Document:

<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

                     Amended and Restated as of May 7, 2001

                                    Borrower

                            BHA GROUP HOLDINGS, INC.

                                   Guarantors

                                 BHA GROUP, INC.

                             BHA TECHNOLOGIES, INC.

                                     Lender

                              BANK OF AMERICA, N.A.

                      $18,000,000 Revolving Line of Credit

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                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                      Page
<S>                                                                                                   <C>
ARTICLE 1 DEFINITIONS AND INTERPRETIVE PROVISIONS........................................................1
   1.1   Definitions.....................................................................................1
   1.2   Interpretive Provisions.........................................................................1
   1.3   Exchange Rates; Alternative Currency Equivalents................................................1
   1.4   Redenomination of Certain Alternative Currencies................................................2
ARTICLE 2 REVOLVING LINE OF CREDIT.......................................................................2
   2.1   Agreement to Lend...............................................................................2
   2.2   Revolving Note..................................................................................3
ARTICLE 3 OTHER CREDIT FACILITIES........................................................................3
   3.1   Letters of Credit...............................................................................3
   3.2   Conversion of Revolving Loans...................................................................4
ARTICLE 4 TYPES OF LOANS, DISBURSEMENTS, INTEREST, PAYMENTS..............................................4
   4.1   Types of Loans..................................................................................4
   4.2   Loan Disbursement Procedures....................................................................4
   4.3   Interest........................................................................................5
   4.4   Optional and Mandatory Payments.................................................................6
   4.5   Payments........................................................................................6
   4.6   Direct Debit and Pre-Billing....................................................................7
   4.7   Minimum Amounts.................................................................................8
   4.8   Certain Requests and Notices....................................................................8
ARTICLE 5 GUARANTIES, FEES, COLLATERAL...................................................................9
   5.1   Guaranties......................................................................................9
   5.2   Unused Commitment and Letter of Credit Fees.....................................................9
   5.3   Additional LIBOR and EURIBOR Rate Loan Costs...................................................10
   5.4   Collateral.....................................................................................11
ARTICLE 6 CONDITIONS TO MAKING LOANS....................................................................11
   6.1   Delivery of Loan Documents.....................................................................11
   6.2   Proper Proceedings; Charter Documents..........................................................11
   6.3   Legal Opinions.................................................................................11
   6.4   No Adverse Changes; Representations; No Default................................................11
   6.5   No Material Impairment.........................................................................12
   6.6   Required Consents and Approvals................................................................12
   6.7   Legality.......................................................................................12
   6.8   General........................................................................................12
ARTICLE 7 REPRESENTATIONS AND WARRANTIES................................................................12
   7.1   Corporate Existence and Standing...............................................................13
   7.2   Authorization and Validity.....................................................................13
   7.3   No Conflict; Governmental Consent..............................................................13
   7.4   Compliance with Laws; Environmental and Safety Matters.........................................13
   7.5   Financial Statements...........................................................................14
   7.6   Ownership of Properties; Collateral Liens......................................................14
   7.7   Subsidiaries...................................................................................14

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   7.8   Litigation.....................................................................................15
   7.9   Material Agreements; Labor Matters.............................................................15
   7.10     Investment Company Act; Public Utility Holding Company Act..................................15
   7.11     Taxes.......................................................................................15
   7.12     Accuracy of Information.....................................................................16
   7.13     Employee Benefit Plans......................................................................16
   7.14     No Undisclosed Dividend Restrictions........................................................16
   7.15     Absence of Default or Event of Default......................................................16
   7.16     Disclosure..................................................................................16
   7.17     Solvency....................................................................................16
   7.18     Margin Regulations..........................................................................16
   7.19     Copyrights, Patents and Other Rights........................................................16
   7.20     Year 2000 Compliance........................................................................17
ARTICLE 8 AFFIRMATIVE COVENANTS.........................................................................17
   8.1   Conduct of Business and Maintenance of  Properties.............................................17
   8.2   Insurance......................................................................................17
   8.3   Compliance with Laws and Taxes.................................................................17
   8.4   Financial Statements, Reports, etc.............................................................18
   8.5   Other Notices..................................................................................20
   8.6   Access to Properties and Inspections...........................................................20
   8.7   Use of Proceeds................................................................................20
   8.8   Year 2000 Compliance...........................................................................20
   8.9   Payment of Claims..............................................................................21
ARTICLE 9 FINANCIAL COVENANTS...........................................................................21
   9.1   Minimum Consolidated Tangible Net Worth........................................................21
   9.2   Consolidated Funded Debt/EBITDA Ratio..........................................................21
   9.3   Consolidated Fixed Charge Coverage Ratio.......................................................21
   9.4   Minimum Consolidated EBITDA....................................................................22
   9.5   Consolidated Current Ratio.....................................................................22
   9.6   Funded Debt to Tangible Capital Ratio..........................................................22
ARTICLE 10 NEGATIVE COVENANTS...........................................................................22
   10.1     Indebtedness................................................................................22
   10.2     Liens.......................................................................................22
   10.3     Sale and Lease-Back Transactions............................................................23
   10.4     Mergers, Transfers of Assets, Acquisitions..................................................23
   10.5     Transactions with Affiliates................................................................24
   10.6     Subsidiary Dividend Restrictions............................................................24
   10.7     Use of Proceeds.............................................................................24
   10.8     Loans, Advances and Investments.............................................................25
   10.9     Negative Pledge.............................................................................25
   10.10    Liquidation or Change in Business...........................................................25
ARTICLE 11 EVENTS OF DEFAULT............................................................................25
   11.1     Events of Default...........................................................................25
   11.2     Rights and Remedies.........................................................................27
ARTICLE 12 MISCELLANEOUS................................................................................28
   12.1     Notices.....................................................................................28

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   12.2     Survival of Agreement.......................................................................28
   12.3     Binding Effect..............................................................................28
   12.4     Successors and Assigns; Participations......................................................29
   12.5     Expenses; Indemnity.........................................................................29
   12.6     Right of Setoff.............................................................................30
   12.7     Applicable Law..............................................................................30
   12.8     Waivers; Amendment..........................................................................30
   12.9     Interest Rate Limitation....................................................................30
   12.10    Entire Agreement............................................................................31
   12.11    Severability................................................................................31
   12.12    Counterparts................................................................................31
   12.13    Headings....................................................................................31
   12.14    Jurisdiction; Consent to Service of Process.................................................31
   12.15    Terms Generally.............................................................................32
   12.16    ARBITRATION.................................................................................32
</TABLE>

                                      iii
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LIST OF EXHIBITS:
         Exhibit 1-       Definitions
         Exhibit 2.2 -    Revolving Note
         Exhibit 4.8-A -  Notice of Borrowing, Prepayment or Termination or
                             Reduction of Commitment
         Exhibit 4.8-B -  Notice of Continuation or Conversion
         Exhibit 5.1 -    Loan Guaranty
         Exhibit 8.4 -    Compliance Certificate

LIST OF SCHEDULES:
         Schedule 7.4  -  Environmental Matters
         Schedule 7.7  -  Subsidiaries of Borrower
         Schedule 7.9  -  Material Contracts
         Schedule 10.1 -  Existing Indebtedness
         Schedule 10.2 -  Existing Liens
         Schedule 10.8 -  Loans, Advances and Investments

                                       iv
<PAGE>

                      AMENDED AND RESTATED CREDIT AGREEMENT

         THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of the 7th day of
May, 2001, by and among BHA GROUP HOLDINGS, INC., a Delaware corporation
("Borrower"), BHA GROUP, INC., a Delaware corporation, and BHA TECHNOLOGIES,
INC., a Delaware corporation (each a "GUARANTOR" and together "GUARANTORS"), and
BANK OF AMERICA, N.A., a national banking association (the "BANK").

         WHEREAS, Borrower has requested the Bank to amend the existing Credit
Agreement among Borrower, Guarantors and the Bank dated September 30, 1999 (the
"EXISTING CREDIT AGREEMENT"), to permit borrowings in U.S. dollars or certain
alternate currencies, to continue the unsecured revolving line of credit
thereunder in the amount of $18,000,000, with a sublimit of $3,000,000 for
borrowings denominated in such alternate currencies, and to continue to make
available, on the request of Borrower, letters of credit to be applied against
the amount available under the revolving line of credit; and

         WHEREAS, the Bank has agreed to amend the Existing Credit Agreement and
to continue to make such credit and loans available to Borrower upon the terms
and conditions set forth herein;

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

                                    ARTICLE 1
                     DEFINITIONS AND INTERPRETIVE PROVISIONS

         1.1 DEFINITIONS. Certain terms used in this Agreement are defined
herein. Certain other terms are defined in Exhibit 1 attached hereto and
incorporated herein by this reference.

         1.2 INTERPRETIVE PROVISIONS. In addition to the interpretive provisions
set forth in Sections 1.3, 1.4 and 1.5, other interpretive provisions are in
Section 12.15 below and in other Articles of this Agreement.

         1.3 EXCHANGE RATES; ALTERNATIVE CURRENCY EQUIVALENTS. On each
Calculation Date, the Bank shall determine the exchange rate as of such
Calculation Date to be used for calculating relevant Dollar equivalent and
Alternative Currency equivalent amounts. The exchange rates so determined shall
become effective on such Calculation Date and shall for all purposes of this
Agreement (other than any provision expressly requiring the use of a current
exchange rate) be the exchange rates employed in converting any amounts between
the applicable currencies. Wherever in this Agreement in connection with a Loan,
a conversion or continuation of a Loan or the issuance of a Letter of Credit, an
amount (such as a required minimum or multiple amount) is expressed in Dollars
but such Loan or Letter of Credit is denominated in an Alternative

<PAGE>

Currency, such amount shall be the relevant Alternative Currency Equivalent of
such Dollar amount (rounded to the nearest 1,000 units of such Alternative
Currency), as determined by the Bank.

         1.4 REDENOMINATION OF CERTAIN ALTERNATIVE CURRENCIES. Each obligation
of Borrower to make a payment denominated in the national currency unit of any
member state of the European Union that adopts the Euro as its lawful currency
after the date hereof shall be redenominated into Euro at the time of such
adoption (in accordance with the EMU Legislation). If, in relation to the
currency of any such member state, the basis of accrual of interest expressed in
this Agreement in respect of that currency shall be inconsistent with any
convention or practice in the London interbank market for the basis of accrual
of interest in respect of the Euro, such expressed basis shall be replaced by
such convention or practice with effect from the date on which such member state
adopts the Euro as its lawful currency; provided that if any Loan in the
currency of such member state is outstanding immediately prior to such date,
such replacement shall take effect, with respect to such Loan, at the end of the
then current Interest Period. Each provision of this Agreement shall be subject
to such reasonable changes of construction as the Bank may from time to time
specify to be appropriate to reflect the adoption of the Euro by any member
state of the European Union and any relevant market conventions or practices
relating to the Euro.

                                    ARTICLE 2
                            REVOLVING LINE OF CREDIT

         2.1      AGREEMENT TO LEND.

                  (a) The Bank agrees, on the terms and subject to the
conditions set forth in this Agreement, to make loans (each a "REVOLVING LOAN")
to Borrower in Dollars or in one or more Alternative Currencies from time to
time before the Revolving Credit Termination Date, in such amounts as Borrower
shall request as provided in Section 4.8 hereof and to treat each draw under any
Letter of Credit as a Revolving Loan as provided in Section 3.1 below; provided,
however, that the Bank shall have no obligation to make a requested Revolving
Loan if, after the making of such Revolving Loan, (i) the aggregate unpaid
principal balance of all Revolving Loans, plus the aggregate undrawn amount
under all outstanding Letters of Credit would exceed the Revolving Credit
Commitment; (ii) the aggregate unpaid principal balance of all Revolving Loans
denominated in Alternative Currencies plus the aggregate undrawn amount under
all outstanding Letters of Credit denominated in Alternative Currencies would
exceed the Alternative Currency Sublimit; (iii) a Default or Event of Default
has occurred and is continuing; or (iv) the Loan requested is a LIBOR Rate Loan
or a EURIBOR Rate Loan and the requested LIBOR Rate or EURIBOR Rate election
would cause more than five (5) LIBOR Rate Loans or five (5) EURIBOR Rate Loans
to be outstanding. Borrower may terminate or reduce the unused portion of the
Revolving Credit Commitment at any time by giving notice to the Bank as provided
in Section 4.8 below, provided that any partial reduction shall be in an amount
of at least $1,000,000. Revolving Loans shall be used to pay existing
indebtedness to the Bank, for working

                                       2

<PAGE>

capital, for Acquisitions up to an aggregate of $3,000,000 during the term of
this Agreement, to purchase or redeem its own stock and for other corporate
purposes.

                  (b) If the aggregate principal indebtedness of Borrower under
the Revolving Note (as defined below), plus the aggregate undrawn amount under
all outstanding Letters of Credit, at any time exceeds the Revolving Credit
Commitment, Borrower shall immediately, without demand or notice, pay principal
under the Revolving Note so that the aggregate principal amount outstanding
thereunder, plus the aggregate undrawn amount under all outstanding Letters of
Credit, does not exceed the Revolving Credit Commitment.

         2.2 REVOLVING NOTE. The Revolving Loans shall be evidenced by and
repaid in accordance with a Revolving Credit Note executed by Borrower, in the
form of Exhibit 2.2 hereto, dated as of the date hereof, and payable to the
order of the Bank. Such note and any and all amendments, extensions,
modifications, renewals, reaffirmations, restatements, replacements and
substitutions thereof and therefor are herein referred to as the "REVOLVING
NOTE." Interest shall accrue on the unpaid principal balance of the Revolving
Note outstanding from time to time at a rate or rates determined as provided in
Section 4.3 below. The Revolving Note shall be paid in full on the Revolving
Credit Termination Date.

                                    ARTICLE 3
                             OTHER CREDIT FACILITIES

         3.1 LETTERS OF CREDIT. From time to time after the date hereof until
the Revolving Credit Termination Date, Borrower may apply to the Bank to issue,
in Dollars or in an Alternative Currency, or extend the expiration date of one
or more standby letters of credit for the account of Borrower (all such letters
of credit, together with all letters of credit issued by the Bank for the
account of Borrower outstanding on the date of this Agreement and all renewals
and extensions of any thereof, "LETTERS OF CREDIT"), each of which:

                  (a) shall be in a stated amount which, together with the
aggregate undrawn amount then outstanding under all Letters of Credit and the
principal amount then outstanding of all Revolving Loans, does not exceed the
Revolving Credit Commitment;

                  (b) shall, if it is denominated in an Alternative Currency, be
in a stated amount which, together with the aggregate undrawn amount then
outstanding under all Letters of Credit in Alternative Currencies and the
principal amount then outstanding of all Revolving Loans denominated in
Alternative Currencies, does not exceed the Alternative Currency Sublimit;

                  (c) shall, by its terms, not exceed a term of one year and
shall expire not later than the Revolving Credit Termination Date;

                                       3
<PAGE>

                  (d) shall require payment by Borrower of fees as described in
Section 5.2 hereof; and

                  (e) shall be issued, to the extent applicable, pursuant to the
Bank's  then-current standard form of application for letters of credit.

Borrower authorizes and directs the Bank to cause the repayment of each draw
under the Letters of Credit to be made immediately by charging such repayment
against the Revolving Note as a Prime Rate Loan; any draw under a Letter of
Credit denominated in an Alternative Currency shall be charged against the
Revolving Note as a Loan denominated in Dollars, with the Dollar equivalent
determined at the exchange rate in effect on the date of such draw.

         3.2 CONVERSION OF REVOLVING LOANS. Borrower may convert all or any
portion of the outstanding Revolving Loans to a loan with a fixed rate of
interest pursuant to an interest rate swap agreement or other similar agreement
that has terms and conditions acceptable to the Bank. The effective fixed rate
offered by the Bank will be based upon market conditions on the date of the
closing of any swap. Borrower may, at any time, prepay all or any portion of
such a converted loan, without premium or penalty; if Borrower prepays any such
loan, Borrower shall pay all fees and expenses associated with unwinding any
interest rate swap.

                                    ARTICLE 4
                TYPES OF LOANS; DISBURSEMENTS; INTEREST; PAYMENTS

         4.1 TYPES OF LOANS. All loans denominated in an Alternative Currency
shall be EURIBOR Rate Loans. Loans denominated in Dollars may, subject to the
terms and conditions of this Agreement, be Prime Rate Loans or LIBOR Rate Loans
(each being referred to as a "type" of Loan) as specified in the applicable
request for borrowing referred to in Section 4.8 hereof. Borrower may continue
Loans of one type as Loans of the same type or convert Dollar-denominated Loans
of one type into Loans of the other type, at any time or from time to time,
provided that if any LIBOR Rate Loan is converted on any day other than the last
day of the Interest Period for such Loan, Borrower shall pay all applicable fees
and amounts described in Section 5.3 below.

         4.2      LOAN DISBURSEMENT PROCEDURES.

                  (a) Loans shall be disbursed by the Bank upon request by
Borrower from time to time, in such amounts and in Dollars or an Alternative
Currency as is requested as provided in Section 4.8 below or in Section 3.1
above, subject to the limitations on the Bank's obligations to make Loans as set
forth in Section 2.1 and other provisions hereof. Subject to the terms of this
Agreement, Borrower may borrow, repay and reborrow Revolving Loans at any time
prior to the Revolving Credit Termination Date.

                                       4
<PAGE>

         Each request for a Loan shall be delivered to the Bank in writing or by
telex or facsimile transmission in the manner provided in Section 12.1 hereof,
or as otherwise agreed by the Bank, not later than 1:00 p.m., Kansas City,
Missouri time, on the date described in Section 4.8 below, which date shall be a
Business Day and shall be specified in the request (a "Disbursement Date"). The
Bank may rely and act upon any such request which is received from a person
believed by the Bank in good faith to be authorized to make such request on
behalf of Borrower. The Bank shall record in its records all Loans made by the
Bank to Borrower pursuant to this Agreement and all payments made on the Loans.

         4.3      INTEREST.

                  (a) Borrower shall pay to the Bank interest on the unpaid
principal amount of each Revolving Loan for the period commencing on and
including the date of such Loan to but excluding the date such Loan is paid in
full, at the following rates per annum:

         (i) during any period while such Loan is a Prime Rate Loan, the Prime
Rate (as in effect from time to time) less 1%; and

         (ii) during any period while such Loan is a LIBOR Rate Loan or an
EURIBOR Rate Loan, for each Interest Period relating thereto, the LIBOR Rate or
EURIBOR Rate for such Interest Period plus the Applicable Margin (as defined
below) in effect on the Disbursement Date, the date of conversion (with respect
to a LIBOR Rate Loan) or the date of continuation, as applicable and as adjusted
as provided in this Agreement. The Applicable Margin will be calculated and
adjusted, as shown below, on the first day of the month following the receipt by
the Bank of each quarterly Compliance Certificate; any change in the Applicable
Margin shall be effective with respect to Interest Periods beginning on or after
each such date. The interest rate with respect to each outstanding LIBOR Rate
Loan or EURIBOR Rate Loan shall not change during any Interest Period. The
"APPLICABLE MARGIN" will be as follows:

<TABLE>
<CAPTION>
         ---------------------------------------------- --------------------------------------
                         CONSOLIDATED
                  FUNDED DEBT / EBITDA RATIO                      APPLICABLE MARGIN
         ---------------------------------------------- --------------------------------------
         <S>                                                 <C>
                          >=2.75:1.00                                   1.35%
         ---------------------------------------------- --------------------------------------
                  >=2.01:1.00 and <=2.74:1.00                           1.20%
         ---------------------------------------------- --------------------------------------
                  >=1.25:1.00 and <=2.00:1.00                           1.05%
         ---------------------------------------------- --------------------------------------
                  >=.75:1.00 and <=1.24:1.00                            .95%
         ---------------------------------------------- --------------------------------------
                          <.75 :1.00                                    .85%
         ---------------------------------------------- --------------------------------------
</TABLE>

                  (b) Notwithstanding the provisions of Section 4.3 (a) above,
Borrower shall pay interest at the Default Rate on any principal of any Loan and
on any interest or other amount payable by Borrower hereunder or under the Note
(i) that is not paid in full when due (whether at maturity, by acceleration or
otherwise), for the period commencing

                                       5
<PAGE>

on and including the due date thereof until the same is paid in full and (ii)
upon and during the continuance of any failure to comply with or violation of
any of the financial covenants set forth in Article 10 of this Agreement as
shown on and as of the last day of a fiscal quarter as reflected on any
Compliance Certificate.

                  (c) Accrued interest on each Loan shall be payable (i) in the
case of a Prime Rate Loan, on the last Business Day of each calendar quarter,
and (ii) in the case of a LIBOR Rate Loan or EURIBOR Rate Loan, on the last day
of each Interest Period therefor; provided that interest payable at the Default
Rate shall be payable, to the extent applicable, from time to time on demand of
the Bank.

                  (d) The Bank shall, as part of its interest statements, notify
Borrower of any change in the Prime Rate and shall, on the request of Borrower
at any time, notify Borrower of the LIBOR Rate and EURIBOR Rate then in effect.

         4.4 OPTIONAL AND MANDATORY PAYMENTS. Borrower shall have the right to
prepay the Loans in whole or in part at any time without premium or penalty,
subject to giving the Bank prior notice in accordance with the provisions of
Section 4.8 hereof, provided that (i) each such partial prepayment shall be in
the aggregate principal amount of not less than $100,000 with respect to Prime
Rate Loans and $500,000 with respect to LIBOR Rate Loans, and (ii) if any
prepayment of a LIBOR Rate Loan is made on any day other than the last day of
the Interest Period therefor, it may be prepaid only upon three (3) Business
Days prior notice to the Bank and Borrower shall pay to the Bank any applicable
fees and amounts described in Section 5.3(a) below. Amounts prepaid in respect
of Loans under this Section 4.4 may be reborrowed subject to the terms and
conditions hereof. Borrower shall make mandatory principal payments on the Loans
as provided in Section 2.1(b) above.

         4.5 PAYMENTS. Except as otherwise provided herein and subject to
Section 4.8 below, all payments of principal, interest, Fees, taxes, charges,
expenses and other items payable by Borrower hereunder and under the Note shall
be made in U.S. dollars or, with respect to principal and interest on Loans
denominated in an Alternative Currency, in such Alternative Currency (except
with respect to payment made by direct debit as provided in Section 4.6 below)
and shall be credited on the date of receipt by the Bank if received by the Bank
at its principal office in Kansas City, Missouri, in immediately available
funds, prior to 1:00 p.m., Kansas City, Missouri time, on a Business Day.
Payments made in funds which are not immediately available shall be credited
only when the funds are collected by the Bank, and payments received (whether
from Borrower in immediately available funds or through the collection of funds
which were not immediately available at the time payment was tendered by
Borrower) after 1:00 p.m. will be credited on the next Business Day. The Bank
reserves the right to apply all payments received by it from Borrower and
designated or authorized to be applied to a Note first to any Fees and other
charges then due to the Bank, then to accrued interest on such Note and then to
reduction of the principal balance of such Note, or such other order as the Bank
may determine in its sole discretion. The Bank shall also record in its records,
in accordance with customary accounting practice, all interest, Fees, taxes,

                                       6

<PAGE>

charges, expenses and other items properly chargeable to Borrower with respect
to the Loans, all payments received by the Bank for application to the
Obligations, and all other appropriate debits and credits. The Bank's records
shall constitute prima facie evidence of the amount of Obligations outstanding
from time to time.

         4.6      DIRECT DEBIT AND PRE-BILLING.

         (a) Borrower agrees that Bank will debit deposit account number
020100039303 or such other of Borrower's accounts with the Bank as designated in
writing by either Borrower (the "DESIGNATED ACCOUNT") on the date each payment
of principal, interest and all other Obligations, including the fees described
in Section 5.2 and fees, amounts and costs described in Section 5.3, become due
(the "DUE DATE"). Payments by direct debit with respect to Loans denominated in
an Alternative Currency will be converted to Dollars at the exchange rate in
effect at approximately 9:00 a.m. Central Time on the date of the debit. If the
Due Date is not a Business Day, the Designated Account will be debited on the
next Business Day.

         (b) Approximately 10 days prior to each Due Date, Bank will mail to
Borrower a statement of the amounts that will be due on that Due Date (the
"BILLED AMOUNT"). The calculation will be made on the assumption that no new
extensions of credit or payments will be made between the date of the billing
statement and the Due Date and that there will be no changes in the applicable
interest rate.

