Date, as shown by the records of the Company, to the address of
such holder shown on such records, a Right certificate in substantially the form
of Exhibit B hereto ("Right Certificate") evidencing one Right for each share of
Common Stock so held. As of and after the Distribution Date, the Rights will be
evidenced solely by such Right Certificates.

                (b) On the Record Date, or as soon as practicable thereafter,
the Company will send a copy of a Summary of Rights to Purchase Preferred Stock,
substantially in the form attached hereto as Exhibit C ("Summary of Rights"), by
first-class, postage prepaid mail, to each record holder of Common Stock as of
the Close of Business on the Record Date, at the address of such holder shown on
the records of the Company.

                (c) Rights shall be issued in respect of all shares of Common
Stock that are issued (either as an original issuance or from the Company's
treasury) after the Record Date prior to the earlier of the Distribution Date or
the Expiration Date. With respect to certificates representing such shares of
Common Stock, the Rights will be evidenced by such certificates for Common Stock
registered in the names of the holders thereof together with the Summary of
Rights. Until the Distribution Date (or, if earlier, the Expiration Date), the
surrender for transfer of any certificate for Common Stock outstanding on the
Record Date (with or without a copy of the Summary of Rights attached thereto),
shall also constitute the surrender for transfer of the Rights associated with
the Common Stock represented thereby.

                (d) Certificates issued for Common Stock (including, without
limitation, certificates issued upon transfer or exchange of Common Stock) after
the Record Date but prior to the earlier of the Distribution Date or the
Expiration Date shall have impressed on, printed on, written on or otherwise
affixed to them the following legend:

        This certificate also evidences and entitles the holder hereof to
        certain Rights as set forth in the Rights Agreement between Virage, Inc.
        and Continental Stock Transfer & Trust Company, as Rights Agent, dated
        as of November 8, 2000, as the same may be amended from time to time
        (the "Rights Agreement"), the terms of which are incorporated herein by
        reference and a copy of which is on file at the principal executive
        office of Virage, 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. Virage, Inc. will
        mail to the holder of this certificate a copy of the Rights Agreement
        without charge after receipt by it of a written request therefor. UNDER
        CERTAIN

                                       6
<PAGE>   10

        CIRCUMSTANCES, AS PROVIDED IN THE RIGHTS AGREEMENT, RIGHTS ISSUED TO,
        BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
        ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) OR AN ASSOCIATE OR
        AFFILIATE (AS DEFINED IN THE RIGHTS AGREEMENT) THEREOF AND CERTAIN
        TRANSFEREES THEREOF WILL BE NULL AND VOID AND WILL NO LONGER BE
        TRANSFERABLE.

With respect to such certificates containing the foregoing legend, the Rights
associated with the Common Stock represented by such certificates shall, until
the Distribution Date, be evidenced by such certificates alone, and registered
holders of Common Stock shall also be the registered holders of the associated
Rights, and the surrender for transfer of any such certificate shall also
constitute the surrender for transfer of the Rights associated with the Common
Stock represented thereby. In the event that the Company purchases or acquires
any shares of Common Stock after the Record Date but prior to the earlier of the
Distribution Date, the Redemption Date or the Expiration Date, any Rights
associated with such shares of Common Stock shall be deemed canceled and retired
so that the Company shall not be entitled to exercise any Rights associated with
the shares of Common Stock no longer outstanding.

        Notwithstanding this paragraph (d), the omission of a legend shall not
affect the enforceability of any part of this Agreement or the rights of any
holder of the Rights.

        4. Form of Right Certificates.

                (a) The Right Certificates (and the forms of election to
purchase shares and of assignment to be printed on the reverse thereof), when,
as and if issued, shall be substantially in the form set forth in 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 Rights
Agreement, or as may be required to comply with any law or with any rule or
regulation made pursuant thereto or with any rule or regulation of any stock
exchange on which the Rights may from time to time be listed, or to conform to
usage. Subject to the provisions of Sections 11, 13 and 22 hereof, the Right
Certificates evidencing the Rights issued on the Record Date whenever such
certificates are issued, shall be dated as of the Record Date and the Right
Certificates evidencing Rights to holders of record of Common Stock issued after
the Record Date shall be dated as of the Record Date but shall also be dated to
reflect the date of issuance of such Right Certificate. On their face, Right
Certificates shall entitle the holders thereof to purchase, for each Right, one
one-thousandth of a share of Preferred Stock, or other securities or property as
provided herein, as the same may from time to time be adjusted as provided
herein, at the price per one one-thousandth of a share of Preferred Stock of
$100.00, as the same may from time to time be adjusted as provided herein (the
"Purchase Price").

                (b) Notwithstanding any other provision of this Rights
Agreement, any Right Certificate that represents Rights that are or were at any
time on or after the earlier of the Stock Acquisition Date or the Distribution
Date beneficially owned by an Acquiring Person or any Affiliate or Associate
thereof (or any transferee of such Rights) shall have impressed on, printed on,
written on or otherwise affixed to it (if the Company or the Rights Agent has
knowledge that

                                       7
<PAGE>   11

such Person is an Acquiring Person or an Associate or Affiliate thereof or
transferee of such Persons or a nominee of any of the foregoing) the following
legend:

        The beneficial owner of the Rights represented by this Right Certificate
        is an Acquiring Person or an Affiliate or Associate (as defined in the
        Rights Agreement) of an Acquiring Person or a subsequent holder of such
        Right Certificates beneficially owned by such Persons. Accordingly, this
        Right Certificate and the Rights represented hereby are null and void
        and will no longer be transferable as provided in the Rights Agreement.

The provisions of Section 11(a)(ii) and Section 24 of this Rights Agreement
shall be operative whether or not the foregoing legend is contained on any such
Right Certificates.

        5. Countersignature and Registration.

                (a) The Right Certificates shall be executed on behalf of the
Company by its Chief Executive Officer, its President or any Vice President,
either manually or by facsimile signature, and have affixed thereto the
Company's seal or a facsimile thereof which shall be attested by the Secretary
or an Assistant Secretary of the Company, either manually or by facsimile
signature. The Right Certificates shall be countersigned, either manually or by
facsimile, by the Rights Agent and shall not be valid for any purpose unless so
countersigned. In case any officer of the Company who shall have signed any of
the Right Certificates shall cease to be such officer of the Company before
countersignature by the Rights Agent and issuance and delivery by the Company,
such Right Certificates, nevertheless, may be countersigned by the Rights Agent,
issued and delivered with the same force and effect as though the person who
signed such Right Certificates had not ceased to be such officer of the Company;
and any Right Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Right Certificate, shall be a
proper officer 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 for such purposes, records
for registration and transfer of the Right Certificates issued hereunder. Such
records shall show the names and addresses of the respective holders of the
Right Certificates, the number of Rights evidenced on its face by each of the
Right Certificates, the date of each of the Right Certificates and the
certificate numbers for each of the Right Certificates.

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

                (a) Subject to the provisions of Sections 7(e), 11(a)(ii) and 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 (other than Right Certificates representing Rights that have
become void pursuant to Section 11(a)(ii) hereof or that have been exchanged
pursuant to Section 14 hereof) may be (i) transferred or (ii) split up, combined
or exchanged for another Right Certificate or Right Certificates, entitling the
registered holder to

                                       8
<PAGE>   12

purchase a like number of shares of Preferred Stock or other securities as the
Right Certificate or Right Certificates surrendered then entitled such holder to
purchase. Any registered holder desiring to transfer any Right Certificate shall
surrender the Right Certificate at the office of the Rights Agent designated for
such purposes with the form of assignment on the reverse side thereof duly
endorsed (or enclose with such Right Certificate a written instrument of
transfer in form satisfactory to the Company and the Rights Agent), duly
executed by the registered holder thereof or his attorney duly authorized in
writing, and with such signature guaranteed by a member of a securities approved
medallion program. Any registered holder desiring to 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 Right
Certificates to be split up, combined or exchanged at the principal office of
the Rights Agent. Thereupon the Rights Agent shall, subject to Sections 4(b),
7(e), 11 and 14 hereof, countersign (by manual or facsimile signature) and
deliver to the person entitled thereto a Right Certificate or Right
Certificates, as the case may be, as so requested. The Company may require
payment 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) Subject to the provisions of Section 11(a)(ii) hereof, upon
receipt by the Company and the Rights Agent of evidence reasonably satisfactory
to them of the loss, theft, destruction or mutilation of a Right Certificate,
and, in case of loss, theft or destruction, of indemnity or security reasonably
satisfactory to them, and, if requested by the Company, reimbursement to the
Company 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 delivery to the registered owner in lieu of the Right Certificate so
lost, stolen, destroyed or mutilated.

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

                (a) Subject to Section 11(a)(ii) hereof, the Rights shall become
exercisable, and may be exercised to purchase Preferred Stock, except as
otherwise provided herein, in whole or in part at any time after the
Distribution Date upon surrender of the Right Certificate, with the form of
election to purchase on the reverse side thereof duly executed (with such
signature duly guaranteed), to the Rights Agent at Continental Stock Transfer &
Trust Company, 2 Broadway, New York, New York 10004, together with payment of
the Purchase Price with respect to each Right exercised, subject to adjustment
as hereinafter provided, at or prior to the Close of Business on the earlier of
(i) November 7, 2010 (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (such date being herein
referred to as the "Redemption Date") or (iii) the time at which all such Rights
are exchanged as provided in Section 24 hereof (the earliest of (i), (ii) and
(iii) being herein referred to as the "Expiration Date").

                (b) The Purchase Price and the number of shares of Preferred
Stock or other securities or consideration to be acquired upon exercise of a
Right shall be subject to adjustment from time to time as provided in Sections
11 and 13 hereof. The Purchase Price shall be payable in lawful money of the
United States of America, in accordance with Section 7(c) hereof.

                                       9
<PAGE>   13

                (c) Except as provided in Section 11(a)(ii) hereof, upon receipt
of a Right Certificate with the form of election to purchase duly executed,
accompanied by payment of the Purchase Price (as such amount may be reduced
pursuant to Section 11(a)(iii) hereof) or so much thereof as is necessary for
the shares to be purchased and an amount equal to any applicable transfer tax,
by cash, certified check or official bank check payable to the order of the
Company or the Rights Agent, the Rights Agent shall, subject to Section 20(j),
thereupon promptly (i) requisition from any transfer agent of the Preferred
Stock (or make available if the Rights Agent is the transfer agent) certificates
for the number of shares of Preferred Stock so elected to be purchased and the
Company will comply and hereby authorizes and directs such transfer agent to
comply with all such requests, (ii) requisition from the Company the amount of
cash to be paid in lieu of issuance of fractional shares in accordance with
Section 14(b) hereof, and (iii) promptly after receipt of such Preferred Stock
certificates cause the same to be delivered to or upon the order of the
registered holder of such Right Certificate, registered in such name or names as
may be designated by such holder, and, when appropriate, after receipt promptly
deliver such cash to or upon the order of the registered holder of such Right
Certificate. In the event of a purchase of securities, other than Preferred
Stock, pursuant to Section 11(a) or Section 13 hereof, the Rights Agent shall
promptly take the appropriate actions corresponding to the foregoing clauses (i)
through (iii). In the event that the Company is obligated to issue other
securities of the Company, pay cash and/or distribute other property pursuant to
Section 11(a) hereof, the Company will make all arrangements necessary so that
such other securities, cash and/or other property are available for distribution
by the Rights Agent, if and when appropriate.