         (c) Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "ACCRUED AMOUNT"). If the
Billed Amount debited to the Designated Account differs from the Accrued Amount,
the discrepancy will be treated as follows:

                  (i) If the Billed Amount is less than the Accrued Amount, the
Billed Amount for the following Due Date will be increased by the amount of the
discrepancy. Borrower will not be in default and an Event of Default will not
occur by reason of any such discrepancy.

                  (ii) If the Billed Amount is more than the Accrued Amount, the
Billed Amount for the following Due Date will be decreased by the amount of the
discrepancy.

         Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without compounding. Bank
will not pay Borrower interest on any overpayment.

         (d) Borrower will maintain sufficient funds in the Designated Account
to cover each debit. If there are insufficient funds in the Designated Account
on the date Bank enters any debit authorized by this Agreement, the debit will
be reversed.

         (e) Borrower may terminate this direct debit arrangement at any time
by sending written notice to Bank.

                                       7
<PAGE>

         4.7 MINIMUM AMOUNTS. Each borrowing or conversion of Prime Rate Loans
shall be in an amount of at least $100,000 and each borrowing, conversion or
continuation of LIBOR Rate Loans and each borrowing or continuation of EURIBOR
Rate Loan shall be in an amount of or equivalent to $500,000 or a multiple of
$100,000 in excess thereof.

         4.8 CERTAIN REQUESTS AND NOTICES. Borrower will request borrowings and
give notice to the Bank of all terminations or reductions of Commitments,
conversions, continuations and prepayments of Loans and the duration of Interest
Periods, such requests and notices to be substantially in the form of Exhibits
4.8-A and 4.8-B hereto. Each such notice shall be irrevocable and shall be
effective only if received by the Bank not later than 1:00 p.m. Kansas City time
(i) on the Business Day prior to the effective date of the requested termination
or reduction of a Commitment, (ii) on the same date if it is a notice of a
borrowing or prepayment of a Prime Rate Loan (except that if such date is not a
Business Date, then on the next Business Day), or (iii) three (3) Business Days
prior to the requested effective date for a borrowing or prepayment of or
continuation as a LIBOR or EURIBOR Rate Loan or a conversion of a LIBOR Rate
Loan or any selection of Interest Period for a LIBOR or EURIBOR Rate Loan.

         Except as otherwise specifically provided in this Agreement, a LIBOR
Rate Loan may be converted to a Prime Rate Loan only on the last day of the
Interest Period for such Loan. A LIBOR Rate Loan or an EURIBOR Rate Loan may be
continued only on the last day of the Interest Period for such Loan. An EURIBOR
Rate Loan may not be converted.

         If Borrower fails to specify a currency for a borrowing, then the Loan
so requested shall be made in Dollars. If Borrower fails to specify a type
(whether Prime Rate or LIBOR Rate) of Dollar-denominated Loan in a request for a
borrowing or if Borrower fails to give a timely notice requesting a conversion
or continuation of a Dollar-denominated Loan, then the applicable Loan shall be
made or continued as, or converted to, a Prime Rate Loan. Any automatic
conversion to a Prime Rate Loan shall be effective as of the last day of the
Interest Period then in effect with respect to the applicable LIBOR Rate Loan.
In the case of a failure to timely request a continuation of a Loan denominated
in an Alternative Currency, such Loan shall be continued as a EURIBOR Rate Loan
in its original currency with an Interest Period of one month. If Borrower
requests a borrowing of or continuation of a LIBOR or EURIBOR Rate Loan or a
conversion of a Prime Rate Loan to a LIBOR Rate Loan but fails to specify an
Interest Period, Borrower will be deemed to have specified an Interest Period of
one month. No Loan may be converted into or continued as a Loan denominated in a
different currency but instead must be prepaid in the original currency of such
Loan and reborrowed in the other currency.

         For purposes of calculating the number of Business Days, the date the
notice is received shall be included if received not later than 1:00 p.m. Kansas
City time and excluded if received after 1:00 p.m. Kansas City time.

                                       8
<PAGE>

                                    ARTICLE 5
                          GUARANTIES; FEES; COLLATERAL

         5.1 GUARANTIES. Each of the Guarantors is delivering to the Bank, on
the date of this Agreement, a confirmation of its Guaranty Agreement. If
Borrower or any Subsidiary acquires or creates any subsidiary after the date of
this Agreement or if the Bank so requests with respect to any Subsidiary,
Borrower shall cause each such newly acquired or created Subsidiary and each
such other Subsidiary to become a Guarantor by causing it to deliver to the Bank
(i) a Guaranty Agreement executed by the Subsidiary in substantially the form
attached hereto as Exhibit 5.1 with such additional matters included therein as
may be required by the Bank (whether delivered at the Closing or thereafter,
each, a "LOAN GUARANTY"), (ii) if requested by Bank, an opinion of such
Subsidiary's counsel, satisfactory in form and substance to the Bank, as to the
enforceability of such Loan Guaranty and other matters required by the Bank;
such opinion shall be substantially the same as the opinion delivered with
respect to the initial Guarantors, with such additional matters included therein
as may be required by the Bank and shall include, if requested by the Bank, the
opinion of counsel from the Subsidiary's jurisdictions of organization and
operation, and (iii) copies of such Subsidiary's charter documents, certified by
the appropriate public official, and of its bylaws, certified by its secretary.

         5.2 UNUSED COMMITMENT AND LETTER OF CREDIT FEES. Borrower agrees to pay
a quarterly unused commitment fee equal to .25% of the Revolving Credit
Commitment less (i) the daily average outstanding balance of all Loans
denominated in Dollars, (ii) the aggregate undrawn amounts of all outstanding
Letters of Credit denominated in Dollars as of the Calculation Date, (iii) the
outstanding balance, in Dollars, as of the Calculation Date of all Loans
denominated in an Alternative Currency, using the exchange rate in effect on
such date, and (iv) the aggregate undrawn amount, in Dollars, of all outstanding
Letters of Credit denominated in an Alternative Currency as of the Calculation
Date, using the exchange rate in effect on such date. Borrower shall pay the
unused Commitment fees with respect to each quarter within 15 days after the end
of such quarter.

         Borrower agrees to pay an initial issuance fee on the date that each
standby Letter of Credit is issued in an amount equal to .125% of the amount of
such Letter of Credit and to pay the Bank's then standard fee for any renewals
and extensions of any Letter of Credit. Borrower also agrees to pay a fee in an
amount equal to the Applicable Margin rate per annum times the undrawn amount of
all outstanding Letters of Credit; such fee will be calculated and paid on last
business day of each fiscal quarter and shall be subject to appropriate
adjustment after the Bank's receipt of Borrower's Compliance Certificate
respecting such quarter.

         All fees shall be calculated on a 360-day year basis, if applicable.

                                       9
<PAGE>

         5.3      ADDITIONAL LIBOR AND EURIBOR RATE LOAN COSTS.

                  (a) Borrower shall pay to the Bank from time to time, upon
request of the Bank, (i) such amounts as the Bank may determine to be necessary
to compensate it for any Additional LIBOR and EURIBOR Rate Loan Costs respecting
Regulatory Changes and (ii) an administrative fee of $300 plus such amounts as
the Bank may determine to be necessary to compensate it for any loss, cost or
expense which the Bank incurs (including, without limitation, any loss, cost or
expense incurred by reason of the liquidation or re-employment of deposits, but
excluding loss of anticipated profits) that is attributable to (A) any payment,
prepayment or conversion of a LIBOR Rate Loan or EURIBOR Rate Loan made by
either Borrower for any reason on a date other than the last day of an Interest
Period for such Loan or (B) any failure by either Borrower for any reason
(including, without limitation, the failure of any condition specified in
Article 6 hereof to be satisfied) to borrow or continue or convert a LIBOR or
EURIBOR Rate Loan or convert a LIBOR Rate Loan on the date therefor specified in
the request for borrowing or notice given pursuant to Section 4.8 hereof. Such
compensation may include an amount equal to the excess, if any, of (i) the
amount of interest which would have accrued on the amount so prepaid, or not so
borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Loans provided
for herein (excluding, however, the Applicable Margin included therein, if any)
over (ii) the amount of interest (as reasonably determined by the Bank) which
would have accrued to the Bank on such amount by placing such amount on deposit
for a comparable period with leading banks in the interbank LIBOR market. The
covenants of Borrower set forth in this Section 5.3 shall survive the
termination of this Agreement and the payment of the Loans and all other amounts
payable hereunder. The Bank will notify Borrower of any event which will entitle
the Bank to compensation pursuant to this Section 5.3 as promptly as practicable
after the Bank determines to require such compensation and will furnish Borrower
with a certificate setting forth in reasonable detail the basis and amount of
such compensation.

                  (b) Determinations by the Bank of the effect of any Regulatory
Change on its rate of return or cost of maintaining the LIBOR or EURIBOR Rate
Loans, on its obligation to make LIBOR or EURIBOR Rate Loans or on amounts
receivable by it in respect of the LIBOR or EURIBOR Rate Loans and
determinations of the amounts required to compensate such Bank under this
Section 5.3 shall be conclusive, provided that such determinations are made on a
reasonable basis and are set forth in reasonable detail in the certificates
referred to in Section 5.3(a) above.

                  (c) Anything herein to the contrary notwithstanding, if it
becomes unlawful for the Bank to honor its obligation to make or maintain LIBOR
or EURIBOR Rate Loans hereunder or if, on or prior to the determination of any
LIBOR Rate or EURIBOR Rate for any Interest Period, the Bank determines (which
determination shall be conclusive) that quotations of interest rates for the
relevant deposits referred to in the

                                       10

<PAGE>

definition of "LIBOR Rate" or "EURIBOR Rate" in Exhibit 1 hereto are not being
provided in the relevant amounts or for the relevant maturities for purposes of
determining rates of interest for such Loans, then the Bank shall give Borrower
prompt notice thereof, and, so long as such condition remains in effect, the
Bank shall be under no obligation to make or continue such Loans or to convert
Prime Rate Loans into LIBOR Rate Loans, and Borrower shall, on the last day(s)
of the then current Interest Period(s) for the outstanding LIBOR or EURIBOR Rate
Loans, either prepay such Loans or, with respect to LIBOR Rate Loans, convert
them into Prime Rate Loans.

         5.4 COLLATERAL. The Note will be unsecured. All assets of Borrower,
Guarantors and other Subsidiaries will be subject to the negative pledge set
forth in Section 10.9 below.

                                    ARTICLE 6
                           CONDITIONS TO MAKING LOANS

         The Bank's entering into this Credit Agreement is subject to the
satisfaction of the conditions set forth in this Article 6 and the Bank's
obligation hereunder to, after the date hereof, make any additional Loans
hereunder, extend any additional credit or enter into any additional
transactions referred to in Article 3 shall be subject to the satisfaction of
the conditions set forth in Sections 6.4, 6.5, 6.6, 6.7 and 6.8, as of each
Disbursement Date and as of each date a Letter of Credit is issued, renewed or
extended:

         6.1 DELIVERY OF LOAN DOCUMENTS. Borrower and Guarantors shall have
executed, as applicable, this Agreement, the Note, a confirmation of the
Guaranties by executing the confirmation on the signature pages hereof, any UCC
financing statements relating thereto requested by the Bank and any other Loan
Documents, all of which shall be in form and substance satisfactory to the Bank
and its counsel, and delivered them to the Bank.

         6.2 PROPER PROCEEDINGS; CHARTER DOCUMENTS. Borrower and each Guarantor
shall have taken all corporate proceedings necessary to authorize the Loan
Documents and the transactions contemplated hereby. Borrower and Guarantors
shall have delivered to the Bank certificates, dated the date hereof and signed
by their respective Secretaries, satisfactory to the Bank, respecting such
proceedings and the incumbency of the officers executing the Loan Documents.
Borrower shall have and each Guarantor shall have delivered to the Bank copies
of any amendment to its charter documents or bylaws adopted or made after
September 1, 1999, certified by the appropriate officer.

         6.3 LEGAL OPINIONS. The Bank shall have received opinions from counsel
to Borrower and Guarantors, dated as of the date hereof, satisfactory to the
Bank.

         6.4 NO ADVERSE CHANGES; REPRESENTATIONS; NO DEFAULT. Since the date
hereof, there shall have been no material adverse change in the business,
operations,

                                       11

<PAGE>

financial condition or prospects of Borrower or any Subsidiary. The
representations and warranties contained in Article 7 hereof with respect to
Borrower and the Subsidiaries (including entities becoming Subsidiaries as a
result of an Acquisition) shall be true and correct as though made on and as of
the date hereof or such Disbursement Date or such date of issuance, renewal or
extension of a Letter of Credit, as the case may be, except that the
representations and warranties set forth in the first sentence of Section
7.4(b), Section 7.7 and the second sentence of Section 7.9 (which relate to
disclosure schedules 7.4, 7.7 and 7.9) are not required by this Section 6.4 to
be made as of any Disbursement Date or date of issuance, renewal or extension of
a Letter of Credit. No Default or Event of Default shall have occurred and be
continuing. The Bank shall have received certifications of Borrower in form
satisfactory to the Bank and dated the date of the request for borrowing or for
issuing, renewing or extending a Letter of Credit, as applicable, certifying as
to each matter set forth in this Section 6.4, which certifications may be
included in the notice of borrowing described in Section 4.8 hereof.

         6.5 NO MATERIAL IMPAIRMENT. The Bank shall have determined that the
prospect of payment of the Loans has not been materially impaired.

         6.6 REQUIRED CONSENTS AND APPROVALS. All consents, approvals and
authorizations of any Governmental Authority or any other Person with respect to
the execution and performance of the Loan Documents, the consummation of the
transactions contemplated hereby or the making of the Loans hereunder shall have
been obtained and shall be in full force and effect.

         6.7 LEGALITY. The making of any Loan shall not subject the Bank to any
penalty or special tax, shall not be prohibited by any law or governmental order
or regulations applicable to the Bank or to Borrower and shall not violate any
voluntary credit restraint program of the executive branch of the government of
the United States or any other Governmental Authority, and all necessary
consents, approvals and authorizations of any Governmental Authority to or of
such Loan shall have been obtained.

         6.8 GENERAL. All instruments and legal and corporate proceedings in
connection with the transactions contemplated by this Agreement shall be
satisfactory in form and substance to the Bank and its counsel, and the Bank
shall have received copies of all other documents, including records of
corporate proceedings and opinions of counsel, which the Bank may have requested
in connection therewith, such documents where appropriate to be certified by
proper corporate or governmental authorities, and such other conditions shall
have been fulfilled as may have been requested by the Bank.

                                    ARTICLE 7
                         REPRESENTATIONS AND WARRANTIES

         Borrower, with respect to itself and with respect to each of the
Subsidiaries, and each of Guarantors, with respect to itself, represent and
warrant to the Bank that:

                                       12

<PAGE>

         7.1 CORPORATE EXISTENCE AND STANDING. Borrower is and each Subsidiary
is a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation and has all requisite authority to
own its property and to carry on its business in each jurisdiction where the
failure to so qualify would have a material adverse effect on its business,
properties, assets, operations or condition (financial or otherwise).

         7.2 AUTHORIZATION AND VALIDITY. Borrower has and each Guarantor has the
corporate power and authority and legal right to execute and deliver the Loan
Documents to which it is a party and to perform its obligations thereunder. Such
execution and delivery have been duly authorized by proper proceedings, and the
Loan Documents constitute the legal, valid and binding obligations of Borrower
and the Guarantors, enforceable against them in accordance with their respective
terms.

         7.3 NO CONFLICT; GOVERNMENTAL CONSENT. The execution, delivery and
performance of the Loan Documents will not violate any law, rule, regulation,
order, writ, judgment, injunction, decree or award binding on Borrower or any
Subsidiaries, any provision of their respective articles or certificate of
incorporation, by-laws or other charter document, or the provisions of any
indenture, instrument or other written or oral agreement to which Borrower or
any Subsidiary is a party or is subject or by which Borrower or any Subsidiary
or any of their property is bound, or conflict therewith or constitute a default
thereunder, or result in the creation or imposition of any Lien in, of or on any
of their property pursuant to the terms of any such indenture, instrument or
agreement. No order, consent, approval, license, authorization or validation of,
or filing, recording or registration with, or exemption by, any Governmental
Authority is required to authorize or is required in connection with the
execution, delivery and performance of or the enforceability of any of the Loan
Documents.

         7.4      COMPLIANCE WITH LAWS; ENVIRONMENTAL AND SAFETY MATTERS.

                  (a) Borrower has and each Subsidiary has complied with all
applicable statutes, rules, regulations, orders and restrictions of any domestic
or foreign government or Governmental Authority having jurisdiction over the
conduct of its businesses or the ownership of its respective properties except
to the extent that such non-compliance will not have a material adverse effect
on the financial condition or business operations of Borrower, on a consolidated
or unconsolidated basis, or of either Guarantor.

                  (b) Borrower and the Subsidiaries have each, except as
disclosed in Schedule 7.4 hereto and to Borrower's and Guarantors' actual
knowledge, complied with all federal, national, state, local and other statutes,
ordinances, orders, judgments, rulings and regulations relating to environmental
pollution, environmental regulation or control, or employee health or safety,
except to the extent that such non-compliance will not have a material adverse
effect on their respective financial conditions or business operations; they
have not received any written notice of any failure so to comply except as
disclosed in Schedule 7.4 hereto; and their facilities do not treat, store or
dispose of any hazardous

                                       13

<PAGE>

wastes, hazardous substances, hazardous materials, toxic substances,
toxic pollutants or substances ("HAZARDOUS MATERIALS") similarly denominated, as
those terms or similar terms are used in RCRA, CERCLA, the Hazardous Materials
Transportation Act, the Toxic Substances Control Act, the Clean Air Act, the
Clean Water Act, the Occupational Safety and Health Act or any other state,
local or federal applicable law, ordinance, rule or regulation relating to
environmental pollution, environmental regulation or control or employee health
and safety ("ENVIRONMENTAL LAWS") in a quantity or manner that requires a
permit, registration, or another notification or authorization from a
Governmental Authority except for the treatment, storage, or disposal of
Hazardous Materials in a quantity or manner which, if in non-compliance with
Environmental Laws, would not have a material adverse effect on their respective
financial conditions or business operations except as disclosed in Schedule 7.4
hereto. The conduct of the business and the condition of the property of
Borrower and each of the Subsidiaries do not violate any Environmental Laws or
any judicial interpretation thereof relating primarily to the environment or
Hazardous Materials. Neither Borrower nor any Subsidiary is aware of any events,
conditions or circumstances involving environmental pollution or contamination
or employee health or safety that could reasonably be expected to result in
material liability on the part of Borrower or any Subsidiary.

         7.5 FINANCIAL STATEMENTS. Borrower has heretofore furnished to the Bank
its (a) consolidated balance sheet and related consolidated statements of
earnings and cash flows as of and for the fiscal year ended September 30, 2000,
and (b) an unaudited consolidated balance sheet and unaudited statements of
earnings and cash flows as of and for quarter ended March 31, 2001. Such
financial statements fairly state the consolidated financial condition and
results of operations of Borrower and the Subsidiaries as of such dates and for
such periods. Neither Borrower nor any of the Subsidiaries had on said date any
material (on a consolidated basis) contingent liabilities, material (on a
consolidated basis) liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments, except as referred to or reflected or provided for in said balance
sheet or the notes thereto as at said date. Such financial statements were
prepared in accordance with GAAP applied on a consistent basis. Since March 31,
2001, no material adverse change has occurred in the business, properties,
financial condition, prospects or results of operations of Borrower (on a
consolidated or unconsolidated basis) or of either Guarantor.

         7.6 OWNERSHIP OF PROPERTIES; COLLATERAL LIENS. Borrower has and each
Subsidiary has good title, free and clear of all Liens (other than those
permitted by Section 10.2 hereof), to all of the properties and assets reflected
in its financial statements as owned by it, and its interest in all other
properties and assets in or to which it has an interest as a lessee, licensee or
otherwise is free and clear of all Liens (other than those permitted under
Section 10.2 hereof).

         7.7 SUBSIDIARIES. Neither Borrower nor any Subsidiary has any
subsidiaries except as disclosed in Schedule 7.7. Except as described in
Schedule 7.7, all of the issued and outstanding shares of capital stock or other
ownership interests of each

                                       14

<PAGE>

Subsidiary, have been duly authorized and issued to Borrower or to a Subsidiary
and are fully paid and non-assessable, free and clear of all liens,
restrictions and rights.

         7.8 LITIGATION. All litigation, arbitration, mediation, governmental
investigations, proceedings or inquiries before any Governmental Authority,
arbitrator or mediator that are pending or, to the knowledge of any of its
officers, threatened against or affecting Borrower or any Subsidiary (other than
those covered by insurance, but only to the extent so covered) are not
reasonably expected to exceed, in the aggregate, $750,000.

         7.9 MATERIAL AGREEMENTS; LABOR MATTERS. Any agreement or instrument of
either Borrower or any Subsidiary that has or is likely to have a material
effect on the assets, prospects, business, operations, financial condition,
liabilities or capitalization of Borrower or Guarantor as a separate company or
of Borrower on a consolidated basis is referred to in this Section 7.9 as a
"MATERIAL CONTRACT." As of the date hereof, all of the Material Contracts are
listed on Schedule 7.9 hereto. Neither Borrower nor any Guarantor is in default
under any Material Contract in any manner that could materially and adversely
affect its assets, prospects, business, operations, financial condition,
liabilities or capitalization of or in any manner that could jeopardize its
right to require the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any Material Contract. There
are no strikes or walkouts relating to any labor contracts with Borrower or any
Subsidiary pending or threatened, and no labor contracts are scheduled to expire
during the term of this Agreement, and no efforts are being made by any
employees to form a union or collectively bargain with Borrower or any
Subsidiary.

         7.10 INVESTMENT COMPANY ACT; PUBLIC UTILITY HOLDING COMPANY ACT.
Neither Borrower nor any Subsidiary is an "investment company" or a company
"controlled" by an "investment company," within the meaning of the Investment
Company Act of 1940, as amended, or a "holding company," a "subsidiary company"
of a "holding company" or an "affiliate" of a "holding company" or of a
"subsidiary company" of a "holding company," within the meaning of the Public
Utility Holding Company Act of 1935, as amended.

         7.11 TAXES. Borrower has and each Subsidiary has filed all United
States federal tax returns and all other tax returns which, to Borrower's or
either Guarantor's actual knowledge, are required to be filed and paid all taxes
due pursuant to said returns or pursuant to any assessment received by it,
including without limitation all federal and state withholding taxes and all
taxes required to be paid pursuant to applicable law, except such taxes, if any,
as are being contested in good faith, by appropriate proceedings and as to which
adequate charges, accruals and reserves have been set aside. No tax Liens have
been filed, and no claims are being asserted with respect to any such taxes,
except such tax Liens and claims that will not have a material adverse effect,
individually or in the aggregate, on the assets, business, operations or
financial condition of Borrower or either Guarantor, on a consolidated or
unconsolidated basis. The charges, accruals and reserves on the books of
Borrower, on a consolidated basis, in respect of any taxes or other governmental
charges are adequate.

                                       15
<PAGE>

         7.12 ACCURACY OF INFORMATION. No information, exhibit or report
furnished by Borrower or any Subsidiary to the Bank in connection with the
negotiation of the Loan Documents contained any material misstatement of fact or
omitted to state a material fact or any fact necessary to make the statements
contained therein not misleading.

         7.13 EMPLOYEE BENEFIT PLANS. Neither Borrower nor any Subsidiary
maintains, sponsors or contributes to any Defined Benefit Pension Plan.

         7.14 NO UNDISCLOSED DIVIDEND RESTRICTIONS. Except for limitations on
the payment of dividends under applicable corporate statutes, neither Borrower
nor any Subsidiary is subject to any agreement, covenant or understanding that
limits or restricts its ability to declare or pay dividends.

         7.15 ABSENCE OF DEFAULT OR EVENT OF DEFAULT. No Default and no Event of
Default has occurred and is continuing.

         7.16 DISCLOSURE. The pro forma financial information contained in
financial statements delivered to the Bank will be based upon good faith
estimates and assumptions believed by Borrower to be reasonable at the time
made. There is no fact known to Borrower (other than matters of a general
economic nature) that has had or could reasonably be expected to have a material
adverse effect and that has not been disclosed herein or in such other
documents, certificates and statements furnished to the Bank for use in
connection with the transactions contemplated by this Agreement.

         7.17 SOLVENCY. Based upon its financial and accounting records,
Borrower has and each Subsidiary has assets of a value that exceeds the amount
of its liabilities (excluding, for purposes of this representation, all
intercompany loans from liabilities). Borrower reasonably anticipates that it
and each of its Subsidiaries will be able to meet their respective debts as they
mature. Borrower and each Subsidiary have adequate capital to conduct the
business in which it is engaged.

         7.18 MARGIN REGULATIONS. Neither the making of the Loans hereunder, nor
the use of the proceeds thereof, will violate or be inconsistent with the
provisions of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System. No part of the proceeds of any Loan will be used, whether
directly or indirectly, and whether immediately, incidentally or ultimately, to
purchase or to extend credit to others for the purpose of purchasing or carrying
Margin Stock (as defined in said Regulation U).

         7.19 COPYRIGHTS, PATENTS AND OTHER RIGHTS. Borrower possesses and each
Subsidiary possesses all licenses, patents, patent rights and patent licenses,
trademarks, trademark rights and licenses, trade names, copyrights and all other
intellectual property rights which are required or desirable to conduct its
business as presently conducted; to the best of its knowledge, such rights do
not infringe on or conflict with the rights of any other Person; and Borrower
has and each Subsidiary has, and is current and in good

                                       16

<PAGE>

standing with respect to, all governmental approvals, permits and certificates
required to conduct its businesses as heretofore conducted.

         7.20 YEAR 2000 COMPLIANCE. Borrower has (a) initiated a review and
assessment of all areas within its and each of its Subsidiaries' business and
operations (including those affected by material suppliers and vendors) that
could be adversely affected by the risk that computer applications used by
Borrower or any Subsidiary or any of such suppliers and vendors may be unable to
recognize and properly perform date-sensitive functions involving certain dates
prior to and any date after December 31, 1999 (the "YEAR 2000 PROBLEM"), (b)
developed a plan and time line for addressing the Year 2000 Problem on a timely
basis, and (c) implemented that plan in accordance with that timetable. Borrower
reasonably believes that all computer applications (including those of its
suppliers and vendors) that are material to its or any of its Subsidiaries'
business and operations will on a timely basis be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000 (that
is, be "YEAR 2000 COMPLIANT"), except to the extent that a failure to do so
could not reasonably be expected to have material adverse effect on the
financial condition or operations of Borrower, on a consolidated or
unconsolidated basis, or of either Guarantor.

                                    ARTICLE 8
                              AFFIRMATIVE COVENANTS

         Unless the Bank shall otherwise consent in writing, Borrower agrees
that it will, and will cause each of the Subsidiaries to, and each Guarantor
agrees that it will:

         8.1 CONDUCT OF BUSINESS AND MAINTENANCE OF PROPERTIES. Carry on and
conduct its business in substantially the same manner and in substantially the
same fields of enterprise as it is presently conducted and do all things
necessary to remain duly incorporated, validly existing and in good standing in
its jurisdiction of organization and maintain all requisite authority to conduct
its business in each jurisdiction in which its business is conducted; maintain,
preserve, protect and keep its properties in good repair, working order and
condition; and comply in all material respects with all agreements and
instruments to which it is a party.

         8.2 INSURANCE. Maintain with financially sound and reputable insurance
companies insurance on all its property, covering such liabilities and such
risks (including business interruption risks) and in such amounts as is
consistent with sound business practice and reasonably satisfactory to the Bank
and furnish to the Bank upon request full information as to the insurance
carried.

         8.3 COMPLIANCE WITH LAWS AND TAXES. Comply with any and all laws,
statutes, rules, regulations orders, judgments, decrees and awards, a violation
of which, in any respect, may materially and adversely affect its business,
assets, operations or condition, financial or otherwise, including, without
limitation, those regarding the collection, payment and deposit of employees'
income, unemployment, and Social

                                       17

<PAGE>

Security taxes and those regarding environmental matters; pay when due all
taxes, assessments and governmental charges and levies upon it or its income,
profits or property, except those which are being contested in good faith by
appropriate proceedings and with respect to which adequate reserves have been
set aside; make a timely payment or deposit of all FICA payments and withholding
taxes required of it under applicable law; and, upon request, furnish to the
Bank evidence satisfactory to the Bank that such payments have been made.

         8.4 FINANCIAL STATEMENTS, REPORTS, ETC.  Maintain a system of
accounting established and administered in accordance with GAAP and furnish to
the Bank:

                  (A) ANNUAL AND CONSOLIDATING FINANCIAL STATEMENTS. Within 120
days after the close of its fiscal year, audited financial statements, prepared
in accordance with GAAP, including a balance sheet and statements of
stockholders' equity, income and cash flows, prepared on a consolidated basis
and setting forth in comparative form the corresponding figures for the
preceding fiscal year, all in reasonable detail, accompanied by an unqualified
opinion thereon or an unqualified opinion with explanatory language added to the
auditors' standard report of independent certified public accountants
satisfactory to the Bank, which opinion shall state that the financial
statements fairly present the financial condition and results of operations and
cash flows of Borrower and its consolidated Subsidiaries as of the end of and
for such fiscal year in conformity with GAAP, and a certificate of such
accountants stating that, in making the examination necessary for their opinion,
they obtained no knowledge, except as specifically stated, of any Default or
Event of Default continuing as of the date of such certificate; such financial
statements shall also include an unaudited balance sheet and income statement on
a consolidating basis.

                  (B) QUARTERLY REPORTING. Within 45 days after the end of each
of the first three fiscal quarters and within 120 days after the end of the last
fiscal quarter, (i) financial statements for Borrower and its Subsidiaries for
the quarter or fiscal year, as applicable, then ended, including a balance sheet
and statements of stockholders' equity, income and cash flows for such quarter
and for the period from the beginning of the respective fiscal year to the end
of such quarter, prepared on a consolidated basis and, with respect to each
balance sheet and income statement, a consolidating basis, and setting forth in
each case in comparative form the corresponding figures for the corresponding
period in the preceding fiscal year, accompanied by (ii) a certificate of the
chief financial officer or treasurer of Borrower stating that said financial
statements fairly present the financial condition and results of operations of
Borrower and its consolidated Subsidiaries in accordance with, as to the
financial statements referred to in clause (i) above, GAAP consistently applied,
as of the end of and for such period (subject to normal year-end adjustments and
to the absence of footnote disclosures) and that, to the best of such officer's
knowledge, no Default or Event of Default has occurred under this Agreement or,
if any Default or Event of Default exists, stating the nature and status
thereof.

                                       18
<PAGE>

                  (C) COMPLIANCE CERTIFICATE. Together with each set of
financial statements required under paragraphs (a) and (b) of this Section 8.4,
a compliance certificate of Borrower in substantially the form of Exhibit 8.4 (a
"COMPLIANCE CERTIFICATE"), signed on its behalf by the chief financial officer
or treasurer of Borrower, showing the calculations necessary to determine
compliance with all financial covenants contained in Article 9 of this Agreement
and stating that all of the representations and warranties set forth in Article
7 hereof (including those referring to the Schedules to the Agreement) with
respect to Borrower and the Subsidiaries, including Subsidiaries that are
Acquired Companies, shall be true and correct as though made on and as of the
date of the Compliance Certificate, except for matters specifically updated or
described in the Compliance Certificate, and (ii) that no Default or Event of
Default exists or, if any Default or Event of Default exists, stating the nature
and status thereof.

                  (D) SEC AND OTHER FILINGS. Promptly upon their becoming
publicly available, copies of all registration statements and annual, periodic
or other regular reports, final proxy statements and such other similar
information as shall be filed by either Borrower or any Subsidiary with the
Securities and Exchange Commission (the "SEC"), any national securities exchange
or (to the extent not duplicative) any other similar U.S. or foreign
Governmental Authority and, promptly upon the mailing thereof to the
shareholders of either Borrower generally, copies of all notices, financial
statements, reports and proxy statements so mailed.

                  (E) LITIGATION. Prompt notice of all legal, arbitration or
mediation proceedings and of all proceedings by or before any Governmental
Authority affecting Borrower or any Subsidiary which, if adversely determined,
might result in a monetary loss in an amount in excess of $750,000 individually
or in excess of $750,000 in the aggregate for all such proceedings and of the
issuance by any Governmental Authority of any injunction, order or other
restraint prohibiting, or having the effect of prohibiting or delaying, any
action on the part of Borrower or any Subsidiary, which injunction, order or
restraint might materially and adversely affect the business, properties or
affairs of Borrower or of either Guarantor (on a consolidated or unconsolidated
basis) or the institution of any proceedings seeking any such injunction, order
or other restraint.

                  (F) MANAGEMENT LETTERS. Promptly upon receipt by Borrower, a
copy of any management letter sent by Borrower's independent certified public
accountants, and promptly upon completion of any response report, a copy of such
response report.

                  (G) REPORTABLE EVENTS. If at any time after the date hereof,
Borrower or any Subsidiary adopts, sponsors or contributes to any Defined
Benefit Pension Plan, as soon as possible and in any event within ten (10) days
after Borrower or any Subsidiary knows that any Reportable Event has occurred
with respect to any such Defined Benefit Pension Plan, a statement, signed by an
authorized officer of Borrower, describing said Reportable Event and the action
which such Borrower or such Subsidiary proposes to take with respect thereto.

                                       19
<PAGE>

                  (H) ENVIRONMENTAL NOTICES. As soon as possible and in any
event within 10 days after receipt, a copy of (i) any notice or claim to the
effect that Borrower or any Subsidiary is or may be liable to any person as a
result of the release by such Borrower, such Subsidiary or any other person of
any toxic or hazardous waste or substance into the environment or that all or
any of its properties is subject to an Environmental Lien and (ii) any notice
alleging any violation of any federal, state or local environmental, health or
safety law or regulation by Borrower or any Subsidiary received after the date
hereof.

                  (I) OTHER INFORMATION. Such other information (including
consolidating financial reports and other financial information) as the Bank
may from time to time reasonably request.

         On request of the Bank, Borrower shall deliver a letter to Borrower's
accountants (i) authorizing them to comply with the provisions of this
paragraph, (ii) directing them to send to the Bank true, correct, and exact
copies of any and all financial statements and reports which are prepared as a
result of any audit or other review of operations, finances or internal controls
of Borrower or any Subsidiary (specifically including any reports dealing with
improper accounting or financial practices, defalcation, financial
irregularities, financial reporting errors or misstatements or fraud), and (iii)
authorizing the Bank to rely on financial statements of Borrower issued by such
accountants, which letter shall be acknowledged and consented to in writing by
such accountants.

         8.5 OTHER NOTICES. Give prompt notice in writing to the Bank of the
occurrence of any Default or Event of Default and of any other development,
financial or otherwise, which might materially and adversely affect its
business, properties or affairs of Borrower or any Subsidiaries or the ability
of Borrower or any Guarantor to repay the Obligations.

         8.6 ACCESS TO PROPERTIES AND INSPECTIONS. Permit the Bank to make
reasonable inspections of the properties, corporate books and financial records
of Borrower and each Subsidiary, to make reasonable examinations and copies of
their respective books of account and other financial records and to discuss
their respective affairs, finances and accounts with, and to be advised as to
the same by, their officers, auditors, accountants and attorneys at such
reasonable times and intervals as the Bank may designate. All of the Bank's
reasonable expenses incurred for travel in connection with such audits and
inspections shall be paid for by Borrower.

         8.7 USE OF PROCEEDS. Use the proceeds of the Revolving Loans to pay
indebtedness to the Bank existing on the date of this Agreement, to provide
working capital, to make Acquisitions in an amount up to an aggregate $3,000,000
over the term of this Agreement and for other corporate purposes.

         8.8 YEAR 2000 COMPLIANCE. Promptly notify the Bank in the event that it
discovers or determines that any computer application (including those of any of
its suppliers or vendors that could affect the business or operations of
Borrower or any of its

                                       20

<PAGE>

Subsidiaries) will not be Year 2000 Compliant (as defined in Section 7.20
above) on a timely basis, except to the extent that such failure
could not reasonably be expected to have a material adverse effect on the
financial condition or operations of Borrower or any Subsidiary.

         8.9 PAYMENT OF CLAIMS. Promptly pay when due all lawful claims,
whether for labor, materials or otherwise.

                                    ARTICLE 9
                               FINANCIAL COVENANTS

         Borrower will, so long as this Agreement shall remain in effect or any
Obligations shall be unpaid:

         9.1 MINIMUM CONSOLIDATED TANGIBLE NET WORTH. Maintain as of the end of
each fiscal quarter a Consolidated Tangible Net Worth of at least $40,000,000 up
to December 31, 2001; of at least $44,000,000 on December 31, 2001 and
thereafter up to December 31, 2002; and of at least $47,000,000 on December 31,
2002 and thereafter. "CONSOLIDATED TANGIBLE NET WORTH" means, at any date, (i)
the aggregate book value of all assets (after deducting all applicable reserves
and excluding any reappraisal or write-up of assets) which, under GAAP, would
appear as assets on the consolidated balance sheet of Borrower and its
consolidated Subsidiaries, but excluding all patents, franchises and operating
rights, research and development expenditures, treasury stock, goodwill, all
other intangibles, and the net amount owed to Borrower or any of its
Subsidiaries by any Affiliates, employees or shareholders and minus (ii) the
aggregate amount of liabilities of Borrower and its consolidated Subsidiaries,
all on a consolidated basis as determined in accordance with GAAP.

         9.2 CONSOLIDATED FUNDED DEBT/EBITDA RATIO. Maintain as of the last day
of each fiscal quarter a Consolidated Funded Debt/EBITDA Ratio no greater than
3.25 to 1.00, determined in accordance with GAAP. "CONSOLIDATED FUNDED
DEBT/EBITDA RATIO" means the ratio of (i) the aggregate outstanding principal
amount of Funded Debt of Borrower and its consolidated Subsidiaries as of the
last day of each fiscal quarter to (ii) EBITDA of Borrower and its consolidated
Subsidiaries for the four quarters ending on such date. "FUNDED DEBT" means,
without duplication, all long term and current Indebtedness as described in
subsections (i) and (iii) of the definition of "Indebtedness" in Exhibit 1
hereto (including any such Indebtedness to non-consolidated Subsidiaries,
shareholders and other Affiliates but excluding any documentary letters of
credit). "EBITDA" means, for any period, the earnings before interest, taxes,
depreciation and amortization for such period; non-recurring charges must be
reported on a quarter-by-quarter basis, and no non-recurring expenses or charges
of any type may be added to EBITDA for any four-quarter period.

         9.3 CONSOLIDATED FIXED CHARGE COVERAGE RATIO. Maintain as of the last
day of each fiscal quarter a Fixed Charge Coverage Ratio of at least 1.50 to
1.00, determined on a consolidated basis in accordance with GAAP. "FIXED CHARGE
COVERAGE RATIO"

                                       21

<PAGE>

means, as of the last day of any fiscal quarter, the ratio of (i) EBITDA for the
four fiscal quarters ending on such day, to (ii) the sum of interest expense,
tax expense, scheduled principal payments and dividends paid during such four
fiscal quarters.

         9.4 MINIMUM CONSOLIDATED EBITDA. Maintain as of September 30, 2001, and
as of the last day of each fiscal quarter thereafter, on a rolling four-quarter
basis, a Consolidated EBITDA of at least $10,000,000. "CONSOLIDATED EBITDA"
means EBITDA of Borrower and its consolidated Subsidiaries for each such period,
determined on a consolidated basis in accordance with GAAP.

         9.5 CONSOLIDATED CURRENT RATIO. Maintain as of the last day of each
fiscal quarter a Consolidated Current Ratio of at least 2.00 to 1.00.
"CONSOLIDATED CURRENT RATIO" means the ratio of Borrower's current assets to
current liabilities, determined on a consolidated basis in accordance with GAAP,
excluding, however, any current Indebtedness under the Revolving Note unless an
Event of Default (or event which, with the giving of notice or the passage of
time, will become an Event of Default) exists.

         9.6 FUNDED DEBT TO TANGIBLE CAPITAL RATIO. Maintain as of the last day
of each fiscal quarter a Funded Debt to Tangible Capital Ratio of no more than
50%. "FUNDED DEBT TO TANGIBLE CAPITAL RATIO" means the ratio of (i) the
aggregate outstanding principal amount of Funded Debt of Borrower and its
consolidated Subsidiaries as of the last day of each fiscal quarter, to (ii)
such amount plus Borrower's Consolidated Tangible Net Worth as of such date,
determined on a consolidated basis in accordance with GAAP.

                                   ARTICLE 10
                               NEGATIVE COVENANTS

         So long as this Agreement shall remain in effect or any of the
Obligations shall be unpaid, unless the Bank shall otherwise consent in writing,
each Borrower agrees that it will and will cause each of its Subsidiaries to,
and each Guarantor agrees that it will:

         10.1 INDEBTEDNESS. Not incur, create or suffer to exist any
Indebtedness (other than to the Bank), except (a) trade payables incurred in the
ordinary course of business; (b) Indebtedness existing on the date of this
Agreement and disclosed in Schedule 10.1 hereto; and (c) in addition to the
Indebtedness described in Sections 10.1(a) and (b), Indebtedness on a
consolidated basis not exceeding, at any time outstanding, an aggregate
principal amount of $100,000.

         10.2 LIENS. Not create, incur, or suffer to exist any other Lien in, of
or on any of their respective properties (now owned or hereafter acquired) or on
any income or revenues or rights in respect of any thereof, except:

                  (a) Liens in favor of the Bank;

                                       22

<PAGE>

                  (b) Liens for taxes, assessments or governmental charges or
levies, if the same shall not at the time be delinquent or thereafter can be
paid without penalty, or are being contested in good faith and by appropriate
proceedings;

                  (c) Liens imposed by law, such as carriers', warehousemen's
and mechanics' liens and other similar Liens arising in the ordinary course of
business, that secure payment of obligations not more than 60 days past due
except for such Liens as are being contested in good faith by appropriate
proceedings;

                  (d) Liens arising out of pledges or deposits under laws
relating to worker's compensation, unemployment insurance, old age pensions, or
other social security or retirement benefits, or under similar laws;

                  (e) Liens existing on the date of this Agreement and
disclosed in Schedule 10.2 hereto;

                  (f) Liens securing Indebtedness permitted in Section 10.1(c)
above; and

                  (g) Options to purchase stock of Borrower under stock-based
compensation plans or arrangements in favor of employees of Borrower or of any
Subsidiary and non-employee directors of Borrower.

         10.3 SALE AND LEASE-BACK TRANSACTIONS. Not enter into any arrangement,
directly or indirectly, with any person whereby it shall sell or transfer any
property, real or personal, used or useful in its business, whether now owned or
hereafter acquired, and thereafter rent or lease such property or other property
which it intends to use for substantially the same purpose or purposes as the
property being sold or transferred, provided that Borrower or any Subsidiary may
enter into any sale and lease-back transaction if (a) at the time of such
transaction no Default or Event of Default shall have occurred and be
continuing, (b) the proceeds from the sale of the subject property shall be at
least equal to its fair market value and (c) the subject property shall have
been acquired by such Borrower or such Subsidiary after the date of this
Agreement and held by it for not more than one year.

         10.4 MERGERS, TRANSFERS OF ASSETS, ACQUISITIONS. Not merge into or
consolidate with any other person, or permit any other person to merge into or
consolidate with it; sell, transfer, lease or otherwise dispose of (in one
transaction or in a series of transactions) any assets or any capital stock of
any Subsidiary or be a party to any Acquisition of another Person or of all of
substantially all another Person's assets, other than:

                  (a) sales of inventory in the ordinary course of business;

                                       23
<PAGE>

                  (b) the disposition of obsolete or worn-out fixed assets or
other property no longer required by or useful to it in connection with the
operation of its business;

                  (c) sales, assignments, transfers or other dispositions of
assets (other than stock of Subsidiaries) for cash consideration, but only so
long as the aggregate fair market value of the assets so disposed of does not
exceed $10,000,000 in the aggregate during the term of this Agreement;

                  (d) any Acquisition by Borrower, so long as not less than 15
days prior to the consummation of any Acquisition, Borrower shall provide to the
Bank, if the Bank so requests, the following information: pro forma financial
statements and projections and a pro forma Compliance Certificate, demonstrating
that Borrower will be, after giving effect to the Acquisition, in compliance
with each of the financial covenants set forth in Article 9 of this Agreement.
For purposes of such pro forma financial statements and pro forma compliance
certificate, to calculate the Borrower's compliance with the financial covenants
set forth in Article 9 hereof, after an acquisition of 100% of the stock or
assets of a company (an "ACQUIRED COMPANY"), the EBITDA of the Acquired Company,
based upon pro forma numbers acceptable to the Bank, from its last four rolling
quarters may be included to the extent that such numbers reflect cash flow from
assets fully transferred to Borrower as a result of the acquisition of the
Acquired Company, with adjustments for any transactions not in the ordinary
course of business. If Borrower acquires less than 100% of the stock or assets
of an Acquired Company, the Bank shall make a good faith determination of what
portion of such Acquired Company's EBITDA to include in the proforma financial
statements;

                  (e) any merger or consolidation of Borrower and any
Subsidiary, provided that Borrower is the surviving corporation thereof, or of
any Subsidiary with another Subsidiary or any sale or other transfer of assets
by a Subsidiary to Borrower.

         10.5 TRANSACTIONS WITH AFFILIATES. Not sell or transfer any property or
assets to, or purchase or acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates (other than any
Subsidiary as provided in Section 10.4 above), except that Borrower or a
Subsidiary may engage in any of the foregoing transactions in the ordinary
course of business at prices and on terms and conditions not less favorable to
it than could be obtained on an arm's-length basis from unrelated third parties.

         10.6 SUBSIDIARY DIVIDEND RESTRICTIONS. Not permit any Subsidiary to be
bound by or enter into any agreement, amendment, covenant, understanding or
revision to any agreement which prohibits or restricts the ability of any
Subsidiary to declare and pay dividends or make any other distribution to
Borrower.

         10.7 USE OF PROCEEDS. Not use any of the proceeds of the Loans (a) for
any purpose that entails a violation of, or that is inconsistent with, the
provisions of the regulations of the Board of Governors of the Federal Reserve
System, including without

                                       24

<PAGE>

limitation Regulations G, T, U and X or (b) to make any acquisition for which
the board of directors of the target company has not given its consent or
approval.

         10.8 LOANS, ADVANCES AND INVESTMENTS. Not make any loans, advances or
extensions of credit to, or investments (whether acquisitions of stock or
securities or otherwise) in, or acquire any assets of, any Persons, including,
without limitation, any Affiliates of Borrower or any of its partners,
shareholders, officers or employees (collectively, "INVESTMENTS"), other than:

                  (a) expenses advanced in the ordinary course of business.

                  (b) investments in short-term obligations issued or fully
guaranteed by the U.S. Government and funds comprised of such obligations;

                  (c) certificates of deposit and other time deposits with, and
any other Investment purchased through any Bank;

                  (d) commercial paper rated A-1 by Standard & Poor's
Corporation or P-1 by Moody's Investors Service, Inc.;

                  (e) existing Investments listed on Schedule 10.8 hereto;

                  (f) Investments made to acquire Acquisitions permitted under
Section 10.4(d) above;

                  (g) Investments of Borrower in or to any one or more
Subsidiaries in an aggregate amount not in excess of $3,000,000 at any time
outstanding (in addition to those existing at the date of this Agreement and
listed on Schedule 10.8 hereto).

         10.9 NEGATIVE PLEDGE. Not permit or allow any Subsidiary to permit, to
exist any Lien on any of its property, except as permitted under Section 10.2
above; on the request of the Bank, Borrower will and each Guarantor will execute
acknowledgments or other forms of notice of such negative pledge, and the Bank
may record or file the same in the appropriate filing offices.

         10.10 LIQUIDATION OR CHANGE IN BUSINESS. Not liquidate, dissolve,
discontinue business, materially change its general business purpose or the
character of its business, engage in any type of business not reasonably related
to its business as conducted on the date hereof or take any action with a view
towards the same.