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

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

                                       10
<PAGE>   14

of the Company, destroy such canceled Right Certificates, and in such case shall
deliver a certificate of destruction thereof to the Company.

        9. Reservation and Availability of Shares of Preferred Stock.

                (a) The Company covenants and agrees that at all times it will
cause to be reserved and kept available, out of and to the extent of its
authorized and unissued shares of Preferred Stock not reserved for another
purpose (and, following the occurrence of a Triggering Event, other securities)
or held in its treasury, the number of shares of Preferred Stock (and, following
the occurrence of a Triggering Event, other securities) that, as provided in
this Agreement, including Section 11(a)(iii) hereof, will be sufficient to
permit the exercise in full of all outstanding Rights, provided, however, that
the Company shall not be required to reserve and keep available shares of
Preferred Stock or other securities sufficient to permit the exercise in full of
all outstanding Rights pursuant to the adjustments set forth in Section
11(a)(ii), Section 11(a)(iii) or Section 13 hereof unless, and only to the
extent that, the Rights become exercisable pursuant to such adjustments.

                (b) The Company shall (i) use its best efforts to cause, from
and after such time as the Rights become exercisable, the Rights and all shares
of Preferred Stock (and following the occurrence of a Triggering Event, other
securities) issued or reserved for issuance upon exercise thereof to be reported
by the National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ"), or such other system then in use, and if the Preferred Stock
shall become listed on any national securities exchange, to cause, from and
after such time as the Rights become exercisable, the Rights and all shares of
Preferred Stock (and, following the occurrence of a Triggering Event, other
securities) issued or reserved for issuance upon exercise thereof to be listed
on such exchange upon official notice of issuance upon such exercise and (ii) if
then necessary, to permit the offer and issuance of such shares of Preferred
Stock (and, following the occurrence of a Triggering Event, other securities),
register and qualify such share of Preferred Stock (and, following the
occurrence of a Triggering Event, other securities) under the Securities Act and
any applicable state securities or "blue sky" laws (to the extent exemptions
therefrom are not available), cause such registration statement and
qualifications to become effective as soon as possible after such filing and
keep such registration and qualifications effective until the Expiration Date of
the Rights. The Company may temporarily suspend, for a period of time not to
exceed ninety (90) days, the exercisability of the Rights in order to prepare
and file a registration statement under the Securities Act and permit it to
become effective. Upon any such suspension, the Company shall issue a public
announcement stating that the exercisability of the Rights has been temporarily
suspended, as well as a public announcement at such time as the suspension is no
longer in effect. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction unless the
requisite qualification in such jurisdiction shall have been obtained and until
a registration statement under the Securities Act (if required) shall have been
declared effective.

                (c) The Company covenants and agrees that it will take all such
action as may be necessary to ensure that all shares of Preferred Stock (and
following the occurrence of a Triggering Event, other securities) delivered upon
exercise of Rights shall, at the time of delivery

                                       11
<PAGE>   15

of the certificates for such shares (subject to payment of the Purchase Price in
respect thereof), be duly and validly authorized and issued and fully paid and
nonassessable shares in accordance with applicable law.

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

        10. Preferred Stock Record Date. Each Person in whose name any
certificate for shares of Preferred Stock (or other securities, as the case may
be) is issued upon the exercise of Rights shall for all purposes be deemed to
have become the holder of record of the shares of Preferred Stock (or other
securities, as the case may be) represented thereby on, and such certificate
shall be dated, the date upon which the Right Certificate evidencing such Rights
was duly surrendered and payment of the Purchase Price (and any applicable
transfer taxes) was made. Prior to the exercise of the Rights evidenced thereby,
the holder of a Right Certificate, as such, shall not be entitled to any rights
of a stockholder of the Company with respect to the 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.

        11. Adjustments to Number and Kind of Shares, Number of Rights or
Purchase Price. The number and kind of shares subject to purchase upon the
exercise of each Right, the number of Rights outstanding and the Purchase Price
are subject to adjustment from time to time as provided in this Section 11.

                (a) (i) In the event the Company shall at any time after the
date of this Rights Agreement (A) declare or pay any dividend on Preferred Stock
payable in shares of Preferred Stock, (B) subdivide or split the outstanding
shares of Preferred Stock into a greater number of shares, (C) combine or
consolidate the outstanding shares of Preferred Stock into a smaller number of
shares or effect a reverse split of the outstanding shares of Preferred Stock,
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), the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of Preferred Stock or capital stock, as the case may
be, issuable on such date, shall be proportionately adjusted so that the holder
of any Right exercised after such time shall be entitled to receive,

                                       12
<PAGE>   16

upon payment of the Purchase Price then in effect, the aggregate number and kind
of shares of capital stock or other securities which, if such Right had been
exercised immediately prior to such date, the holder thereof would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which would
require an adjustment under both this 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).

                        (ii) Subject to Section 24, in the event

                                (A) any Acquiring Person or any Associate or
Affiliate of any Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall consolidate with or merge with and into the
Company or any of its Subsidiaries or otherwise combine with the Company or any
of its Subsidiaries and the Company or such Subsidiary shall be the continuing
or surviving corporation of such consolidation, merger or combination and the
Common Stock of the Company shall remain outstanding and no shares thereof shall
be changed into or exchanged for stock or other securities of the Company or of
any other Person or cash or any other property, or (2) shall, in one or more
transactions, other than in connection with the exercise of a Right or Rights
and other than in connection with the exercise or conversion of securities
exercisable for or convertible into securities of the Company or of any
Subsidiary of the Company, transfer any assets or property to the Company or any
of its Subsidiaries in exchange (in whole or in part) for any shares of any
class of capital stock of the Company or any of its Subsidiaries or any
securities exercisable for or convertible into shares of any class of capital
stock of the Company or any of its Subsidiaries, or otherwise obtain from the
Company or any of its Subsidiaries, with or without consideration, any
additional shares of any class of capital stock of the Company or any of its
Subsidiaries or any securities exercisable for or convertible into shares of any
class of capital stock of the Company or any of its Subsidiaries (other than as
part of a pro rata offer or distribution by the Company or such Subsidiary to
all holders of such shares), or (3) shall sell, purchase, lease, exchange,
mortgage, pledge, transfer or otherwise acquire (other than as a pro rata
dividend) or dispose, to, from or with, as the case may be, in one transaction
or a series of transactions, the Company or any of its Subsidiaries, assets
(including securities) on terms and conditions less favorable to the Company or
such Subsidiary than the Company or such Subsidiary would be able to obtain in
arm's-length negotiation with an unaffiliated third party, or (4) shall receive
any compensation from the Company or any of its Subsidiaries for services other
than compensation for employment as a regular or part-time employee, or fees for
serving as a director, at rates in accordance with the Company's (or its
Subsidiary's) past practices, or (5) shall receive the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits or tax
advantage provided by the Company or any of its Subsidiaries, or (6) shall
engage in any transaction with the Company (or any of its Subsidiaries)
involving the sale, license, transfer or grant of any right in, or disclosure
of, any patents, copyrights, trade secrets, trademarks, know-how or any other
intellectual or industrial property rights recognized under any country's
intellectual property laws which the Company (including its Subsidiaries) owns
or has the right to use on terms and conditions not approved by the Board; or

                                       13
<PAGE>   17

                                (B) any Person, alone or together with its
Affiliates and Associates, shall become an Acquiring Person; or

                                (C) during such time as there is an Acquiring
Person, there shall be any reclassification of securities (including any reverse
stock split), or any recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any other
transaction or series of transactions involving the Company or any of its
Subsidiaries (whether or not with or into or otherwise involving an Acquiring
Person or any Affiliate or Associate of such Acquiring Person) which has the
effect, directly or indirectly, of increasing by more than 1% the proportionate
share of the outstanding shares of any class of equity securities of the Company
or any of its Subsidiaries, or securities exercisable for or convertible into
equity securities of the Company or any of its Subsidiaries, which is directly
or indirectly beneficially owned by any Acquiring Person or any Affiliate or
Associate of any Acquiring Person (any of (A), (B) or (C) being referred to
herein as a "Flip-In Event"),

                        then upon the first occurrence of such Flip-In Event (A)
the Purchase Price shall be adjusted to be the Purchase Price in effect
immediately prior to the Flip-In Event multiplied by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to such Flip-In Event, whether or not such Right was then
exercisable, and (B) each holder of a Right, except as otherwise provided in
this Section 11(a)(ii) and Section 11(a)(iii) hereof, shall thereafter have the
right to receive, upon exercise thereof at a price equal to the Purchase Price
(as so adjusted), in accordance with the terms of this Agreement and in lieu of
shares of Preferred Stock, such number of shares of Common Stock as shall equal
the result obtained by dividing the Purchase Price (as so adjusted) by 50% of
the Current Market Price per share of the Common Stock (determined pursuant to
Section 11(d) hereof) on the date of such Flip-In Event; provided, however, that
the Purchase Price (as so adjusted) and the number of shares of Common Stock so
receivable upon the exercise of a Right shall, following the Flip-In Event, be
subject to further adjustment as appropriate in accordance with Section 11(f)
hereof. Notwithstanding anything in this Agreement to the contrary, however,
from and after the Flip-In Event, any Rights that are beneficially owned by (x)
any Acquiring Person (or any Affiliate or Associate of any Acquiring Person),
(y) a transferee of any Acquiring Person (or any such Affiliate or Associate)
who becomes a transferee after the Flip-In Event or (z) a transferee of any
Acquiring Person (or any such Affiliate or Associate) who became a transferee
prior to or concurrently with the Flip-In Event pursuant to either (I) a
transfer from the Acquiring Person to holders of its equity securities or to any
Person with whom it has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (II) a transfer which the Board of Directors
has determined is part of a plan, arrangement or understanding which has the
purpose or effect of avoiding the provisions of this paragraph, and subsequent
transferees of such Persons, shall be void without any further action and any
holder of such Rights shall thereafter have no rights whatsoever with respect to
such Rights under any provision of this Agreement. The Company shall use all
reasonable efforts to ensure that the provisions of this Section 11(a)(ii) 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 its Affiliates, Associates or transferees
hereunder. From and after the Flip-In Event, no Right Certificate shall be
issued pursuant to Section 3 or Section 6 hereof that represents Rights that are
or have become void pursuant to the provisions of this

                                       14
<PAGE>   18
paragraph, and any Right Certificate delivered to the Rights Agent that
represents Rights that are or have become void pursuant to the provisions of
this paragraph shall be canceled.