                                   ARTICLE 11
                                EVENTS OF DEFAULT

         11.1 EVENTS OF DEFAULT. Each of the following events shall constitute
an Event of Default under this Agreement:

                                       25
<PAGE>

                  (A) MISREPRESENTATION. Any representation or warranty made or
deemed made by or on behalf of Borrower or any Subsidiary to the Bank under or
in connection with this Agreement, any Loan, or any certificate or information
delivered in connection with this Agreement or any other Loan Document shall be
materially false on the date as of which made;

                  (B) NONPAYMENT. Borrower shall fail to pay any principal of
the Note, any interest upon the Note, any reimbursement obligation respecting
any Letter of Credit or any Fee or other Obligations within five (5) days after
the same becomes due;

                  (C) NON-PERFORMANCE OF OTHER COVENANTS. Borrower shall fail to
perform or comply with any of the terms or provisions of Article 8 of this
Agreement and such failure is not cured within fifteen (15) days or Borrower
shall fail to perform or comply with or violates any covenant set forth in
Article 9, Article 10 or any other covenant, term or provision hereof;

                  (D) OTHER INDEBTEDNESS. The failure of Borrower or any
Subsidiary to make any payment of principal or interest within five (5) days
after the same becomes due on any Indebtedness to the Bank or any of the Bank's
affiliates or subsidiaries (other than Indebtedness relating to the Loans) or
with respect to any Indebtedness to Commerce Bank, N.A. or to any other Person
or Persons or any default occurs under any agreement which evidences, secures or
relates to, any such Indebtedness;

                  (E) INSOLVENCY. Borrower or any Subsidiary shall (i) have an
order for relief entered with respect to it under the federal Bankruptcy Code,
(ii) not pay, or admit in writing its inability to pay, its debts generally as
they become due, (iii) make an assignment for the benefit of creditors, (iv)
apply for, seek, consent to, or acquiesce in, the appointment of a receiver,
custodian, trustee, examiner, liquidator or similar official for it or any
substantial part of its property, (v) institute any proceeding seeking an order
for relief under the federal Bankruptcy Code or under any other laws relating to
bankruptcy, insolvency, dissolution, winding up, liquidation or reorganization
or relief of debtors, (vi) take any corporate action to authorize or effect any
of the foregoing actions set forth in this paragraph (e), or (vii) fail to
contest in good faith any appointment or proceeding described in paragraph (f)
of this Section 11.1;

                  (F) APPOINTMENT OF RECEIVERS. Without the application,
approval or consent of Borrower or Subsidiary, a receiver, trustee, examiner,
liquidator or similar official shall be appointed for Borrower or any Subsidiary
or any substantial part of its property, or a proceeding described in clause (v)
of paragraph (e) of this Section 11.1 shall be instituted against either
Borrower or any Subsidiary;

                  (G) JUDGMENT. Borrower or any Subsidiary shall fail within 45
days to pay, bond or otherwise discharge any judgment or order for the payment
of money in excess of $750,000 that is not stayed on appeal or otherwise being
appropriately contested in good faith;

                                       26
<PAGE>

                  (H) ERISA. Any Reportable Event shall occur in connection with
any Defined Benefit Pension Plan adopted or sponsored by Borrower or any
Subsidiary or to which Borrower or any Subsidiary makes contributions, which
occurrence may have a materially adverse effect on such entity's business or
financial condition;

                  (I) MATERIAL ADVERSE CHANGE. Upon the occurrence of any event
or condition which the Bank, in its sole discretion, determines is a material
adverse change in the business or financial condition of Borrower on an
unconsolidated or on a consolidated basis or which materially and adversely
affects its ability to perform its obligations to Bank; or

                  (J) OWNERSHIP OR MANAGEMENT CHANGE. Any transfer of Control of
Borrower or any 50% or more change in the ownership of Borrower shall occur or
the employment of Borrower's chief executive officer and the employment of its
chief operating officer terminate, for any reason, at the same time or during
any one month period.

         11.2 RIGHTS AND REMEDIES. Upon the occurrence of each and every Event
of Default (other than an event with respect to Borrower or any Subsidiary
described in paragraph (e) or (f) of Section 11.1 above), and at any time
thereafter during the continuance of such event, the Bank may, by notice to
Borrower, take either or both of the following actions, at the same or different
times: (i) terminate forthwith the Commitment and (ii) declare the Loans then
outstanding to be forthwith due and payable in whole or in part, whereupon the
principal of the Loans so declared to be due and payable, together with all
accrued interest thereon and all other Obligations shall become forthwith due
and payable, without presentment, demand, protest or any other notice of any
kind, all of which are hereby expressly waived by Borrower, anything contained
herein or in any other Loan Document to the contrary notwithstanding; and in any
event with respect to either Borrower or any Subsidiary described in paragraph
(e) or (f) of Section 11.1 above, the Commitments shall automatically terminate
and the principal of the Loans then outstanding, together with all accrued
interest thereon and all other Obligations shall automatically become due and
payable, without presentment, demand, protest or any other notice of any kind,
all of which are hereby expressly waived by Borrower, anything contained herein
or in any other Loan Document to the contrary notwithstanding.

         Upon the occurrence and during the continuance of any Event of Default,
the Bank may also exercise any or all of its rights and remedies, whether
existing under this Agreement, other Loan Documents, applicable law or
otherwise.

                                       27

<PAGE>

                                   ARTICLE 12
                                  MISCELLANEOUS

         12.1 NOTICES. Notices and other communications provided for herein
shall be in writing and shall be delivered by hand or overnight courier service,
mailed or sent by telecopy or other telegraphic communications equipment of the
sending party, as follows:

                  (a) if to either Borrower or a Subsidiary, to it at 8800 East
63rd Street, Kansas City, Missouri, 64133, Attention: Stanley D. Biggs
(Facsimile: 816-353-1873).

                  (b) if to the Bank, to it at 1200 Main Street, Kansas City,
Missouri 64105-1702, Attention: Tom Mahoney (Facsimile: 816/979-7561) (if by
hand delivery or overnight courier service then the post office box is
eliminated and the zip code is 64105) with a required copy to Steven H. Graham,
Lathrop & Gage L.C., 2345 Grand Boulevard, Kansas City, Missouri 64108
(Facsimile: 816/292-2001);

or to such other address or telecopy number as any party may direct by notice
given as provided in this Section 12.1. All notices and other communications
given to any party hereto in accordance with the provisions of this Agreement
shall be deemed to have been given on the date of receipt if delivered by hand
or overnight courier service or sent by telecopy or other telegraphic
communications equipment of the sender, if received on or before 5:00 p.m.,
local time of the recipient, on a Business Day, or on the next Business Day if
received after 5:00 p.m. on a Business Day or on a day that is not a Business
Day, or on the date five (5) Business Days after dispatch by certified or
registered mail if mailed, in each case delivered, sent or mailed (properly
addressed) to such party as provided in this Section 12.1 or in accordance with
the latest unrevoked direction from such party given in accordance with this
Section 12.1.

         12.2 SURVIVAL OF AGREEMENT. All covenants, agreements, representations
and warranties made by Borrower herein and in the certificates or other
instruments prepared or delivered in connection with or pursuant to this
Agreement or any other Loan Document shall be considered to have been relied
upon by the Bank and shall survive the making by the Bank of the Loans and the
execution and delivery to the Bank of the Notes, regardless of any investigation
made by the Bank or on its behalf, and shall continue in full force and effect
as long as the principal of or any accrued interest on any Loan or any other
Obligations are outstanding.

         12.3 BINDING EFFECT. This Agreement shall become effective when it
shall have been executed by Borrower, Guarantors and the Bank and thereafter
shall be binding upon and inure to the benefit of Borrower, Guarantors, the Bank
and their respective successors and permitted assigns, except that Borrower and
Guarantors shall not have the right to assign or delegate any of their
respective rights or duties hereunder or any interest herein without the prior
consent of the Bank.

                                       28
<PAGE>

         12.4 SUCCESSORS AND ASSIGNS; PARTICIPATIONS. Whenever in this Agreement
any of the parties hereto is referred to, such reference shall be deemed to
include the successors and permitted assigns of such party. The Bank may assign
or delegate to one or more of its Affiliates all or a portion of its interests,
rights and obligations under this Agreement (including all or a portion of the
Loans and the Note). The Bank may sell participations to one or more of its
Affiliates in all or a portion of its rights and obligations under this
Agreement (including all or a portion of the Loans and the Notes). The Bank may,
in connection with any assignment or participation or proposed assignment or
participation pursuant to this Section 12.4, disclose to the assignee or
participant or proposed assignee or participant any information relating to
Borrower and any Subsidiaries furnished to the Bank by or on behalf of Borrower
or any Subsidiaries.

         12.5     EXPENSES; INDEMNITY.

                  (a) Borrower agree to pay all out-of-pocket expenses incurred
by the Bank in connection with the preparation of this Agreement and the other
Loan Documents or in connection with any amendments, modifications or waivers of
the provisions hereof or thereof (whether or not the transactions hereby
contemplated shall be consummated) or incurred by the Bank in connection with
the enforcement or protection of its rights in connection with this Agreement
and the other Loan Documents or in connection with the Loans made or the Note
issued hereunder, including, but not limited to, all appraisal fees (equipment
or otherwise), filing fees and search fees, the fees, charges and disbursements
of Lathrop & Gage L.C., counsel for the Bank, and, in connection with any such
amendment, modification or waiver or any such enforcement or protection, the
fees, charges and disbursements of any other counsel for the Bank. Borrower
further agrees that it shall indemnify the Bank from and hold it harmless
against any documentary taxes, assessments or charges made by any Governmental
Authority by reason of the Loans or this Agreement or any of the other Loan
Documents.

                  (b) Borrower agree to indemnify the Bank and its directors,
officers, employees and agents (each such person being called an "INDEMNITEE")
against, and to hold each Indemnitee harmless from, any and all losses, claims,
damages, liabilities and related expenses, including reasonable counsel fees,
charges and disbursements, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery of this Agreement or any other Loan Document or any agreement or
instrument contemplated thereby, the performance by the parties thereto of their
respective obligations thereunder or the consummation of the transactions
contemplated thereby, (ii) the making of any loans or the use of the proceeds of
the Loans or (iii) any claim, litigation, investigation or proceeding relating
to any of the foregoing, whether or not any Indemnitee is a party thereto;
provided that such indemnity shall not, as to any Indemnitee, be available to
the extent that such losses, claims, damages, liabilities or related expenses
(i) are determined by a court of competent jurisdiction by final and
nonappealable judgment to have resulted from the negligence or wilful misconduct
of such Indemnitee and (ii) have not, in whole or in part, arisen out of or
resulted from any act, or omission to act, of either Borrower or any of their
Affiliates.

                                       29
<PAGE>

                  (c) The provisions of this Section 12.5 shall remain operative
and in full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans, the invalidity or unenforceability of any term or
provision of this Agreement or any other Loan Document or any investigation made
by or on behalf of the Bank. All amounts due under this Section 12.5 shall be
payable on written demand therefor.

         12.6 RIGHT OF SETOFF. If an Event of Default shall have occurred and be
continuing, the Bank is hereby authorized at any time and from time to time, to
the fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Bank to or for the credit or the
account of Borrower or any Guarantor against any and all of the Obligations,
irrespective of whether or not the Bank shall have made any demand under this
Agreement or such other Loan Document and notwithstanding that such Obligations
may be unmatured. The rights of the Bank under this Section 12.6 are in addition
to other rights and remedies (including other rights of setoff) which the Bank
may have.

         12.7 APPLICABLE LAW. This Agreement and the other loan documents shall
be governed by and construed and enforced under and in accordance with the laws
of the State of Missouri applicable to contracts made and to be performed wholly
within said state, without giving effect to choice of law or conflict of law
principles.

         12.8 WAIVERS; AMENDMENT. No failure or delay of the Bank in exercising
any power or right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power preclude any other or
further exercise thereof or the exercise of any other right or power. The rights
and remedies of the Bank hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies which they would
otherwise have. No waiver of any provision of this Agreement or any other Loan
Document or consent to any departure by Borrower or any Guarantor therefrom
shall in any event be effective unless the same shall be contained in a written
instrument signed by the Bank, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on Borrower in any case shall entitle Borrower or any
Subsidiary to any other or further notice or demand in similar or other
circumstances.

         12.9 INTEREST RATE LIMITATION. Notwithstanding anything herein or in
the Note to the contrary, if at any time the applicable interest rate, together
with all fees and charges which are treated as interest under applicable law
(collectively the "CHARGES"), as provided for herein or in any other document
executed in connection herewith, or otherwise contracted for, charged, received,
taken or reserved by the Bank, shall exceed the maximum lawful rate (the
"MAXIMUM RATE") which may be contracted for, charged, taken, received or
reserved by the Bank in accordance with applicable law, the rate of interest
payable under the Note, together with all Charges payable to the Bank, shall be
limited to the Maximum Rate.

                                       30
<PAGE>

         12.10 ENTIRE AGREEMENT. This Agreement and the other Loan Documents
constitute the entire contract between the parties relative to the subject
matter hereof. Any previous agreement among the parties with respect to the
subject matter hereof is superseded by this Agreement and the other Loan
Documents. Nothing in this Agreement or in the other Loan Documents, expressed
or implied, is intended to confer upon any party other than the parties hereto
and thereto any rights, remedies, obligations or liabilities under or by reason
of this Agreement or the other Loan Documents.

         12.11 SEVERABILITY. In the event any one or more of the provisions
contained in this Agreement or in any other Loan Document should be held
invalid, illegal or unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein and therein shall
not in any way be affected or impaired thereby. The parties shall endeavor in
good faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

         12.12 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which when taken together shall constitute but one
contract, and shall become effective as provided in Section 12.3.

         12.13 HEADINGS. Section headings and the Table of Contents used herein
are for convenience of reference only, are not part of this Agreement and are
not to affect the construction of, or to be taken into consideration in
interpreting, this Agreement.

         12.14    JURISDICTION; CONSENT TO SERVICE OF PROCESS.

                  (a) Borrower and each Guarantor hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of any Missouri state court or the federal court for the Western
District of Missouri, any appellate court from any thereof, in any action or
proceeding arising out of or relating to this Agreement or the other Loan
Documents or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such
Missouri state or, to the extent permitted by law, in such federal court. Each
of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Bank may otherwise have to bring any
action or proceeding relating to this Agreement or the other Loan Documents
against Borrower or any Subsidiary or its properties in the courts of any
jurisdiction.

                  (b) Borrower and each Subsidiary hereby irrevocably and
unconditionally waive, to the fullest extent it may legally and effectively do
so, any objection which it may now or hereafter have to the laying of venue of
any suit, action or proceeding arising out of or relating to this agreement or
the other Loan Documents in any Missouri state court or federal court for the
Western District of Missouri. Each of the

                                       31

<PAGE>

parties hereto hereby irrevocably waives, to the fullest extent permitted by
law, the defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

                  (c) Each party to this Agreement irrevocably consents to
service of process in the manner provided for notices in Section 12.1. Nothing
in this Agreement will affect the right of any party to this Agreement to serve
process in any other manner permitted by law.

         12.15 TERMS GENERALLY. The definitions contained in this Agreement and
in Exhibit 1 hereto shall apply equally to both the singular and plural forms of
the terms defined. Whenever the context may require, any pronoun shall include
the corresponding masculine, feminine and neuter forms. The words "INCLUDE,"
"INCLUDES" and "INCLUDING" shall be deemed to be followed by the phrase "WITHOUT
LIMITATION." All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits and
Schedules to, this Agreement unless the context shall otherwise require. Except
as otherwise expressly provided herein, all terms of an accounting or financial
nature shall be construed in accordance with GAAP, as in effect from time to
time, provided, however, that, for purposes of determining compliance with any
covenant set forth in Article 9, such terms shall be construed in accordance
with GAAP as in effect on the date of this Agreement applied on a basis
consistent with the application used in preparing the Borrower' financial
statements referred to in Article 9.

         12.16 ARBITRATION. EXCEPT AS SET OUT BELOW, ANY CONTROVERSY OR CLAIM
BETWEEN OR AMONG THE PARTIES HERETO, INCLUDING BUT NOT LIMITED TO THOSE ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY RELATED DOCUMENTS, INCLUDING ANY
CLAIM BASED ON OR ARISING FROM AN ALLEGED TORT (COLLECTIVELY "CLAIM"), SHALL BE
DETERMINED BY BINDING ARBITRATION IN ACCORDANCE WITH THE FEDERAL ARBITRATION ACT
(OR IF NOT APPLICABLE, THE APPLICABLE STATE LAW), THE RULES OF PRACTICE AND
PROCEDURE FOR THE ARBITRATION OF COMMERCIAL DISPUTES OF J.A.M.S./ENDISPUTE OR
ANY SUCCESSOR THEREOF ("J.A.M.S."), AND THE "SPECIAL RULES" SET FORTH BELOW. IN
THE EVENT OF ANY INCONSISTENCY, THE SPECIAL RULES SHALL CONTROL. JUDGMENT UPON
ANY ARBITRATION AWARD MAY BE ENTERED IN ANY COURT HAVING JURISDICTION. ANY PARTY
TO THIS AGREEMENT MAY BRING AN ACTION, INCLUDING A SUMMARY OR EXPEDITED
PROCEEDING, TO COMPEL ARBITRATION OF ANY CLAIM IN ANY COURT HAVING JURISDICTION
OVER SUCH ACTION. THE INSTITUTION AND MAINTENANCE OF AN ACTION FOR ANY JUDICIAL
RELIEF SHALL NOT CONSTITUTE A WAIVER OF THE RIGHT OF ANY PARTY, INCLUDING THE
PLAINTIFF, TO SUBMIT THE CLAIM TO ARBITRATION IF ANY OTHER PARTY CONTESTS SUCH
ACTION FOR JUDICIAL RELIEF.

                                       32
<PAGE>

(a) SPECIAL RULES. ANY ARBITRATION SHALL BE CONDUCTED IN THE COUNTY OF
BORROWER'S DOMICILE AT THE TIME OF THE EXECUTION OF THIS AGREEMENT, OR IF THERE
IS REAL OR PERSONAL PROPERTY COLLATERAL, IN THE COUNTY WHERE SUCH REAL OR
PERSONAL PROPERTY IS LOCATED, AND ADMINISTERED BY J.A.M.S. WHO WILL APPOINT AN
ARBITRATOR; IF J.A.M.S. IS UNABLE OR LEGALLY PRECLUDED FROM ADMINISTERING THE
ARBITRATION, THEN THE AMERICAN ARBITRATION ASSOCIATION WILL SERVE. ALL
ARBITRATION HEARINGS WILL BE COMMENCED WITHIN 90 DAYS OF THE DEMAND FOR
ARBITRATION; FURTHER, THE ARBITRATION SHALL ONLY, UPON A SHOWING OF CAUSE, BE
PERMITTED TO EXTEND THE COMMENCEMENT OF SUCH HEARING FOR UP TO AN ADDITIONAL 60
DAYS. ANY DISPUTE CONCERNING THIS ARBITRATION PROVISION OR WHETHER A CLAIM IS
ARBITRABLE SHALL BE DETERMINED BY THE ARBITRATOR. THE ARBITRATOR SHALL HAVE THE
POWER TO AWARD LEGAL FEES PURSUANT TO THE TERMS OF THIS AGREEMENT.

(b) RESERVATION OF RIGHTS. NOTHING IN THIS ARBITRATION PROVISION SHALL BE DEEMED
TO (I) LIMIT THE APPLICABILITY OF ANY OTHERWISE APPLICABLE STATUTES OF
LIMITATION OR REPOSE AND ANY WAIVERS CONTAINED IN THIS AGREEMENT; OR (II)) BE A
WAIVER BY BANK OF THE PROTECTION AFFORDED TO IT BY 12 U.S.C. SEC. 91 OR ANY
SUBSTANTIALLY EQUIVALENT STATE LAW; OR (III) LIMIT THE RIGHT OF ANY PARTY HERETO
(A) TO EXERCISE SELF HELP REMEDIES SUCH AS (BUT NOT LIMITED TO) SETOFF, OR (B)
TO FORECLOSE AGAINST OR SELL ANY REAL OR PERSONAL PROPERTY OR COLLATERAL, OR (C)
TO OBTAIN FROM A COURT PROVISIONAL OR ANCILLARY REMEDIES SUCH AS (BUT NOT
LIMITED TO) INJUNCTIVE RELIEF, WRIT OF POSSESSION OR THE APPOINTMENT OF A
RECEIVER, ANY PARTY MAY EXERCISE SUCH SELF HELP RIGHTS, FORECLOSE OR SELL
COLLATERAL OR OBTAIN SUCH PROVISIONAL OR ANCILLARY REMEDIES BEFORE, DURING OR
AFTER THE PENDENCY OF ANY ARBITRATION PROCEEDING BROUGHT PURSUANT TO THIS
AGREEMENT. NONE OF THESE ACTIONS SHALL CONSTITUTE A WAIVER OF THE RIGHT OF ANY
PARTY, INCLUDING THE CLAIMANT IN ANY SUCH ACTION, TO ARBITRATE THE MERITS OF THE
CLAIM OCCASIONING RESORT TO SUCH REMEDIES OR PROCEDURES.

(C) WAIVER OF CERTAIN DAMAGES. THE PARTIES HERETO WAIVE ANY RIGHT OR REMEDY
EITHER MAY HAVE AGAINST THE OTHER TO RECOVER PUNITIVE OR EXEMPLARY DAMAGES
ARISING OUT OF ANY CLAIM WHETHER THE CLAIM IS RESOLVED BY ARBITRATION OR BY
JUDICIAL ACTION.

                  ORAL AGREEMENTS OR COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR
         TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT INCLUDING PROMISES

                                       33
<PAGE>

         TO EXTEND OR RENEW SUCH DEBT ARE NOT ENFORCEABLE. TO PROTECT YOU
         (BORROWERS) AND US (CREDITOR) FROM MISUNDERSTANDING OR DISAPPOINTMENT,
         ANY AGREEMENTS WE REACH COVERING SUCH MATTERS ARE CONTAINED IN THIS
         WRITING, WHICH IS THE COMPLETE AND EXCLUSIVE STATEMENT OF THE AGREEMENT
         BETWEEN US, EXCEPT AS WE MAY LATER AGREE IN WRITING TO MODIFY IT.

                  THIS DOCUMENT, TOGETHER WITH OTHER WRITTEN AGREEMENTS BETWEEN
        BORROWERS AND BANK OF AMERICA, N.A., IS THE FINAL EXPRESSION OF THE
        CREDIT AGREEMENT BETWEEN SUCH PARTIES. THIS DOCUMENT MAY NOT BE
        CONTRADICTED BY EVIDENCE OF PRIOR OR CONTEMPORANEOUS ORAL CREDIT
        AGREEMENTS OR PRIOR WRITTEN CREDIT AGREEMENTS BETWEEN SUCH PARTIES
        RELATING TO THE SUBJECT MATTER HEREOF. ANY ADDITIONAL TERMS OF THE
        CREDIT AGREEMENT BETWEEN SUCH PARTIES ARE SET FORTH BELOW.

         THERE ARE NO SUCH ORAL AGREEMENTS BETWEEN SUCH PARTIES.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the 7th day
of May, 2001, by their duly authorized officers, effective for all purposes as
of such date.

<TABLE>
<CAPTION>
<S>                                                  <C>
[SEAL]                                               BHA GROUP HOLDINGS, INC.

ATTEST:
                                                     By: ___________________________________
By: ________________________________________                        James C. Shay, Senior
         Stanley D. Biggs, Secretary                                Vice President - Finance
                                                                    and Administration

[SEAL]                                               BHA GROUP, INC.

ATTEST:

By:_________________________________________         By: _____________________________________
         Stanley D. Biggs, Assistant                                 James C. Shay, Senior
         Secretary                                                   Vice President - Finance
                                                                     and Administration and
                                                                     Chief Financial Officer
</TABLE>

                                       34
<PAGE>

<TABLE>
<CAPTION>
<S>                                                  <C>
[SEAL]                                               BHA TECHNOLOGIES, INC.