                        (iii) The Company may at its option substitute for a
share of Common Stock issuable upon the exercise of Rights in accordance with
the foregoing subparagraph (ii) such number or fractions of shares of Preferred
Stock having an aggregate current market value equal to the Current Market Price
of a share of Common Stock. In the event that there shall not be sufficient
shares of Common Stock issued but not outstanding or authorized but unissued to
permit the exercise in full of the Rights in accordance with the foregoing
subparagraph (ii), the Board of Directors shall, to the extent permitted by
applicable law and any material agreements then in effect to which the Company
is a party (A) determine the excess (such excess, the "Spread") of (1) the value
of the shares of Common Stock issuable upon the exercise of a Right in
accordance with the foregoing subparagraph (ii) (the "Current Value") over (2)
the Purchase Price (as adjusted in accordance with the foregoing subparagraph
(ii)), and (B) with respect to each Right (other than Rights which have become
void pursuant to the foregoing subparagraph (ii)), make adequate provision to
substitute for the shares of Common Stock issuable in accordance with the
foregoing paragraph (ii) upon exercise of the Right and payment of the Purchase
Price (as adjusted in accordance therewith), (1) cash, (2) a reduction in such
Purchase Price, (3) shares of Preferred Stock or other equity securities of the
Company (including, without limitation, shares or fractions of shares of
preferred stock which, by virtue of having dividend, voting and liquidation
rights substantially comparable to those of the shares of Common Stock, are
deemed in good faith by the Board of Directors to have substantially the same
value as the shares of Common Stock (such shares of Preferred Stock and shares
or fractions of shares of preferred stock are hereinafter referred to as "Common
Stock Equivalents," (4) debt securities of the Company, (5) other assets, or (6)
any combination of the foregoing, having a value which, when added to the value
of the shares of Common Stock actually issued upon exercise of such Right, shall
have an aggregate value equal to the Current Value (less the amount of any
reduction in such Purchase Price), where such aggregate value has been
determined by the Board of Directors upon the advice of a nationally recognized
investment banking firm selected in good faith by the Board of Directors;
provided, however, that if the Company shall not make adequate provision to
deliver value pursuant to clause (B) above within thirty (30) days following the
Flip-In Event (the "Flip-in Trigger Date"), then the Company shall be obligated
to deliver, to the extent permitted by applicable law and any material
agreements then in effect to which the Company is a party, upon the surrender
for exercise of a Right and without requiring payment of such Purchase Price,
shares of Common Stock (to the extent available), and then, if necessary, such
number or fractions of shares of Preferred Stock (to the extent available) and
then, if necessary, cash, which shares and/or cash have an aggregate value equal
to the Spread. If the Board of Directors of the Company shall determine in good
faith that it is likely that sufficient additional shares of Common Stock and/or
Common Stock Equivalents could be authorized for issuance upon exercise in full
of the Rights, the thirty (30) day period set forth above may be extended to the
extent necessary, but not more than ninety (90) days after the Flip-In Trigger
Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares or Common Stock Equivalents (such thirty
(30) day period, as it may be extended, is herein called the "Substitution
Period"). To the extent that the Company determines that some action need be
taken pursuant to the second and/or third sentence

                                       15
<PAGE>   19

of this Section 11(a)(iii), the Company (x) shall provide, subject to the last
sentence of Section 11(a)(ii) hereof, that such action shall apply uniformly to
all outstanding Rights, and (y) may suspend the exercisability of the Rights
until the expiration of the Substitution Period in order to seek any
authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to the first sentence of Section 11(a)(iii) and
to determine the value thereof. In the event of any such suspension, the Company
shall issue a public announcement stating that the exercisability of the Rights
has been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. For purposes of this Section 11(a)(iii),
the value of the Common Stock shall be the Current Market Price per share of the
Common Stock on the Flip-In Trigger Date and the per share or per unit value of
any Common Stock Equivalent shall be deemed to equal the Current Market Price
per share of the Common Stock on such date. The Board of Directors may, but
shall not be required to, establish procedures to allocate the right to receive
Common Stock upon the exercise of the Rights among holders of Rights pursuant to
this Section 11(a)(iii).

                (b) In case the Company shall fix a record date for the issuance
of rights (other than the Rights), options or warrants to all holders of
Preferred Stock entitling them to subscribe for or purchase (for a period
expiring within forty-five calendar days after such record date) Preferred
Stock, shares having the same rights, privileges and preferences as the
Preferred Stock ("Equivalent Preferred Stock") or securities convertible into
Preferred Stock or equivalent preferred stock at a price per share of Preferred
Stock or equivalent preferred stock (or having a conversion price per share, if
a security convertible into Preferred Stock or equivalent preferred stock) less
than the Current Market Price per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of 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 and/or equivalent preferred stock (and/or the aggregate initial
conversion price of the convertible securities so to be offered) would purchase
at such Current Market Price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date, plus the number of
additional shares of Preferred Stock and/or equivalent preferred stock to be
offered for subscription or purchase (or into which the convertible securities
so to be offered are initially convertible). In case such subscription price may
be paid by delivery of consideration part or all of which may be in a form other
than cash, the value of such non-cash consideration shall be as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent. Shares 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 adjustment shall be
made successively whenever such a record date is fixed, and in the event that
such rights or warrants are not so issued, the Purchase Price shall be adjusted
to be the Purchase Price which would then be in effect if such record date had
not been fixed.

                (c) In case the Company shall fix a record date for 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 corporation) of evidences of indebtedness, cash, assets (other than a
dividend payable in Preferred Stock, but including any dividend payable in

                                       16
<PAGE>   20

stock other than Preferred Stock) or subscription rights or warrants (excluding
those referred to in Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the Current Market Price per share of Preferred Stock on such
record date, less the fair market value (as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent) of the portion of the cash, assets or
evidences of indebtedness to be distributed or of such subscription rights or
warrants applicable to a share of Preferred Stock and the denominator of which
shall be such Current Market Price per share of Preferred Stock. Such
adjustments shall be made successively whenever such a record date is fixed, and
in the event that such distribution is not so made, the Purchase Price shall be
adjusted to be the Purchase Price which would have been in effect if such record
date had not been fixed.

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

                                       17
<PAGE>   21

term "Trading Day" shall mean a day on which the principal national securities
exchange on which the shares of Common Stock are listed or admitted to trading
is open for the transaction of business or, if the shares of Common Stock are
not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed or
traded, "Current Market Price" per share shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

                        (ii) For the purpose of any computation hereunder, the
"Current Market Price" per share (or one one-thousandth of a share) of Preferred
Stock shall be determined in the same manner as set forth above for the Common
Stock in clause (i) of this Section 11(d) (other than the last sentence
thereof). If the Current Market Price per share (or one one-thousandth of a
share) of Preferred Stock cannot be determined in the manner provided above or
if the Preferred Stock is not publicly held or listed or traded in a manner
described in clause (i) of this Section 11(d), the "Current Market Price" per
share of Preferred Stock shall be conclusively deemed to be an amount equal to
1,000 (as such number may be appropriately adjusted for such events as stock
splits, stock dividends and recapitalizations with respect to the Common Stock
occurring after the date of this Agreement) multiplied by the Current Market
Price per share of the Common Stock, and the "Current Market Price" per one
one-thousandth of a share of Preferred Stock shall, be equal to the Current
Market Price per share of the Common Stock (as appropriately adjusted). If
neither the Common Stock nor the Preferred Stock is publicly held or so listed
or traded, "Current Market Price" per shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.

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

                (f) If, as a result of an adjustment made pursuant to Section
11(a)(ii) or Section 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable upon
exercise of any Right and the Purchase Price thereof shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the shares of Preferred Stock
contained in Section 11(a), (iii), (c), (e), (g), (h), (i), (j), (k) and (m)
hereof, 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.

                                       18
<PAGE>   22

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

                (i) The Company may elect on or after the date of any adjustment
of the Purchase Price or any adjustment to the number of shares of Preferred
Stock for which a Right may be exercised made pursuant to Sections 11(a)(i),
11(b) or 11(c), to adjust the number of Rights in lieu of 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 shares 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 hundred-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price. The Company shall make a public announcement of its election
to adjust the number of Rights, indicating the record date for the adjustment,
and, if known at the time, the amount of the adjustment to be made. This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Right Certificates have been issued, shall be at least
ten 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 Purchase Price) and
shall be registered in the names of the holders of record of Right Certificates
on the record date specified in the public announcement.

                (j) Irrespective of any adjustment or change in the Purchase
Price or the number of shares of Preferred Stock issuable upon the exercise of
the Rights, the Right

                                       19
<PAGE>   23

Certificates theretofore and thereafter issued may continue to express the
Purchase Price per share and the number of shares which were expressed in the
initial Right Certificate issued hereunder.

                (k) Before taking any action that would cause an adjustment
reducing the Purchase Price below the then par value, if any, of the shares of
Common Stock, Preferred Stock or other capital stock issuable upon exercise of
the Rights, the Company shall take any corporate action, including using its
best efforts to obtain any required stockholder approvals, 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 Common Stock, Preferred
Stock or other capital stock at such adjusted Purchase Price. If upon any
exercise of the Rights, a holder is to receive a combination of Common Stock and
Common Stock Equivalents, a portion of the consideration paid upon such
exercise, equal to at least the then par value of a share of Common Stock of the
Company, shall be allocated as the payment for each share of Common Stock of the
Company so received.

                (l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the shares of Preferred Stock and other capital stock or securities of the
Company, if any, issuable upon such exercise over and above the shares of
Preferred Stock and other capital stock or securities of the Company, if any,
issuable upon such exercise on the basis of the Purchase Price in effect prior
to such adjustment; provided, however, that the Company shall deliver to such
holder a due bill or other appropriate instrument evidencing such holder's right
to receive such additional shares of Preferred Stock and other capital stock or
securities 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 Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance for cash of any shares of
Preferred Stock at less than the Current Market Price, (iii) issuance for cash
of shares of Preferred Stock or securities which by their terms are convertible
into or exchangeable for shares of Preferred Stock, (iv) stock dividends or (v)
issuance of rights, options or warrants referred to in this Section 11,
hereafter made by the Company to holders of its Preferred Stock shall not be
taxable to such stockholders.

                (n) The Company covenants and agrees that it shall not, at any
time after the Distribution Date, (i) consolidate with any other Person, (ii)
merge with or into any other Person, or (iii) sell or transfer (or permit any
Subsidiary to sell or transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole) to, any
other Person or Persons, if (x) at the time of or immediately after such
consolidation, merger or sale there are any charter or by-law provisions or any
rights, warrants or other instruments or securities outstanding or agreements in
effect which substantially diminish or otherwise eliminate the benefits intended

                                       20
<PAGE>   24

to be afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates. The Company shall not
consummate any such consolidation, merger or sale unless prior thereto the
Company and such other Person shall have executed and delivered to the Rights
Agent a supplemental agreement evidencing compliance with this subsection.

                (o) The Company covenants and agrees that, after the
Distribution Date, it will not, except as permitted by Section 23, Section 24 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
diminish substantially or eliminate the benefits intended to be afforded by the
Rights.

                (p) Anything in this Agreement to the contrary notwithstanding,
in the event that the Company shall at any time after the Record Date and prior
to the Distribution Date (i) declare or pay any dividend on the outstanding
shares of Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, the number of Rights associated
with each share of Common Stock then outstanding, or issued or delivered
thereafter, shall be proportionately adjusted so that the number of Rights
thereafter associated with each share of Common Stock following any such event
equals the result obtained by multiplying the number of Rights associated with
each share of Common Stock immediately prior to such event by a fraction, the
numerator or which shall be the number of shares of Common Stock outstanding
immediately prior to the occurrence of such event and the denominator of which
shall be the number of shares of Common Stock outstanding immediately following
the occurrence of such event.

        12. Certification of Adjustments. Whenever an adjustment is made as
provided in Sections 11 and 13 hereof, the Company shall (a) promptly prepare a
certificate signed by its Chief Executive Officer, its President or any Vice
President and by the Treasurer or any Assistant Treasurer or the Secretary or
any Assistant Secretary of the Company setting forth such adjustment and a brief
statement of the facts giving rise to 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 (or, if prior to the Distribution Date, to
each holder of a certificate representing shares of Common Stock) in accordance
with Section 26 hereof. Notwithstanding the foregoing sentence, the failure of
the Company to give such notice shall not affect the validity of or the force or
effect of or the requirement for such adjustment. The Rights Agent shall be
fully protected in relying on any certificate prepared by the Company pursuant
to Sections 11 and 13 and on any adjustment therein contained and shall not be
responsible or obligated for calculating any adjustment and shall not be deemed
to have knowledge of any such adjustment unless and until it shall have received
such certificate. Any adjustment to be made pursuant to Sections 11 and 13 of
this Rights Agreement shall be effective as of the date of the event giving rise
to such adjustment.

                                       21
<PAGE>   25

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

                (a) In the event that following the first occurrence of a
Flip-In Event, directly or indirectly, (x) the Company shall consolidate with,
or merge with and into, any other Person or Persons and the Company shall not be
the surviving or continuing corporation of such consolidation or merger, or (y)
any Person or Persons shall consolidate with, or merge with and into, the
Company, and the Company shall be the continuing or surviving corporation of
such consolidation or merger and, in connection with such consolidation or
merger, all or part of the outstanding shares of Common Stock shall be changed
into or exchanged for stock or other securities of any other Person or of the
Company or cash or any other property other than, in the case of the
transactions described in subparagraphs (x) or (y), a merger or consolidation
which would result in all of the Voting Power represented by the securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into securities of the
surviving entity) all of the Voting Power represented by the securities of the
Company or such surviving entity outstanding immediately after such merger or
consolidation and the holders of such securities not having changed as a result
of such transactions), or (z) the Company or one or more of its Subsidiaries
shall sell, mortgage or otherwise transfer to any other Person or any Affiliate
or Associate of such Person, in one transaction, or a series of related
transactions, assets or earning power aggregating more than 50% of the assets or
earning power of the Company and its Subsidiaries (taken as a whole), then, on
the first occurrence of any such event (a "Flip-Over Event"), proper provision
shall be made so that (i) each holder of a Right (other than Rights which have
become void pursuant to Section 11(a)(ii) hereof) shall thereafter have the
right to receive, upon the exercise thereof at the Purchase Price (as
theretofore adjusted in accordance with Section 11(a)(ii) hereof), in accordance
with the terms of this Agreement and in lieu of shares of Preferred Stock or
Common Stock of the Company, such number of validly authorized and issued, fully
paid, non-assessable and freely tradeable shares of Common Stock of the
Principal Party (as such term is hereinafter defined), not subject to any liens,
encumbrances, rights of first refusal or other adverse claims, as shall equal
the result obtained by dividing the Purchase Price (as theretofore adjusted in
accordance with Section 11(a)(ii) hereof) by 50% of the Current Market Price per
share of the Common Stock of such Principal Party (determined pursuant to
Section 11(d) hereof) on the date of consummation of such consolidation, merger,
sale or transfer; provided, however, that the Purchase Price (as theretofore
adjusted in accordance with Section 11(a)(ii) hereof) and the number of shares
of Common Stock of such Principal Party so receivable upon exercise of a Right
shall be subject to further adjustment as appropriate in accordance with Section
11(f) hereof to reflect any events occurring in respect of the Common Stock of
such Principal Party after the occurrence of such consolidation, merger, sale or
transfer; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Flip-Over Event, all the obligations and duties of the
Company pursuant to this Rights Agreement; (iii) the term "Company" for all
purposes of this Rights Agreement shall thereafter be deemed to refer to such
Principal Party, it being specifically intended that the provisions of Section
11 hereof shall only apply to such Principal Party following the first
occurrence of a Flip-Over Event; 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 in accordance with Section 9 hereof) in connection
with the consummation of any such transaction as may be necessary to assure that
the provisions hereof

                                       22
<PAGE>   26

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; provided, however, that, upon the subsequent occurrence of any merger,
consolidation, sale of all or substantially all assets, recapitalization,
reclassification of shares, reorganization or other extraordinary transaction in
respect of such Principal Party, each holder of a Right shall thereupon be
entitled to receive, upon exercise of a Right, such cash, shares, rights,
warrants and other property which such holder would have been entitled to
receive had he, at the time of such transaction, owned the shares of Common
Stock of the Principal Party purchasable upon the exercise of a Right, and such
Principal Party shall take such steps (including, but not limited to,
reservation of shares of stock) as may necessary to permit the subsequent
exercise of the Rights in accordance with the terms hereof for such cash,
shares, rights, warrants and other property.

                (b) "Principal Party" shall mean

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

                        (ii) in the case of any transaction described in (z) of
the first sentence in Section 13(a) hereof, the Person that is the party
receiving the greatest portion of the assets or earning power transferred
pursuant to such transaction or transactions, or, if each Person that is a party
to such transaction or transactions receives the same portion of the assets or
earning power so transferred or if the Person receiving the greatest portion of
the assets or earning power cannot be determined, whichever of such Persons as
is the issuer of Common Stock having the greatest aggregate market value of
shares outstanding;

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

                                       23
<PAGE>   27

venturers, and the Principal Party in each such case shall bear the obligations
set forth in this Section 13 in the same ratio as its interest in such Person
bears to the total of such interests.

                (c) The Company shall not consummate any consolidation, merger,
sale or transfer referred to in Section 13(a) unless the Principal Party shall
have a sufficient number of authorized shares of its Common Stock that have not
been issued or reserved for issuance to permit the exercise in full of the
Rights in accordance with this Section 13 and unless prior thereto the Company
and the Principal Party involved therein shall have executed and delivered to
the Rights Agent an agreement confirming that the requirements of Sections 13(a)
and (b) hereof shall promptly be performed in accordance with their terms and
that such consolidation, merger, sale or transfer of assets shall not result in
a default by the Principal Party under this Rights Agreement as the same shall
have been assumed by the Principal Party pursuant to Sections 13(a) and (b)
hereof and further providing that, as soon as practicable after executing such
agreement pursuant to this Section 13, the Principal Party at its own expense
shall:

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

                        (ii) use its best efforts, if the Common Stock of the
Principal Party shall become listed on a national securities exchange, to list
(or continue the listing of) the Rights and the securities purchasable upon
exercise of the Rights on such securities exchange and, if the Common Stock of
the Principal Party shall not be listed on a national securities exchange, to
cause the Rights and the securities purchased upon exercise of the Rights to be
reported by NASDAQ or such other system then in use;

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

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

In the event that any of the transactions described in Section 13(a) hereof
shall occur at any time after the occurrence of a transaction described in
Section 11(a)(ii) hereof, the Rights which have not theretofore been exercised
shall thereafter be exercisable in the manner described in Section 13(a).

                (d) Furthermore, in case the Principal Party which is to be a
party to a transaction referred to in this Section 13 has a provision in any of
its authorized securities or in its Certificate of Incorporation or Bylaws or
other instrument governing its corporate affairs,

                                       24
<PAGE>   28

which provision would have the effect of (i) causing such Principal Party to
issue, in connection with, or as a consequence of, the consummation of a
transaction referred to in this Section 13, shares of Common Stock of such
Principal Party at less than the then Current Market Price per share (determined
pursuant to Section 11(d) hereof) or securities exercisable for, or convertible
into, Common Stock of such Principal Party at less than such then current market
price (other than to holders of Rights pursuant to this Section 13) or (ii)
providing for any special payment, tax or similar provisions in connection with
the issuance of the Common Stock of such Principal Party pursuant to the
provisions of Section 13, then, in such event, the Company hereby agrees with
each holder of Rights that it shall not consummate any such transaction unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing that the
provision in question of such Principal Party shall have been canceled, waived
or amended, or that the authorized securities shall be redeemed, so that the
applicable provision will have no effect in connection with, or as a consequence
of, the consummation of the proposed transaction.

        14. Fractional Rights and Fractional Shares.

                (a) The Company shall not be required to issue fractions of
Rights or to distribute Right Certificates which evidence fractional Rights. In
lieu of such fractional Rights, there shall be paid to the holders of record 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 then
current market value of a whole Right. For the purposes of this Section 14(a),
the then current market value of a Right shall be determined in the same manner
as the Current Market Price of a share of Common Stock shall be 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 fractions which are integral multiples of one one-thousandth of a share
of Preferred Stock). Fractions of shares of Preferred Stock in integral
multiples of one one-thousandth of a share of Preferred Stock may, at the
election of the Company, be evidenced by depository receipts, pursuant to an
appropriate agreement between the Company and a depository selected by it,
provided that such agreement shall provide that the holders of such depository
receipts shall have all the rights, privileges and preferences to which they are
entitled as beneficial owners of the shares of Preferred Stock represented by
such depository receipts. 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 current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one one-thousandth of a share of Preferred Stock shall be the Current Market
Price of a share of Common Stock (as determined pursuant to Section 11(d)(ii)
hereof) for the Trading Day immediately prior to the date of such exercise.