ATTEST:

By:___________________________________________       By: ______________________________________
         Christopher Dierks, Secretary                                 James E. Lund, President

                                                     BANK OF AMERICA, N.A., a national banking
                                                     association

                                                      By: _______________________________________
                                                                       Thomas R. Mahoney, Senior
                                                                       Vice President
</TABLE>

                                       35
<PAGE>

              CONFIRMATION OF GUARANTY AGREEMENT BY EACH GUARANTOR

         Each of the undersigned Guarantors hereby confirms all terms and
provisions of its Guaranty Agreement dated as of September 30, 1999 in favor of
the Bank and agrees that all references to the Credit Agreement therein shall be
references to the foregoing Amended and Restated Credit Agreement; that all
references to the Revolving Note therein shall be references to the Revolving
Note described above; and that all provisions thereof are ratified and in full
force and effect with respect to the foregoing Amended and Restated Credit
Agreement and such Revolving Note.

Date:  As of May 7, 2001          BHA GROUP, INC.

                                  By: ______________________________________
                                           James C. Shay, Senior Vice
                                           President - Finance and
                                           Administration and Chief
                                           Financial Officer

Date:  As of May 7, 2001          BHA TECHNOLOGIES, INC.

                                  By: _______________________________________
                                           James E. Lund, President

                                       36
<PAGE>

                                                                    EXHIBIT 1

                                   DEFINITIONS

         For purposes of the Credit Agreement, the following terms shall have
the meanings specified below:

         "Acquired Company" is defined in Section 10.4(d) of the Agreement.

         "Acquisition" shall mean any transaction, or any series of related
transactions, consummated after the date of this Agreement, by which Borrower or
any Subsidiary (in one transaction or as the most recent transaction in a series
of transactions) (i) acquires any going business or all or substantially all of
the assets of any Person (including, in the case of a corporation, any division
thereof), whether through purchase of assets, merger or otherwise, (ii) directly
or indirectly acquires control of at least a majority (in number of votes) of
the securities of a corporation which have voting power for the election of
directors, or (iii) directly or indirectly acquires control of a majority
ownership interest in any partnership or joint venture.

         "Additional LIBOR and EURIBOR Rate Loan Costs" shall mean any costs or
expenses resulting from any Regulatory Change (i) which imposes, modifies or
deems applicable any reserve, special deposit, minimum capital, capital ratio or
similar requirements relating to any extensions of credit or other assets of, or
any deposits with or other liabilities of, the Bank or any Commitment of the
Bank and (ii) which is attributable to the Bank's making or maintaining any
LIBOR Rate Loans or EURIBOR Rate Loans or its obligation to make any LIBOR Rate
Loans or EURIBOR Rate Loans hereunder.

         "Affiliate" shall mean, when used with respect to a specified person,
another person that directly, or indirectly through one or more intermediaries,
Controls or is Controlled by or is under common Control with the person
specified and in any case shall include, when used with respect to either
Borrower or any Subsidiary, any joint venture in which such Borrower or such
Subsidiary holds an equity interest.

         "Agreement" or "Credit Agreement" shall mean this Agreement, together
with all exhibits and schedules hereto, as it may be amended from time to time.

         "Alternative Currency" means Euro and each other currency (other than
Dollars) that is freely available, freely transferrable or convertible into
Dollars and approved by the Bank.

         "Alternative Currency Loan" means any Loan denominated in an
Alternative Currency. Each Alternative Currency Loan must be an EURIBOR Rate
Loan.

         "Alternative Currency Equivalent" means, with respect to any amount
denominated in Dollars on any date of determination, the amount of an
Alternative

<PAGE>

Currency that could be purchased with such amount of Dollars using the
reciprocal of the foreign exchange rate(s) specified in the definition of
"Dollar Equivalent," as determined by the Bank.

         "Alternative Currency Sublimit" means $3,000,000.

         "Applicable Margin" is defined in Section 4.3 of the Agreement.

         "Assets" shall mean all assets which, under GAAP, would appear as
assets on the balance sheet of Borrower.

         "Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of Missouri) on which banks in
the State of Missouri are open for business.

         "Calculation Date" means (a) with respect to each Loan denominated in
an Alternative Currency, the date falling two Business Days (or such other
period as is customary in the relevant foreign exchange market for delivery on
the date of the relevant Loan) prior to the date of such Loan or the date of
continuation of such Loan pursuant to Section 2.02, (b) each date a draw on a
Letter of Credit denominated in an Alternative Currency that is charged against
the Revolving Loan as a Loan denominated in Dollars, (c) each date fees relating
to Letters of Credit, denominated in an Alternative Currency, are due, (d) each
date that is a Due Date under Section 4.6 of the Credit Agreement with respect
to a Loan that is denominated in an Alternative Currency, or (e) such additional
dates as the Bank may determine are necessary or appropriate shall specify.

         "Capital Expenditures" shall mean, without duplication, (i)
expenditures (whether paid in cash or accrued as a liability) for fixed assets,
tooling, plant and equipment (including without limitation the incurrence of
Capital Lease Obligations), and (ii) any other expenditures that would be
classified as capital expenditures under GAAP. Capital Expenditures shall not
include the amount of consideration paid or any monetary obligation incurred in
respect of the purchase price for any Acquisition.

         "Capital Lease Obligations" shall mean, as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP; and, for purposes of this
Agreement, the amount of such obligations shall be the capitalized amount
thereof, determined in accordance with GAAP.

         "CERCLA" shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
and Reauthorization Act of 1986.

         "Charges" is defined in Section 12.9 of the Agreement.

                                       2
<PAGE>

         "Code" shall mean the Internal Revenue Code of 1986, as the same may be
amended from time to time.

         "Commitment" shall mean the Revolving Credit Commitment.

         "Compliance Certificate" is defined in Section 8.4(c) of the Agreement.

         "Consolidated EBITDA," "Consolidated Current Ratio," "Consolidated
Fixed Charge Coverage," "Consolidated Funded Debt/EBITDA Ratio" and
"Consolidated Tangible Net Worth" are defined in Article 9 of the Agreement.

         "Control" shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of a
person, whether through the ownership of voting securities, by contract or
otherwise, and "Controlling" and "Controlled" shall have meanings correlative
thereto.

         "Controlled Group" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control which, together with either Borrower or any Subsidiary, are
treated as a single employer under Section 414(b) or 414(c) of the Code.

         "Default" shall mean any event or condition which upon notice, lapse of
time or both would constitute an Event of Default.

         "Default Rate" shall mean the Prime Rate plus 2% per annum.

         "Defined Benefit Pension Plan" shall mean any employee pension benefit
plan that is covered by Title IV of ERISA or subject to the minimum funding
standards under Section 412 of the Code as to which Borrower or any Subsidiary
may have any liability.

         "Disbursement Date" is defined in Section 4.2 of the Agreement.

         "Dollars" or "$" shall mean lawful money of the United States of
America.

         "Dollars Equivalent" means, as of any date of determination (a) with
respect to any amount denominated in Dollars, such amount, and (b) with respect
to any amount denominated in any currency other than Dollars, the amount of
Dollars that would be required to purchase the amount of the relevant
Alternative currency based on the spot rate for the purchase by Bank of America
of such Alternative Currency through its foreign exchange trading office at
approximately 9:00 a.m. Central Time on such date.

         "EBITDA" is defined in Section 9.2 of the Agreement.

         "EMU" means the economic and monetary union in accordance with the
Treaty of Rome 1957, as amended by the Single European Act 1986, the Maastricht
Treaty of 1992 and the Amsterdam Treaty of 1998, as amended from time to time.

                                       3
<PAGE>

         "EMU Legislation" means the legislative measures of the European
Council for the introduction of, changeover to or operation of a single or
unified European currency (whether known as the "euro" or otherwise).

         "Environmental Laws" is defined in Section 7.4(b) of the Agreement.

         "ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time.

         "Euro" and "o" mean the lawful currency of the Participating Member
States introduced in accordance with the EMU Legislation.

         "EURIBOR Rate" shall mean, at any date, with respect to any applicable
Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in the applicable Alternative
Currency at approximately 11:00 a.m. (London time) two Business Days prior to
the first day of such Interest Period for a term comparable to such Interest
Period.

         "EURIBOR Rate Loan" means a Loan that accrues interest at an EURIBOR
Rate.

         "Event of Default" is defined in Article 11 of the Agreement.

         "Fees" shall mean the unused commitment and Letter of Credit fees
payable under Article 5 of the Agreement.

         "Funded Debt" is defined in Section 9.2 of the Agreement.

         "GAAP" shall mean generally accepted accounting principles, applied on
a consistent basis.

         "Governmental Authority" shall mean any federal, state, local or
foreign court or governmental agency, board, authority, instrumentality or
regulatory body.

         "Guarantee" or "Guaranty" of a person shall mean any agreement by which
such person assumes, guarantees, endorses, contingently agrees to purchase or
provide funds for the payment of, or otherwise becomes liable upon, the
obligation of any other person, or agrees to maintain the net worth or working
capital or other financial condition of any other person or otherwise assures
any creditor of such other person against loss, including, without limitation,
any comfort letter, operating agreement or take-or-pay contract and shall
include, without limitation, the contingent liability of such person in
connection with any application for a letter of credit. The term "Guarantee"
used as a verb has a corresponding meaning.

         "Guarantor" shall mean each maker of a Loan Guaranty.

                                       4
<PAGE>

         "Hazardous Materials" is defined in Section 7.4(b) of the Agreement.

         "Indebtedness" shall mean, as to any Person, on a consolidated basis
with such Person's Subsidiaries (unless otherwise specified), without
duplication: (i) all obligations of such Person for borrowed money or evidenced
by bonds, debentures, notes or similar instruments (including all indebtedness
to stockholders, howsoever evidenced), (ii) all obligations of such Person for
the deferred purchase price of property or services, except trade accounts
payable and accrued liabilities arising in the ordinary course of business which
are not overdue by more than 60 days or which are being contested in good faith
by appropriate proceedings, (iii) all Capital Lease Obligations of such Person,
(iv) all Indebtedness of others secured by a Lien on any properties, assets or
revenues of such Person to the extent of the value of the property subject to
such Lien, (v) all Indebtedness of others Guaranteed by such Person and (vi) all
obligations of such Person, contingent or otherwise, in respect of any letters
of credit or bankers' acceptances. The Indebtedness of any Person shall include
the Indebtedness of any partnership in which such Person is a general partner.

         "Interest Period" shall mean, with respect to any LIBOR or EURIBOR Rate
Loan, each period commencing on the date such Loan is made or, with respect to
LIBOR Rate Loans, is converted from a Prime Rate Loan type or the last day of
the next preceding Interest Period for such Loan, and ending on the numerically
corresponding day in the first, second or third calendar month thereafter, as
Borrower may select, except that each Interest Period which commences on the
last Business Day of a calendar month (or on any day for which there is no
numerically corresponding day in the appropriate subsequent calendar month)
shall end on the last Business Day of the appropriate subsequent calendar month.
Notwithstanding the foregoing: (i) any Interest Period for any Loan which would
otherwise extend beyond the Revolving Credit Termination Date shall end on such
Date; (ii) each Interest Period that would otherwise end on a day which is not a
Business Day shall end on the immediately succeeding Business Day (or, if such
next succeeding Business Day falls in the next succeeding calendar month, on the
immediately preceding Business Day); and (iii) Borrower shall select the
duration of Interest Periods in such a way so that notwithstanding clauses (i)
and (ii) above, no Interest Period shall have a duration of less than one month
(and, if any LIBOR Rate Loans would otherwise have an Interest Period of a
shorter duration, they shall be Prime Rate Loans for the relevant period).

         "Investments" is defined in Section 10.8 of the Agreement.

         "Letters of Credit" is defined in Section 3.1 of the Agreement.

         "LIBOR Rate" shall mean, at any date, with respect to any applicable
Interest Period, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) appearing on Telerate Page 3750 (or any successor page) as
the London interbank offered rate for deposits in U.S. Dollars at approximately
11:00 a.m. (London time) two Business

                                       5

<PAGE>

Days prior to the first day of such Interest Period for a term comparable to
such Interest Period.

         "LIBOR Rate Loan" shall mean a Loan that accrues interest at a LIBOR
Rate.

         "Lien" shall mean, with respect to any asset, (a) any mortgage, deed of
trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset,
and (c) in the case of securities, any purchase option, call, restriction on
right to sell or similar right of a third party with respect to such securities.

         "Loan" shall mean any Revolving Loan or any advance under the Credit
Agreement, and "Loans" shall mean all Revolving Loans and advances thereunder
collectively.

         "Loan Documents" shall mean, collectively, the Agreement, the Note, any
Loan Guaranties and all other documents, agreements and instruments executed by
either Borrower or any Subsidiary in favor of the Bank in connection with the
transactions contemplated by the Agreement.

         "Loan Guaranty" is defined in Section 5.1 of the Agreement.

         "Material Contracts" is defined in Section 7.9 of the Agreement.

         "Net Income" shall mean, for any period, all operating and
non-operating revenue, less all operating and non-operating expenses, including
taxes, depreciation, amortization and interest expenses, all as determined in
accordance with GAAP. In calculating Net Income, there shall be excluded
extraordinary gains and losses (as determined in accordance with GAAP), any
revenues and expenses from disposition of capital assets and insurance policies
and condemnation awards and gifts, donations, grants, pledges, devises,
legacies, requests and contributions which are specifically designated or
restricted as to use by their terms.

         "Note" shall mean the Revolving Note.

         "Obligations" shall mean all unpaid principal of and accrued and unpaid
interest on the Note, all accrued and unpaid Fees, and all other obligations and
liabilities of Borrower to the Bank now existing or hereafter arising under the
Loan Documents, including, without limitation, all renewals, replacements,
extensions and modifications thereof and thereto and any and all draws under any
and all Letters of Credit and any other letters of credit issued by Bank for the
account of Borrower or any Subsidiary.

         "PBGC" shall mean the Pension Benefit Guarantee Corporation referred to
and defined in ERISA.

                                       6
<PAGE>

         "Participating Member State" means each state so described in any EMU
Legislation.

         "Person" or "person" shall mean any natural person, corporation,
business trust, joint venture, association, company, partnership or government,
or any agency or political subdivision thereof.

         "Prime Rate" shall mean, at any date, the rate of interest per annum
then most recently established by the Bank as its "prime rate," it being
understood and agreed that such rate is set by the Bank as a general reference
rate of interest, taking into account such factors as the Bank may deem
appropriate, that it is not necessarily the lowest or best rate actually charged
to any customer or a favored rate, that it may not correspond with future
increases or decreases in interest rates charged by other lenders or market
rates in general, and that the Bank may make various business or other loans at
rates of interest having no relationship to such rate.

         "Prime Rate Loan" shall mean a Loan that accrues interest at the Prime
Rate.

         "RCRA" shall mean the Resource Conservation and Recovery Act, as the
same may be amended from time to time.

         "Regulation G, T, U or X" shall mean Regulation G, T, U or X,
respectively, of the Board of Governors of the Federal Reserve System as from
time to time in effect and all official rulings and interpretations thereunder
or thereof.

         "Regulatory Change" shall mean, with respect to either Bank, any change
after the date of this Agreement in United States federal or state law or
regulations, or the entry, adoption, or making after such date of any order,
interpretation, directive, or request of or under any United States federal or
state law or regulations (whether or not having the force of law) by any court
or governmental or monetary authority charged with the interpretation or
administration thereof, applying to a class of banks including such Bank.

         "Reportable Event" shall mean any reportable event, as defined in
Section 4043 of ERISA and the regulations issued under such Section, with
respect to a Defined Benefit Pension Plan, excluding, however, such events as to
which the PBGC by regulation has waived the requirement of Section 4043(a) of
ERISA that it be notified within 30 days of the occurrence of such event;
provided that a failure to meet the minimum funding standard of Section 412 of
the Code and of Section 302 of ERISA involving an amount aggregating $50,000 or
more shall be a Reportable Event regardless of the issuance of any waiver in
accordance with Section 412(d) of the Code.

         "Revolving Credit Commitment" shall mean Eighteen Million Dollars
($18,000,000) or such amount reduced as provided in Section 2.1(a) of the
Agreement.

                                       7
<PAGE>

         "Revolving Credit Termination Date" shall mean April 30, 2004 or such
other date as may be agreed to by Bank and Borrower from time to time.

         "Revolving Loan" is defined in Section 2.1 of the Agreement.

         "Revolving Note" is defined in Section 2.2 of the Agreement.

         "Subordinated Debt" shall mean Indebtedness subordinated in right of
payment to the Indebtedness to the Bank on terms and conditions satisfactory to
the Bank.

         "subsidiary" shall mean, with respect to any person (herein referred to
as the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the voting power or more than 50% of
the general partnership interests are, at the time any determination is being
made, owned, controlled or held by the parent, or (b) which is, at the time any
determination is made, otherwise Controlled by the parent or one or more
subsidiaries of the parent or by the parent and one or more subsidiaries of the
parent.

         "Subsidiary" shall mean any subsidiary of Borrower, direct or indirect,
now existing or hereafter acquired or created.

         "Telerate Page 3750" shall mean the British Bankers Association Libor
Rates (determined at 11:00 a.m. London, England time) that are published by
Bridge Information Systems, Inc.

         "Type" or "type" means, with respect to a Loan denominated in Dollars,
its character as a Prime Rate Loan or as a LIBOR Rate Loan.

         "Year 2000 Compliant" and "Year 2000 Problem" are defined in Section
7.20 of the Agreement.

                                       8<PAGE>

                                                                     EXHIBIT 4.1

                              CERIDIAN CORPORATION

                                       and

                              THE BANK OF NEW YORK,

                                  Rights Agent

                                Rights Agreement

                          Dated as of November 6, 2001

<PAGE>

                               TABLE OF CONTENTS

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

Section 2.        Appointment of Rights Agent............................................................6

Section 3.        Issuance of Rights Certificates........................................................6

Section 4.        Form of Rights Certificates............................................................8

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

Section 6.        Transfer, Split-Up, Combination and Exchange of Rights Certificates; Mutilated,
                  Destroyed, Lost or Stolen Rights Certificates.........................................10

Section 7.        Exercise of Rights; Purchase Price; Expiration Date of Rights.........................11

Section 8.        Cancellation of Rights Certificates...................................................13

Section 9.        Reservation and Availability of Capital Stock.........................................13

Section 10.       Preferred Stock Record Date...........................................................14

Section 11.       Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights...........15

Section 12.       Certificate of Adjusted Purchase Price or Number of Shares............................23

Section 13.       Consolidation, Merger or Sale or Transfer of Assets Cash Flow or Earning Power........23

Section 14.       Fractional Rights and Fractional Shares...............................................26

Section 15.       Rights of Action......................................................................27

Section 16.       Agreement of Rights Holders...........................................................27

Section 17.       Rights Certificate Holder Not Deemed a Stockholder....................................28

Section 18.       Concerning the Rights Agent...........................................................28

Section 19.       Merger or Consolidation or Change of Name of Rights Agent.............................29

Section 20.       Duties of Rights Agent................................................................30

</TABLE>

                                       i

<PAGE>

<TABLE>
<S>               <C>                                                                                  <C>

Section 21.       Change of Rights Agent................................................................32

Section 22.       Issuance of New Rights Certificates...................................................33

Section 23.       Redemption and Termination............................................................33

Section 24.       Exchange..............................................................................36

Section 25.       Notice of Certain Events..............................................................37

Section 26.       Notices...............................................................................38

Section 27.       Supplements and Amendments............................................................39

Section 28.       Successors............................................................................39

Section 29.       Determinations and Actions by the Board of Directors, etc.............................40

Section 30.       Benefits of this Agreement............................................................40

Section 31.       Severability..........................................................................40

Section 32.       Governing Law.........................................................................41

Section 33.       Counterparts..........................................................................41

Section 34.       Descriptive Headings..................................................................41
</TABLE>

                                       ii

<PAGE>

                                    EXHIBITS

Exhibit A --      Form of Certificate of Designation, Preferences and Rights

Exhibit B --      Form of Rights Certificates

Exhibit C --      Form of Summary of Rights

                                      iii

<PAGE>

                                RIGHTS AGREEMENT

     RIGHTS AGREEMENT, dated as of November 6, 2001 (the "Agreement"), between
Ceridian Corporation, a Delaware corporation (the "Company"), and The Bank of
New York, a New York banking corporation (the "Rights Agent").

                               W I T N E S S E T H

     WHEREAS, on October 24, 2001 (the "Rights Dividend Declaration Date"), the
Board of Directors of the Company authorized and declared a dividend
distribution of one Right (as hereinafter defined) for each share of common
stock, par value $.01 per share, of the Company (the "Common Stock") outstanding
at the close of business on November 9, 2001 (the "Record Date"), and has
authorized the issuance of one Right (as such number may hereinafter be adjusted
pursuant to the provisions of Section 11(p) hereof) for each share of Common
Stock of the Company issued between the Record Date (whether originally issued
or delivered from the Company's treasury) and the Distribution Date (as
hereinafter defined) each Right initially representing the right to purchase one
ten-thousandth of a share of Series A Junior Participating Preferred Stock of
the Company (the "Preferred Stock") having the rights, powers and preferences
set forth in the form of Certificate of Designation, Preferences and Rights
attached hereto as Exhibit A, upon the terms and subject to the conditions
hereinafter set forth (the "Rights");

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

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

     (a) "Acquiring Person" shall mean (x) any Person who or which, together
with all Affiliates and Associates of such Person, shall be the Beneficial Owner
of 15% or more of the shares of Common Stock then outstanding, but shall not
include:

          (i) the Company;

          (ii) any Subsidiary of the Company;

          (iii) any employee benefit plan of the Company, or of any Subsidiary
     of the Company, or any Person or entity organized, appointed or established
     by the Company for or pursuant to the terms of any such plan;

          (iv) any Person who is the Beneficial Owner of less than 20% of the
     shares of Common Stock then outstanding and (x) is permitted, pursuant to
     Rule 13d-1 under the Exchange Act, to report such ownership on Schedule 13G
     (or any comparable or successor report) or (y) was permitted to report such

<PAGE>

     ownership on Schedule 13G (or any comparable or successor report) and
     thereafter does not acquire additional shares of Common Stock (other than
     as a result of any stock split, stock dividend or similar transaction)
     subsequent to the time when such Person became ineligible to report such
     ownership on Schedule 13G (or any comparable or successor report);

          (v) any Person who is the Beneficial Owner of less than 20% of the
     shares of Common Stock then outstanding and has reported or is required to
     report such ownership on Schedule 13D under the Exchange Act (or any
     comparable or successor report) which Schedule 13D does not state any
     intention to or reserve the right to control or influence the management or
     policies of the Company or engage in any of the actions specified in Item 4
     of such schedule (other than the disposition of the Common Stock) and,
     within 10 Business Days of being requested by the Company to advise it
     regarding the same, certifies to the Company that such Person acquired
     shares of Common Stock in excess of 14.9% inadvertently or without
     knowledge of the terms of the Rights and who or which, together with all
     Affiliates and Associates, thereafter does not acquire additional shares of
     Common Stock (other than as a result of any stock split, stock dividend or
     similar transaction) while the Beneficial Owner of 15% or more of the
     shares of Common Stock then outstanding; provided, however, that if the
     Person requested to so certify fails to do so within 10 Business Days, then
     such Person shall become an Acquiring Person immediately after such
     10-Business-Day period; or

          (vi) any Person who becomes the Beneficial Owner of 15% (or 20% if
     clause (iv) of this Section 1(a) is applicable to such Person) or more of
     the shares of Common Stock then outstanding as a result of a reduction in
     the number of shares of Common Stock outstanding due to the repurchase of
     shares of Common Stock by the Company other than during the Special Period
     (as defined in Section 23(c) hereof) or at a time when the rights are not
     redeemable, unless and until such Person, after becoming aware that such
     Person has become the Beneficial Owner of 15% or more of the then
     outstanding shares of Common Stock, acquires beneficial ownership of
     additional shares of Common Stock representing 1% or more of the shares of
     Common Stock then outstanding; or

     (y) any Person who or which has entered into any agreement or arrangement
     with the Company or any Subsidiary of the Company providing for an
     Acquisition Transaction during the Special Period or at a time when the
     Rights are not redeemable.

                                       2

<PAGE>

     (b) "Acquisition Transaction" shall mean (x) a merger, consolidation or
similar transaction involving the Company or any of its Subsidiaries as a result
of which stockholders of the Company will no longer own a majority of the
outstanding shares of Common Stock of the Company or a publicly traded entity
which controls the Company or, if appropriate, the entity into which the Company
may be merged, consolidated or otherwise combined (based solely on the shares of
Common Stock received or retained by such stockholders, in their capacity as
stockholders of the Company, pursuant to such transaction), (y) a purchase or
other acquisition of all or a substantial portion of the assets of the Company
and its Subsidiaries, or (z) a purchase or other acquisition of securities
representing 15% or more of the shares of Common Stock then outstanding.