                (c) Following the occurrence of a Flip-In Event, the Company
shall not be required to issue fractions of shares or units of Common Stock or
Common Stock Equivalents or

                                       25
<PAGE>   29

other securities upon exercise of the Rights or to distribute certificates which
evidence fractional shares of such Common Stock or Common Stock Equivalents or
other securities. In lieu of fractional shares or units of such Common Stock or
Common Stock Equivalents or other securities, 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 Current
Market Value of a share or unit of such Common Stock or Common Stock Equivalent
or other securities. For purposes of this Section 14(c), the Current Market
Value shall be determined in the manner set forth in Section 11(d) hereof for
the Trading Day immediately prior to the date of such exercise and, if such
Common Stock Equivalent is not traded, each such Common Stock Equivalent shall
have the value of one one-thousandth of a share of Preferred Stock.

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

        15. Rights of Action. All rights of action in respect of this Agreement,
other than any rights of action vested in the Rights Agent pursuant to Sections
18 and 20 below, are vested in the respective holders of record of the Right
Certificates (and, prior to the Distribution Date, the holders of record of the
Common Stock); and any holder of record of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company or any other Person to enforce, or otherwise act in respect
of, his right to exercise the Rights evidenced by such Right Certificate in the
manner provided in such Right Certificate and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate
remedy at law for any breach of this Agreement and, accordingly, that they will
be entitled to specific performance of the obligations under, and injunctive
relief against actual or threatened violations of, the obligations of any Person
subject to this Agreement. Holders of Rights shall be entitled to recover the
reasonable costs and expenses, including attorneys' fees, incurred by them in
any action to enforce the provisions of this Agreement.

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

                (a) prior to the Distribution Date, the Rights will not be
evidenced by a Right Certificate and will be transferable only in connection
with the transfer of Common Stock;

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

                (c) the Company and the Rights Agent may deem and treat the
person in whose name the Right Certificate (or, prior to the Distribution Date,
the associated Common

                                       26
<PAGE>   30

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 Certificate or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent or the transfer agent of the Common
Stock) 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 a 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 obligation; 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.

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

        18. Concerning the Rights Agent.

                (a) The Company agrees to pay to the Rights Agent reasonable
compensation for all service rendered by it hereunder and, from time to time, on
demand of the Rights Agent, its reasonable expenses and counsel fees and other
disbursements incurred in the administration and execution of this Rights
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 any thing done or omitted
to be done by the Rights Agent in connection with the acceptance and
administration of this Rights Agreement, including the cost and expenses of
defending against any claim of liability in the premises. The costs and expenses
of enforcing this right of indemnification shall also be paid by the Company.
The indemnity provided herein shall survive the expiration of the Rights and the
termination of this Rights Agreement. Anything in this agreement to the contrary
notwithstanding, in no event shall the Rights Agent be liable for special,
indirect or consequential loss or damage of any kind whatsoever (including but
not limited to lost profits), even if the Rights Agent has been advised of the
likelihood of such loss damage and regardless of the form of action.

                                       27
<PAGE>   31

                (b) The Rights Agent may conclusively rely upon and shall be
protected and shall incur no liability for or in respect of any action taken,
suffered or omitted by it in connection with its administration of this Rights
Agreement in reliance upon any Right Certificate, certificate for Common 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, executed and, where necessary, guaranteed, verified or
acknowledged, by the proper Person or Persons.

        19. Merger or Consolidation or Changed 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 stock transfer business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the provisions of
Section 21 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 Rights
Agent or in the name of the successor Rights Agent; and in all such cases such
Right Certificates shall have the full force provided in the Right Certificates
and in this Agreement.

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

        20. Duties of Rights Agent. The Rights Agent undertakes the duties and
obligations imposed by this Rights Agreement upon the following terms and
conditions, and no implied duties or obligations shall be read into this
Agreement against the Rights Agent by all of which the Company and the holders
of Right Certificates, by their acceptance thereof, shall be bound:

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

                                       28
<PAGE>   32

                (b) Whenever in the performance of its duties under this Rights
Agreement the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without limitation, the identity of any Acquiring Person and
the determination of "Current Market Price") be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by certificate signed by the
President or any Vice President and by the Treasurer or any Assistant Treasurer
or the Secretary or any Assistant Secretary of the Company and delivered to the
Rights Agent; and such certificate shall be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Rights 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 Rights 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 Rights Agreement or the execution and delivery
hereof (except the due execution hereof by the Rights Agent) or in respect of
the validity or execution of any Right Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Company of any
covenant or condition contained in this Rights Agreement or in any Right
Certificate; nor shall it be responsible for any adjustment required under the
provisions of Sections 11, 13, 23 or 24 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 furnished pursuant to Section 12 describing any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock to
be issued pursuant to this Rights Agreement or any Right Certificate or as to
whether any shares of Common Stock will, when issued, be validly authorized and
issued, fully paid and nonassessable.

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

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

                                       29
<PAGE>   33

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 Rights Agreement and the
date on and/or after which such action shall be taken or such omission shall be
effective. Subject to Section 20(c) hereof, the Rights Agent shall not be liable
for any action taken by, or omission of, the Rights Agent in accordance with a
proposal included in any such application on or after the date specified in such
application (which date shall not be less than five 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 stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not the Rights
Agent under this Rights Agreement. Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other entity.

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

                (j) 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.

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

                (l) The Rights Agent shall not be required to take notice or be
deemed to have notice of any fact, event or determination (including, without
limitation, and dates or events defined in this Agreement or the designation of
any Person as an Acquiring Person, Affiliate or Associate) under this Agreement
unless and until the Rights Agent shall be notified in writing by the Company of
such fact, event or determination.

        21. Change of Rights Agent. The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Rights Agreement
upon thirty (30) days'

                                       30
<PAGE>   34

notice in writing, or such earlier period as shall be agreed to in writing,
mailed to the Company and to each transfer agent of the Common Stock by
registered or certified mail, and, at the expense of the Company, to the holders
of the Right Certificates 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, or such earlier period as shall be agreed to 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 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.
Notwithstanding the foregoing provisions of this Section 21, in no event shall
the resignation or removal of a Rights Agent be effective until a successor
Rights Agent shall have been appointed and have accepted such appointment. If
the Company shall fail to make such appointment within a period of thirty (30)
days after such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Right Certificate (who shall, with such notice, submit his Right
Certificate for inspection by the Company), then the incumbent Rights Agent or
the holder of record 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 any State thereof, in good standing, which is authorized under such laws to
exercise corporate trust or stock transfer 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 controlled by 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 mail a notice thereof in writing to the registered holders
of the Right Certificates. Failure to give any notice provided for in this
Section 21, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
the successor Rights Agent, as the case may be.

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

                                       31
<PAGE>   35

issued by the Company, in each case existing prior to the Distribution Date,
issue Right Certificates representing the appropriate number of Rights in
connection with such issuance or sale; provided, however, that (i) no such Right
Certificate shall be issued if, and to the extent that, the Company shall be
advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Right Certificate would be issued, and (ii) no such Right Certificate shall be
issued, if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.

        23. Redemption.

                (a) The Board of Directors of the Company may, at its option, at
any time prior to the earlier of (x) the first occurrence of a Flip-In Event or
(y) the Close of Business on the Expiration Date, redeem all but not less than
all the then outstanding Rights at a redemption price of $.001 per Right, as
such amount may be appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date hereof (such redemption
price being hereinafter referred to as the "Redemption Price").

                (b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights (or at such later time as the
Board of Directors may establish for the effectiveness of such redemption), and
without any further action and without any notice, the right to exercise the
Rights will terminate and the only right thereafter of the holders of Rights
shall be to receive the Redemption Price. The Company shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten (10) days after such action of the Board of Directors ordering the
redemption of the Rights (or such later time as the Board of Directors may
establish for the effectiveness of such redemption), the Company shall mail a
notice of redemption to all the holders of the then outstanding Rights 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 shall state the method by which the payment of the Redemption
Price will be made. The failure to give notice required by this Section 23(b) or
any defect therein shall not affect the legality or validity of the action taken
by the Company.

                (c) In the case of a redemption permitted under Section 23(a),
the Company may, at its option, discharge all of its obligations with respect to
the Rights by (i) issuing a press release announcing the manner of redemption of
the Rights and (ii) mailing payment of the Redemption Price to the registered
holders of the Rights at their last addresses as they appear on the registry
books of the Rights Agent or, prior to the Distribution Date, on the registry
books of the transfer agent of the Common Stock, and upon such action, all
outstanding Right Certificates shall be null and void without any further action
by the Company.

        24. Exchange of Rights for Common Stock.

                (a) The Board of Directors of the Company may, at its option, at
any time after the occurrence of a Flip-In Event, exchange all or part of the
then outstanding and

                                       32
<PAGE>   36

exercisable Rights (which (i) shall not include Rights that have become void
pursuant to the provisions of Section 11(a)(ii) and (ii) shall include, without
limitation, any Rights issued after the Distribution Date in accordance with
Section 22) 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 shares of Common Stock aggregating 50% or more of the shares of Common Stock
then outstanding. From and after the occurrence of an event specified in Section
13(a) hereof, any Rights that theretofore have not been exchanged pursuant to
this Section 24(a) shall thereafter be exercisable only in accordance with
Section 13 and may not be exchanged pursuant to this Section 24(a).

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

                (c) In any exchange pursuant to this Section 24, the Company, at
its option, may substitute, and, in the event that there shall not be sufficient
shares of Common Stock 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 substitute to the extent of such insufficiency, for each
share of Common Stock that would otherwise be issuable upon exchange of a Right,
a number of shares of Preferred Stock or fractions thereof (or Equivalent
Preferred Shares, as such term is defined in Section 11(b)) having an aggregate
current per share market price (determined pursuant to Section 11(d) hereof)
equal to the current per share market price of one share of Common Stock
(determined pursuant to Section 11(d) hereof) as of the date of the Flip-In
Event.

                (d) In the event that there shall not be sufficient shares of
Common Stock 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

                                       33
<PAGE>   37

be necessary to authorize additional shares of Common Stock for issuance upon
exchange of the Rights.

                (e) The Company shall not be required to issue fractions of
shares of Common Stock or to distribute certificates which evidence fractional
shares of Common Stock. In lieu of such fractional shares of Common Stock, the
Company shall pay 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 current market
value of a whole share of Common Stock. For the purposes of this paragraph (d),
the current market value of a whole share of Common Stock shall be the Current
Market Price of a share of Common Stock (as defined in Section 11(d) hereof for
the purposes of computations made other than pursuant to Section 11(a)(iii)) for
the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.

        25. Notice of Proposed Actions.

                (a) In case the Company, after the Distribution Date, shall
propose (i) to effect any of the transactions referred to in Section 11(a)(i) or
to pay any dividend to the holders of record of its Preferred Stock payable in
stock of any class or to make any other distribution to the holders of record of
its Preferred Stock (other than a regular periodic cash dividend), or (ii) to
offer to the holders of record of its Preferred Stock or options, warrants, or
other rights to subscribe for or to purchase shares of Preferred Stock
(including any security convertible into or exchangeable for Preferred Stock) or
shares of stock of any other class or any other securities, options, warrants,
convertible or exchangeable securities or other rights, or (iii) to effect any
reclassification of its Preferred Stock or any recapitalization or
reorganization of the Company, or (iv) to effect any consolidation or merger
with or into, or to effect any sale or other transfer (or to permit one or more
of its Subsidiaries to effect any sale or other transfer), in one or more
transactions, of more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to, any other Person or Persons, or (v) to
effect the liquidation, dissolution or winding up of the Company, then, in each
such case, the Company shall give to each holder of record of a Right
Certificate, in accordance with Section 26 hereof, notice of such proposed
action, which shall specify the record date for the purposes of such transaction
referred to in Section 11(a)(i), or such dividend or distribution, or the date
on which such reclassification, recapitalization, reorganization, consolidation,
merger, sale or transfer of assets, liquidation, dissolution or winding up is to
take place and the record date for determining participation therein by the
holders of record of 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 10 days prior to the record date for determining holders of
record of the Preferred Stock for purposes of such action, and in the case of
any such other action, at least 10 days prior to the date of the taking of such
proposed action or the date of participation therein by the holders of record of
Preferred Stock, whichever shall be the earlier.

                (b) In case any of the transactions referred to in Section
11(a)(ii) or Section 13 of this Rights Agreement are proposed, then, in any such
case, the Company shall give to each holder of Rights, in accordance with
Section 26 hereof, notice of the proposal of such transaction at least 10 days
prior to consummating such transaction, which notice shall specify the proposed

                                       34
<PAGE>   38

event and the consequences of the event to holders of Rights under Section
11(a)(ii) or Section 13 hereof, as the case may be, and, upon consummating such
transaction, shall similarly give notice thereof to each holder of Rights.

                (c) The failure to give notice required by this Section 25 or
any defect therein shall not affect the legality or validity of the action taken
by the Company or the vote upon any such action.

        26. Notices. Notices or demands authorized by this Rights Agreement to
be given or made by the Rights Agent or by the holder of record of any Right
Certificate or Right to or on behalf of 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:

                 Virage, Inc.
                 177 Bovet Road, Suite 520
                 San Mateo, CA  94402
                 Attention:  Corporate Secretary

Subject to the provisions of Section 20 hereof, any notice or demand authorized
by this Rights Agreement to be given or made by the Company or by the holder of
record of any Right Certificate or Right to or on the Rights Agent shall be
sufficiently given or made if sent by registered or certified mail and shall be
deemed given upon receipt (until another address is filed in writing with the
Company) as follows:

                 Continental Stock Transfer & Trust Company
                 2 Broadway
                 New York, NY  10004
                 Attention:  Compliance Department

Notices or demands authorized by this Rights Agreement to be given or made by
the Company or the Rights Agent to the holder of record of any Right Certificate
or Right 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 it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent.

        27. Supplements and Amendments. Except as provided in the penultimate
sentence of this Section 27, for so long as the Rights are then redeemable, the
Company may in its sole and absolute discretion, and the Rights Agent shall if
the Company so directs, supplement or amend any provision of this Agreement in
any respect without the approval of any holders of the Rights. At any time when
the Rights are no longer redeemable, except as provided in the penultimate
sentence of this Section 27, the Company may, and the Rights Agent shall, if the
Company so directs, supplement or amend this Agreement without the approval of
any holders of Rights Certificates in order to (i) cure any ambiguity, (ii)
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) shorten or lengthen any
time period hereunder, or (iv) change or supplement the provisions hereunder in
any manner which the Company may deem necessary or desirable; provided that no
such

                                       35
<PAGE>   39

supplement or amendment shall adversely affect the interests of the holders
of Rights as such (other than an Acquiring Person or an Affiliate or Associate
of an Acquiring Person), and no such amendment may cause the Rights again to
become redeemable or cause the Agreement again to become amendable other than in
accordance with this sentence. Notwithstanding anything contained in this Rights
Agreement to the contrary, no supplement or amendment shall be made which
changes the Redemption Price and no supplement or amendment that changes the
rights and duties of the Rights Agent under this Agreement will be effective
against the Rights Agent without the execution of such supplement or amendment
by the Rights Agent. 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.

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

        29. Benefits of this Rights Agreement. Nothing in this Rights 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 Rights Agreement; but this Rights Agreement shall be
for the sole and exclusive benefit of the Company, the Rights Agent and the
holders of record of the Right Certificates (and, prior to the Distribution
Date, the Common Stock).

        30. Governing Law. This Rights Agreement and each Right Certificate
issued hereunder shall be deemed to be a contract made under the laws of the
State of 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 solely
by residents of such state and performed entirely within such state.

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

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

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

                                       36
<PAGE>   40

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

[SEAL]
ATTEST:                                     VIRAGE, INC.

By:                                         By:
   ---------------------------------           ---------------------------------
    Frank H. Pao                               Paul G. Lego
    Secretary                                  Chief Executive Officer and
                                               President

[SEAL]

ATTEST:                                     CONTINENTAL STOCK TRANSFER & TRUST
                                            COMPANY
                                            as Rights Agent

By:                                         By:
   ---------------------------------           ---------------------------------
   Name:                                       Name:
   Title:                                      Title:

                                       37
<PAGE>   41

                                   EXHIBIT A

                                  VIRAGE, INC.

                                   CERTIFICATE
                     OF DESIGNATION, PREFERENCES AND RIGHTS
                               OF THE TERMS OF THE
                            SERIES A PREFERRED STOCK

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

        We, the President and Chief Executive Officer and the Secretary,
respectively, of Virage, Inc., organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 103 thereof, DO HEREBY CERTIFY:

        That pursuant to the authority conferred upon the Board of Directors by
the Certificate of Incorporation of the said Corporation, the said Board of
Directors on November 8, 2000, adopted the following resolution creating a
series of 200,000 shares of Preferred Stock designated as Series A Preferred
Stock:

        RESOLVED, that pursuant to the authority vested in the Board of
Directors of this Corporation in accordance with the provisions of its
Certificate of Incorporation, a series of Preferred Stock of the Corporation be
and it hereby is created, and that the designation and amount thereof and the
powers, preferences and relative, participating, optional and other special
rights of the shares of such series, and the qualifications, limitations or
restrictions thereof are as follows:

        Section 1. Designation and Amount. The shares of such series shall be
designated as "Series A Preferred Stock" (the "Series A Preferred Stock"), $.001
par value per share, and the number of shares constituting such series shall be
200,000.

        Section 2. Dividends and Distributions.

                (A) The dividend rate on the shares of Series A Preferred Stock
shall be for each quarterly dividend (hereinafter referred to as a "quarterly
dividend period"), which quarterly dividend periods shall commence on April 1,
July 1, October 1 and January 1 each fiscal year (each such date being referred
to herein as a "Quarterly Dividend Payment Date") (or in the case of original
issuance, from the date of original issuance) and shall end on and include the
day next preceding the first date of the next quarterly dividend period, at a
rate per quarterly dividend period (rounded to the nearest cent) equal to the
greater of (a) $2,500.00 or (b) subject to the provisions for adjustment
hereinafter set forth, 1,000 times the aggregate per share amount of all cash
dividends, and 1,000 times the aggregate per share amount (payable in cash,
based upon the fair market value at the time the non-cash dividend or other
distribution is declared as determined in good faith by the Board of Directors)
of all non-cash dividends or other

                                       1
<PAGE>   42

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 (but not withdrawn) on the Common Stock, par value $.001
per share, of the Corporation (the "Common Stock") during the immediately
preceding quarterly dividend period, or, with respect to the first quarterly
dividend period, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. In the event this Corporation shall at any time after
December 5, 2000 (the "Rights Declaration Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, or (iii) combine the outstanding Common Stock into a smaller
number of shares, then in each such case the amount to which holders of shares
of Series A Preferred Stock were entitled immediately prior to such event under
clause (b) of the preceding sentence shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of which is
the number of shares of Common Stock that were outstanding immediately prior to
such event.

                (B) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A
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 A 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
A Preferred Stock in an amount less than the total amount of such dividends at
the time accrued and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The Board of
Directors may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than
forty-five (45) days prior to the date fixed for the payment thereof.

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

                (A) Subject to the provision for adjustment hereinafter set
forth, each share of Series A Preferred Stock shall entitle the holder thereof
to 1,000 votes on all matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the number of votes per share to which holders of shares of Series A Preferred
Stock were entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is the number of
shares of Common Stock outstanding immediately after such event and the
denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

                                       2
<PAGE>   43

                (B) Except as otherwise provided herein, in the Certificate of
Incorporation or Bylaws, the holders of shares of Series A Preferred Stock and
the holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation.

                (C) Except as set forth herein, in the Certificate of
Incorporation and in the Bylaws, holders of Series A 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. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.

        Section 5. Liquidation, Dissolution or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the Series A Preferred Stock shall be entitled to
receive the greater of (a) $100,000.00 per share, plus accrued dividends to the
date of distribution, whether or not earned or declared, or (b) an amount per
share, subject to the provision for adjustment hereinafter set forth, equal to
1,000 times the aggregate amount to be distributed per share to holders of
Common Stock. In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Common Stock payable in shares of
Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the
outstanding Common Stock into a smaller number of shares, then in each such case
the amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event pursuant to clause (b) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.

        Section 6. 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 A 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 1,000 times the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on Common Stock payable in shares of Common Stock, (ii)
subdivide the outstanding Common Stock, or (iii) combine the outstanding Common
Stock into a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or change of shares
of Series A 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

                                       3
<PAGE>   44

which is the number of shares of Common Stock that were outstanding immediately
prior to such event.

        Section 7. No Redemption. The shares of Series A Preferred Stock shall
not be redeemable.

        Section 8. Fractional Shares. Series A Preferred Stock may be issued in
fractions of a share which shall entitle the holder, in proportion to such
holder's fractional shares, to exercise voting rights, receive dividends,
participate in distributions and have the benefit of all other rights of holders
of Series A Preferred Stock. All payments made with respect to fractional shares
hereunder shall be rounded to the nearest whole cent.

        Section 9. Certain Restrictions.

                (A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A 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 A 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 A
        Preferred Stock;

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

                        (iii) redeem or purchase or otherwise acquire for
        consideration shares of any stock ranking on a parity (either as to
        dividends or upon liquidation, dissolution or winding up) with the
        Series A 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 A Preferred Stock; or

                        (iv) purchase or otherwise acquire for consideration any
        shares of Series A Preferred Stock, or any shares of stock ranking on a
        parity with the Series A 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.