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

     (d) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Exchange Act.

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

               (i) which such Person or any of such Person's Affiliates or
          Associates, directly or indirectly, has the right to acquire (whether
          such right is exercisable immediately or only after the passage of
          time) pursuant to any agreement, arrangement or understanding (whether
          or not in writing) or upon the exercise of conversion rights, exchange
          rights, other rights, warrants or options, or otherwise; provided,
          however, that a Person shall not be deemed the "Beneficial Owner" of,
          or to "beneficially own," (A) 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, (B) securities issuable upon exercise of
          Rights at any time prior to the occurrence of a Triggering Event (as
          hereinafter defined), or (C) securities issuable upon exercise of
          Rights from and after the occurrence of a Triggering Event which
          Rights were acquired by such Person or any of such Person's Affiliates
          or Associates prior to the Distribution Date (as hereinafter defined)
          or pursuant to Section 3(a) or Section 22 hereof (the "Original
          Rights") or pursuant to Section 11(i) hereof in connection with an
          adjustment made with respect to any Original Rights;

               (ii) which such Person or any of such Person's Affiliates or
          Associates, directly or indirectly, has the right to vote or dispose
          of or has "beneficial ownership" of (as determined pursuant to Rule
          13d-3 of the General Rules and Regulations under the Exchange Act),
          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
          security under this subparagraph (ii) as a result of an agreement,
          arrangement or understanding to vote such security if such agreement,

                                       3

<PAGE>

          arrangement or understanding: (A) arises solely from a revocable proxy
          given in response to a public proxy or consent solicitation made
          pursuant to, and in accordance with, the applicable provisions of the
          General Rules and Regulations under the Exchange Act, and (B) is not
          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 (or any Affiliate or Associate thereof) with which
          such Person (or any of such Person's Affiliates or Associates) has any
          agreement, arrangement or understanding (whether or not in writing),
          for the purpose of acquiring, holding, voting (except pursuant to a
          revocable proxy as described in the proviso to subparagraph (ii) of
          this paragraph (e)) or disposing of any voting securities of the
          Company; provided, however, that nothing in this paragraph (e) shall
          cause a Person engaged in business as an underwriter of securities to
          be the "Beneficial Owner" of, or to "beneficially own," any securities
          acquired through such Person's participation in good faith in a firm
          commitment underwriting until the expiration of forty days after the
          date of such acquisition, and then only if such securities continue to
          be owned by such Person at such expiration of forty days.

     (f) "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.

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

     (h) "Common Stock" shall mean the common stock, par value $0.01 per share,
of the Company, except that "Common Stock" when used with reference to any
Person other than the Company shall mean the capital stock of such Person with
the greatest voting power, or the equity securities or other equity interest
having power to control or direct the management, of such Person.

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

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

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

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

                                       4

<PAGE>

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

     (n) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

     (o) "Exchange Ratio" shall have the meaning set forth in Section 24(a)
hereof.

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

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

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

     (s) "Preferred Stock" shall mean shares of Series A Junior Participating
Preferred Stock, par value $0.01 per share, of the Company, and, to the extent
that there are not a sufficient number of shares of Series A Junior
Participating Preferred Stock authorized to permit the full exercise of the
Rights, any other series of preferred stock of the Company designated for such
purpose containing terms substantially similar to the terms of the Series A
Junior Participating Preferred Stock.

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

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

     (v) "Record Date" shall have the meaning set forth in the preamble of this
Agreement.

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

     (x) "Rights" shall have the meaning set forth in the preamble of this
Agreement.

     (y) "Rights Agent" shall have the meaning set forth in the preamble of this
Agreement.

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

     (aa) "Rights Dividend Declaration Date" shall have the meaning set forth in
the preamble of this Agreement.

                                       5

<PAGE>

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

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

     (dd) "Spread" shall have the meaning set forth in Section 11(a)(iii)
hereof.

     (ee) "Stock Acquisition Date" shall mean the earlier of (i) the first date
of public announcement (which, for purposes of this definition, shall include,
without limitation, a report filed or amended pursuant to Section 13(d) under
the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person
has become such pursuant to clause (x) of the definition of Acquiring Person,
and (ii) the date that an Acquiring Person has become such pursuant to clause
(y) of the definition of Acquiring Person.

     (ff) "Subsidiary" shall mean, with reference to any Person, any corporation
of which an amount of voting securities sufficient to elect at least a majority
of the directors of such corporation is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such Person.

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

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

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

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

     Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company 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.

     Section 3. Issuance of Rights Certificates.

     (a) Until the earlier of (i) the close of business on the tenth Business
Day after the Stock Acquisition Date (or, if the tenth Business Day after the
Stock Acquisition Date occurs before the Record Date, the close of business on
the Record Date), or (ii) the close of business on the tenth Business Day (or
such later date as the Board shall determine, provided, however, that no

                                       6

<PAGE>

deferral of a Distribution Date by the Board pursuant to this clause (ii) may be
made at any time during the Special Period) after the date that a tender or
exchange offer by any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed or established by the
Company for or pursuant to the terms of any such plan) is first published or
sent or given within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if upon consummation thereof, such Person
would become an Acquiring Person, (the earlier of (i) and (ii) being herein
referred to as the "Distribution Date"), (x) the Rights will be evidenced
(subject to the provisions of paragraphs (b) and (c) of this Section 3) by the
certificates for the Common Stock registered in the names of the holders of the
Common Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the Rights
will be transferable only in connection with the transfer of the underlying
shares of Common Stock (including a transfer to the Company). The Company shall
give the Rights Agent prompt written notice of the Distribution Date. As soon as
practicable after the Distribution Date and receipt of written notice of the
Distribution Date from the Company, the Rights Agent will send, at the Company's
expense, by first-class, insured, postage-prepaid mail, to each record holder of
the Common Stock as of the close of business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit B hereto (the "Rights
Certificates"), evidencing one Right for each share of Common Stock so held,
subject to adjustment as provided herein. In the event that an adjustment in the
number of Rights per share of Common Stock has been made pursuant to Section
11(p) hereof, at the time of distribution of the Rights Certificates, the
Company shall make the necessary and appropriate rounding adjustments (in
accordance with Section 14(a) hereof) so that Rights Certificates representing
only whole numbers of Rights are distributed and cash is paid in lieu of any
fractional Rights. As of and after the Distribution Date, the Rights will be
evidenced solely by such Rights Certificates.

     (b) The Company will make available, as promptly as practicable following
the Record Date, a copy of a Summary of Rights, in substantially the form
attached hereto as Exhibit C (the "Summary of Rights") to any holder of Rights
who may so request from time to time prior to the Expiration Date. With respect
to certificates for the Common Stock outstanding as of the Record Date, or
issued subsequent to the Record Date, unless and until the Distribution Date
shall occur, the Rights will be evidenced by such certificates for the Common
Stock and the registered holders of the Common Stock shall also be the
registered holders of the associated Rights. Until the earlier of the
Distribution Date or the Expiration Date, the transfer of any certificates
representing shares of Common Stock in respect of which Rights have been issued
shall also constitute the transfer of the Rights associated with such shares of
Common Stock.

     (c) Rights shall be issued in respect of all shares of Common Stock which
are issued (whether originally issued or from the Company's treasury) after the
Record Date but prior to the earlier of the Distribution Date or the Expiration
Date. Certificates representing such shares of Common Stock shall also be deemed

                                       7

<PAGE>

to be certificates for Rights, and shall bear the following legend if such
certificates are issued after the Record Date but prior to the earlier of the
Distribution Date or the Expiration Date:

         This certificate also evidences and entitles the holder hereof to
         certain Rights as set forth in the Rights Agreement between Ceridian
         Corporation (the "Company") and the Rights Agent thereunder (the
         "Rights Agent") dated as of November 6, 2001 (the "Rights Agreement"),
         the terms of which are hereby incorporated herein by reference and a
         copy of which is on file at the principal offices of the Rights Agent.
         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. The Rights Agent will mail to the holder
         of this certificate a copy of the Rights Agreement, as in effect on the
         date of mailing, without charge, promptly after receipt of a written
         request therefor. Under certain circumstances set forth in the Rights
         Agreement, Rights issued to, or held by, any Person who is, was or
         becomes an Acquiring Person or any Affiliate or Associate thereof (as
         such terms are defined in the Rights Agreement), whether currently held
         by or on behalf of such Person or by any subsequent holder, may become
         null and void.

With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Common Stock represented by such certificates shall be
evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any of such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.

     Section 4. Form of Rights Certificates.

     (a) The Rights Certificates (and the forms of election to purchase and of
assignment to be printed on the reverse thereof) shall each 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 Agreement, or as may be required to comply with any applicable law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Rights may from time to time be listed, or to
conform to usage. Subject to the provisions of Section 11 and Section 22 hereof,
the Rights Certificates, whenever distributed, shall be dated as of the Record
Date and on their face shall entitle the holders thereof to purchase such number
of one ten-thousandths of a share of Preferred Stock as shall be set forth
therein at the price set forth therein (such exercise price per one
one-hundredth of a share, the "Purchase Price"), but the amount and type of
securities purchasable upon the exercise of each Right and the Purchase Price
thereof shall be subject to adjustment as provided herein.

                                       8

<PAGE>

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

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

     The Company shall supply the Rights Agent with such legended Right
Certificates and shall instruct the Rights Agent accordingly.

     Section 5. Countersignature and Registration.

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

                                       9

<PAGE>

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

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

     (a) Subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, at any time after the close of business on the Distribution Date, and at
or prior to the close of business on the Expiration Date, any Rights Certificate
or Certificates (other than Rights Certificates representing Rights that may
have been exchanged pursuant to Section 24 hereof) may be transferred, split up,
combined or exchanged for another Rights Certificate or Certificates, entitling
the registered holder to purchase a like number of one ten-thousandths of a
share of Preferred Stock (or, following a Triggering Event, Common Stock, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitles such holder (or former holder in the
case of a transfer) to purchase. Any registered holder desiring to transfer,
split up, combine or exchange any Rights Certificate or Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Rights Certificate or Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Company shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Rights Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Rights Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Company shall reasonably request. Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24
hereof, countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment by the holders of Rights 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 Rights Certificates.

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

                                       10

<PAGE>

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

     (a) Subject to Section 7(e) hereof, at any time after the Distribution Date
the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein including, without
limitation, the restrictions on exercisability set forth in Section 9(c),
Section 11(a)(iii) and Section 23(a) hereof) in whole or in part upon surrender
of the Rights Certificate, with the form of election to purchase and the
certificate on the reverse side thereof duly executed, to the Rights Agent at
the principal office or offices of the Rights Agent designated for such purpose,
together with payment of the aggregate Purchase Price with respect to the total
number of one ten-thousandths of a share (or other securities, cash or other
assets, as the case may be) as to which such surrendered Rights are then
exercisable, at or prior to the earlier of (i) 5:00 P.M., New York City time, on
November 9, 2011, or such later date as may be established by the Board of
Directors prior to the expiration of the Rights (such date, as it may be
extended by the Board, the ("Final Expiration Date"), or (ii) the time at which
the Rights are redeemed or exchanged as provided in Section 23 and Section 24
hereof (the earlier of (i) and (ii) being herein referred to as the "Expiration
Date").

     (b) The Purchase Price for each one ten-thousandth of a share of Preferred
Stock pursuant to the exercise of a Right initially shall be $75.00, shall be
subject to adjustment from time to time as provided in Section 11 and Section
13(a) hereof and shall be payable in accordance with paragraph (c) below.

     (c) Upon receipt of a Rights Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment, with respect to each Right so exercised, of the Purchase
Price per one ten-thousandth of a share of Preferred Stock (or other shares,
securities, cash or other assets, as the case may be) to be purchased as set
forth below and an amount equal to any applicable transfer tax, the Rights Agent
shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Preferred Stock (or make available, if
the Rights Agent is the transfer agent for such shares) certificates for the
total number of one ten-thousandths of a share of Preferred Stock to be
purchased and the Company hereby irrevocably authorizes its transfer agent to
comply with all such requests, or (B) if the Company shall have elected to
deposit the total number of shares of Preferred Stock issuable upon exercise of
the Rights hereunder with a depositary agent, requisition from the depositary
agent depositary receipts representing such number of one ten-thousandths of a
share of Preferred Stock as are to be purchased (in which case certificates for
the shares of Preferred Stock represented by such receipts shall be deposited by
the transfer agent with the depositary agent) and the Company will direct the
depositary agent to comply with such request, (ii) requisition from the Company
the amount of cash, if any, to be paid in lieu of fractional shares in
accordance with Section 14 hereof, (iii) after receipt of such certificates or
depositary receipts, cause the same to be delivered to or, upon the order of the
registered holder of such Rights Certificate, registered in such name or names
as may be designated by such holder, and (iv) after receipt thereof, deliver
such cash, if any, to or upon the order of the registered holder of such Rights
Certificate. The payment of the Purchase Price (as such amount may be reduced

                                       11

<PAGE>

pursuant to Section 11(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Company. In the event that
the Company is obligated to issue other securities (including Common Stock) 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. The Company reserves the right to require
prior to the occurrence of a Triggering Event that, upon any exercise of Rights,
a number of Rights be exercised so that only whole shares of Preferred Stock
would be issued.

     (d) In case the registered holder of any Rights Certificate shall exercise
less than all the Rights evidenced thereby, a new Rights Certificate evidencing
the Rights remaining unexercised shall be issued by the Rights Agent and
delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.

     (e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Associate or Affiliate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee after the Acquiring Person becomes such, or
(iii) a transferee of an Acquiring Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person to holders of
equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Company has determined is part of a plan, arrangement or understanding
which has as a primary purpose or effect the avoidance of this Section 7(e),
shall become null and void without any further action and no holder of such
Rights shall have any rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise. The Company shall use all
reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to any holder
of Rights Certificates or any other Person as a result of its failure to make
any determinations with respect to an Acquiring Person or any of its Affiliates,
Associates or transferees hereunder.

     (f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Company shall be obligated to undertake any action with
respect to a registered holder 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 Rights 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.

                                       12

<PAGE>

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

     Section 9. Reservation and Availability of Capital Stock.

     (a) The Company covenants and agrees that it will cause to be reserved and
kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of its authorized
and issued shares held in its treasury), the number of shares of Preferred Stock
(and, following the occurrence of a Triggering Event, Common Stock and/or 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.

     (b) So long as the shares of Preferred Stock (and, following the occurrence
of a Triggering Event, Common Stock and/or other securities) issuable and
deliverable upon the exercise of the Rights may be listed on any national
securities exchange, the Company shall use its best efforts to cause, from and
after such time as the Rights become exercisable, all shares reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.

     (c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11(a)(ii) Event on which the consideration to be delivered by the Company upon
exercise of the Rights has been determined in accordance with Section 11(a)(iii)
hereof, a registration statement under the Act, with respect to the securities
purchasable upon exercise of the Rights on an appropriate form, (ii) cause such
registration statement to become effective as soon as practicable after such
filing, and (iii) cause such registration statement to remain effective (with a
prospectus at all times meeting the requirements of the Act) until the earlier
of (A) the date as of which the Rights are no longer exercisable for such
securities, and (B) the date of the expiration of the Rights. The Company will
also take such action as may be appropriate under, or to ensure compliance with,
the securities or "blue sky" laws of the various states in connection with the
exercisability of the Rights. The Company may temporarily suspend, for a period
of time not to exceed ninety (90) days after the date set forth in clause (i) of
the first sentence of this Section 9(c), the exercisability of the Rights in
order to prepare and file such registration statement and permit it to become
effective. Upon 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 has
been rescinded, in each case with written notice to the Rights Agent. In

                                       13

<PAGE>

addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained, the
exercise thereof shall not be permitted under applicable law, or a registration
statement shall not have been declared effective.

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

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

     Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for a number of one ten-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company

                                       14

<PAGE>

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

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

          (a) (i) In the event the Company shall at any time after the date of
     this Agreement (A) declare a dividend on the Preferred Stock payable in
     shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
     (C) combine the outstanding Preferred Stock into a smaller number of
     shares, or (D) issue any shares of its capital stock in a reclassification
     of the Preferred Stock (including any such reclassification in connection
     with a consolidation or merger in which the Company is the continuing or
     surviving corporation), except as otherwise provided in this Section 11(a)
     and Section 7(e) hereof, the 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, upon payment of the
     Purchase Price then in effect, the aggregate number and kind of shares of
     Preferred Stock or capital stock, as the case may be, which, if such Right
     had been exercised immediately prior to such date and at a time when the
     Preferred Stock transfer books of the Company were open, such holder 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) hereof.

          (ii) In the event any Person shall, at any time after the Rights
     Dividend Declaration Date, become an Acquiring Person, unless the event
     causing such Person to become an Acquiring Person is a transaction set
     forth in Section 13(a) hereof, or is an acquisition of shares of Common
     Stock pursuant to a tender offer or an exchange offer for all outstanding
     shares of Common Stock at a price and on terms determined by the Board of
     Directors, after receiving advice from one or more investment banking
     firms, to be (a) at a price which is fair to stockholders and not
     inadequate (taking into account all factors which such members of the Board
     deem relevant, including, without limitation, prices which could reasonably

                                       15

<PAGE>

     be achieved if the Company or its assets were sold on an orderly basis
     designed to realize maximum value) and (b) otherwise in the best interests
     of the Company and its stockholders (a "Qualified Offer") (provided,
     however, that no such determination shall be made during the Special
     Period), then, promptly following the occurrence of such event, proper
     provision shall be made so that each holder of a Right (except as provided
     below and in Section 7(e) hereof) shall thereafter have the right to
     receive, upon exercise thereof at the then current Purchase Price in
     accordance with the terms of this Agreement, in lieu of a number of one
     ten-thousandths of a share of Preferred Stock, such number of shares of
     Common Stock of the Company as shall equal the result obtained by (x)
     multiplying the then current Purchase Price by the then number of one
     ten-thousandths of a share of Preferred Stock for which a Right was
     exercisable immediately prior to the first occurrence of a Section
     11(a)(ii) Event, and (y) dividing that product (which, following such first
     occurrence, shall thereafter be referred to as the "Purchase Price" for
     each Right and for all purposes of this Agreement) by 50% of the Current
     Market Price (determined pursuant to Section 11(d) hereof) per share of
     Common Stock on the date of such first occurrence (such number of shares,
     the "Adjustment Shares").

          (iii) In the event that the number of shares of Common Stock which is
     authorized by the Company's certificate of incorporation, but not
     outstanding or reserved for issuance for purposes other than upon exercise
     of the Rights, is not sufficient to permit the exercise in full of the
     Rights in accordance with the foregoing subparagraph (ii) of this Section
     11(a), the Company shall (A) determine the value of the Adjustment Shares
     issuable upon the exercise of a Right (the "Current Value"), and (B) with
     respect to each Right (subject to Section 7(e) hereof), make adequate
     provision to substitute for the Adjustment Shares, upon the exercise of a
     Right and payment of the applicable Purchase Price, (1) cash, (2) a
     reduction in the Purchase Price, (3) Common Stock or other equity
     securities of the Company (including, without limitation, shares, or units
     of shares, of preferred stock, such as the Preferred Stock, which the Board
     has deemed to have essentially the same value or economic rights as shares
     of Common Stock (such shares of preferred stock being referred to as
     "Common Stock Equivalents")), (4) debt securities of the Company, (5) other
     assets, or (6) any combination of the foregoing, having an aggregate value
     equal to the Current Value (less the amount of any reduction in the
     Purchase Price), where such aggregate value has been determined by the
     Board based upon the advice of a nationally recognized investment banking
     firm selected by the Board; provided, however, that if the Company shall
     not have made adequate provision to deliver value pursuant to clause (B)
     above within thirty (30) days following the later of (x) the first
     occurrence of a Section 11(a)(ii) Event and (y) the date on which the
     Company's right of redemption pursuant to Section 23(a) expires (the later
     of (x) and (y) being referred to herein as the "Section 11(a)(ii) Trigger

                                       16

<PAGE>

     Date"), then the Company shall be obligated to deliver, upon the surrender
     for exercise of a Right and without requiring payment of the Purchase
     Price, shares of Common Stock (to the extent available) and then, if
     necessary, cash, which shares and/or cash have an aggregate value equal to
     the Spread. For purposes of the preceding sentence, the term "Spread" shall
     mean the excess of (i) the Current Value over (ii) the Purchase Price. If
     the Board determines in good faith that it is likely that sufficient
     additional shares of Common Stock 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 Section 11(a)(ii) Trigger Date, in order that the Company may
     seek shareholder approval for the authorization of such additional shares
     (such thirty (30) day period, as it may be extended, is herein called the
     "Substitution Period"). To the extent that the Company determines that
     action should be taken pursuant to the first and/or third sentences of this
     Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e)
     hereof, that such action shall apply uniformly to all outstanding Rights,
     and (2) may suspend the exercisability of the Rights until the expiration
     of the Substitution Period in order to seek such shareholder approval for
     such authorization of additional shares and/or to decide the appropriate
     form of distribution to be made pursuant to such first sentence and to
     determine the value thereof. In the event of any such suspension, the
     Company shall issue a public announcement stating that the exercisability
     of the Rights has been temporarily suspended, as well as a public
     announcement at such time as the suspension is no longer in effect. For
     purposes of this Section 11(a)(iii), the value of each Adjustment Share
     shall be the Current Market Price per share of the Common Stock on the
     Section 11(a)(ii) 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.

     (b) In case the Company shall fix a record date for the issuance of rights,
options or warrants to all holders of Preferred Stock entitling them to
subscribe for or purchase (for a period expiring within forty-five (45) calendar
days after such record date) Preferred Stock (or shares having the same rights,
privileges and preferences as the shares of Preferred Stock ("Equivalent
Preferred Stock")) or securities convertible into Preferred Stock or Equivalent
Preferred Stock at a price per share of Preferred Stock or per share of
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 (as determined pursuant to Section 11(d) hereof)
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 so to be offered (and/or the aggregate initial

                                       17

<PAGE>

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 consideration shall be as determined in good
faith by the Board of Directors of the Company, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of the Rights. 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), cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred Stock) or evidences of indebtedness, or of 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 (as
determined pursuant to Section 11(d) hereof) 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 so 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 (as determined pursuant to Section 11(d)
hereof) 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 such Common Stock for
     the thirty (30) consecutive Trading Days immediately prior to such date,
     and for purposes of computations made pursuant to Section 11(a)(iii)
     hereof, the Current Market Price per share of Common Stock on any date
     shall be deemed to be the average of the daily closing prices per share of
     such Common Stock for the ten (10) consecutive Trading Days immediately
     following such date; provided, however, that in the event that the Current

                                       18

<PAGE>

     Market Price per share of the Common Stock is determined during a period
     following the announcement by the issuer of such Common Stock of (A) a
     dividend or distribution on such Common Stock payable in shares of such
     Common Stock or securities convertible into shares of such Common Stock
     (other than the Rights), or (B) any subdivision, combination or
     reclassification of such Common Stock, and the ex-dividend date for such
     dividend or distribution, or the record date for such subdivision,
     combination or reclassification shall not have occurred prior to the
     commencement of the requisite thirty (30) Trading Day or ten (10) Trading
     Day period, as set forth above, then, and in each such case, the Current
     Market Price shall be properly adjusted to take into account ex-dividend
     trading. The closing price for each day shall be the last sale price,
     regular way, or, in case no such sale takes place on such day, the average
     of the closing bid and asked prices, regular way, in either case as
     reported in the principal consolidated transaction reporting system with
     respect to securities listed or admitted to trading on the New York Stock
     Exchange or, if the 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 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 the
     National Association of Securities Dealers Automated Quotation System
     ("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. 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
     shall be used. The term "Trading Day" shall mean a day on which the
     principal national securities exchange on which the shares of Common Stock
     are listed or admitted to trading is open for the transaction of business
     or, if the shares of Common Stock are not listed or admitted to trading on
     any national securities exchange, a Business Day. 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, 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 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 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

                                       19

<PAGE>

     amount equal to 10,000 (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. If
     neither the Common Stock nor the Preferred Stock is publicly held or so
     listed or traded, Current Market Price per share of the Preferred Stock
     shall mean the fair value per share as determined in good faith by the
     Board, whose determination shall be described in a statement filed with the
     Rights Agent and shall be conclusive for all purposes.