                                       4
<PAGE>   45

                (B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any shares of
stock of the Corporation unless the Corporation could, under paragraph (A) of
this Section 9, purchase or otherwise acquire such shares at such time and in
such manner.

        Section 10. Ranking. The Series A Preferred Stock shall be junior to all
other Series of the Corporation's preferred stock as to the payment of dividends
and the distribution of assets, unless the terms of any series shall provide
otherwise.

        Section 11. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A 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 A Preferred Stock voting
together as a single class.

        IN WITNESS WHEREOF, we have executed and subscribed this Certificate and
do affirm the foregoing as true under the penalties of perjury this 8th day of
November, 2000.

                                       -----------------------------------------
                                       Paul G. Lego
                                       Chief Executive Officer and President
Attest:

--------------------------
Frank H. Pao
Secretary

                                       5
<PAGE>   46

                                   EXHIBIT B

                          [Form of Right Certificate]

Certificate No. W-_______                                        _______ Rights

        NOT EXERCISABLE AFTER NOVEMBER 7, 2010, OR EARLIER IF REDEEMED OR
        EXCHANGED. AT THE OPTION OF THE COMPANY, THE RIGHTS MAY BE REDEEMED AT
        $.001 PER RIGHT OR EXCHANGED FOR PREFERRED STOCK ON THE TERMS SET FORTH
        IN THE RIGHTS AGREEMENT. IN THE EVENT THAT THE RIGHTS REPRESENTED BY
        THIS CERTIFICATE ARE ISSUED TO A PERSON WHO IS AN ACQUIRING PERSON OR
        CERTAIN TRANSFEREE OF THE RIGHTS PREVIOUSLY OWNED BY SUCH PERSONS, THIS
        RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY SHALL BE NULL AND
        VOID AND WILL NO LONGER BE TRANSFERABLE.

                                RIGHT CERTIFICATE

        This certifies that _______________, or registered assigns, is the
registered owner of the number of Rights set forth above, each of which entitles
the owner thereof, subject to the terms, provisions and conditions of the Rights
Agreement dated as of November 8, 2000 ("Rights Agreement") between Virage,
Inc., a Delaware corporation (the "Company"), and Continental Stock Transfer &
Trust Company (the "Rights Agent"), to purchase from the Company at any time
after the Distribution Date (as such term is defined in the Rights Agreement)
and prior to 5:00 p.m. (New York time) on November 7, 2010 at the principal
office of the Rights Agent, or its successors as Rights Agent, designated for
such purposes, one one-thousandth of a fully paid and nonassessable share of
Series A Preferred Stock of the Company ("Preferred Stock") at a purchase price
of $100.00 per one one-thousandth of a share of Preferred Stock, as the same may
from time to time be adjusted in accordance with the Rights Agreement ("Purchase
Price"), upon presentation and surrender of this Right Certificate with the Form
of Election to Purchase duly executed. Capitalized terms used herein and not
otherwise defined herein shall have the meanings ascribed to such terms in the
Rights Agreement.

                                       1
<PAGE>   47

        As provided in the Rights Agreement, the Purchase 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 and, upon the
happening of certain events, securities other than shares of Preferred Stock, or
other property, may be acquired upon exercise of the Rights evidenced by this
Right Certificate, as provided by the Rights Agreement.

        Upon the occurrence of a Flip-In Event, if the Rights evidenced by this
Rights Certificate are beneficially owned by (i) an Acquiring Person or an
Affiliate or Associate of any such Acquiring Person, (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 any Affiliate or Associate
of an Acquiring Person, such Rights shall be null and void and will no longer be
transferable and no holder hereof shall have any right with respect to such
Rights from and after the occurrence of such Flip-In Events.

        This Right Certificate is subject to all the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
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 of the Rights Agent,
the Company and the holders of record of the Right Certificates, which
limitation 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 executive office of
the Company and are available upon written request to the Company.

        This Right Certificate, with or without other Right Certificates, upon
surrender at the principal office of the Rights Agent, may be exchanged for
another Right Certificate or Right Certificates of like tenor and date
evidencing Rights entitling the holder of record to purchase a like aggregate
number of shares of Preferred Stock as the Rights evidenced by the Right

                                       2
<PAGE>   48

Certificate or Right Certificates surrendered shall have entitled such holder to
purchase. If this Right Certificate shall be exercised in part, the holder shall
be entitled to receive upon surrender hereof, another Right Certificate or Right
Certificates for the number of whole Rights not exercised.

        Subject to the provisions of the Rights Agreement, at any time prior to
the earlier of (i) the occurrence of a Flip-In Event (as such term is defined in
the Rights Agreement) or (ii) the Expiration Date (as such term is defined in
the Rights Agreement), the Rights evidenced by this Certificate may be redeemed
by the Company at its option at a redemption price of $.001 per Right. Subject
to the provisions of the Rights Agreement, the Company may, at its option, at
any time after a Flip-In Event, exchange all or part of the Rights evidenced by
this Certificate for shares of the Company's Common Stock or for Preferred Stock
(or shares of a class or series of the Company's preferred stock having the same
rights, privileges and preferences as the Preferred Stock).

        In the event (i) any person or group becomes an Acquiring Person or (ii)
any of the types of transactions, acquisitions or other events described above
as self-dealing transactions occur, and prior to the acquisition by such person
or group of 50% or more of the outstanding shares of Common Stock, the Board may
require all or any portion of the outstanding Rights (other than Rights owned by
such Acquiring Person which have become void) to be exchanged for Common Stock
on a pro rata basis, at an exchange ratio of one share of Common Stock or one
one-thousandth of a share of Preferred Stock (or of a share of a class or series
of the Company's Preferred Stock having equivalent rights, preferences and
privileges), per Right (subject to adjustment).

        No fractional shares of Preferred Stock shall be issued 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 option of the Company, be evidenced by depository receipts), and no
fractional shares of Common Stock will be issued upon the exchange of any Right
or Rights evidenced hereby, and in lieu thereof, as provided in the Rights

                                       3
<PAGE>   49
Agreement, fractions of shares of Preferred Stock or Common Stock shall receive
an amount in cash equal to the same fraction of the then Current Market Price
(as such term is defined in the Rights Agreement) of a share of Preferred Stock
or Common Stock, as the case may be.

        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 Common Stock or
of any other securities of the Company which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote in 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 (other than certain actions specified 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 or exchanged as provided in the Rights Agreement.

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

        WITNESS the facsimile signature of the proper officers of the Company
and its corporate seal. Dated as of _______________, 20___.

ATTEST:                             Virage, Inc.
                                    By:
------------------------               --------------------------------------
Secretary
                                    Title:
                                          --------------------------------------

COUNTERSIGNED:                      Continental Stock Transfer and Trust Company
                                    As Rights Agent

                                    By:
                                       -----------------------------------------
                                       Authorized Officer

                                       4
<PAGE>   50

                    Form of Reverse Side of Right Certificate

                               FORM OF ASSIGNMENT

             (To be executed by the registered holder if such holder
                  desires to transfer any or all of the Rights
                     represented by this Right Certificate)

  FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

________________________________________________________________________________

________________________________________________________________________________

                   (Name, address and social security or other
                        identifying number of transferee)

___________________________________ (_______________) of the Rights represented
by this Right Certificate, together with all right, title and interest in and to
said Rights, and hereby irrevocably constitutes and appoints
_________________________ attorney to transfer said Rights 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 sold, assigned and transferred by or on behalf of a Person who is or was
an Acquiring Person (as such capitalized terms are defined in the Rights
Agreement);

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

       Dated:
             ---------------------           -----------------------------------
                                             (Signature)
Signature Guaranteed:

                                       5
<PAGE>   51

                    Form of Reverse Side of Right Certificate
                                   (continued)

                                     NOTICE

        The signatures to the foregoing Assignment and the foregoing
Certificate, if applicable, 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, and must be guaranteed by a participant in a
Securities Transfer Association ("STA") recognized signature program.

        In the event that the foregoing Certificate is not duly executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.

                                       6
<PAGE>   52

                      Form of Reverse of Right Certificate
                                   (continued)

                          FORM OF ELECTION TO PURCHASE

             (To be executed by the registered holder if such holder
                  desires to exercise any or all of the Rights
                     represented by this Right Certificate)

To:

        The undersigned hereby irrevocably elects to exercise
____________________________ (__________) of the Rights represented by this
Right Certificate to purchase the shares of the Common Stock of the Company, or
other securities or property issuable upon the exercise of said number of Rights
pursuant to the Rights Agreement.

        The undersigned hereby requests that a certificate for any such
securities and any such property be issued in the name of and delivered to:

________________________________________________________________________________

________________________________________________________________________________

                   (Name, address and social security or other
                          identifying number of issuee)

        The undersigned hereby further requests that if said number of Rights
shall not be all the Rights represented by this Right Certificate, a new Right
Certificate for the remaining balance of such Rights be issued in the name of
and delivered to:

________________________________________________________________________________

                   (Name, address and social security or other
                          identifying number of issuee)

       Dated:
             ---------------------           -----------------------------------
                                             (Signature)
Signature Guaranteed:

                                       7
<PAGE>   53

                    Form of Reverse Side of Right Certificate
                                   (continued)

                                   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 Acquiring Person or an Affiliate or
Associate of any such Acquiring Person (as such terms are defined pursuant to
the Rights Agreement);

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

       Dated:
             ---------------------           -----------------------------------
                                             (Signature)
Signature Guaranteed:

                                     NOTICE

        The signature to the foregoing Election to Purchase and the foregoing
Certificate, if applicable, must correspond to the name as written upon the face
of the this Right Certificate in every particular, without alteration or
enlargement or any change whatsoever, and must be guaranteed by a member firm of
a registered national securities exchange, a member of the National Association
of Securities Dealers, Inc., or a commercial bank or trust company having an
office or correspondent in the United States.

        In the event that the foregoing Certificate is not executed, with
signature guaranteed, the Company may deem the Rights represented by this Right
Certificate to be Beneficially Owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person (as such capitalized terms are defined in the
Rights Agreement), and not issue any Right Certificate or Right Certificates in
exchange for this Right Certificate.

                                       8
<PAGE>   54

                                   EXHIBIT C

UNDER CERTAIN CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS AGREEMENT, RIGHTS ISSUED
TO, BENEFICIALLY OWNED BY OR TRANSFERRED TO ANY PERSON WHO IS OR BECOMES AN
ACQUIRING PERSON (AS DEFINED IN THE RIGHTS AGREEMENT) OR AN ASSOCIATE OR
AFFILIATE (AS DEFINED IN THE RIGHTS AGREEMENT) THEREOF AND CERTAIN TRANSFEREES
THEREOF WILL BE NULL AND VOID AND WILL NO LONGER BE TRANSFERABLE.