     (e) 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 (1%) 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 hundred-millionth 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
(3) 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 Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.

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

     (h) Unless the Company shall have exercised its election as provided in
Section 11(i), upon each adjustment of the 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 ten-thousandths of

                                       20

<PAGE>

a share of Preferred Stock (calculated to the nearest hundred-millionth)
obtained by (i) multiplying (x) the number of one ten-thousandths of a share
covered by a Right immediately prior to this adjustment, by (y) the Purchase
Price in effect immediately prior to such adjustment of the Purchase Price, and
(ii) dividing the product so obtained by the Purchase Price in effect
immediately after such adjustment of the Purchase Price.

     (i) The Company may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one ten-thousandths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after the adjustment in the
number of Rights shall be exercisable for the number of one ten-thousandths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such adjustment of the
number of Rights shall become that number of Rights (calculated to the nearest
millionth) 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 Rights Certificates have
been issued, shall be at least ten (10) days later than the date of the public
announcement. If Rights 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 Rights
Certificates on such record date Rights 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
Rights Certificates held by such holders prior to the date of adjustment, and
upon surrender thereof, if required by the Company, new Rights Certificates
evidencing all the Rights to which such holders shall be entitled after such
adjustment. Rights 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 Rights 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 one ten-thousandths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one ten-thousandth of a
share and the number of one ten-thousandth of a share which were expressed in
the initial Rights Certificates issued hereunder.

     (k) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then stated value, if any, of the number of one
ten-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one ten-thousandths of a share
of Preferred Stock at such adjusted Purchase Price.

                                       21

<PAGE>

     (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 number
of one ten-thousandths of a share of Preferred Stock and other capital stock or
securities of the Company, if any, issuable upon such exercise over and above
the number of one ten-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the 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 (fractional or otherwise) 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 wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (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 (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets, cash flow or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions each
of which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in effect
which would substantially diminish or otherwise eliminate the benefits intended
to be afforded by the Rights or (y) prior to, simultaneously with or immediately
after such consolidation, merger or sale, the shareholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.

                                       22

<PAGE>

     (o) The Company covenants and agrees that, after the Distribution Date, it
will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action if at the time such action is taken it
is reasonably foreseeable that such action will diminish substantially or
otherwise 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 Rights Dividend Declaration
Date and prior to the Distribution Date (i) declare a 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 but prior to the Distribution Date, shall be
proportionately adjusted so that the number of Rights thereafter associated with
each share of Common Stock following any such event shall equal 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 which
shall be the total number of shares of Common Stock outstanding immediately
prior to the occurrence of the event and the denominator of which shall be the
total number of shares of Common Stock outstanding immediately following the
occurrence of such event.

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

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

     (a) In the event that, following the Stock Acquisition Date, directly or
indirectly, (x) the Company shall consolidate with, or merge with and into, any
other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or 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 cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of

                                       23

<PAGE>

its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets, cash flow or earning power aggregating
more than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any Person or Persons (other than the Company
or any Subsidiary of the Company in one or more transactions each of which
complies with Section 11(o) hereof), then, and in each such case, proper
provision shall be made so that: (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price in accordance with the terms
of this Agreement, 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 be equal
to the result obtained by (1) multiplying the then current Purchase Price by the
number of one ten-thousandths of a share of Preferred Stock for which a Right is
exercisable immediately prior to the first occurrence of a Section 13 Event (or,
if a Section 11(a)(ii) Event has occurred prior to the first occurrence of a
Section 13 Event, multiplying the number of such one ten-thousandths of a share
for which a Right was exercisable immediately prior to the first occurrence of a
Section 11(a)(ii) Event by the Purchase Price in effect immediately prior to
such first occurrence of a Section 11(a)(ii) Event), and (2) dividing that
product (which, following the first occurrence of a Section 13 Event, shall be
referred to as the "Purchase Price" for each Right and for all purposes of this
Agreement) by 50% of the Current Market Price (determined pursuant to Section
11(d)(i) hereof) per share of the Common Stock of such Principal Party on the
date of consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (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 connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.

     (b) "Principal Party" shall mean:

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

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

                                       24

<PAGE>

     pursuant to such transaction or transactions; provided, however, that in
     any such case, (1) if the Common Stock of such Person is not at such time
     and has not been continuously over the preceding twelve (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, "Principal Party" shall refer to such other
     Person; and (2) in case such Person is a Subsidiary, directly or
     indirectly, of more than one Person, the Common Stock of two or more of
     which are and have been so registered, "Principal Party" shall refer to
     whichever of such Persons is the issuer of the Common Stock having the
     greatest aggregate market value.

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

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

          (ii) take all such other action as may be necessary to enable the
     Principal Party to issue the securities purchasable upon exercise of the
     Rights, including but not limited to the registration or qualification of
     such securities under all requisite securities laws of jurisdictions of the
     various states and the listing of such securities on such exchanges and
     trading markets as may be necessary or appropriate; and

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

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

                                       25

<PAGE>

     Section 14. Fractional Rights and Fractional Shares.

     (a) The Company shall not be required to issue fractions of Rights, except
prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, the Company shall pay to the registered holders of the Rights
Certificates with regard to which such fractional Rights would otherwise be
issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights, selected by the Board
of Directors of the Company. If on any such date no such market maker is making
a market in the Rights, the fair value of the Rights on such date as determined
in good faith by the Board of Directors of the Company shall be used.

     (b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one
ten-thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one ten-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one ten-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights 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 ten-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value of
one ten-thousandth of a share of Preferred Stock shall be one ten-thousandth of
the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.

                                       26

<PAGE>

     (c) Following the occurrence of a Triggering Event, the Company shall not
be required to issue fractions of shares of Common Stock upon exercise of the
Rights or to distribute certificates which evidence fractional shares of Common
Stock. In lieu of fractional shares of Common Stock, the Company may pay to the
registered holders of Rights 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 (1) share of Common Stock. For purposes of this Section
14(c), the current market value of one share of Common Stock shall be the
closing price per share of Common Stock (as determined pursuant to Section
11(d)(i) hereof) on the Trading Day immediately prior to the date of such
exercise.

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

     Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights 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 Rights 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 to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

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

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

     (b) after the Distribution Date, the Rights Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates fully executed;

     (c) subject to Section 6(a) and Section 7(f) hereof, the Company and the
Rights Agent may deem and treat the person in whose name a Rights Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Rights

                                       27

<PAGE>

Certificates or the associated Common Stock certificate made by anyone other
than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be required to 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, the Company must use its best efforts to have any
such order, decree or ruling lifted or otherwise overturned as soon as possible.

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

     Section 18. Concerning the Rights Agent.

     (a) The Company agrees to pay to the Rights Agent such compensation as
shall be agreed to in writing between the Company and the Rights Agent for all
services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and disbursements and
other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties hereunder. The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith or
willful misconduct on the part of the Rights Agent, for anything done or omitted
by the Rights Agent in connection with the acceptance and administration of this
Agreement, including the costs and expenses of defending against any claim
(whether asserted by the Company, a holder of Rights, or any other Person) of
liability in the premises. The provisions of this Section 18(a) shall survive
the expiration of the Rights and the termination of this Agreement.

                                       28

<PAGE>

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

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

     (a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to all or
substantially all the corporate trust, stock transfer or other shareholder
services business of the Rights Agent or any successor Rights Agent, shall be
the successor to the Rights Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
but only if 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 Rights Certificates shall have been countersigned but not delivered,
any such successor Rights Agent may adopt the countersignature of a predecessor
Rights Agent and deliver such Rights Certificates so countersigned; and in case
at that time any of the Rights Certificates shall not have been countersigned,
any successor Rights Agent may countersign such Rights Certificates either in
the name of the predecessor or in the name of the successor Rights Agent; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights 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 Rights Certificates shall have been countersigned but
not delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that time
any of the Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior name or in
its changed name; and in all such cases such Rights Certificates shall have the
full force provided in the Rights Certificates and in this Agreement.

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

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<PAGE>

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

     (b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(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 a certificate signed by the
Chairman of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, 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 Agreement in reliance upon such certificate.

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

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

     (e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 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 Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.

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

                                       30

<PAGE>

     (g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, 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 or for
any delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Company may, at the option of the
Rights Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent under this Agreement and the date on and/or after which such
action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in such application on or after the date
specified in such application (which date shall not be less than three Business
Days after the date any officer of the Company actually receives such
application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Right 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 Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity.

     (i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents as reasonably approved by the Company, 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, however,
reasonable care was exercised in the selection 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 Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has either not
been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.

                                       31

<PAGE>

     Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and, if such resignation occurs after the Distribution Date, to
the registered holders of the Rights Certificates by first-class mail. The
Company may remove the Rights Agent or any successor Rights Agent upon thirty
(30) days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock and
Preferred Stock, by registered or certified mail, and, if such removal occurs
after the Distribution Date, to the holders of the Rights Certificates by
first-class mail. If the Rights Agent shall resign or be removed or shall
otherwise become incapable of acting, the Company shall appoint a successor to
the Rights Agent. If the Company shall fail to make such appointment within a
period of thirty (30) days after giving notice of such removal or after it has
been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent or by the holder of a Rights Certificate (who shall,
with such notice, submit his Rights Certificate for inspection by the Company),
then the Rights Agent or any registered holder of any Rights Certificate may
apply, at the expense of the Company, 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 legal business
entity organized and doing business under the laws of the United States or of
the State of New York or of any other state of the United States, in good
standing, having an office in the State of New York, which is authorized under
such laws to exercise corporate trust, stock transfer or shareholder services
powers and which has at the time of its appointment as Rights Agent a combined
capital and surplus of at least $50,000,000 or (b) an affiliate of a legal
business entity described in clause (a) of this sentence. After appointment, the
successor Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Company shall file notice thereof in writing with the predecessor Rights Agent
and each transfer agent of the Common Stock and the Preferred Stock, and, if
such appointment occurs after the Distribution Date, mail a notice thereof in
writing to the registered holders of the Rights Certificates. Failure to give
any notice provided for in this Section 21, however, or any defect therein,
shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of the successor Rights Agent, as the case may
be.

     Section 22. Issuance of New Rights Certificates. Notwithstanding any of the
provisions of this Agreement or of the Rights to the contrary, the Company may,
at its option, issue new Rights Certificates evidencing Rights in such form as
may be approved by the Board of Directors to reflect any adjustment or change in
the Purchase Price and the number or kind or class of shares or other securities
or property purchasable under the Rights Certificates made in accordance with
the provisions of this Agreement. In addition, in connection with the issuance
or sale of shares of Common Stock following the Distribution Date and prior to

                                       32

<PAGE>

the redemption or expiration of the Rights, the Company (a) shall, with respect
to shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, granted or awarded as of the
Distribution Date, or upon the exercise, conversion or exchange of securities
hereinafter issued by the Company, and (b) may, in any other case, if deemed
necessary or appropriate by the Board of Directors of the Company, issue Rights
Certificates representing the appropriate number of Rights in connection with
such issuance or sale; provided, however, that (i) no such Rights Certificate
shall be issued if, and to the extent that, the Company shall be advised by
counsel that such issuance would create a significant risk of material adverse
tax consequences to the Company or the Person to whom such Rights Certificate
would be issued, and (ii) no such Rights Certificate shall be issued if, and to
the extent that, appropriate adjustment shall otherwise have been made in lieu
of the issuance thereof.

     Section 23. Redemption and Termination.

     (a) The Board of Directors of the Company may, at its option, at any time
prior to the earlier of (i) the close of business on the tenth Business Day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the tenth
Business Day following the Record Date), or (ii) the Final Expiration Date,
redeem all but not less than all of the then outstanding Rights at a redemption
price of $0.001 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"). The aggregate Redemption Price otherwise payable to a
holder of Rights shall be rounded to the nearest $0.01, provided, however, if
such aggregate redemption price is less than $0.01, such holder will be entitled
to receive $0.01 upon the redemption of such Rights. Notwithstanding anything
contained in this Agreement to the contrary, the Rights shall not be exercisable
after the first occurrence of a Section 11(a)(ii) Event until such time as the
Company's right of redemption hereunder has expired. The Company may, at its
option, pay the Redemption Price in cash, shares of Common Stock (based on the
Current Market Price, as defined in Section 11(d)(i) hereof, of the Common Stock
at the time of redemption) or any other form of consideration deemed appropriate
by the Board of Directors.

     (b) Immediately upon the action of the Board of Directors of the Company
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent and without any further action and without any notice, the
right to exercise the Rights will terminate and the only right thereafter of the
holders of Rights shall be to receive the Redemption Price for each Right so
held as described in Section 23(a) hereof. Promptly after the action of the
Board of Directors ordering the redemption of the Rights, the Company shall give
notice of such redemption to the Rights Agent and the holders of the then
outstanding Rights by mailing such notice to all such holders at each holder's
last address 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 for the
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.

                                       33

<PAGE>

     (c) Notwithstanding the provisions of Section 23(a) hereof, if, within 180
days of a public announcement by a third party of an intent or proposal to
engage (without the current and continuing concurrence of the Board) in a
transaction involving an acquisition of or business combination with the Company
or otherwise to become an Acquiring Person, there is an election of Directors
(at one or more stockholder meetings) resulting in a majority of the Board being
comprised of persons who were not nominated by the Board in office immediately
prior to such election, then following the effectiveness of such election for a
period of 180 days (the "Special Period") the Rights, if otherwise then
redeemable absent the provisions of this paragraph (c), shall be redeemable upon
either of the following conditions being satisfied, but not otherwise:

          (A) by a vote of a majority of the Directors then in office, provided
     that

          (I) before such vote, the Board of Directors shall have implemented
     the Value Enhancement Procedures (as defined below) and

          (II) promptly after such vote, the Company publicly announces such
     vote and

               (a) the manner in which the Value Enhancement Procedures were
          implemented,

               (b) any material financial, business, personal or other benefit
          or relationship (an "Interest") which each Company Director and each
          Affiliate of such Company Director (identifying each Director and
          Affiliate separately in relation to each such Interest) has in
          connection with any suggested, proposed or pending transaction with or
          involving the Company (a "Transaction"), or with any other party or
          Affiliate of any other party to a Transaction, where such Transaction
          would or might, or is intended to, be permitted or facilitated by
          redemption of the Rights (an "Affected Transaction"), other than
          treatment as a shareholder on a pro rata basis with other shareholders
          or pursuant to compensation arrangements as a director or employee of
          the Company or a subsidiary which have been previously disclosed by
          the Company,

               (c) the individual vote of each Director on the motion to redeem
          the Rights, and

               (d) the statement of any Director who voted for or against the
          motion to redeem the Rights and desires to have a statement included
          in such announcement, or

                                       34

<PAGE>

          (B) if clause (A) is not applicable, by a vote of a majority of the
     Directors then in office, provided that (I) if there is a challenge to the
     Directors' action approving redemption and/or any related Affected
     Transaction as a breach of the fiduciary duty of care or loyalty, the
     Directors (solely for purposes of determining the effectiveness of such
     redemption pursuant to this clause (B)) are able to establish the entire
     fairness of such redemption and, if applicable, such related Affected
     Transaction, and (II) the Company shall have publicly announced the vote of
     the Board of Directors approving such redemption and, if applicable, such
     related Affected Transaction, which announcement shall set forth the
     information prescribed by clauses (A) (II) (b), (c) and (d) above.

     "Value Enhancement Procedures" shall mean:

          (1) the selection by the Board of Directors of an independent
     financial advisor (the "Independent Advisor") from among financial advisors
     which have national standing, have established expertise in advising on
     mergers, acquisitions and related matters and have no Interest relating to
     an Affected Transaction, and have not during the preceding year provided
     services to, been engaged by or been a financing source for any other party
     to an Affected Transaction or any Affiliate of any such party or of any
     Director (other than the Company and its subsidiaries);

          (2) whether or not there is a then-pending Affected Transaction, the
     receipt by the Board of Directors from its Independent Advisor of (a) such
     advisor's view (expressed in such form and subject to such qualifications
     and limitations as the Independent Advisor deems appropriate) regarding
     whether redemption of the Rights will serve the best interests of the
     Company and its shareholders or (b) such advisor's statement that it is
     unable to express such a view, setting forth the reasons therefor;

          (3) if there is a then-pending Affected Transaction,

               (A) the establishment and implementation by the Board of
          Directors of a process and procedures approved by its Independent
          Advisor which the Board and such advisor conclude would be most likely
          to result in the best value reasonably available to shareholders
          (regardless of whether such Affected Transaction involves a "sale of
          control" or "break-up" of the Company for Delaware law purposes),

               (B) the Board of Directors (I) receiving the opinion of its
          Independent Advisor, in customary form and content for transactions of
          the type involved, that the Affected Transaction is fair to the
          Company's shareholders from a financial point of view and (II)

                                       35

<PAGE>

          determining, and the Independent Advisor confirming, that it has no
          reason to believe that a superior transaction is reasonably available
          for the benefit of the Company's shareholders, and

               (C) the execution of a definitive transaction agreement and other
          definitive documentation necessary to effect the Affected Transaction.

     (d) Neither the Company nor any of its Affiliates or Associates may redeem,
acquire or purchase for value any Rights at any time in any manner other than
that specifically set forth in this Section 23 and other than in connection with
the purchase or repurchase by any of them of Common Stock prior to the
Distribution Date.

     Section 24. Exchange.

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

     (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 Common Stock for Rights will be effected
and, in the event of any partial exchange, the number of Rights which will be
exchanged. Any partial exchange shall be effected pro rata based on the number
of Rights (other than Rights which have become void pursuant to the provisions
of Section 7(e) hereof) held by each holder of Rights.

                                       36

<PAGE>

     (c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute Preferred Stock (or Equivalent Preferred Stock, as such
term is defined in paragraph (b) of Section 11 hereof) for Common Stock
exchangeable for Rights, at the initial rate of one ten-thousandth of a share of
Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock,
as appropriately adjusted to reflect stock splits, stock dividends and other
similar transactions after the date hereof.

     (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 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, there shall be
paid to the registered holders of the Rights 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 subsection (e), the current market value
of a whole share of Common Stock shall be the closing price of a share of Common
Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
for the Trading Day immediately prior to the date of exchange pursuant to this
Section 24.

     Section 25. Notice of Certain Events.

     (a) In case the Company shall propose, at any time after the Distribution
Date, (i) to pay any dividend payable in stock of any class to the holders of
Preferred Stock or to make any other distribution to the holders of Preferred
Stock (other than a regular quarterly cash dividend out of earnings or retained
earnings of the Company), or (ii) to offer to the holders of Preferred Stock
rights or warrants to subscribe for or to purchase any additional shares of
Preferred Stock or shares of stock of any class or any other securities, rights
or options, or (iii) to effect any reclassification of its Preferred Stock
(other than a reclassification involving only the subdivision of outstanding
shares of Preferred Stock), or (iv) to effect any consolidation or merger into
or with any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), 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 transaction or a series of related transactions, of
more than 50% of the assets, cash flow or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate and to the Rights Agent, to
the extent feasible and in accordance with Section 26 hereof, a notice of such
proposed action, which shall specify the record date for the purposes of such
stock dividend, distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,

                                       37

<PAGE>

dissolution, or winding up is to take place and the date of participation
therein by the holders of the shares 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 twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock, whichever
shall be the earlier.

     (b) In case any of the events set forth in Section 11(a)(ii) hereof shall
occur, then, in any such case, (i) the Company shall as soon as practicable
thereafter give to each holder of a Rights Certificate and to the Rights Agent,
to the extent feasible and in accordance with Section 26 hereof, a notice of the
occurrence of such event, which shall specify the event and the consequences of
the event to holders of Rights under Section 11(a)(ii) hereof, and (ii) all
references in the preceding paragraph to Preferred Stock shall be deemed
thereafter to refer to Common Stock and/or, if appropriate, other securities.

     Section 26. Notices. Notices or demands authorized by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights Certificate to
or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing by
the Rights Agent with the Company) as follows:

                  Ceridian Corporation
                  3311 East Old Shakopee Road
                  Minneapolis, MN  55425
                  Attention:  Corporate Secretary

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

                  The Bank of New York
                  101 Barclay Street, Floor 12W
                  New York, NY 10286
                  Attention: Stock Transfer Administration

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

                                       38

<PAGE>

Section 27.       Supplements and Amendments.

     (a) Prior to the Distribution Date, and subject to the provisions of
Section 27(b) hereof, the Company and the Rights Agent shall, if the Company so
directs, supplement or amend any provision of this Agreement without the
approval of any holders of certificates representing shares of Common Stock.
From and after the Distribution Date, and subject to the provisions of Section
27(b) hereof, the Company 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 (i) to cure any ambiguity, (ii) to correct or supplement
any provision contained herein which may be defective or inconsistent with any
other provisions herein, (iii) to shorten or lengthen any time period hereunder,
or (iv) to change or supplement the provisions hereunder in any manner which the
Company may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person
or an Affiliate or Associate of an Acquiring Person). Upon the delivery of a
certificate from an appropriate officer of the Company which states that the
proposed supplement or amendment is in compliance with the terms of this Section
27, the Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.

     (b) Notwithstanding anything herein to the contrary, no supplement or
amendment shall be made to this Agreement during the Special Period or at a time
when the Rights are not redeemable, except as contemplated by clause (i) or (ii)
of Section 27(a) hereof.

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

     Section 29. Determinations and Actions by the Board of Directors, etc. For
all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of capital stock outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding shares of Common Stock of which any Person is the Beneficial Owner,
shall be made in accordance with the last sentence of Rule 13d-3(d)(1)(i) of the
General Rules and Regulations under the Exchange Act. The Board of Directors of
the Company shall have the exclusive power and authority to administer this
Agreement and to exercise all rights and powers specifically granted to the
Board or to the Company, or as may be necessary or advisable in the
administration of this Agreement, including, without limitation, the right and
power to (i) interpret the provisions of this Agreement, and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement (including a determination to redeem or not redeem the Rights or to
amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of clause (y) below, all omissions with
respect to the foregoing) which are done or made by the Board in good faith,
shall (x) be final, conclusive and binding on the Company, the Rights Agent, the
holders of the Rights and all other parties, and (y) not subject the Board, or
any of the directors on the Board to any liability to the holders of the Rights.

                                       39

<PAGE>

     Section 30. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock) any legal or equitable right,
remedy or claim under this Agreement; but this Agreement shall be for the sole
and exclusive benefit of the Company, the Rights Agent and the registered
holders of the Rights Certificates (and, prior to the Distribution Date,
registered holders of the Common Stock).

     Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth Business Day following the date of such determination by the Board of
Directors. Without limiting the foregoing, if any provision requiring a specific
group of directors to act is held to by any court of competent jurisdiction or
other authority to be invalid, void or unenforceable, such determination shall
then be made by the Board of Directors of the Company in accordance with
applicable law and the Company's Amended and Restated Certificate of
Incorporation and By-laws. Section 32. Governing Law. This Agreement, each Right
and each Rights 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 made and to be performed entirely within such State, provided,
however, that the rights and obligations of the Rights Agent shall be governed
by and construed in accordance with the laws of the State of New York. The
parties hereto hereby waive the right to a jury trial in any action arising out
of this Agreement. Any dispute arising out of this Agreement shall be litigated
in the borough of Manhattan, New York City, New York, and the parties hereby
submit to the jurisdiction of such courts and acknowledge that such courts are a
convenient forum.

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

                                       40

<PAGE>

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

                                       41

<PAGE>

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

                                       CERIDIAN CORPORATION

                                       By /s/ Gary M. Nelson
                                          --------------------------------------
                                       Name:  Gary M. Nelson
                                      Title:  Executive Vice President, General
                                              Counsel and Secretary

                                       THE BANK OF NEW YORK

                                       By /s/ Jeffrey D. Grosse
                                          --------------------------------------
                                       Name:  Jeffrey D. Grosse
                                      Title:  Vice President

                                       42

<PAGE>

                                                                       Exhibit A

                                     FORM OF

                   CERTIFICATE OF DESIGNATION, PREFERENCES AND

                       RIGHTS OF SERIES A PREFERRED STOCK

                                       of

                              CERIDIAN CORPORATION

             Pursuant to Section 151 of the General Corporation Law

                            of the State of Delaware

     The undersigned officers of Ceridian Corporation, a corporation 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
Amended and Restated Certificate of Incorporation of said Corporation, said
Board of Directors on October 24, 2001, adopted the following resolution
creating a series of 50,000 shares of Preferred Stock designated as Series A
Junior Participating Preferred Stock:

     RESOLVED, that pursuant to the authority vested in the Board of Directors
of this Corporation in accordance with the provisions of its Restated
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
voting 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 Junior Participating Preferred Stock" and the number of
shares constituting such series shall be 50,000.