                                  VIRAGE, INC.

                               SUMMARY OF TERMS OF
                                RIGHTS AGREEMENT

NATURE OF RIGHT:                When exercisable, each Right (a "Right") will
                                initially entitle the holder to purchase one
                                one-thousandth of a share of Series A Preferred
                                Stock ("Preferred Stock") of Virage, Inc. (the
                                "Company").

MEANS OF DISTRIBUTION:          The Rights will be distributed to holders of the
                                Company's outstanding Common Stock as a dividend
                                of one Right for each share of Common Stock. The
                                Rights will also be attached to all future
                                issuances of Common Stock prior to the
                                Distribution Date (as defined below).

EXERCISABILITY:                 Rights become exercisable on the earlier of: (i)
                                the tenth day following the date of public
                                announcement by the Company or by any person or
                                group (an "Acquiring Person") that such person
                                or group has acquired beneficial ownership of
                                15% or more of the Company's outstanding Common
                                Stock, or (ii) the tenth business day (unless
                                extended by the Board prior to the time a person
                                becomes an Acquiring Person) following the
                                commencement, or announcement of an intention to
                                commence, by any person or group of a tender or
                                exchange offer which would result in such person
                                owning 15% or more of the outstanding Common
                                Stock of the Company (the earlier of such dates
                                being referred to as the "Distribution Date"),
                                provided that an Acquiring Person does not
                                include an Exempt Person (as such term is
                                defined in the Rights Agreement). Rights will
                                trade separately from the Common Stock once the
                                Rights become exercisable.

EXERCISE PRICE:                 $100.00 per one one-thousandth of a share of
                                Preferred Stock, which is the amount that in the
                                judgment of the Board of Directors represents
                                the long-term value of the Common Stock over the
                                term of the Rights Agreement (the "Purchase
                                Price").

TERM:                           The Rights will expire upon the earlier of (i)
                                ten years after the date of issuance, or
                                November 7, 2010 or (ii) redemption or exchange
                                by the Company as described below.

REDEMPTION OF RIGHTS:           Rights are redeemable at a price of $.001 per
                                Right, by the vote of the Company's Board of
                                Directors, at any time until the occurrence of a
                                Flip-In Event (defined below).

PREFERRED STOCK:                The Preferred Stock purchasable upon exercise of
                                the Rights will be nonredeemable and junior to
                                any other series of preferred stock the Company
                                may issue (unless otherwise provided in the
                                terms of such other series). Each share of
                                Preferred Stock will have a preferential

                                       1
<PAGE>   55

                                cumulative quarterly dividend in an amount equal
                                to the greater of (a) $2,500.00 or (b) 1,000
                                times the dividend declared on each share of
                                Common Stock. In the event of liquidation, the
                                holders of Preferred Stock will receive a
                                preferred liquidation payment equal to the
                                greater of (a) $100,000.00 per share, plus
                                accrued dividends to the date of distribution
                                whether or not earned or declared, or (b) an
                                amount per share equal to 1,000 times the
                                aggregate payment to be distributed per share of
                                Common Stock. Each share of Preferred Stock will
                                have 1,000 votes, voting together with the
                                shares of Common Stock. In the event of any
                                merger, consolidation or other transaction in
                                which shares of Common Stock are exchanged for
                                or changed into other securities, cash and/or
                                other property, each share of Preferred Stock
                                will be entitled to receive 1,000 times the
                                amount and type of consideration received per
                                share of Common Stock. The rights of the
                                Preferred Stock as to dividends, liquidation and
                                voting, and in the event of mergers and
                                consolidations, are protected by customary
                                anti-dilution provisions. Fractional shares (in
                                integral multiples of one one-thousandth) of
                                Preferred Stock will be issuable; however, the
                                Company may elect to distribute depositary
                                receipts in lieu of such fractional shares. In
                                lieu of fractional shares other than fractions
                                that are multiples of one one-thousandth of a
                                share, an adjustment in cash will be made based
                                on the market price of the Preferred Stock on
                                the last trading date prior to the date of
                                exercise. Because of the nature of the Preferred
                                Stock's dividend, liquidation and voting rights,
                                the value of one one-thousandth of a share of
                                Preferred Stock purchasable upon exercise of
                                each Right should approximate the value of one
                                share of Common Stock.

RIGHTS IN EVENT OF              In the event that an Acquiring Person engages in
SELF-DEALING TRANSACTION        certain self-dealing transactions or becomes a
OR ACQUISITION OF SUBSTANTIAL   beneficial owner of 15% or more of the
AMOUNT OF COMMON STOCK:         outstanding Common Stock ("Flip-In Events"), a
                                holder of a Right thereafter has the right to
                                purchase, upon payment of the then current
                                Exercise Price, in lieu of one one-thousandth of
                                a share of Preferred Stock, such number of
                                shares of Common Stock having a market value at
                                the time of the transaction equal to the
                                Exercise Price divided by one-half the Current
                                Market Price (as defined in the Rights
                                Agreement) of the Common Stock. Notwithstanding
                                the foregoing, Rights held by the Acquiring
                                Person or any Associate or Affiliate thereof or
                                certain transferees will be null and void and no
                                longer be transferable.

                                Self-dealing transactions are defined to include
                                a consolidation, merger or other combination of
                                an Acquiring Person with the Company in which
                                the Company is the surviving corporation, the
                                transfer of assets to the Company in exchange
                                for securities of the Company, the acquisition
                                of securities of the Company (other than in a
                                pro rata distribution to all stockholders), the
                                sale, purchase, transfer, distribution, lease,
                                mortgage, pledge or acquisition of assets by the
                                Acquiring Person to, from or with the Company on
                                other than an arm's length basis, compensation
                                to an Acquiring Person for services (other than
                                for employment as a regular or part-time
                                employee or director on a basis consistent with
                                the Company's past practice), a loan or
                                provision of other financial assistance (except
                                proportionately as a stockholder) to an
                                Acquiring Person or the licensing, sale or other
                                transfer of proprietary technology or know-how
                                from the Company to the Acquiring Person on
                                terms not approved by the Board of Directors or
                                a reclassification, recapitalization or other
                                transaction with the effect of increasing by
                                more than 1% the Acquiring Person's
                                proportionate share of any class of securities
                                of the Company.

                                       2
<PAGE>   56

RIGHTS IN EVENT OF BUSINESS     If, following the occurrence of a Flip-In Event,
COMBINATION:                    the Company is acquired by any person in a
                                merger or other business combination transaction
                                in which the Common Stock is exchanged or
                                converted or in which the Company is not the
                                surviving corporation, or 50% or more of its
                                assets or earnings power are sold to any person,
                                each holder of a Right (other than an Acquiring
                                Person, or Affiliates or Associates thereof)
                                shall thereafter have the right to purchase,
                                upon payment of the then current Exercise Price,
                                such number of shares of common stock of the
                                acquiring company having a current market value
                                equal to the Exercise Price divided by one-half
                                the Current Market Price of such common stock.

EXCHANGE OPTION:                In the event (i) any person or group becomes an
                                Acquiring Person or (ii) any of the types of
                                transactions, acquisitions or other events
                                described above as self-dealing transactions
                                occur, and prior to the acquisition by such
                                person or group of 50% or more of the
                                outstanding shares of Common Stock, the Board
                                may require all or any portion of the
                                outstanding Rights (other than Rights owned by
                                such Acquiring Person which have become void) to
                                be exchanged for Common Stock on a pro rata
                                basis, at an exchange ratio of one share of
                                Common Stock or one one-thousandth of a share of
                                Preferred Stock (or of a share of a class or
                                series of the Company's Preferred Stock having
                                equivalent rights, preferences and privileges),
                                per Right (subject to adjustment).

FRACTIONAL SHARES:              No fractional shares of Common Stock will be
                                issued upon exercise of the Rights and, in lieu
                                thereof, a payment in cash will be made to the
                                holder of such Rights equal to the same fraction
                                of the current market value of a share of Common
                                Stock.

ADJUSTMENT:                     The Exercise Price payable, and the number of
                                shares of Preferred Stock or other securities or
                                property issuable, upon exercise of the Rights
                                are subject to adjustment from time to time to
                                prevent dilution (i) in the event of a stock
                                dividend on, or a subdivision, combination or
                                reclassification of the Preferred Stock, (ii)
                                upon the grant to holders of the Preferred Stock
                                of certain rights or warrants to subscribe for
                                Preferred Stock or convertible securities at
                                less than the current market price of the
                                Preferred Stock or (iii) upon the distribution
                                to holders of the Preferred Stock of evidences
                                of indebtedness or assets (excluding dividends
                                payable in Preferred Stock) or of subscription
                                rights or warrants (other than those referred to
                                above). The number of Rights associated with
                                each share of Common Stock is also subject to
                                adjustment in the event of a stock split of the
                                Common Stock or a stock dividend on the Common
                                Stock payable in Common Stock or subdivisions,
                                consolidations or combinations of the Common
                                Stock occurring, in any such case, prior to the
                                Distribution Date.

RIGHTS AS STOCKHOLDER:          The Rights themselves do not entitle the holder
                                thereof to any rights as a stockholder,
                                including, without limitation, voting rights or
                                to receive dividends.

AMENDMENT OF RIGHTS:            Until the Rights become nonredeemable, the
                                Company may, except with respect to the
                                redemption price, amend the Agreement in any
                                manner. After the Rights become nonredeemable,
                                the Company may amend the Agreement to cure any
                                ambiguity, to correct or supplement any
                                provision

                                       3
<PAGE>   57

                                which may be defective or inconsistent with any
                                other provisions, to shorten or lengthen any
                                time period under the Rights Agreement, or to
                                change or supplement any provision in any manner
                                the Company may deem necessary or desirable,
                                provided that no such amendment may adversely
                                affect the interests of the holders of the
                                Rights (other than the Acquiring Person or its
                                Affiliates or Associates) or cause the Rights to
                                again be redeemable or the Agreement to again be
                                freely amendable.

A COPY OF THE RIGHTS AGREEMENT IS AVAILABLE, FREE OF CHARGE, FROM THE COMPANY,
VIRAGE, INC., 177 BOVET ROAD, SUITE 520, SAN MATEO, CA 94402, ATTENTION:
CORPORATE SECRETARY. THIS SUMMARY DESCRIPTION OF THE RIGHTS AGREEMENT DOES NOT
PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE
RIGHTS AGREEMENT, AS AMENDED FROM TIME TO TIME, WHICH IS INCORPORATED IN THIS
SUMMARY DESCRIPTION BY REFERENCE.

                                       4

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