     Section 2. Dividends and Distributions.

<PAGE>

     (A) The holders of shares of Series A Junior Participating Preferred Stock
shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly dividends payable in
cash on the fifteenth day of February, May, August and November of each year
(each such date being referred to herein as a "Quarterly Dividend Payment
Date"), commencing on the first Quarterly Dividend Payment Date after the first
issuance of a share or fraction of a share of Series A Junior Participating
Preferred Stock, in an amount per share (rounded to the nearest cent) equal to
the greater of (a) $100.00 and (b) subject to the provision for adjustment
hereinafter set forth, 10,000 times the aggregate per share amount of all cash
dividends, and 10,000 times the aggregate per share amount (payable in kind) of
all non-cash dividends or other distributions other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of Common
Stock (by reclassification or otherwise), declared on the Common Stock, par
value $0.01 per share, of the Corporation (the "Common Stock") since the
immediately preceding Quarterly Dividend Payment Date, or, with respect to the
first Quarterly Dividend Payment Date, since the first issuance of any share or
fraction of a share of Series A Junior Participating Preferred Stock. In the
event the Corporation shall at any time after October 24, 2001 (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 Junior Participating Preferred
Stock were entitled immediately prior to such event under clause (b) of the
preceding sentence shall be adjusted by multiplying such amount by a fraction
the numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

     (B) The Corporation shall declare a dividend or distribution on the Series
A Junior Participating Preferred Stock as provided in Paragraph (A) above
immediately after it declares a dividend or distribution on the Common Stock
(other than a dividend payable in shares of Common Stock); provided that, in the
event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $100.00 per share on
the Series A Junior Participating Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.

     (C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Junior Participating Preferred Stock from the Quarterly Dividend
Payment Date next preceding the date of issue of such shares of Series A Junior
Participating 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 Participating 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

                                       2

<PAGE>

Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends
paid on the shares of Series A Junior Participating 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 Junior Participating
Preferred Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days prior to the
date fixed for the payment thereof.

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

     (A) Subject to the provision for adjustment hereinafter set forth, each
share of Series A Junior Participating Preferred Stock shall entitle the holder
thereof to 10,000 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 Junior Participating Preferred Stock were entitled immediately prior to
such event shall be adjusted by multiplying such number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

     (B) Except as otherwise provided herein or by law, the holders of shares of
Series A Junior Participating 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) (i) If at any time dividends on any Series A Junior Participating
     Preferred Stock shall be in arrears in an amount equal to six (6) quarterly
     dividends thereon, the occurrence of such contingency shall mark the
     beginning of a period (herein called a "default period") which shall extend
     until such time when all accrued and unpaid dividends for all previous
     quarterly dividend periods and for the current quarterly dividend period on
     all shares of Series A Junior Participating Preferred Stock then
     outstanding shall have been declared and paid or set apart for payment.
     During each default period, all holders of Preferred Stock (including
     holders of the Series A Junior Participating Preferred Stock) with
     dividends in arrears in an amount equal to six (6) quarterly dividends
     thereon, voting as a class, irrespective of series, shall have the right to
     elect two (2) directors.

          (ii) During any default period, such voting right of the holders of
     Series A Junior Participating Preferred Stock may be exercised initially at
     a special meeting called pursuant to subparagraph (iii) of this Section

                                       3

<PAGE>

     3(C) or at any annual meeting of stockholders, and thereafter at annual
     meetings of stockholders, provided that such voting right shall not be
     exercised unless the holders of ten percent (10%) in number of shares of
     Preferred Stock outstanding shall be present in person or by proxy. The
     absence of a quorum of the holders of Common Stock shall not affect the
     exercise by the holders of Preferred Stock of such voting right. At any
     meeting at which the holders of Preferred Stock shall exercise such voting
     right initially during an existing default period, they shall have the
     right, voting as a class, to elect directors to fill such vacancies, if
     any, in the Board of Directors as may then exist up to two (2) directors
     or, if such right is exercised at an annual meeting, to elect two (2)
     directors. If the number which may be so elected at any special meeting
     does not amount to the required number, the holders of the Preferred Stock
     shall have the right to make such increase in the number of directors as
     shall be necessary to permit the election by them of the required number.
     After the holders of the Preferred Stock shall have exercised their right
     to elect directors in any default period and during the continuance of such
     period, the number of directors shall not be increased or decreased except
     by vote of the holders of Preferred Stock as herein provided or pursuant to
     the rights of any equity securities ranking senior to or pari passu with
     the Series A Junior Participating Preferred Stock.

          (iii) Unless the holders of Preferred Stock shall, during an existing
     default period, have previously exercised their right to elect directors,
     the Board of Directors may order, or any stockholder or stockholders owning
     in the aggregate not less than ten percent (10%) of the total number of
     shares of Preferred Stock outstanding, irrespective of series, may request,
     the calling of a special meeting of the holders of Preferred Stock, which
     meeting shall thereupon be called by the President, a Vice-President or the
     Secretary of the Corporation. Notice of such meeting and of any annual
     meeting at which holders of Preferred Stock are entitled to vote pursuant
     to this Paragraph (C)(iii) shall be given to each holder of record of
     Preferred Stock by mailing a copy of such notice to him at his last address
     as the same appears on the books of the Corporation. Such meeting shall be
     called for a time not earlier than 20 days and not later than 60 days after
     such order or request or in default of the calling of such meeting within
     60 days after such order or request, such meeting may be called on similar
     notice by any stockholder or stockholders owning in the aggregate not less
     than ten percent (10%) of the total number of shares of Preferred Stock
     outstanding. Notwithstanding the provisions of this Paragraph (C)(iii), no
     such special meeting shall be called during the period within 60 days
     immediately preceding the date fixed for the next annual meeting of the
     stockholders.

          (iv) In any default period, the holders of Common Stock, and other
     classes of stock of the Corporation if applicable, shall continue to be
     entitled to elect the whole number of directors until the holders of

                                       4

<PAGE>

     Preferred Stock shall have exercised their right to elect two (2) directors
     voting as a class, after the exercise of which right (x) the directors so
     elected by the holders of Preferred Stock shall continue in office until
     their successors shall have been elected by such holders or until the
     expiration of the default period, and (y) any vacancy in the Board of
     Directors may (except as provided in Paragraph (C)(ii) of this Section 3)
     be filled by vote of a majority of the remaining directors theretofore
     elected by the holders of the class of stock which elected the director
     whose office shall have become vacant. References in this Paragraph (C) to
     directors elected by the holders of a particular class of stock shall
     include directors elected by such directors to fill vacancies as provided
     in clause (y) of the foregoing sentence.

          (v) Immediately upon the expiration of a default period, (x) the right
     of the holders of Preferred Stock as a class to elect directors shall
     cease, (y) the term of any directors elected by the holders of Preferred
     Stock as a class shall terminate, and (z) the number of directors shall be
     such number as may be provided for in the certificate of incorporation or
     by-laws irrespective of any increase made pursuant to the provisions of
     Paragraph (C)(ii) of this Section 3 (such number being subject, however, to
     change thereafter in any manner provided by law or in the certificate of
     incorporation or by-laws). Any vacancies in the Board of Directors effected
     by the provisions of clauses (y) and (z) in the preceding sentence may be
     filled by a majority of the remaining directors.

     (D) Except as set forth herein, holders of Series A Junior Participating
Preferred Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with holders of
Common Stock as set forth herein) for taking any corporate action.

     Section 4. Certain Restrictions.

     (A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Junior Participating 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 Junior
Participating 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 Junior Participating Preferred
     Stock;

                                       5

<PAGE>

          (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 Junior
     Participating Preferred Stock, except dividends paid ratably on the Series
     A Junior Participating 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 Junior
     Participating 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 Junior Participating Preferred Stock; or

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

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

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

     Section 6. Liquidation, Dissolution or Winding Up. (A) Upon any liquidation
(voluntary or otherwise), dissolution or winding up of the Corporation, no
distribution shall be made to the holders of shares of stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Junior Participating Preferred Stock unless, prior thereto, the holders
of shares of Series A Junior Participating Preferred Stock shall have received
an amount equal to $100.00 per share of Series A Participating Preferred Stock,
plus an amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment (the "Series A Liquidation
Preference"). Following the payment of the full amount of the Series A
Liquidation Preference, no additional distributions shall be made to the holders
of shares of Series A Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per

                                       6
<PAGE>

share (the "Common Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 10,000 (as appropriately adjusted as
set forth in subparagraph (C) below to reflect such events as stock splits,
stock dividends and recapitalizations with respect to the Common Stock) (such
number in clause (ii), the "Adjustment Number"). Following the payment of the
full amount of the Series A Liquidation Preference and the Common Adjustment in
respect of all outstanding shares of Series A Junior Participating Preferred
Stock and Common Stock, respectively, holders of Series A Junior Participating
Preferred Stock and holders of shares of Common Stock shall receive their
ratable and proportionate share of the remaining assets to be distributed in the
ratio of the Adjustment Number to 1 with respect to such Preferred Stock and
Common Stock, on a per share basis, respectively.

     (B) In the event, however, that there are not sufficient assets available
to permit payment in full of the Series A Liquidation Preference and the
liquidation preferences of all other series of preferred stock, if any, which
rank on a parity with the Series A Junior Participating Preferred Stock, then
such remaining assets shall be distributed ratably to the holders of such parity
shares in proportion to their respective liquidation preferences. In the event,
however, that there are not sufficient assets available to permit payment in
full of the Common Adjustment, then such remaining assets shall be distributed
ratably to the holders of Common Stock.

     (C) 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 Adjustment Number in effect immediately prior to such event shall be
adjusted by multiplying such Adjustment 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.

     Section 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such case the shares of
Series A Junior Participating 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 10,000 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 Junior Participating Preferred Stock shall be
adjusted by multiplying such amount by a fraction the numerator of which is the
number of shares of Common Stock outstanding immediately after such event and
the denominator of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.

                                       7

<PAGE>

     Section 8. No Redemption. The shares of Series A Junior Participating
Preferred Stock shall not be redeemable.

     Section 9. Ranking. The Series A Junior Participating Preferred Stock shall
rank 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
such series shall provide otherwise.

     Section 10. Amendment. At any time when any shares of Series A Junior
Participating Preferred Stock are outstanding, neither the Amended and Restated
Certificate of Incorporation of the Corporation nor this Certificate of
Designation shall be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Junior
Participating Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of a majority or more of the outstanding shares
of Series A Junior Participating Preferred Stock, voting separately as a class.

     Section 11. Fractional Shares. Series A Junior Participating 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 to have the benefit of all
other rights of holders of Series A Junior Participating Preferred Stock.

                                       8

<PAGE>

     IN WITNESS WHEREOF, we have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this __day of _____,
200 .

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

                                       9
<PAGE>

                                                                       Exhibit B

                          [Form of Rights Certificate]

Certificate No. R-                                               ________ Rights

NOT EXERCISABLE AFTER NOVEMBER 9, 2011 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001
PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS
DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY
BECOME NULL AND VOID. [THE RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR
WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME AN ACQUIRING PERSON OR AN
AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS
REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN
SECTION 7(e) OF SUCH AGREEMENT.](1)

                               Rights Certificate

                              CERIDIAN CORPORATION

     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 6, 2001 (the "Rights Agreement"), between
Ceridian Corporation, a Delaware corporation (the "Company"), and The Bank of
New York, a New York banking corporation (the "Rights Agent"), to purchase from
the Company at any time prior to 5:00 P.M. (New York City time) on November 9,
2011 (unless such date is extended prior thereto by the Board of Directors) at
the office or offices of the Rights Agent designated for such purpose, or its
successors as Rights Agent, one ten-thousandth of a fully paid, non-assessable
share of Series A Junior Participating Preferred Stock (the "Preferred Stock")

--------
(1) The portion of the legend in brackets shall be inserted only if applicable
and shall replace the preceding sentence.

<PAGE>

of the Company, at a purchase price of $75.00 per one ten-thousandth of a share
(the "Purchase Price"), upon presentation and surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate duly
executed. The number of Rights evidenced by this Rights Certificate (and the
number of shares which may be purchased upon exercise thereof) set forth above,
and the Purchase Price per share set forth above, are the number and Purchase
Price as of November 6, 2001, based on the Preferred Stock as constituted at
such date. The Company reserves the right to require prior to the occurrence of
a Triggering Event (as such term is defined in the Rights Agreement) that a
number of Rights be exercised so that only whole shares of Preferred Stock will
be issued.

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

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

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

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

                                       2

<PAGE>

     Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $0.001 per Right at any time prior to the earlier of the close of
business on (i) the tenth Business Day following the Stock Acquisition Date (as
such time period may be extended pursuant to the Rights Agreement), and (ii) the
Final Expiration Date. The aggregate redemption price otherwise payable to a
beneficial holder of Rights shall be rounded to the nearest $0.01, provided,
however, if such aggregate redemption price is less than $0.01, such holder will
be entitled to receive $0.01 upon the redemption of such Rights. For 180 days
following a change in control of the Board of Directors of the Company, that has
not been approved by the Board of Directors, occurring within six months of
announcement of an unsolicited third party acquisition or business combination
proposal or of a third party's intent or proposal otherwise to become an
Acquiring Person, the new directors are entitled to redeem the rights (assuming
the rights would have otherwise been redeemable), including to facilitate an
acquisition or business combination transaction involving the Company, but only
(1) if they have followed certain prescribed procedures or (2) if such
procedures are not followed, and if their decision regarding redemption and any
acquisition or business combination is challenged as a breach of fiduciary duty
of care or loyalty, the directors (solely for purposes of the effectiveness of
the redemption decision) are able to establish the entire fairness of the
redemption or transaction. In addition, under certain circumstances following
the Stock Acquisition Date, the Rights may be exchanged, in whole or in part,
for shares of the Common Stock, or shares of preferred stock of the Company
having essentially the same value or economic rights as such shares. Immediately
upon the action of the Board of Directors of the Company authorizing any such
exchange, and without any further action or any notice, the Rights (other than
Rights which are not subject to such exchange) will terminate and the Rights
will only enable holders to receive the shares issuable upon such exchange.

     No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one ten-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement. The
Company, at its election, may require that a number of Rights be exercised so
that only whole shares of Preferred Stock would be issued.

     No holder of this Rights Certificate shall be entitled to vote or receive
dividends or be deemed for any purpose the holder of shares of Preferred 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 for the election of
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give consent to or withhold consent from any corporate action, or, to
receive notice of meetings or other actions affecting stockholders (except as
provided in the Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Right or Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Rights Agreement.

                                       3

<PAGE>

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

                                       4

<PAGE>

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

ATTEST:                                      CERIDIAN CORPORATION

By:                                          By:
    --------------------------------             -------------------------------
Name:      Gary M. Nelson                    Name:     Ronald L. Turner
Title:     Vice President, General           Title:    Chairman of the Board,
           Counsel and Secretary                       Chief Executive Officer
                                                       and President

Countersigned:

THE BANK OF NEW YORK

By:                                          Date of countersignature: ____, ___
   ---------------------------------
   Authorized Signatory

                                       5

<PAGE>

                  [Form of Reverse Side of Rights Certificate]

                               FORM OF ASSIGNMENT

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

     FOR VALUE RECEIVED __________________________________________ hereby sells,

assigns and transfers unto _____________________________________________________

                  (Please print name and address of transferee)

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

Dated: __________________,__

                                    --------------------------------------------
                                    Signature

Signature Guaranteed:

                                   Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person or an
Affiliate or Associate of 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 Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person or an Affiliate or
Associate of an Acquiring Person.

<PAGE>

Dated: _______________, __
                                            ------------------------------------
                                            Signature

Signature Guaranteed:

                                     NOTICE

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

<PAGE>

                          FORM OF ELECTION TO PURCHASE

              (To be executed if holder desires to exercise Rights
                     represented by the Rights Certificate.)

To:  CERIDIAN CORPORATION:

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

Please insert social security
or other identifying number

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

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

     If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:

Please insert social security
or other identifying number

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

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

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

Dated:  _______________,__

                                             -----------------------------------
                                             Signature

Signature Guaranteed:

<PAGE>

                                   Certificate

     The undersigned hereby certifies by checking the appropriate boxes that:

     (1) the Rights evidenced by this Rights 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 (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 Rights Certificate from any
Person who is, was or became an Acquiring Person or an Affiliate or Associate of
an Acquiring Person.

Dated: ________, _____                       -----------------------------------
                                             Signature

Signature Guaranteed:

<PAGE>

                                     NOTICE

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

<PAGE>

                                                                       Exhibit C

                          SUMMARY OF RIGHTS TO PURCHASE
                                 PREFERRED STOCK

     On October 24, 2001, the Board of Directors of Ceridian Corporation (the
"Company") declared a dividend distribution of one Right for each outstanding
share of Company Common Stock to stockholders of record at the close of business
on November 9, 2001 (the "Record Date"). Each Right entitles the registered
holder to purchase from the Company a unit consisting of one ten-thousandth of a
share (a "Unit") of Series A Junior Participating Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock") at a Purchase Price of $75.00
per Unit, subject to adjustment. The description and terms of the Rights are set
forth in a Rights Agreement (the "Rights Agreement") between the Company and The
Bank of New York, as Rights Agent.

     Initially, the Rights will be attached to all Common Stock certificates
representing shares then outstanding, and no separate Rights Certificates will
be distributed. Subject to certain exceptions specified in the Rights Agreement,
the Rights will separate from the Common Stock and a Distribution Date will
occur upon the earlier of (i) 10 business days following a public announcement
that a person or group of affiliated or associated persons (an "Acquiring
Person") has acquired beneficial ownership of 15% or more of the outstanding
shares of Common Stock (20%, in the case of certain institutional investors)
other than as a result of repurchases of stock by the Company or certain
inadvertent actions by institutional or certain other stockholders or the date a
Person has entered into an agreement or arrangement with the Company or any
Subsidiary of the Company providing for an Acquisition Transaction (the "Stock
Acquisition Date") or (ii) 10 business days (or such later date as the Board
shall determine, provided, however, that no deferral of a Distribution Date by
the Board pursuant to the terms of the Rights Agreement described in this clause
(ii) may be made at any time during the Special Period (as defined below))
following the commencement of a tender offer or exchange offer that would result
in a person or group becoming an Acquiring Person. An Acquisition Transaction is
defined in the Rights Agreement as (x) a merger, consolidation or similar
transaction involving the Company or any of its Subsidiaries as a result of
which stockholders of the Company will no longer own a majority of the
outstanding shares of Common Stock of the Company or a publicly traded entity
which controls the Company or, if appropriate, the entity into which the Company
may be merged, consolidated or otherwise combined (based solely on the shares of
Common Stock received or retained by such stockholders, in their capacity as
stockholders of the Company, pursuant to such transaction), (y) a purchase or
other acquisition of all or a substantial portion of the assets of the Company
and its Subsidiaries, or (z) a purchase or other acquisition of securities
representing 15% or more of the shares of Common Stock then outstanding. Until
the Distribution Date, (i) the Rights will be evidenced by the Common Stock
certificates and will be transferred with and only with such Common Stock
certificates, (ii) new Common Stock certificates issued after the Record Date
will contain a notation incorporating the Rights Agreement by reference and

<PAGE>

(iii) the surrender for transfer of any certificates for Common Stock
outstanding will also constitute the transfer of the Rights associated with the
Common Stock represented by such certificate. Pursuant to the Rights Agreement,
the Company reserves the right to require prior to the occurrence of a
Triggering Event (as defined below) that, upon any exercise of Rights, a number
of Rights be exercised so that only whole shares of Preferred Stock will be
issued.

     The Rights are not exercisable until the Distribution Date and will expire
at 5:00 P.M. (New York City time) on November 9, 2011, unless such date is
extended or the Rights are earlier redeemed or exchanged by the Company as
described below.

     As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of the Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights. Except as otherwise determined by
the Board of Directors, only shares of Common Stock issued prior to the
Distribution Date will be issued with Rights.

     In the event that a Person becomes an Acquiring Person, except pursuant to
an offer for all outstanding shares of Common Stock which the independent
directors determine to be fair and not inadequate and to otherwise be in the
best interests of the Company and its stockholders, after receiving advice from
one or more investment banking firms (a "Qualified Offer"), each holder of a
Right will thereafter have the right to receive, upon exercise, Common Stock
(or, in certain circumstances, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Right.
Notwithstanding any of the foregoing, following the occurrence of the event set
forth in this paragraph, all Rights that are, or (under certain circumstances
specified in the Rights Agreement) were, beneficially owned by any Acquiring
Person will be null and void. However, Rights are not exercisable following the
occurrence of the event set forth above until such time as the Rights are no
longer redeemable by the Company as set forth below.

     For example, at an exercise price of $75.00 per Right, each Right not owned
by an Acquiring Person (or by certain related parties) following an event set
forth in the preceding paragraph would entitle its holder to purchase $150.00
worth of Common Stock (or other consideration, as noted above) for $75.00.
Assuming that the Common Stock had a per share value of $25.00 at such time, the
holder of each valid Right would be entitled to purchase 6 shares of Common
Stock for $75.00.

     In the event that, at any time following the Stock Acquisition Date, (i)
the Company engages in a merger or other business combination transaction in
which the Company is not the surviving corporation, (ii) the Company engages in
a merger or other business combination transaction in which the Company is the
surviving corporation and the Common Stock of the Company is changed or
exchanged, or (iii) 50% or more of the Company's assets, cash flow or earning
power is sold or transferred, each holder of a Right (except Rights which have
previously been voided as set forth above) shall thereafter have the right to
receive, upon exercise, common stock of the acquiring company having a value
equal to two times the exercise price of the Right. The events set forth in this
paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."

                                       2

<PAGE>

     At any time after a person becomes an Acquiring Person and prior to the
acquisition by such person or group of fifty percent (50%) or more of the
outstanding Common Stock, the Board may exchange the Rights (other than Rights
owned by such person or group which have become void), in whole or in part, at
an exchange ratio of one share of Common Stock, or one ten-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).

     The Purchase Price payable, and the number of Units 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) if holders of the Preferred Stock are granted 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 regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).

     With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. No fractional Units will be issued and, in lieu thereof, 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.

     At any time until ten business days following the Stock Acquisition Date,
the Company may redeem the Rights in whole, but not in part, at a price of
$0.001 per Right (payable in cash, Common Stock or other consideration deemed
appropriate by the Board of Directors). The aggregate redemption price otherwise
payable to a beneficial holder of Rights shall be rounded to the nearest $0.01,
provided, however, if such aggregate redemption price is less than $0.01, such
holder will be entitled to receive $0.01 upon the redemption of such Rights.
Immediately upon the action of the Board of Directors ordering redemption of the
Rights, the Rights will terminate and the only right of the holders of Rights
will be to receive the redemption price.

     For 180 days (the "Special Period") following a change in control of the
Board of Directors of the Company, that has not been approved by the Board of
Directors, occurring within six months of announcement of an unsolicited third
party acquisition or business combination proposal or of a third party's intent
or proposal otherwise to become an Acquiring Person, the new directors are
entitled to redeem the rights (assuming the rights would have otherwise been
redeemable), including to facilitate an acquisition or business combination
transaction involving the Company, but only (1) if they have followed certain
prescribed procedures or (2) if such procedures are not followed, and if their
decision regarding redemption and any acquisition or business combination is
challenged as a breach of fiduciary duty of care or loyalty, the directors
(solely for purposes of the effectiveness of the redemption decision) are able
to establish the entire fairness of the redemption or transaction.

                                       3

<PAGE>

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

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

     A copy of the Rights Agreement has been filed with the Securities and
Exchange Commission as an Exhibit to a Registration Statement on Form
8-A/Current Report on Form 8-K dated November 6, 2001. A copy of the Rights
Agreement is available free of charge from the Rights Agent. This summary
description of the Rights does not purport to be complete and is qualified in
its entirety by reference to the Rights Agreement, which is incorporated herein
by reference.

                                       4

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